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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended April 3, 1999
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from ___________________ to __________________
Commission File Number: 0-26472
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SMARTFLEX SYSTEMS, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 33-0581151
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14312 Franklin Avenue, Tustin, California 92781-2085
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(Address of principal executive offices) (Zip Code)
(714) 838-8737
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days X Yes No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Stock, $.0025 par value 6,464,224 shares as of May 3, 1999
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Page 1 of 19
Exhibit Index on Page 19
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SMARTFLEX SYSTEMS, INC.
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 1999 (Unaudited) 3-4
and December 31, 1998
Condensed Consolidated Statements of Operations (Unaudited) for the 5
three months ended March 31, 1999 and 1998
Condensed Consolidated Statements of Cash Flows (Unaudited) for the 6
three months ended March 31, 1999 and 1998
Notes to Unaudited Condensed Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9-16
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
INDEX TO EXHIBITS 20
</TABLE>
The Company's fiscal year is 52 or 53 weeks, ending on the Saturday nearest
December 31 each year, and follows a four-four-five week quarterly cycle. For
clarity of presentation, the Company has presented its fiscal years as ending
December 31, and its fiscal quarters as ending on March 31, June 30, September
30 and December 31.
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PART I --- FINANCIAL INFORMATION
Item 1. Financial Statements
SMARTFLEX SYSTEMS, INC.
Condensed Consolidated Balance Sheets
(Dollars in thousands except share and amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 1,597 $ 2,613
Short-term investments 18,503 24,743
Accounts receivable, net of allowance for doubtful accounts
of $964 at March 31, 1999 and $957 at December 31, 1998 13,467 11,209
Inventories:
Raw materials 4,595 1,329
Work-in-process 3,319 1,352
Finished goods 1,379 1,246
-------- --------
Total inventories 9,293 3,927
Deferred income taxes 3,613 3,613
Income tax receivable 1,452 --
Prepaid expenses and other current assets 2,348 2,360
-------- --------
Total current assets 50,273 48,465
Property and equipment, at cost:
Machinery and equipment 28,176 25,718
Office furniture and equipment 4,594 4,242
Leasehold improvements 5,769 5,474
-------- --------
38,539 35,434
Less accumulated depreciation and amortization (18,294) (16,959)
-------- --------
Total property and equipment 20,245 18,475
Goodwill, net of accumulated amortization of $196 at
March 31, 1999 and $49 at December 31, 1998 14,529 4,089
Other assets 1,319 1,262
-------- --------
$ 86,365 $ 72,291
======== ========
</TABLE>
See accompanying notes.
3
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LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- -----------
(Unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $10,303 $ 7,050
Accrued compensation and related costs 2,614 1,627
Accrued restructuring liabilities 3,643 650
Other accrued liabilities 5,648 5,269
Current portion of notes payable to bank 1,150 1,150
Current portion of other notes payable 1,500 --
------- -------
Total current liabilities 24,858 15,746
Deferred tax liability 323 323
Line of credit 8,925 1,146
Long-term portion of notes payable to bank 3,071 3,317
Long-term portion of other notes payable 3,022 740
Stockholders' equity:
Preferred stock, $.001 par value:
Authorized shares -- 5,000,000
Issued and outstanding - none -- --
Common stock, $.0025 par value:
Authorized shares -- 25,000,000
Issued and outstanding shares - 6,452,841 at
March 31, 1999 and 6,453,541 at December 31,
1998, respectively 16 16
Additional paid-in capital 36,533 36,532
Retained earnings 9,617 14,471
------- -------
Total stockholders' equity 46,166 51,019
------- -------
$86,365 $72,291
======= =======
</TABLE>
See accompanying notes.
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SMARTFLEX SYSTEMS, INC.
Condensed Consolidated Statements of Operations
(In thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1999 1998
-------- --------
<S> <C> <C>
Net revenues $ 23,152 $ 37,005
Cost of revenues 21,061 32,860
-------- --------
Gross margin 2,091 4,145
Costs and expenses:
Marketing and sales expense 1,157 930
General and administrative expense 2,853 2,081
Goodwill expense 196 --
Restructuring expense 3,847 --
-------- --------
Operating (loss) income (5,962) 1,134
Interest income 316 263
Interest expense (310) (62)
Other income (expense) 35 (73)
-------- --------
Income before income taxes (5,921) 1,262
Income tax provision (benefit) (1,067) 434
-------- --------
Net income $ (4,854) $ 828
======== ========
Net income per share:
Basic $ (0.75) $ 0.13
======== ========
Diluted $ (0.75) $ 0.13
======== ========
Shares used in computing net income
per share:
Basic 6,453 6,371
======== ========
Diluted 6,485 6,462
======== ========
</TABLE>
See accompanying notes.
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SMARTFLEX SYSTEMS, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1999 1998
--------- --------
<S> <C> <C>
Net cash flow from operating activities:
Net (loss) income $ (4,854) $ 828
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Depreciation 1,171 705
Amortization of goodwill 196 --
Provision for doubtful accounts -- 165
Provision for inventory obsolescence (436) 1,941
Other changes in operating assets and liabilities:
Receivables (2,257) 3,100
Inventories (1,430) 513
Prepaid expenses and other assets (1,497) 343
Accounts payable to related parties -- (420)
Accrued restructuring cost 2,993 (49)
Accounts payable and accrued expenses 4,619 (5,588)
-------- --------
Net cash provided by operating activities (1,495) 1,538
Cash flow from investing activities:
Capital expenditures (1,691) (2,807)
Purchase of short-term investments 36 2,492
Proceeds from the sale of short-term investments 6,204 (186)
Purchase of LSI and EAM (214) --
Purchase of Tanon (11,390) --
-------- --------
Net cash used in investing activities (7,055) (501)
Cash flow from financing activities:
Net proceeds from sale of common stock 1 12
Net borrowings (repayments) on revolving line of credit 7,779 --
Borrowing (repayments) on term loan (246) (442)
-------- --------
Net cash provided by (used in) financing
activities 7,534 (430)
-------- --------
Net increase in cash (1,016) 607
Cash at beginning of period 2,613 2,069
-------- --------
Cash at end of period $ 1,597 $ 2,676
======== ========
Supplemental disclosures of cash flow information:
Interest paid $ 310 $ 55
Taxes paid 23 500
Supplemental disclosures of non-cash activities:
Seller note payable for acquisition of Tanon 4,000 --
</TABLE>
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SMARTFLEX SYSTEMS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
March 31, 1999
Note (A) -- Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
include the accounts of Smartflex Systems, Inc. and its wholly owned
subsidiaries ("Smartflex" or the "Company"), and have been prepared in
accordance with generally accepted accounting principles for interim financial
information, and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. The Company's Fremont and New Jersey subsidiaries are consolidated in
the results of operations for the months of February 1999 and March 1999 only.
Operating results for the three-month period ended March 31, 1999 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1999.
Note (B) -- Fiscal Year
The Company's fiscal year is 52 or 53 weeks, ending on the Saturday
nearest December 31 each year, and follows a four-four-five week quarterly
cycle. For clarity of presentation, the Company has presented its fiscal years
as ending December 31, and its fiscal quarters as ending on March 31, June 30,
September 30 and December 31.
Note (C) -- Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
Note (D) -- Credit Facility
The Company amended its bank credit facility (the "facility") on March
30, 1999 and April 20, 1999 to provide for aggregate unsecured borrowings of $25
million under a revolving line of credit (the "credit line"). Borrowings under
the credit line, which expires in September 2000, include a sub-limit for the
issuance of up to $2 million in commercial or standby letters of credit for the
importation or purchase of inventory. No such letters of credit were outstanding
at March 31, 1999. Outstanding balances on the credit line bear interest at the
bank's prime rate or, at the Company's option, a sliding rate of LIBOR plus
1.50% to 2.25%, and unused portions of the credit line bear interest at .125%
per annum. At March 31, 1999 there was $8.9 million outstanding under the credit
line. The facility additionally provides for an unsecured term loan totaling
$2.2 million for the purchase of equipment. This unsecured term loan will bear
interest at the bank's reference rate plus .5% or, at the Company's option, a
sliding rate of LIBOR plus 1.75% to 2.50%. Principal and interest are payable
monthly, and this term loan matures on March 30, 2001. At March 31, 1999, the
outstanding balance on this term loan was $1.4 million. The facility
additionally provides for a second unsecured term loan (the "second term loan")
totaling $3.0 million to be used for general corporate purposes. The second term
loan bears interest at the bank's reference rate, or at the Company's option, a
sliding rate of LIBOR plus 1.75% to 2.50%. At March 31, 1999, the outstanding
balance on the second term loan was 2.8 million. The facility contains certain
financing and operating covenants relating to net worth, liquidity, leverage,
profitability, fixed charge coverage and a prohibition on payment of cash
dividends. At March 31, 1999, the Company was in compliance with all of the
covenants, except those related to fixed charge coverage, for which the Company
has obtained a waiver.
Note (E) -- Impact of newly issued pronouncement by the Financial Accounting
Standards Board
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative instruments and Hedging Activities." This
statement provides a comprehensive and consistent standard for the recognition
and measurement of derivatives and hedging activities. This statement requires
all derivatives to be
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SMARTFLEX SYSTEMS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
March 31, 1999
recorded on the balance sheet at fair value and establishes accounting for
several types of hedges, resulting in the recognition of offsetting changes in
value or cash flows of the hedge and hedged items in earnings in the same
period. The provisions of this statement are effective for years beginning after
June 15, 1999. The Company will adopt this statement for fiscal year 2000. The
Company does not expect SFAS No. 133 to materially impact the Company's results
of operations or financial position.
Note (F) -- Tanon Acquisition
On February 1, 1999, the Company, through its wholly-owned subsidiaries,
Smartflex Fremont, Inc. and Smartflex New Jersey, Inc., acquired certain assets
from Tanon Manufacturing, Inc., the principal operating subsidiary of EA
Industries, Inc. ("Tanon"). On December 3, 1998, Tanon had filed a voluntary
proceeding under Chapter 11 of the Bankruptcy Code in the United States
Bankruptcy Court for Northern District of California. The acquisition of the
assets was subject to approval of the Bankruptcy Court, which was granted on
January 29, 1999. The assets acquired include certain specified contracts,
equipment and inventory used in connection with Tanon's contract manufacturing
electronic assembly business at facilities in Fremont, California and West Long
Branch, New Jersey. The aggregate purchase price paid was $14.9 million, $2.5
million of which is due in April of 2000 and the Company has delivered a
non-interest-bearing promissory note to guaranty this additional payment.
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SMARTFLEX SYSTEMS, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following information includes forward-looking statements, such as
all plans, intentions, projections, and beliefs, the realization of which may be
impacted materially by certain important factors discussed in "Risk Factors,"
below, and the other information in this Form 10-Q. Therefore, investors are
cautioned not to place undue reliance thereon or on historic information as an
indication of future performance.
OVERVIEW
Smartflex is a technology leader in electronics manufacturing services.
The Company provides a diverse range of services for customers to achieve their
product realization needs. These services include product, Application Specific
Integrated Circuit ("ASIC"), software and Radio Frequency ("RF") design;
modeling, and package/enclosure management; and the precision assembly of
comprehensive advanced interconnect solutions, utilizing precision surface mount
and Direct-Chip-Attach ("DCA") technologies. Prototype through high volume
manufacturing of electronic circuit board and box build services is provided
through nine facilities worldwide for customers in the Americas, Europe and
Asia.
During the first quarter of 1999 the Company continued to experience
softness in demand, competitive pricing and margin declines from its core data
storage customers. However, the Company has begun to diversify its customer base
by expanding into additional markets. This expansion was primarily achieved
through acquisitions. Late in 1998 and early in 1999, the Company acquired
Logical Services Incorporated, a design and engineering services firm; certain
assets of the Methuen, Massachusetts division of EA Industries, now owned by
Smartflex New England, Inc., a wholly-owned subsidiary of the Company, and
certain assets of the Tanon subsidiary of EA Industries, now owned by Smartflex
Fremont, Inc. or Smartflex New Jersey, Inc., both wholly-owned subsidiaries of
the Company. The Company believes that these acquisitions will provide a
platform for diversification into the automotive, RF communications, and medical
product marketplaces. These acquisitions are 100% non-data storage related.
Net revenues for the first quarter of 1999 decreased 37.4% from the same
period in the prior year and increased 0.4%, from the previous quarter. During
the first quarter ended March 31, 1999 hard disk drive ("HDD") shipments were
29.2% of total net revenues compared to 53.3% in the comparable quarter of the
prior year. This percentage decrease is attributable primarily to declines in
shipments to the Company's HDD customers and other storage customers.
RESULTS OF OPERATIONS
Net Revenues
Net revenues for the quarter ended March 31, 1999 decreased 37.4% from
the comparable period in 1998. The decrease is largely due to a continued
softness in demand in the data storage industry.
Net revenues from HDD accounted for 29.2% of total revenues as compared
to 53.3% during the same period in the prior year. Net revenues from HDD
accounted for $6.8 million in the first quarter of 1999, 66% less than the
comparable quarter of 1998. See "Risk Factors."
Export sales arise primarily from the shipment of assembled products to
international operations of U.S.-based customers as well as shipments to
intermediary companies that also service these accounts. Total export sales
accounted for 64% in the first quarter of 1999 compared to 93.4% in the
comparable quarter in 1998. Net revenues from the Company's acquisitions are
from domestic customers only.
Restructuring
During the quarter, the Company addressed a need to streamline its
worldwide operations. As part of this restructuring certain support services
have been transferred from the Tustin and Singapore facilities to the Company's
locations in Monterrey, Mexico and Cebu, Philippines. Additionally the Monterrey
facility was sized to match resources to current production demand. The
restructuring also addressed unutilized space within the
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facilities and the write-down of non-current assets. As part of this
restructuring, the Company provided for the following charges in the first
quarter of 1999: $700,000 for severance and other employee-related costs
associated with the reduction in force, $2.2 million for the write-down of
non-current assets and other expenses, and $1.4 million which addresses
unutilized facilities and associated costs.
Also during the quarter the Company received a favorable ruling
regarding a Singapore tax liability, which had been reserved in a restructuring
completed in the third quarter of 1997. This reserve of $500,000 was reversed in
the first quarter of 1999.
Gross Margins
Gross margins as a percentage of net revenues in the first quarter of
1999 were 9.0% compared to 11.2% for the first quarter of 1998, and 11.1% in the
Company's 1998 fourth quarter. This gross margin decline from the first quarter
of 1998 is primarily due to lower revenues and the resultant impact in
supporting the Company's cost structure. The gross margin decline from the
fourth quarter of 1998 is primarily due to the small revenue increase in the
first quarter of 1999 compared to the previous quarter, as the Company added the
incremental cost structure of the Tanon acquisition.
Marketing and Sales Expense
Marketing and sales expenses consist primarily of salaries, facility and
travel costs for marketing, sales and customer service personnel, and sales
commissions paid to direct sales personnel and sales representative
organizations. As a percentage of net revenues, these expenses increased 24% for
the quarter ended March 31, 1999, compared to the same period in fiscal 1998.
Increases in advertising, sales personnel and the additional expenses added by
the Company's acquisitions are the primary contributors to this increase.
General and Administrative Expenses
General and administrative ("G&A") expenses increased both as a
percentage of net revenues, and in absolute dollars, for the quarter ended March
31, 1999 compared to the same period in 1998. In absolute dollars G&A expenses
were $2.9 million in the first quarter of fiscal 1999, an increase of
approximately $772,000 from the G&A expenses in the first quarter of fiscal
1998. As a percentage of net revenues, G&A expenses were 12.3% for the current
year's first quarter, compared to 5.6% for the quarter ended March 31, 1998. The
increase in the first quarter was due to incremental expenses associated with
the Company's acquisitions. In addition in the first quarter of 1998 accruals
related to bad debt and performance related compensation were reversed as they
were determined to no longer be needed.
Interest Income/Expense
Interest income for the first quarter of 1999 was 20% higher than the
comparable quarter in the prior year, due to an increase, on average, of
short-term investments. Interest expense increased $248,000 in the quarter as a
result of borrowing and the utilization of cash in connection with the purchase
of Tanon.
Income Taxes
The Company booked a benefit for income tax in the quarter of $1.1
million compared to a provision of $434,000 in the first quarter of the prior
year.
Liquidity and Capital Resources
At March 31, 1999, the Company's principal sources of liquidity included
$20.1 million in cash and short-term investments, and $16.1 million in available
borrowings under its bank credit facility (the "facility"). The Company amended
its facility on March 30, 1999 and April 20, 1999 to provide for aggregate
unsecured borrowings of $25 million under a revolving line of credit (the
"credit line"). Borrowings under the credit line, which expires in September
2000, include a sub-limit for the issuance of up to $2 million in commercial or
standby letters of credit for the importation or purchase of inventory. No such
letters of credit were outstanding at March 31, 1999.
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Outstanding balances on the credit line bear interest at the bank's prime rate
or, at the Company's option, a sliding rate of LIBOR plus 1.50% to 2.25%, and
unused portions of the credit line bear interest at .125% per annum. At March
31, 1999 there was $8.9 million outstanding under the credit line. The facility
additionally provides for an unsecured term loan totaling $2.2 million for the
purchase of equipment. This unsecured term loan will bear interest at the bank's
reference rate plus .5% or, at the Company's option, a sliding rate of LIBOR
plus 1.75% to 2.50%. Principal and interest are payable monthly, and this term
loan matures on March 30, 2001. At March 31, 1999, the outstanding balance on
this term loan was $1.4 million. The facility additionally provides for a second
unsecured term loan (the "second term loan") totaling $3.0 million to be used
for general corporate purposes. The second term loan bears interest at the
bank's reference rate, or at the Company's option, a sliding rate of LIBOR plus
1.75% to 2.50%. At March 31, 1999, the outstanding balance on the second term
loan was $2.8 million.
Short-term investments at March 31, 1999 totaled $18.5 million, and
consisted primarily of holdings in municipal bonds and money market instruments
in accordance with the Company's investment policy, which is designed to
maintain a highly liquid portfolio with minimal risk. The Company's short-term
investments, which are classified as available-for-sale, decreased $5.2 million
for the quarter ended March 31, 1999 as compared to the comparable period in the
prior year, primarily due to the use of cash in connection with the Company's
acquisitions. For all short-term investments at March 31, 1999, cost
approximated fair market value.
Over the three months ended March 31, 1999, inventory levels increased
$1.4 million in connection with the Company's acquisitions. Inventory levels
fluctuate directly with the volume of the Company's manufacturing; and changes
or significant fluctuations in market demand can cause fluctuations in inventory
levels which may result in changes in levels of inventory turns and liquidity.
See "Risk Factors."
During the three months ended March 31, 1999, the Company acquired $1.7
million in capital equipment and leasehold improvements, primarily due to the
Tanon acquisition.
The Company may require additional capital to finance enhancements to,
and/or expansion of its manufacturing capacity in accordance with its business
strategy. The Company may also utilize capital for the purpose of acquiring
other businesses in accordance with its business strategy. Although no assurance
can be given that future financing will be available on terms acceptable to the
Company, the Company may seek additional funds from time to time through public
or private debt or equity offerings or through bank borrowings. Management
believes, however, that existing cash balances, funds generated from operations
and borrowings under the credit line will be sufficient to permit the Company to
meet its expansion plans and liquidity requirements in fiscal 1999, with the
exception of external acquisitions, where size would determine if additional
capital is needed over the Company's then current availability. See "Risk
Factors".
RISK FACTORS
Important Factors Related to Forward-Looking Statements and Associated Risks
This Quarterly Report on Form 10-Q contains forward-looking statements
that are based on current expectations and involve a number of risks and
uncertainties. All information herein, which is not historic, and any inference
from historic information concerning future periods, is a forward-looking
statement. Factors that may materially affect revenues, expenses and operating
results include, without limitation, the impact of competitive products and
pricing, dependence upon a small number of customers and upon customers
predominantly in the data storage industry, dependence upon export sales, the
impact of conducting international operations, international currency
fluctuations, the transition of volume manufacturing operations from Singapore
to the Philippines, efficient utilization of manufacturing facilities and
financial resources, qualification of manufacturing processes, potential
interruption of the flow of components from a limited number of suppliers,
subsequent changes in business strategy or plan, the ability to retain and
attract qualified personnel, timely completion of the business systems
implementation, and structural and strategic changes affecting certain of the
Company's existing customers, suppliers and competitors, the future financial,
economic, competitive and market conditions and their potential direct or
indirect effect, including cancellations of orders included in backlog, the
integration and management of newly acquired entities or businesses, the ability
to effectively identify, investigate, conclude, integrate and manage
acquisitions and large scale projects, and all of the other material factors
discussed above, under the heading "Management Discussion and Analysis of
Financial Condition and Results of Operations."
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The forward-looking statements included herein are based on current
assumptions that the Company will continue to develop, market, manufacture and
ship new products on a timely basis, that competitive conditions within the
Company's market will not change materially or adversely, that demand for the
Company's products and services will remain strong, that the market will accept
the Company's new products and services, that the Company will retain existing
key management personnel, that inventory risks due to shifts in market demand
will be minimized, that the Company's forecasts will accurately anticipate
market demand, and that there will be no material adverse change in the
Company's operations or business. Assumptions relating to the foregoing involve
judgments that are difficult to predict accurately and are subject to many
factors that can materially affect results. Budgeting and other management
decisions are subjective in many respects and thus susceptible to
interpretations and periodic revisions based on actual experience and business
developments, the impact of which may cause the Company to alter its marketing,
capital expenditure, or other budgets, which may in turn affect the Company's
results. In light of the factors that can materially affect the forward-looking
information included herein, the inclusion of such information should not be
regarded as a representation by the Company or any other person that the
objectives or plans of the Company will be achieved.
Because of these and other factors that may affect the Company's
operating results, and financial position, investors should not overly rely upon
forward looking statements or historical trends to anticipate results or trends
in future periods.
Limited Independent Operating History
The Company was incorporated in September 1993 to acquire all of the
assets and business of Smartflex Systems, which was founded in November 1985 as
a general partnership (the "Smartflex Partnership") jointly owned by Silicon
Systems, Inc. ("Silicon Systems"), a supplier of mixed signal integrated
circuits to the HDD market, and Rogers Corporation ("Rogers"), a supplier of
flex circuits to the HDD market. Until its acquisition by the Company, the
Smartflex Partnership was provided with financial assistance and significant
support in sales and personnel functions by Silicon Systems and Rogers. Although
the business of the Company has been in existence since November 1985, the
Company has only a limited history as an independent operating Company, and
there can be no assurance that the Company will not experience problems
associated with young, growing companies. Although the Company operated
profitably from 1990 through 1996 and in 1998, it experienced operating losses
in fiscal 1997 and thus far in fiscal 1999. There can be no assurance that the
Company will be able to achieve or improve its profitability in future periods.
Substantial Fluctuations in Future Operating Results
The Company has experienced substantial fluctuations in its annual and
quarterly operating results, and such fluctuations are expected to continue in
future periods. The Company's operating results are affected by a number of
factors, many of which are beyond the Company's control. All products
manufactured by the Company are custom designed and assembled for a specific
customer's requirement in anticipation of the receipt of volume production
orders from that customer, which may not always materialize. The Company
typically incurs significant start-up costs in the production of a particular
product, which costs are expensed as incurred. Accordingly, the Company's level
of experience in manufacturing a particular product and its efficiency in
minimizing start-up costs will affect the Company's operating results during the
periods in which production begins and ramp-up occurs. The efficiencies of the
Company in managing inventories and fixed assets, shortages of components or
labor, the degree of automation used in the assembly process, fluctuations in
material costs and the mix of materials, labor, manufacturing and overhead costs
are also significant factors affecting annual and quarterly operating results.
Other factors contributing to fluctuations in the Company's operating results
include price competition, the inability to pass on cost overruns, the timing of
expenditures in anticipation of increased sales, customer product delivery
requirements and the range of services provided. In addition, the amount and
timing of orders placed by a customer may vary due to a number of factors,
including inventory balancing, changes in manufacturing strategy and variation
in product demand attributable to, among other things, product life cycles,
competitive factors and general economic conditions. Any one of these factors,
or a combination thereof, could adversely affect the Company's annual and
quarterly results of operations.
The Company's customers generally require short delivery cycles, and a
substantial portion of the Company's backlog is typically scheduled for delivery
within 90 days. Quarterly sales and operating results therefore depend in
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large part on the volume and timing of bookings received during the quarter,
which are difficult to forecast. The short lead-time for the Company's backlog
also affects its ability to accurately plan production and inventory levels. In
addition, a significant portion of the Company's operating expenses are
relatively fixed in nature and planned expenditures are based in part on
anticipated orders. Any inability to adjust spending by a sufficient amount or
quickly enough to compensate for any revenue shortfall may magnify the adverse
impact of such revenue shortfall on the Company's results of operations.
Dependence on the Data Storage Market
The Company's principal market is the data storage industry, which is
characterized by intense competition, relatively short product life cycles,
rapid technological change, significant fluctuations in product demand and
significant pressure on vendors to reduce or minimize costs. The storage
industry is also highly cyclical and has experienced periods of increased demand
and rapid growth followed by periods of oversupply and contraction. The impact
of cyclical trends on suppliers to this industry has been exacerbated by the
tendency of manufacturers of data storage products to order components in excess
of their needs during growth periods, followed by a sharp reduction in demand
for components during periods of contraction. The Company's operating results
have been adversely affected from time to time during storage industry slowdowns
and could be materially adversely affected in the event of further slowdowns in
this industry now or in the future. Although the Company is attempting to reduce
its dependence on the storage industry, revenues attributable to this market
have historically represented a majority of its revenues, and the Company's
dependence on the data storage industry is expected to continue or increase in
the foreseeable future.
Customer Concentration
The Company's customer base is highly concentrated. During fiscal 1998
and 1997, the Company's five largest customers (which include, in some cases,
multiple divisions) accounted for approximately 68% and 80% of net revenue,
respectively. The Company expects that sales to a relatively small number of
OEMs will continue to account for a substantial portion of net revenues for the
foreseeable future, and the loss of, or a decline in orders from, one of the
Company's key customers would have a material adverse effect on the Company's
financial and operating results.
Component Supply and Sources
Substantially all of the Company's manufacturing services are provided
on a turnkey basis in which the Company, in addition to providing design,
assembly and testing services, is responsible for the procurement of the
components which are assembled by the Company for the customer. In certain
circumstances, the Company is required to bear the risk of component price
fluctuations, which could adversely affect the Company's gross margins. In
addition, in order to assure an adequate supply of certain key components which
have long procurement lead times, such as integrated circuits, the Company often
must order such components prior to receiving customer purchase orders for the
assemblies which require such components. Failure to accurately anticipate the
volume or timing of customer orders can result in component shortages or excess
component inventory, which in either case could adversely affect the Company's
financial and operating results.
Some of the assemblies manufactured by the Company require one or more
components that are ordered from, or which may be available from, only one
source or a limited number of sources. In particular, the Company relies on the
timely supply of components from ADFlex Solutions, Inc. ("ADFlex"), IBM, Mektec
Corporation ("Mektec"), Texas Instruments, Inc. ("TI"), Silicon Systems, Inc. (a
wholly owned subsidiary of TI), and VTC, Inc. ADFlex is also one the Company's
competitors. During fiscal 1998, 1997 and 1996, the Company purchased a majority
of its flex components from either ADFlex or Mektec, and a majority of its
integrated circuits from IBM, TI and VTC, Inc. Delivery problems relating to
components purchased from any one of these or the Company's other key suppliers
could have a material adverse impact on the financial performance of the
Company. From time to time, the Company's suppliers allocate components among
their customers in response to supply shortages. In some cases, supply shortages
will substantially curtail production of all assemblies using a particular
component. In addition, at various times there have been industry-wide shortages
of electronic components, such as servo or read/write circuits. The Company has
experienced shortages of components in the recent past. There can be no
assurance that such shortages will not recur in the future. Any such shortages
could have a material adverse effect on the Company's operating results.
13
<PAGE> 14
International Operations
The Company maintains international operations in Singapore, Mexico, and
the Philippines. In light of the continued relocating to offshore facilities on
the part of the Company's customers, Smartflex anticipates that it will be
required to increase its presence overseas. Manufacturing and sales operations
outside the United States are accompanied by a number of risks inherent in
international operations, including but not limited to imposition of
governmental controls, compliance with a wide variety of foreign and United
States export laws, currency fluctuations, unexpected changes in trade
restrictions, tariffs and barriers, political and economic instability, longer
payment cycles typically associated with foreign sales, difficulties in
administering business overseas, labor union issues and potentially adverse tax
consequences. The Company historically has denominated all export sales in
United States dollars, and accordingly, if the relative value of the U.S. dollar
in comparison to the currency of the Company's foreign customers or competitors
should increase, the resulting effective price increase of the Company's
products to such foreign customers could result in decreased sales. The
Company's production employees at the Monterrey, Mexico facility are represented
by a labor union and covered by a collective bargaining agreement that is
subject to revision annually under Mexican law. The current agreement is subject
to revision in February 2000. While the Company believes that it has established
good relationships with its labor force in Monterrey, Mexico, there can be no
assurance that such relationships will continue in the future.
Variability of Customer Requirements and Customer Financing
The level and timing of orders placed by customers vary due to the
customers' attempts to balance their inventory, changes in customers'
manufacturing strategies and variations in demand for the customers' products.
Due in part to these factors, most of the Company's customers do not commit to
firm production schedules for more than three months in advance of requirements.
The Company's inability to forecast the level of customer orders with certainty
makes it difficult to schedule production and optimize utilization of
manufacturing capacity. In the past, the Company has been required to increase
staffing and incur other expenses in order to meet the anticipated demand of its
customers. From time to time, anticipated orders from some of the Company's
customers have failed to materialize and delivery schedules have been deferred
as a result of changes in a customer's business needs, both of which have
adversely affected the Company's operating results. On other occasions,
customers have required rapid increases in production which have placed an
excessive burden on the Company's resources. Such customers' order fluctuations
and deferrals have had an adverse effect on the Company's operating results in
the past, and there can be no assurance that the Company will not experience
such effects in the future. In addition, the Company incurs significant accounts
receivable in connection with providing manufacturing services to its customers.
If one or more of the Company's principal customers were to become insolvent, or
otherwise were to fail to pay for the services and materials provided by the
Company, the Company's operating results and financial condition would be
adversely affected.
Rapid Technological Change
The Company and the Company's customer base competes in markets that are
characterized by rapid technological change and short product life cycles. In
particular, the HDD, computer and communications markets are prone to rapid
product obsolescence by new technologies. The flexible interconnect industry
could experience future competition from new or emerging technologies that
render existing technology less competitive or obsolete. The inability of the
Company to develop technologies to meet the evolving market requirements of its
customer base could have a material adverse effect on the Company's business,
financial condition and results of operations, including the Company's ability
to maintain its revenue base.
Management of Growth
The Company has experienced certain periods of rapid growth which has
placed, and is expected to continue to place, a significant strain on the
Company's management, operational and financial resources. The Company expects
that continued growth would require the addition of new management personnel and
the development of additional expertise by existing management personnel. The
Company's ability to manage growth effectively, particularly given the
increasingly international scope of its operations, will require it to continue
to implement and improve its operational, financial and management information
systems as well as to develop the management skills of its managers and
supervisors and to train, motivate and manage its employees. The Company's
failure to effectively manage growth could have a material adverse effect on the
Company's results of operations.
14
<PAGE> 15
Integration of Acquisitions
Effective October 1998, the Company made its first acquisition, and has
since made a total of three acquisitions through March 1999. The Company
believes that these acquisitions are an integral part of its diversification
strategy for both markets and customers. The Company's ability to effectively
integrate these acquisitions and control the costs associated with the
integration will be key to its future success. The Company's failure in regard
to selection of acquisitions and due diligence or to effectively manage these
acquisitions could have a material adverse effect on the Company's results of
operations.
Dependence on Key Employees
The Company is highly dependent on its Chief Executive Officer, William
L. Healey, and other principal members of its management team, the loss of whose
services could have a material adverse effect upon the business and financial
condition of the Company, as well as the ability of the Company to achieve its
development objectives. None of such persons has an employment contract with the
Company. The Company is also dependent on other key personnel, and on its
ability to continue to attract, retain and motivate highly skilled personnel.
The competition for such employees is intense, and there can be no assurance
that the Company will be successful in attracting, retaining or motivating key
personnel or that personnel cost increases will not have an adverse effect on
the Company's net income or results of operations.
The Year 2000 issue
The "Year 2000 issue," also known as "Y2K issue" or the "Millennium
Bug," arises out of the fact that many existing computer programs and other
devices use only two digits to identify a year in the date field and, if
uncorrected, would fail or create erroneous results as a result of the Year
2000.
Early in 1997, the Company evaluated the Y2K issue and its impact on the
Company's operations. Currently, the Company uses certain IBM AS400
applications, which are not Y2K compliant, and various desktop applications,
which are Y2K compliant. So-called "embedded systems," that control certain
manufacturing equipment and other fixtures and equipment, have been identified
and have been determined to be Y2K compliant.
A project to implement the latest versions of the IBM AS400 applications
was launched in late 1997. This project also addresses the Y2K issue. The
project team consists of both dedicated resources and key functional
participants. The project consists of five main steps or phases: the first phase
consisting of an assessment of viable alternatives from commercially available
applications; the second phase being the decision process as for which
applications to obtain; the third phase consisting of configuring the system to
run the Company's business; phase four being training, testing and piloting of
all applications; and the final phase consisting of Company-wide implementation.
The team has identified, and the Company has committed to implement, an
enterprise application that is Y2K compliant. Maintenance or modification costs
will be expensed as incurred, while the costs of new software will be
capitalized and amortized over the software's useful life. The Company has
completed phases one, two and three and is currently in the training process.
All user functions have or will be going through training, and all requirements
are being developed for immediate use upon implementation. The total project is
estimated to be completed by the middle of fiscal 1999 at a cost of
approximately $1,000,000, which has been or will be spent throughout the
duration of the project implementation. Costs to March 31, 1999 have been
approximately $770,000. Failure to execute successfully and complete this
project and each step thereof as scheduled could cause material disruption of
the Company's operations and have material adverse impacts on its competitive
posture, financial position and results of operations. Many of the Company's
customers, suppliers and lenders have required the Company to provide assurances
concerning the Company's Y2K issue, and any failure by or affecting the Company
in regard to those assurances could result in material demands or assertions of
liability by such third parties or others.
The Company is in the process of contacting its major external
suppliers, customers and other business partners to estimate their compliance
with the Y2K issue and is presently evaluating inputs received from these
external relationships. Failure of any of the Company's major external suppliers
and customers to appropriately and timely address the Y2K issue could cause
material disruption of the Company's business and have material adverse impacts
on the Company's results of operations.
15
<PAGE> 16
The Company feels that it will successfully implement the Y2K compliant
applications, described above. However, a contingency plan has been developed
for the possibility that timely and successful implementation is not achieved.
The contingency plan is primarily to continue the implementation of the new
application and continue to use the Company's existing applications and manually
manipulate dates until the implementation has been completed.
Environmental Compliance
The Company is subject to a variety of environmental regulations
relating to the use, storage, discharge and disposal of hazardous chemicals and
substances used in its manufacturing process. While the Company believes that it
is in material compliance with all existing applicable environmental statutes
and regulations, any failure by the Company to comply with statutes and
regulations presently existing or enacted in the future could subject it to
liabilities or the suspension of production. In addition, compliance with such
statutes and regulations could restrict the Company's ability to expand its
facilities or require the Company to acquire costly equipment or to incur other
significant expenses.
Control by Existing Stockholders
The Company's officers, directors and existing holders of more than 5%
of the Company's Common Stock, in the aggregate, own beneficially approximately
54% of the outstanding Common Stock as of March 18, 1999 including shares
subject to presently exercisable options or options that become exercisable
within 60 days of March 18, 1999. As a result, any substantial portion of these
stockholders, acting together, are able to effectively control most matters
requiring approval by the stockholders of the Company. Approximately 18% of the
Company's Common Stock is held by TDK U.S.A. Corporation ("TDK"), which holds
the shares formerly owned by Silicon Systems, Inc.
Anti-Takeover Provisions
On July 17, 1996, the Board of Directors approved the adoption of a
Shareholder Rights Plan for the Company, which is intended to protect
stockholder interests in the event of an unsolicited attempt to acquire the
Company on terms that the Board of Directors determines are not in the best
interests of the stockholders. The Plan provides for a dividend of one Right for
each share of outstanding common stock. Each Right entitles the holder, on the
occurrence of certain events, to purchase shares of a newly created class of the
Company's preferred stock. The Company may redeem each Right, on terms spelled
out in the Plan, if approved by the Board of Directors.
The Board of Directors has the authority to issue up to 5,000,000 shares
of Preferred Stock and to fix the rights, preferences, privileges and
restrictions, including voting rights, of those shares without any future vote
or action by the stockholders. The rights of the holders of the Common Stock
will be subject to, and may be adversely affected by, the rights of the holders
of any Preferred Stock that may be issued in the future. The issuance of
Preferred Stock could have the effect of making it more difficult for a third
party to acquire a majority of the outstanding voting stock of the Company,
thereby delaying, deferring or preventing a change in control of the Company.
Furthermore, such Preferred Stock may have other rights senior to the Common
Stock, which could have a material adverse effect on the market value of the
Common Stock. The Company has no present plans to issue shares of Preferred
Stock other than pursuant to the Rights Plan. In addition, Section 203 of the
General Corporation Law of Delaware restricts the Company from engaging in
certain business combinations with interested stockholders, as defined by
statute.
These provisions may have the effect of delaying or preventing a change
in control of the Company and therefore could adversely affect the price of the
Company's Common Stock, or the ability of stockholders to receive a premium
price for their shares upon an acquisition.
16
<PAGE> 17
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in foreign exchange
and interest rates. The Company does not use derivative financial instruments
for speculative or trading purposes. The Company's earnings are affected by
fluctuations in the value of the U. S. dollar against foreign currencies, in
Singapore, the Philippines and Mexico.
The Company's earnings are affected by changes in short-term interest
rates as a result of its borrowings under the credit line, and the unsecured
term loans, all of which are based on variable interest rates. If market
interest rates for such borrowings average 1% higher during the fiscal year
ending January 1, 2000 than they did during the fiscal year ended January 2,
1999 the Company's interest expense would increase and income before income
taxes would decrease by approximately $19,000. This analysis does not consider
the effects of the reduced level of overall economic activity that could exist
in such an environment. Further, in the event of a change of such magnitude,
management could take actions to further mitigate its exposure to the change.
However, due to the uncertainty of the specific actions that would take and
their possible effects, the sensitivity analysis assumes no changes in the
Company's financial structure.
17
<PAGE> 18
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
(b) The Company amended its bank credit facility (the "facility") on
March 30, 1999 and April 20, 1999. The facility contains certain
financing and operating covenants relating to net worth, liquidity,
leverage, profitability, fixed charge coverage and a prohibition on
payment of cash dividends.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -- See exhibits index, incorporated herein by reference
(b) Reports on Form 8-K--None
18
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SMARTFLEX SYSTEMS, INC.
(Registrant)
May 18, 1999 By: /s/ John W. Hohener
- --------------- ----------------------------------------
Date John W. Hohener
Vice President, Chief Financial Officer,
and Duly Authorized Officer
(Principal financial and accounting
officer)
19
<PAGE> 20
INDEX TO EXHIBITS
Exhibit
Number Description
- ------- -----------
10.1 Fourth Amendment, dated April 20, 1999, to the Amended and
Restated Loan Agreement, dated September 26, 1997, between
Registrant and Union Bank of California, N. A.
10.2 Promissory Note, dated April 20, 1999, made by the Registrant in
favor of Union Bank of California, N. A.
10.3 Promissory Note, dated April 20, 1999, made by the Registrant in
favor of Union Bank of California N. A.
10.4 Promissory Note, dated April 20, 1999, from the Registrant in
favor of Union Bank of California, N. A.
10.5 Lease, dated March 21, 1999, between Registrant and Mission
Court Properties, Inc.
10.6 Lease, dated February 4, 1999, between Methuen Acquisition
Corporation, Registrant and Vectron Technology, Inc.
10.7 Lease Agreement, dated April 26, 1999, between Smartflex New
Jersey, Inc. and 185 Monmouth Parkway Associates, L. P
10.8 Lease, dated August 12, 1996, between Logical Services
Incorporated and Decathlon Building, a Partnership
10.9 Lease, dated October 23, 1998, between Logical Services
Incorporated and Gul and Vanessa Gazipura
27 Financial Data Schedule (filed electronically).
<PAGE> 1
EXHIBIT 10.1
[UNION BANK OF CALIFORNIA LETTERHEAD]
AMENDMENT LETTER
Commercial Banking Group
Union Bank of California
500 S. Main Street, Suite 200
Orange, CA 92868
April 20, 1999
Mr. William Healey, President
Smartflex Systems, Inc.
14312 Franklin Avenue
Tustin, CA 92680-7028
Re: FOURTH AMENDMENT ("Amendment") to the Amended and Restated Loan
Agreement dated September 26, 1997 (this Amendment, the Third Amendment
dated March 31, 1999, the Second Amendment dated November 17, 1998, the
First Amendment dated October 1, 1998 and the Amended and Restated Loan
Agreement together called the "Agreement")
Dear Mr. Healey:
In reference to the Agreement defined above between UNION BANK OF CALIFORNIA,
N.A. ("BANK") and SMARTFLEX SYSTEMS, INC. ("BORROWER"), Bank and Borrower desire
to amend the Agreement. Capitalized terms used herein which are not otherwise
defined shall have the meanings given them in the Agreement.
1. Amendment to the Agreement:
(a) Section 5.10, of the Agreement, is hereby amended in
its entirety to read as follows:
"CAPITAL EXPENDITURES. Borrower and its affiliates
will not, in aggregate, make capital expenditures in
excess of Ten Million Dollars ($10,000,000) in any
fiscal year and shall only make such expenditures as
are necessary for Borrower in the conduct of its
ordinary course of business.
Except as specifically amended hereby, the Agreement shall remain in full force
and effect and is hereby ratified and confirmed.
<PAGE> 2
This Fourth Amendment shall become effective when Bank shall have received the
acknowledgment copy of this Fourth Amendment executed by Borrower.
Very truly yours,
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Robert Thomas
------------------------------
Robert Thomas
Title: Vice President
By: /s/ Jim Heim
------------------------------
Jim Heim
Title: Vice President
AGREED AND ACCEPTED TO THIS 30TH DAY OF APRIL 1999.
SMARTFLEX SYSTEMS, INC.
By: /s/ William L. Healey
------------------------------
William Healey
Title: President
<PAGE> 1
EXHIBIT 10.2
UNION BANK OF CALIFORNIA
PROMISSORY NOTE
(BASE RATE)
<TABLE>
<CAPTION>
=====================================================================================================
<S> <C> <C> <C> <C>
Borrower Name SMARTFLEX SYSTEMS, INC.
- -----------------------------------------------------------------------------------------------------
Borrower Address Office 45061 Loan Number 8439907413 0080-00-0-000
14312 FRANKLIN AVENUE -------------------------------------------------------------
TUSTIN, CA 92680-7028 Maturity Date OCTOBER 2, 2000 Amount $25,000,000.00
=====================================================================================================
</TABLE>
$25,000,000.00 Date APRIL 20, 1999
------------- --------------
FOR VALUE RECEIVED, on OCTOBER 2, 2000, the undersigned ("Debtor") promises to
pay to the order of UNION BANK OF CALIFORNIA, N.A. ("Bank"), as indicated below,
the principal sum of TWENTY FIVE MILLION AND NO/100 Dollars ($25,000,000.00), or
so much thereof as is disbursed, together with interest on the balance of such
principal from time to time outstanding, at the per annum rate or rates and at
the times set forth below.
1. INTEREST PAYMENTS. Debtor shall pay interest on the 2ND day of each MONTH
(commencing MAY 2, 1999). Should interest not be paid when due, it shall become
part of the principal and bear interest as herein provided. All computations of
interest under this note shall be made on the basis of a year of 360 days, for
actual days elapsed.
a. BASE INTEREST RATE. At Debtor's option, amounts outstanding
hereunder in minimum amounts of at least $100,000.00 shall bear
interest at a rate, based on an index selected by Debtor, which is
equal to Bank's LIBOR Rate for the Interest Period selected by Debtor
plus the Applicable Margin.
No Base Interest Rate may be changed, altered or otherwise modified
until the expiration of the Interest Period selected by Debtor. The
exercise of interest rate options by Debtor shall be as recorded in
Bank's records, which records shall be prime facie evidence of the
amount borrowed under either interest option and the interest rate;
provided, however, that failure of Bank to make any such notation in
its records shall not discharge Debtor from its obligations to repay in
full with interest all amounts borrowed. In no event shall any Interest
Period extend beyond the maturity date of this note.
To exercise this option, Debtor may, from time to time with respect to
principal outstanding on which a Base Interest Rate is not accruing,
and on the expiration of any Interest Period with respect to principal
outstanding on which a Base Interest Rate has been accruing, select
<PAGE> 2
an index offered by Bank for a Base Interest Rate Loan and an Interest
Period by telephoning an authorized lending officer of Bank located at
the banking office identified below prior to 10:00 a.m., Pacific time,
on any Business Day and advising that officer of the selected index,
the Interest Period and the Origination Date selected (which
Origination Date, for a Base Interest Rate Loan based on the LIBOR
Rate, shall follow the date of such selection by no more than two (2)
Business Days).
Bank will mail a written confirmation of the terms of the selection to
Debtor promptly after the selection is made. Failure to send such
confirmation shall not affect Bank's rights to collect interest at the
rate selected. If, on the date of the selection, the index selected is
unavailable for any reason, the selection shall be void. Bank reserves
the right to fund the principal from any source of funds
notwithstanding any Base Interest Rate selected by Debtor.
b. VARIABLE INTEREST RATE. All principal outstanding hereunder which is
not bearing interest at a Base Interest Rate shall bear interest at a
rate per annum equal to the Reference Rate, which rate shall vary as
and when the Reference Rate changes.
If any interest rate defined in this note ceases to be available from
Bank for any reason, then said interest rate shall be replaced by the
rate then offered by Bank, which, in the sole discretion of Bank, most
closely approximates the unavailable rate.
At any time prior to the maturity of this note, subject to the
provisions of paragraph 4, below, of this note, Debtor may borrow,
repay and reborrow hereon so long as the total outstanding at any one
time does not exceed the principal amount of this note. Debtor shall
pay all amounts due under this note in lawful money of the United
States at Bank's ORANGE COUNTY COMMERCIAL BANKING Office, or such other
office as may be designated by Bank, from time to time.
2. LATE PAYMENTS. If any payment required by the terms of this note shall remain
unpaid ten days after same is due, at the option of Bank, Debtor shall pay a fee
of $100 to Bank.
3. INTEREST RATE FOLLOWING DEFAULT. In the event of default, at the option of
Bank, and, to the extent permitted by law, interest shall be payable on the
outstanding principal under this note at a per annum rate equal to five percent
(5%) in excess of the interest rate specified in paragraph 1.b. above,
calculated from the date of default until all amounts payable under this note
are paid in full.
4. PREPAYMENT.
a. Amounts outstanding under this note bearing interest at a rate based
on the Reference Rate may be prepaid in whole or in part at any time,
without penalty or premium. Debtor may prepay amounts outstanding under
this note bearing interest at a Base Interest Rate in whole or in part
provided Debtor has given Bank not less than five (5) Business Days
prior written notice of Debtor's intention to make such prepayment and
pays to Bank the liquidated damages due as a result. Liquidated Damages
shall also be paid, if Bank, for any other reason, including
acceleration or foreclosure, receives all or any portion of principal
bearing interest at a Base Interest Rate prior to its scheduled payment
date. Liquidated
<PAGE> 3
Damages shall be an amount equal to the present value of the product
of: (i) the difference (but not less then zero) between (a) the Base
Interest Rate applicable to the principal amount which is being
prepaid, and (b) the return which Bank could obtain if it used the
amount of such prepayment of principal to purchase at bid price
regularly quoted securities issued by the United States having a
maturity date most closely coinciding with the relevant Base Rate
Maturity Date and such securities were held by Bank until the relevant
Base Rate Maturity Date ("Yield Rate"); (ii) a fraction, the numerator
of which is the number of days in the period between the date of
prepayment and the relevant Base Rate Maturity Date and the denominator
of which is 360; and (iii) the amount of the principal so prepaid
(except in the event that principal payments are required and have been
made as scheduled under the terms of the Base Interest Rate Loan being
prepaid, then an amount equal to the lesser of (A) the amount prepaid
or (B) 50% of the sum of (1) the amount prepaid and (2) the amount of
principal scheduled under the terms of the Base Interest Rate Loan
being prepaid to be outstanding at the relevant Base Rate Maturity
Date). Present value under this note is determined by discounting the
above product to present value using the Yield Rate as the annual
discount factor.
b. In no event shall Bank be obligated to make any payment or refund to
Debtor, nor shall Debtor be entitled to any setoff or other claim
against Bank, should the return which Bank could obtain under this
prepayment formula exceed the interest that Bank would have received if
no prepayment had occurred. All prepayments shall include payment of
accrued interest on the principal amount so prepaid and shall be
applied to payment of interest before application to principal. A
determination by Bank as to the prepayment fee amount, if any, shall be
conclusive.
1
<PAGE> 4
c. Bank shall provide Debtor a statement of the amount payable on
account of prepayment. Debtor acknowledges that (i) Bank establishes a
Base Interest Rate upon the understanding that it apply to the Base
Interest Rate Loan for the entire Interest Period, and (ii) any
prepayment may result in Bank incurring additional costs, expenses or
liabilities; and Debtor agrees to pay these liquidated damages as a
reasonable estimate of the costs, expenses and liabilities of Bank
associated with such prepayment.
5. DEFAULT AND ACCELERATION OF TIME FOR PAYMENT. Default shall include, but not
be limited to, any of the following: (a) the failure of Debtor to make any
payment required under this note when due; (b) any breach, misrepresentation or
other default by Debtor, any guarantor, co-maker, endorser, or any person or
entity other than Debtor providing security for this note (hereinafter
individually and collectively referred to as the "Obligor") under any security
agreement, guaranty or other agreement between Bank and any Obligor; (c) the
insolvency of any Obligor or the failure of any Obligor generally to pay such
Obligor's debts as such debts become due; (d) the commencement as to any Obligor
of any voluntary or involuntary proceeding under any laws relating to
bankruptcy, insolvency, reorganization, arrangement, debt adjustment or debtor
relief; (e) the assignment by any Obligor for the benefit of such Obligor's
creditors; (f) the appointment, or commencement of any proceeding for the
appointment of a receiver, trustee, custodian or similar official for all or
substantially all of any Obligor's property; (g) the commencement of any
proceeding for the dissolution or liquidation of any Obligor; (h) the
termination of existence or death of any Obligor; (i) the revocation of any
guaranty or subordination agreement given in connection with this note; (j) the
failure of any Obligor to comply with any order, judgement, injunction, decree,
writ or demand of any court or other public authority; (k) the filing or
recording against any Obligor, or the property of any Obligor, of any notice of
levy, notice to withhold, or other legal process for taxes other than property
taxes; (l) the default by any Obligor personally liable for amounts owed
hereunder on any obligation concerning the borrowing of money; (m) the issuance
against any Obligor, or the property of any Obligor, of any writ of attachment,
execution, or other judicial lien; or (n) the deterioration of the financial
condition of any Obligor which results in Bank deeming itself, in good faith,
insecure. Upon the occurrence of any such default, Bank, in its discretion, may
cease to advance funds hereunder and may declare all obligations under this note
immediately due and payable; however, upon the occurrence of an event of default
under d, e, f, or g, all principal and interest shall automatically become
immediately due and payable.
6. ADDITIONAL AGREEMENTS OF DEBTOR. If any amounts owing under this note are not
paid when due, Debtor promises to pay all costs and expenses, including
reasonable attorneys' fees, incurred by Bank in the collection or enforcement of
this note. Debtor and any endorsers of this note, for the maximum period of time
and the full extent permitted by law, (a) waive diligence, presentment, demand,
notice of nonpayment, protest, notice of protest, and notice of every kind; (b)
waive the right to assert the defense of any statute of limitations to any debt
or obligation hereunder; and (c) consent to renewals and extensions of time for
the payment of any amounts due under this note. If this note is signed by more
than one party, the term "Debtor" includes each of the undersigned and any
successors in interest thereof; all of whose liability shall be joint and
several. Any married person who signs this note agrees that recourse may be had
against the separate property of that person for any obligations hereunder. The
receipt of any check or other item of payment by Bank, at its option, shall not
be considered a payment on account until such check or other item of payment is
honored when presented for payment at the drawee bank. Bank may delay the credit
of such payment based upon Bank's schedule of funds availability, and interest
under this note shall accrue until the funds are deemed collected. In any action
brought under or arising out of this note, Debtor and any Obligor, including
their successors and assigns, hereby consent to the jurisdiction of any
competent court within the State of California, as provided in any alternative
dispute resolution agreement executed between Debtor and Bank, and consent to
service of process by any means authorized by said state's law. The term "Bank"
includes, without limitation, any holder of this note. This note shall be
construed in accordance with and governed by the laws of the State of
California. This note hereby incorporates any alternative dispute resolution
agreement previously, concurrently or hereafter executed between Debtor and
Bank.
7. DEFINITIONS. As used herein, the following terms shall have the meetings
respectively set forth below: "AGREEMENT" means that certain Loan Agreement,
dated as of September 26, 1997, by and between Debtor and Bank, as the same has
heretofore been, or may hereafter be, amended, modified, supplemented, extended,
renewed, replaced or restated from time to time. "APPLICABLE MARGIN" means a per
annum rate equal to (a) 1.50%, if the ratio of Debtor's total liabilities to
Tangible Net Worth (as such term is defined in the Agreement) (the "Leverage
Ratio") as at the end of the most recent fiscal quarter in respect of which
Debtor has furnished a financial statement to Bank as required by the Agreement
(the "Reported Period") is less than or equal to 1.00:1.00, (b) 1.75%, if the
Leverage Ratio as at the end of the most recent Reported Period is greater than
1.00:1.00 but less than or equal to 1.30:1.00, (c) 2.00%, if the Leverage Ratio
as at the end of the most recent Reported Period is greater than 1.30:1.00 but
less than or equal to 1.60:1.00, and (d) 2.25%, if the Leverage Ratio as at the
end of the most recent Reported Period is greater than
<PAGE> 5
1.60:1.00. A change in the Applicable Margin resulting from a change in the
Leverage Ratio shall become effective on the fifth day following delivery by
Debtor to Bank of a financial statement reflecting a change in the Leverage
Ratio which requires a change in the Applicable Margin as provided for herein.
For the purpose of determining the Applicable Margin, if a default under this
note or an Event of Default (as such term is defined in the Agreement) has
occurred and is continuing (including without limitation a default or an Event
of Default resulting from the failure of Debtor to furnish any financial
statement to Bank as required by the Agreement), then, without waiving any right
or remedy that Bank may have under the Agreement as a result of such default or
Event of Default (including without limitation the right to accelerate Debtor's
obligations or to invoke the default interest rate), the Leverage Ratio shall be
conclusively presumed to be greater than 1.60:1.00 from the date of the
occurrence of such default or Event of Default until such default or Event of
Default is cured by Debtor or waived by Bank. "BASE INTEREST RATE" means a rate
of interest based on the LIBOR Rate. "BASE INTEREST RATE LOAN" means amounts
outstanding under this note that bear interest at a Base Interest Rate. "BASE
RATE MATURITY DATE" means the last day of the Interest Period with respect to
principal outstanding under a Base Interest Rate Loan. "BUSINESS DAY" means a
day on which Bank is open for business for the funding of corporate loans, and,
with respect to the rate of interest based on the LIBOR-Rate, on which dealings
in U.S. dollar deposits outside of the United States may be carried on by Bank.
"INTEREST PERIOD" means with respect to funds bearing interest at a rate based
on the LIBOR Rate, any calendar period of one, three, six, nine or twelve
months. In determining an Interest Period, a month means a period that starts on
one Business Day in a month and ends on and includes the day preceding the
numerically corresponding day in the next month. For any month in which there is
no such numerically corresponding day, then as to that month, such day shall be
deemed to be the last calendar day of such month. Any Interest Period which
would otherwise end on a non-Business Day shall end on the next succeeding
Business Day unless that is the first day of a month, in which event such
Interest Period shall end on the next preceding Business Day. "LIBOR RATE" means
a per annum rate of interest (rounded upward, if necessary, to the nearest 1/100
of 1%) at which dollar deposits, in immediately available funds and in lawful
money of the United States would be offered to Bank, outside of the United
States, for a term coinciding with the Interest Period selected by Debtor and
for an amount equal to the amount of principal covered by Debtor's interest rate
election, plus Bank's costs, including the costs, if any, of reserve
requirements. "ORIGINATION DATE" means the first day of the Interest Period.
"REFERENCE RATE" means the rate announced by Bank from time to time at its
corporate headquarters as its Reference Rate. The Reference Rate is an index
rate determined by Bank from time to time as a means of pricing certain
extensions of credit and is neither directly tied to any external rate of
interest or index nor necessarily the lowest rate of interest charged by Bank at
any given time.
SMARTFLEX SYSTEMS, INC.
By: /s/ William L. Healey
--------------------------------------
WILLIAM L. HEALEY, PRESIDENT
2
<PAGE> 1
EXHIBIT 10.3
UNION BANK OF CALIFORNIA
PROMISSORY NOTE
(BASE RATE)
<TABLE>
<CAPTION>
=====================================================================================================
<S> <C> <C> <C>
Borrower Name SMARTFLEX SYSTEMS, INC.
- -----------------------------------------------------------------------------------------------------
Borrower Address Office 45061 Loan Number 8439907413 0081-00-0-002
14312 FRANKLIN AVENUE -------------------------------------------------------------
TUSTIN, CA 92680-7028 Maturity Date SEPTEMBER 30, 2001 Amount $1,374,999.93
=====================================================================================================
</TABLE>
$1,374,999.93 Date APRIL 20, 1999
------------ --------------
FOR VALUE RECEIVED, on SEPTEMBER 30, 2001, the undersigned ("Debtor") promises
to pay to the order of UNION BANK OF CALIFORNIA, N.A. ("Bank"), as indicated
below, the principal sum of ONE MILLION THREE HUNDRED SEVENTY FOUR THOUSAND NINE
HUNDRED NINETY NINE AND 93/100 Dollars ($1,374,999.93), or so much thereof as is
disbursed, together with interest on the balance of such principal from time to
time outstanding, at the per annum rate or rates and at the times set forth
below.
1. PAYMENTS.
PRINCIPAL PAYMENTS. Debtor shall pay principal in installments of FORTY
FIVE THOUSAND EIGHT HUNDRED THIRTY THREE AND 33/100 Dollars ($45,833.33) each on
the LAST day of each MONTH, commencing MAY 31, 1999. The availability under this
note shall be reduced on the same day and in the same amount as each scheduled
principal payment.
INTEREST PAYMENTS. Debtor shall pay interest on the LAST day of each
MONTH (commencing MAY 31, 1999). Should interest not be paid when due, it shall
become part of the principal and bear interest as herein provided. All
computations of interest under this note shall be made on the basis of a year of
360 days, for actual days elapsed.
a. BASE INTEREST RATE. At Debtor's option, amounts outstanding
hereunder in minimum amounts of at least $500,000.00 shall bear
interest at a rate, based on an index selected by Debtor, which is
equal to Bank's LIBOR Rate for the Interest Period selected by Debtor
plus the Applicable Margin.
No Base Interest Rate may be changed, altered or otherwise modified
until the expiration of the Interest Period selected by Debtor. The
exercise of interest rate options by Debtor shall be as recorded in
Bank's records, which records shall be prime facie evidence of the
amount borrowed under either interest option and the interest rate;
provided, however, that failure of Bank to make any such notation in
its records shall not discharge Debtor from its obligations
<PAGE> 2
to repay in full with interest all amounts borrowed. In no event shall
any Interest Period extend beyond the maturity date of this note.
To exercise this option, Debtor may, from time to time with respect to
principal outstanding on which a Base Interest Rate is not accruing,
and on the expiration of any Interest Period with respect to principal
outstanding on which a Base Interest Rate has been accruing, select an
index offered by Bank for a Base Interest Rate Loan and an Interest
Period by telephoning an authorized lending officer of Bank located at
the banking office identified below prior to 10:00 a.m., Pacific time,
on any Business Day and advising that officer of the selected index,
the Interest Period and the Origination Date selected (which
Origination Date, for a Base Interest Rate Loan based on the
LIBOR-Rate, shall follow the date of such selection by no more than two
(2) Business Days).
Bank will mail a written communication of the terms of the selection to
Debtor promptly after the selection is made. Failure to send such
confirmation shall not affect Bank's rights to collect interest at the
rate selected. If, on the date of the selection, the index selected is
unavailable for any reason, the selection shall be void. Bank reserves
the right to fund the principal from any source of funds
notwithstanding any Base Interest Rate selected by Debtor.
b. VARIABLE INTEREST RATE. All principal outstanding hereunder which is
not bearing interest at a Base Interest Rate shall bear interest at a
rate per annum of 0.25% in excess of the Reference Rate, which rate
shall vary as and when the Reference Rate changes.
If any interest rate defined in this note ceases to be available from
Bank for any reason, then said interest rate shall be replaced by the
rate then offered by Bank, which, in the sole discretion of Bank, most
closely approximates the unavailable rate.
Debtor shall pay all amounts due under this note in lawful money of the
United States at Bank's ORANGE COUNTY COMMERCIAL BANKING Office, or
such other office as may be designated by Bank, from time to time.
2. LATE PAYMENTS. If any payment required by the terms of this note shall remain
unpaid ten days after same is due, at the option of Bank, Debtor shall pay a fee
of $100 to Bank.
3. INTEREST RATE FOLLOWING DEFAULT. In the event of default, at the option of
Bank, and, to the extent permitted by law, interest shall be payable on the
outstanding principal under this note at a per annum rate equal to five percent
(5%) in excess of the interest rate specified in paragraph 1.b. of this note,
calculated from the date of default until all amounts payable under this note
are paid in full.
4. PREPAYMENT.
a. Amounts outstanding under this note bearing interest at a rate based
on the Reference Rate may be prepaid in whole or in part at any time,
without penalty or premium. Debtor may prepay amounts outstanding under
this note bearing interest at a Base Interest Rate in whole or in part
provided Debtor has given Bank not less than five (5) Business Days
prior written notice of Debtor's intention to make such prepayment and
pays to Bank the
<PAGE> 3
liquidated damages due as a result. Liquidated Damages shall also be
paid, if Bank, for any other reason, including acceleration or
foreclosure, receives all or any portion of principal bearing interest
at a Base Interest Rate prior to its scheduled payment date. Liquidated
Damages shall be an amount equal to the present value of the product
of: (i) the difference (but not less then zero) between (a) the Base
Interest Rate applicable to the principal amount which is being
prepaid, and (b) the return which Bank could obtain if it used the
amount of such prepayment of principal to purchase at bid price
regularly quoted securities issued by the United States having a
maturity date most closely coinciding with the relevant Base Rate
Maturity Date and such securities were held by Bank until the relevant
Base Rate Maturity Date ("Yield Rate"); (ii) a fraction, the numerator
of which is the number of days in the period between the date of
prepayment and the relevant Base Rate Maturity Date and the denominator
of which is 360; and (iii) the amount of the principal so prepaid
(except in the event that principal payments are required and have been
made as scheduled under the terms of the Base Interest Rate Loan being
prepaid, then an amount equal to the lesser of (A) the amount prepaid
or (B) 50% of the sum of (1) the amount prepaid and (2) the amount of
principal scheduled under the terms of the Base Interest Rate Loan
being prepaid to be outstanding at the relevant Base Rate Maturity
Date). Present value under this note is determined by discounting the
above product to present value using the Yield Rate as the annual
discount factor.
b. In no event shall Bank be obligated to make any payment or refund to
Debtor, nor shall Debtor be entitled to any setoff or other claim
against Bank, should the return which Bank could obtain under this
prepayment formula exceed the interest that Bank would have received if
no prepayment had occurred. All prepayments shall include payment of
accrued interest on the principal amount so prepaid and shall be
applied to payment of interest before
1
<PAGE> 4
application to principal. A determination by Bank as to the prepayment
fee amount, if any, shall be conclusive. In the event of partial
prepayment, such prepayments shall be applied to principal payments in
the inverse order of their maturity.
c. Bank shall provide Debtor a statement of the amount payable on
account of prepayment. Debtor acknowledges that (i) Bank establishes a
Base Interest Rate upon the understanding that it apply to the Base
Interest Rate Loan for the entire Interest Period, and (ii) any
prepayment may result in Bank incurring additional costs, expenses or
liabilities; and Debtor agrees to pay these liquidated damages as a
reasonable estimate of the costs, expenses and liabilities of Bank
associated with such prepayment.
5. DEFAULT AND ACCELERATION OF TIME FOR PAYMENT. Default shall include, but not
be limited to, any of the following: (a) the failure of Debtor to make any
payment required under this note when due; (b) any breach, misrepresentation or
other default by Debtor, any guarantor, co-maker, endorser, or any person or
entity other than Debtor providing security for this note (hereinafter
individually and collectively referred to as the "Obligor") under any security
agreement, guaranty or other agreement between Bank and any Obligor; (c) the
insolvency of any Obligor or the failure of any Obligor generally to pay such
Obligor's debts as such debts become due; (d) the commencement as to any Obligor
of any voluntary or involuntary proceeding under any laws relating to
bankruptcy, insolvency, reorganization, arrangement, debt adjustment or debtor
relief; (e) the assignment by any Obligor for the benefit of such Obligor's
creditors; (f) the appointment, or commencement of any proceeding for the
appointment of a receiver, trustee, custodian or similar official for all or
substantially all of any Obligor's property; (g) the commencement of any
proceeding for the dissolution or liquidation of any Obligor; (h) the
termination of existence or death of any Obligor; (i) the revocation of any
guaranty or subordination agreement given in connection with this note; (j) the
failure of any Obligor to comply with any order, judgement, injunction, decree,
writ or demand of any court or other public authority; (k) the filing or
recording against any Obligor, or the property of any Obligor, of any notice of
levy, notice to withhold, or other legal process for taxes other than property
taxes; (l) the default by any Obligor personally liable for amounts owed
hereunder on any obligation concerning the borrowing of money; (m) the issuance
against any Obligor, or the property of any Obligor, of any writ of attachment,
execution, or other judicial lien; or (n) the deterioration of the financial
condition of any Obligor which results in Bank deeming itself, in good faith,
insecure. Upon the occurrence of any such default, Bank, in its discretion, may
cease to advance funds hereunder and may declare all obligations under this note
immediately due and payable; however, upon the occurrence of an event of default
under d, e, f, or g, all principal and interest shall automatically become
immediately due and payable.
6. ADDITIONAL AGREEMENTS OF DEBTOR. If any amounts owing under this note are not
paid when due, Debtor promises to pay all costs and expenses, including
reasonable attorneys' fees, incurred by Bank in the collection or enforcement of
this note. Debtor and any endorsers of this note, for the maximum period of time
and the full extent permitted by law, (a) waive diligence, presentment, demand,
notice of nonpayment, protest, notice of protest, and notice of every kind; (b)
waive the right to assert the defense of any statute of limitations to any debt
or obligation hereunder; and (c) consent to renewals and extensions of time for
the payment of any amounts due under this note. If this note is signed by more
than one party, the term "Debtor" includes each of the undersigned and any
successors in interest thereof; all of whose liability shall be joint and
several. Any married person who signs this note agrees that recourse may be had
against the separate property of that person for any obligations hereunder. The
receipt of any check or other item of payment by Bank, at its option, shall not
be considered a payment on account until such check or other item of payment is
honored when presented for payment at the drawee bank. Bank may delay the credit
of such payment based upon Bank's schedule of funds availability, and interest
under this note shall accrue until the funds are deemed collected. In any action
brought under or arising out of this note, Debtor and any Obligor, including
their successors and assigns, hereby consent to the jurisdiction of any
competent court within the State of California, as provided in any alternative
dispute resolution agreement executed between Debtor and Bank, and consent to
service of process by any means authorized by said state's law. The term "Bank"
includes, without limitation, any holder of this note. This note shall be
construed in accordance with and governed by the laws of the State of
California. This note hereby incorporates any alternative dispute resolution
agreement previously, concurrently or hereafter executed between Debtor and
Bank.
7. DEFINITIONS. As used herein, the following terms shall have the meetings
respectively set forth below: "AGREEMENT" means that certain Loan Agreement,
dated as of September 26, 1997, by and between Debtor and Bank, as the same has
heretofore been, or may hereafter be, amended, modified, supplemented, extended,
renewed, replaced or restated from time to time. "APPLICABLE MARGIN" means a per
annum rate equal to (a) 1.75%, if the ratio of Debtor's total liabilities to
Tangible Net Worth (as such term is defined in the Agreement) (the "Leverage
Ratio") as at the end of the most recent fiscal quarter in respect of which
Debtor has furnished a financial statement to Bank as required by the Agreement
(the "Reported Period") is less than or equal to 1.00:1.00,
<PAGE> 5
(b) 2.00%, if the Leverage Ratio as at the end of the most recent Reported
Period is greater than 1.00:1.00 but less than or equal to 1.30:1.00, (c) 2.25%,
if the Leverage Ratio as at the end of the most recent Reported Period is
greater than 1.30:1.00 but less than or equal to 1.60:1.00, and (d) 2.50%, if
the Leverage Ratio as at the end of the most recent Reported Period is greater
than 1.60:1.00. A change in the Applicable Margin resulting from a change in the
Leverage Ratio shall become effective on the fifth day following delivery by
Debtor to Bank of a financial statement reflecting a change in the Leverage
Ratio which requires a change in the Applicable Margin as provided for herein.
For the purpose of determining the Applicable Margin, if a default under this
note or an Event of Default (as such term is defined in the Agreement) has
occurred and is continuing (including without limitation a default or an Event
of Default resulting from the failure of Debtor to furnish any financial
statement to Bank as required by the Agreement), then, without waiving any right
or remedy that Bank may have under the Agreement as a result of such default or
Event of Default (including without limitation the right to accelerate Debtor's
obligations or to invoke the default interest rate), the Leverage Ratio shall be
conclusively presumed to be greater than 1.60:1.00 from the date of the
occurrence of such default or Event of Default until such default or Event of
Default is cured by Debtor or waived by Bank. "BASE INTEREST RATE" means a rate
of interest based on the LIBOR-Rate. "BASE INTEREST RATE LOAN" means amounts
outstanding under this note that bear interest at a Base Interest Rate. "BASE
RATE MATURITY DATE" means the last day of the Interest Period with respect to
principal outstanding under a Base Interest Rate Loan. "BUSINESS DAY" means a
day on which Bank is open for business for the funding of corporate loans, and,
with respect to the rate of interest based on the LIBOR-Rate, on which dealings
in U.S. dollar deposits outside of the United States may be carried on by Bank.
"INTEREST PERIOD" means with respect to funds bearing interest at a rate based
on the LIBOR Rate, any calendar period of one, three, six, nine or twelve
months. In determining an Interest Period, a month means a period that starts on
one Business Day in a month and ends on and includes the day preceding the
numerically corresponding day in the next month. For any month in which there is
no such numerically corresponding day, then as to that month, such day shall be
deemed to be the last calendar day of such month. Any Interest Period which
would otherwise end on a non-Business Day shall end on the next succeeding
Business Day unless that is the first day of a month, in which event such
Interest Period shall end on the next preceding Business Day. "LIBOR RATE" means
a per annum rate of interest (rounded upward, if necessary, to the nearest 1/100
of 1%) at which dollar deposits, in immediately available funds and in lawful
money of the United States would be offered to Bank, outside of the United
States, for a term coinciding with the Interest Period selected by Debtor and
for an amount equal to the amount of principal covered by Debtor's interest rate
election, plus Bank's costs, including the cost, if any, of reserve
requirements. "ORIGINATION DATE" means the first day of the Interest Period.
"REFERENCE RATE" means the rate announced by Bank from time to time at its
corporate headquarters as its Reference Rate. The Reference Rate is an index
rate determined by Bank from time to time as a means of pricing certain
extensions of credit and is neither directly tied to any external rate of
interest or index nor necessarily the lowest rate of interest charged by Bank at
any given time.
SMARTFLEX SYSTEMS, INC.
By: /s/ William L. Healey
--------------------------------------
WILLIAM L. HEALEY, PRESIDENT
2
<PAGE> 1
EXHIBIT 10.4
UNION BANK OF CALIFORNIA
PROMISSORY NOTE
(BASE RATE)
<TABLE>
<CAPTION>
=====================================================================================================
<S> <C> <C> <C> <C>
Borrower Name SMARTFLEX SYSTEMS, INC.
- -----------------------------------------------------------------------------------------------------
Borrower Address Office 45061 Loan Number 8439907413 0082-00-0-001
14312 FRANKLIN AVENUE -------------------------------------------------------------
TUSTIN, CA 92680-7028 Maturity Date DECEMBER 1, 2003 Amount $2,800,000.00
=====================================================================================================
</TABLE>
$2,800,000.00 Date APRIL 20, 1999
------------ --------------
FOR VALUE RECEIVED, on DECEMBER 1, 2003, the undersigned ("Debtor") promises to
pay to the order of UNION BANK OF CALIFORNIA, N.A. ("Bank"), as indicated below,
the principal sum of TWO MILLION EIGHT HUNDRED THOUSAND AND NO/100 Dollars
($2,800,000.00), or so much thereof as is disbursed, together with interest on
the balance of such principal from time to time outstanding, at the per annum
rate or rates and at the times set forth below.
1. PAYMENTS.
PRINCIPAL PAYMENTS. Debtor shall pay principal in installments of FIFTY
THOUSAND AND NO/100 Dollars ($50,000.00) each on the 1ST day of each MONTH,
commencing MAY 1, 1999. The availability under this note shall be reduced on the
same day and in the same amount as each scheduled principal payment.
INTEREST PAYMENTS. Debtor shall pay interest on the 1ST day of each
MONTH (commencing MAY 1, 1999). Should interest not be paid when due, it shall
become part of the principal and bear interest as herein provided. All
computations of interest under this note shall be made on the basis of a year of
360 days, for actual days elapsed.
a. BASE INTEREST RATE. At Debtor's option, amounts outstanding
hereunder in minimum amounts of at least $500,000.00 shall bear
interest at a rate, based on an index selected by Debtor, which is
equal to Bank's LIBOR Rate for the Interest Period selected by Debtor
plus the Applicable Margin.
No Base Interest Rate may be changed, altered or otherwise modified
until the expiration of the Interest Period selected by Debtor. The
exercise of interest rate options by Debtor shall be as recorded in
Bank's records, which records shall be prime facie evidence of the
amount borrowed under either interest option and the interest rate;
provided, however, that failure of
<PAGE> 2
Bank to make any such notation in its records shall not discharge
Debtor from its obligations to repay in full with interest all amounts
borrowed. In no event shall any Interest Period extend beyond the
maturity date of this note.
To exercise this option, Debtor may, from time to time with respect to
principal outstanding on which a Base Interest Rate is not accruing,
and on the expiration of any Interest Period with respect to principal
outstanding on which a Base Interest Rate has been accruing, select an
index offered by Bank for a Base Interest Rate Loan and an Interest
Period by telephoning an authorized lending officer of Bank located at
the banking office identified below prior to 10:00 a.m., Pacific time,
on any Business Day and advising that officer of the selected index,
the Interest Period and the Origination Date selected (which
Origination Date, for a Base Interest Rate Loan based on the
LIBOR-Rate, shall follow the date of such selection by no more than two
(2) Business Days).
Bank will mail a written communication of the terms of the selection to
Debtor promptly after the selection is made. Failure to send such
confirmation shall not affect Bank's rights to collect interest at the
rate selected. If, on the date of the selection, the index selected is
unavailable for any reason, the selection shall be void. Bank reserves
the right to fund the principal from any source of funds
notwithstanding any Base Interest Rate selected by Debtor.
b. VARIABLE INTEREST RATE. All principal outstanding hereunder which is
not bearing interest at a Base Interest Rate shall bear interest at a
rate per annum of 0.25% in excess of the Reference Rate, which rate
shall vary as and when the Reference Rate changes.
If any interest rate defined in this note ceases to be available from
Bank for any reason, then said interest rate shall be replaced by the
rate then offered by Bank, which, in the sole discretion of Bank, most
closely approximates the unavailable rate.
Debtor shall pay all amounts due under this note in lawful money of the
United States at Bank's ORANGE COUNTY COMMERCIAL BANKING Office, or
such other office as may be designated by Bank, from time to time.
2. LATE PAYMENTS. If any payment required by the terms of this note shall remain
unpaid ten days after same is due, at the option of Bank, Debtor shall pay a fee
of $100 to Bank.
3. INTEREST RATE FOLLOWING DEFAULT. In the event of default, at the option of
Bank, and, to the extent permitted by law, interest shall be payable on the
outstanding principal under this note at a per annum rate equal to five percent
(5%) in excess of the interest rate specified in paragraph 1.b. of this note,
calculated from the date of default until all amounts payable under this note
are paid in full.
4. PREPAYMENT.
a. Amounts outstanding under this note bearing interest at a rate based
on the Reference Rate may be prepaid in whole or in part at any time,
without penalty or premium. Debtor may prepay amounts outstanding under
this note bearing interest at a Base Interest Rate in whole or in part
provided Debtor has given Bank not less than five (5) Business Days
prior
<PAGE> 3
written notice of Debtor's intention to make such prepayment and pays
to Bank the liquidated damages due as a result. Liquidated Damages
shall also be paid, if Bank, for any other reason, including
acceleration or foreclosure, receives all or any portion of principal
bearing interest at a Base Interest Rate prior to its scheduled payment
date. Liquidated Damages shall be an amount equal to the present value
of the product of: (i) the difference (but not less then zero) between
(a) the Base Interest Rate applicable to the principal amount which is
being prepaid, and (b) the return which Bank could obtain if it used
the amount of such prepayment of principal to purchase at bid price
regularly quoted securities issued by the United States having a
maturity date most closely coinciding with the relevant Base Rate
Maturity Date and such securities were held by Bank until the relevant
Base Rate Maturity Date ("Yield Rate"); (ii) a fraction, the numerator
of which is the number of days in the period between the date of
prepayment and the relevant Base Rate Maturity Date and the denominator
of which is 360; and (iii) the amount of the principal so prepaid
(except in the event that principal payments are required and have been
made as scheduled under the terms of the Base Interest Rate Loan being
prepaid, then an amount equal to the lesser of (A) the amount prepaid
or (B) 50% of the sum of (1) the amount prepaid and (2) the amount of
principal scheduled under the terms of the Base Interest Rate Loan
being prepaid to be outstanding at the relevant Base Rate Maturity
Date). Present value under this note is determined by discounting the
above product to present value using the Yield Rate as the annual
discount factor.
b. In no event shall Bank be obligated to make any payment or refund to
Debtor, nor shall Debtor be entitled to any setoff or other claim
against Bank, should the return which Bank could obtain under this
prepayment formula exceed the interest that Bank would have received if
no prepayment had occurred. All prepayments shall include payment of
accrued interest on the principal amount so prepaid and shall be
applied to payment of interest before application to principal. A
determination by Bank as to the prepayment fee amount, if any, shall be
conclusive. In the event of partial prepayment, such prepayments shall
be applied to principal payments in the inverse order of their
maturity.
1
<PAGE> 4
c. Bank shall provide Debtor a statement of the amount payable on
account of prepayment. Debtor acknowledges that (i) Bank establishes a
Base Interest Rate upon the understanding that it apply to the Base
Interest Rate Loan for the entire Interest Period, and (ii) any
prepayment may result in Bank incurring additional costs, expenses or
liabilities; and Debtor agrees to pay these liquidated damages as a
reasonable estimate of the costs, expenses and liabilities of Bank
associated with such prepayment.
5. DEFAULT AND ACCELERATION OF TIME FOR PAYMENT. Default shall include, but not
be limited to, any of the following: (a) the failure of Debtor to make any
payment required under this note when due; (b) any breach, misrepresentation or
other default by Debtor, any guarantor, co-maker, endorser, or any person or
entity other than Debtor providing security for this note (hereinafter
individually and collectively referred to as the "Obligor") under any security
agreement, guaranty or other agreement between Bank and any Obligor; (c) the
insolvency of any Obligor or the failure of any Obligor generally to pay such
Obligor's debts as such debts become due; (d) the commencement as to any Obligor
of any voluntary or involuntary proceeding under any laws relating to
bankruptcy, insolvency, reorganization, arrangement, debt adjustment or debtor
relief; (e) the assignment by any Obligor for the benefit of such Obligor's
creditors; (f) the appointment, or commencement of any proceeding for the
appointment of a receiver, trustee, custodian or similar official for all or
substantially all of any Obligor's property; (g) the commencement of any
proceeding for the dissolution or liquidation of any Obligor; (h) the
termination of existence or death of any Obligor; (i) the revocation of any
guaranty or subordination agreement given in connection with this note; (j) the
failure of any Obligor to comply with any order, judgement, injunction, decree,
writ or demand of any court or other public authority; (k) the filing or
recording against any Obligor, or the property of any Obligor, of any notice of
levy, notice to withhold, or other legal process for taxes other than property
taxes; (l) the default by any Obligor personally liable for amounts owed
hereunder on any obligation concerning the borrowing of money; (m) the issuance
against any Obligor, or the property of any Obligor, of any writ of attachment,
execution, or other judicial lien; or (n) the deterioration of the financial
condition of any Obligor which results in Bank deeming itself, in good faith,
insecure. Upon the occurrence of any such default, Bank, in its discretion, may
cease to advance funds hereunder and may declare all obligations under this note
immediately due and payable; however, upon the occurrence of an event of default
under d, e, f, or g, all principal and interest shall automatically become
immediately due and payable.
6. ADDITIONAL AGREEMENTS OF DEBTOR. If any amounts owing under this note are not
paid when due, Debtor promises to pay all costs and expenses, including
reasonable attorneys' fees, incurred by Bank in the collection or enforcement of
this note. Debtor and any endorsers of this note, for the maximum period of time
and the full extent permitted by law, (a) waive diligence, presentment, demand,
notice of nonpayment, protest, notice of protest, and notice of every kind; (b)
waive the right to assert the defense of any statute of limitations to any debt
or obligation hereunder; and (c) consent to renewals and extensions of time for
the payment of any amounts due under this note. If this note is signed by more
than one party, the term "Debtor" includes each of the undersigned and any
successors in interest thereof; all of whose liability shall be joint and
several. Any married person who signs this note agrees that recourse may be had
against the separate property of that person for any obligations hereunder. The
receipt of any check or other item of payment by Bank, at its option, shall not
be considered a payment on account until such check or other item of payment is
honored when presented for payment at the drawee bank. Bank may delay the credit
of such payment based upon Bank's schedule of funds availability, and interest
under this note shall accrue until the funds are deemed collected. In any action
brought under or arising out of this note, Debtor and any Obligor, including
their successors and assigns, hereby consent to the jurisdiction of any
competent court within the State of California, as provided in any alternative
dispute resolution agreement executed between Debtor and Bank, and consent to
service of process by any means authorized by said state's law. The term "Bank"
includes, without limitation, any holder of this note. This note shall be
construed in accordance with and governed by the laws of the State of
California. This note hereby incorporates any alternative dispute resolution
agreement previously, concurrently or hereafter executed between Debtor and
Bank.
7. DEFINITIONS. As used herein, the following terms shall have the meetings
respectively set forth below: "AGREEMENT" means that certain Loan Agreement,
dated as of September 26, 1997, by and between Debtor and Bank, as the same has
heretofore been, or may hereafter be, amended, modified, supplemented, extended,
renewed, replaced or restated from time to time. "APPLICABLE MARGIN" means a per
annum rate equal to (a) 1.75%, if the ratio of Debtor's total liabilities to
Tangible Net Worth (as such term is defined in the Agreement) (the "Leverage
Ratio") as at the end of the most recent fiscal quarter in respect of which
Debtor has furnished a financial statement to
<PAGE> 5
Bank as required by the Agreement (the "Reported Period") is less than or equal
to 1.00:1.00, (b) 2.00%, if the Leverage Ratio as at the end of the most recent
Reported Period is greater than 1.00:1.00 but less than or equal to 1.30:1.00,
(c) 2.25%, if the Leverage Ratio as at the end of the most recent Reported
Period is greater than 1.30:1.00 but less than or equal to 1.60:1.00, and (d)
2.50%, if the Leverage Ratio as at the end of the most recent Reported Period is
greater than 1.60:1.00. A change in the Applicable Margin resulting from a
change in the Leverage Ratio shall become effective on the fifth day following
delivery by Debtor to Bank of a financial statement reflecting a change in the
Leverage Ratio which requires a change in the Applicable Margin as provided for
herein. For the purpose of determining the Applicable Margin, if a default under
this note or an Event of Default (as such term is defined in the Agreement) has
occurred and is continuing (including without limitation a default or an Event
of Default resulting from the failure of Debtor to furnish any financial
statement to Bank as required by the Agreement), then, without waiving any right
or remedy that Bank may have under the Agreement as a result of such default or
Event of Default (including without limitation the right to accelerate Debtor's
obligations or to invoke the default interest rate), the Leverage Ratio shall be
conclusively presumed to be greater than 1.60:1.00 from the date of the
occurrence of such default or Event of Default until such default or Event of
Default is cured by Debtor or waived by Bank. "BASE INTEREST RATE" means a rate
of interest based on the LIBOR-Rate. "BASE INTEREST RATE LOAN" means amounts
outstanding under this note that bear interest at a Base Interest Rate. "BASE
RATE MATURITY DATE" means the last day of the Interest Period with respect to
principal outstanding under a Base Interest Rate Loan. "BUSINESS DAY" means a
day on which Bank is open for business for the funding of corporate loans, and,
with respect to the rate of interest based on the LIBOR-Rate, on which dealings
in U.S. dollar deposits outside of the United States may be carried on by Bank.
"INTEREST PERIOD" means with respect to funds bearing interest at a rate based
on the LIBOR Rate, any calendar period of [one, two or three weeks or one, two,
three, four, five, six, nine or twelve months]. In determining an Interest
Period, a month means a period that starts on one Business Day in a month and
ends on and includes the day preceding the numerically corresponding day in the
next month. For any month in which there is no such numerically corresponding
day, then as to that month, such day shall be deemed to be the last calendar day
of such month. Any Interest Period which would otherwise end on a non-Business
Day shall end on the next succeeding Business Day unless that is the first day
of a month, in which event such Interest Period shall end on the next preceding
Business Day. "LIBOR RATE" means a per annum rate of interest (rounded upward,
if necessary, to the nearest 1/100 of 1%) at which dollar deposits, in
immediately available funds and in lawful money of the United States would be
offered to Bank, outside of the United States, for a term coinciding with the
Interest Period selected by Debtor and for an amount equal to the amount of
principal covered by Debtor's interest rate election, plus Bank's costs,
including the cost, if any, of reserve requirements. "ORIGINATION DATE" means
the first day of the Interest Period. "REFERENCE RATE" means the rate announced
by Bank from time to time at its corporate headquarters as its Reference Rate.
The Reference Rate is an index rate determined by Bank from time to time as a
means of pricing certain extensions of credit and is neither directly tied to
any external rate of interest or index nor necessarily the lowest rate of
interest charged by Bank at any given time.
SMARTFLEX SYSTEMS, INC.
By: /s/ William L. Healey
-------------------------------------
WILLIAM L. HEALEY, PRESIDENT
2
<PAGE> 1
EXHIBIT 10.5
LEASE
980 Mission Court
Fremont, California
For a part of Building 4 of Mission Corporate Center
LANDLORD: MISSION COURT PROPERTIES, INC.,
a California corporation
TENANT: SMARTFLEX SYSTEMS, INCORPORATED,
a Delaware corporation
<PAGE> 2
LEASE
SUMMARY OF BASIC TERMS
A. REFERENCE DATE: March 21, 1999
B. LANDLORD: Mission Court Properties, Inc., a California
corporation
C. TENANT: Smartflex Systems, Incorporated, a Delaware
corporation
D. TRADE NAME (if any): None.
E. GUARANTOR (if any): None.
F. PREMISES (Section 1.1, Exhibit A): Approximately forty one thousand
nine hundred two (41,902) square feet of Rentable Area, comprising of a
part of the Rentable Area in Building 4 (the Building ) of Mission
Corporate Center, known as 980 Mission Court, located in the city of
Fremont, County of Alameda, State of California, more particularly
described in Exhibit A hereto.
Project: The Building, other buildings, landscaping, parking spaces,
roadways and walkways on the land commonly known as Mission Corporate
Center, Fremont, California. A general site plan of the Project is set
forth in Exhibit B hereto.
G. PARKING SPACES (Section 1.3): Unreserved use of 168 Parking Spaces.
H. TERM (Section 2.1): Approximately Five (5) years, One and one-half
(1.5) months
Projected Commencement Date: March 21, 1999
Rent Commencement Date: The sooner of the date of Substantial Completion of
Phase 1 of the Tenant Improvements or April 21,
1999
Expiration Date: April 30, 2004
I. BASE ANNUAL RENT (Section 3.1):
Advance Rent payable upon Tenant's execution: $37,292.78
Base Annual Rent: Four Hundred Forty Seven Thousand Five Hundred
Thirteen and 36/100 Dollars ($447,513.36).
Monthly Installments: $37,292.78
Adjustment Dates: May 1, 2000; May 1, 2001; May 1, 2002; May 1, 2003
J. PERMITTED USE (Section 4.1): Subject to the requirements regarding
Hazardous Material and other limitations and provisions of Article 4:
The Premises shall be used only for the purpose of manufacturing of
electronics and electro mechanical products, general warehousing and
related office uses.
K. ADDRESS FOR NOTICES (Article 23):
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To Landlord: With Copies To:
Mission Court Properties, Inc. Richard Yeung
5020 Brandin Court Pacific Resources Asset Development, Inc.
Fremont, California 94538 22 Fourth Street
San Francisco, California 94103
Tyrrell M. Prosser
Baker & McKenzie
2 Embarcadero Ctr., 24th Floor
San Francisco, California 94111
To Tenant:
With a copy to:
Smartflex Systems, Incorporated Smartflex Systems, Incorporated
980 Mission Court 14312 Franklin Avenue
Fremont, California 94539 P.O. Box 2085
Attn: Mr. James Cogan Tustin, California 92781-2085
Attn: Mr. Joe Pendergrass
</TABLE>
i
<PAGE> 3
L. TAXES AND OPERATING COSTS (Section 3.4):
Tenant's Building Share:51.29 %
Tenant's Project Share: 13.04 %
M. SECURITY DEPOSIT (Article 24): Forty Two Thousand Seven Hundred Ninety
Four and 32/100 Dollars ($42,794.32).
N. BROKER(S) (Article 25):
Steve Kapp
BT Commercial Real Estate
530 Water Street, Suite 750
Oakland, California 94607
License No.: 00825241
--------
COOPERATING BROKERS:
Terry Bill
Joe Elliot
Colliers International
1960 The Alameda, Suite 100
San Jose, California 95126
License No.: 00490878
--------
O. ADJUSTMENTS IN RENT AND TERM: The figures set forth in Paragraph I (Base
Annual Rent) above are subject to increase pursuant to Section 3.3 and
Article 27 hereto, and the length of term set forth in Paragraph H
(Term) above is subject to extension pursuant to Article 27 hereto.
The General Lease Provisions identified above in parentheses are those
provisions making reference to above-described Basic Terms. Each such reference
in the General Lease Provisions shall incorporate the applicable Basic Terms.
The Summary of Basic Terms and the General Lease Provisions each comprise a part
of this Lease, and in the event of any conflict between the Summary of Basic
Terms and the General Lease Provisions, the latter shall control.
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TENANT: LANDLORD:
SMARTFLEX SYSTEMS INCORPORATED, a Delaware MISSION COURT PROPERTIES, INC., a California
corporation corporation
By: /s/ James C. Cogan By: /s/ Sam Yip
----------------------------------- --------------------------------------
James C. Cogan Sam Yip
----------------------------------- --------------------------------------
Print Name: Print Name:
Its: VP & GM, EMS Business Unit Its: VP of Finance
----------------------------------- --------------------------------------
By: /s/ Joe L. Pendergrass By:
----------------------------------- --------------------------------------
Joe L. Pendergrass
----------------------------------- --------------------------------------
Print Name: Print Name:
Its: Director of Logistics Its:
----------------------------------- --------------------------------------
</TABLE>
ii
<PAGE> 4
TABLE OF CONTENTS
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Page
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SUMMARY OF BASIC TERMS.........................................................i
TABLE OF CONTENTS..............................................................iii
ARTICLE 1 - PREMISES/COMMON AREAS/PARKING......................................1
Section 1.1 - Premises.........................................................1
Section 1.2 - Common Areas.....................................................1
Section 1.3 - Parking..........................................................1
ARTICLE 2 - TERM/CONSTRUCTION OF PREMISES......................................2
Section 2.1 - Term.............................................................2
Section 2.2 - Construction of Premises.........................................2
Section 2.3 - Acceptance by Tenant.............................................2
ARTICLE 3 - RENT: BASE ANNUAL RENT: TAXES. BUILDING COSTS
AND PROJECT COSTS..............................................................3
Section 3.1 - Rent.............................................................3
Section 3.2 - Base Annual Rent.................................................3
Section 3.3 - Adjustments to Base Annual Rent..................................3
Section 3.4 - Taxes, Building Costs and Project Costs..........................3
Section 3.5 - Additional Taxes.................................................6
Section 3.6 - Late Payments: Charges: Interest: Default Rate...................6
Section 3.7 - Consideration....................................................6
Section 3.8 - Time and Manner of Payment in General............................6
ARTICLE 4 - USE AND OCCUPANCY..................................................7
Section 4.1 - Permitted Use....................................................7
Section 4.2 - Compliance with Law..............................................7
Section 4.3 - Compliance with Insurance Requirements...........................7
Section 4.4 - Certificates of Occupancy........................................7
Section 4.5 - Life-Safety Systems..............................................8
Section 4.6 - Prohibited Uses..................................................8
Section 4.7 - Definition of Hazardous Material.................................8
Section 4.8 - Tenant's Obligation..............................................8
Section 4.9 - Landlord's Exculpation...........................................10
Section 4.10 - Right of Contribution...........................................10
Section 4.11 - Monitoring......................................................10
Section 4.12 - Abatement Activities............................................11
Section 4.13 - Effect on Proposed Assignments and Sublets......................11
ARTICLE 5 - ASSIGNMENT/SUBLETTING/MORTGAGE.....................................11
Section 5.1 - Prohibition: Definitions.........................................11
Section 5.2 - Assignments or Subleases Subject to Landlord's
Prior Written Consent ...........................................12
Section 5.3 - Share of Proceeds of Assignment or Sublease......................13
Section 5.4 - Landlord Options to Terminate Lease..............................13
ARTICLE 6 - ALTERATIONS........................................................13
Section 6.1 - Alterations......................................................13
Section 6.2 - Mechanics' Liens.................................................14
Section 6.3 - Alterations as Landlord's Property...............................14
Section 6.4 - Indemnification..................................................14
Section 6.5 - Survival.........................................................15
ARTICLE 7 - REPAIRS............................................................15
Section 7.1 - Tenant's Obligations/Procedures..................................15
Section 7.2 - Landlord's Obligations and Rights................................15
Section 7.3 - Statutory Waivers................................................16
Section 7.4 - No Liability of Landlord.........................................16
ARTICLE 8 - SUBORDINATION/PROTECTION OF LENDERS................................16
Section 8.1 - Subordination and Attornment.....................................16
Section 8.2 - Superiority of Lease and Attornment..............................17
Section 8.3 - Lender's Right to Cure...........................................17
Section 8.4 - Tenant's Financial Statements....................................17
Section 8.5 - Lease Modifications..............................................17
ARTICLE 9 - LIABILITY/INDEMNIFICATION..........................................18
Section 9.1 - Landlords Exculpation and Limitation of Liability................18
Section 9.2 - Tenant's Liability. Indemnification and Hold Harmless............18
Section 9.3 - Survival and Conflicts with other Indemnity Provisions...........18
ARTICLE 10 - DAMAGE/DESTRUCTION................................................18
</TABLE>
iii
<PAGE> 5
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Section 10.1 - Destruction and Repair..........................................18
Section 10.2 - 180 Day and 60 Day Repair Criteria..............................19
Section 10.3 - Lack of Insurance Proceeds......................................19
Section 10.4 - No Release of Liability.........................................19
Section 10.5 - Tenant's Negligence.............................................19
Section 10.6 - Express Agreement Re Damage and Destruction.....................20
ARTICLE 11 - EMINENT DOMAIN....................................................20
Section 11.1 - Partial or Total Taking.........................................20
Section 11.2 - Award...........................................................20
Section 11.3 - Sale to Condemning Authority....................................20
Section 11.4 - Proration/Abatement of Base Annual Rent.........................20
Section 11.5 - Temporary Taking................................................20
ARTICLE 12 - UTILITIES.........................................................20
Section 12.1 - Utilities.......................................................20
ARTICLE 13 - LANDLORD'S RIGHT OF ENTRY.........................................21
ARTICLE 14 - TENANT'S INSURANCE................................................21
Section 14.1 - Tenant's Insurance..............................................21
Section 14.2 - General Requirements of Tenant's Insurance......................21
Section 14.3 - Waiver of Subrogation...........................................22
Section 14.4 - Landlord's Insurance............................................22
ARTICLE 15 - INSOLVENCY OR BANKRUPTCY..........................................23
Section 15.1 - Insolvency or Bankruptcy........................................23
Section 15.2 - Measure of Damages..............................................23
Section 15.3 - Provision of Services and Assumption of Lease...................23
ARTICLE 16 - DEFAULT/REMEDIES..................................................23
Section 16.1 - Events of Default...............................................23
Section 16.2 - Termination of the Right to Possession..........................24
Section 16.3 - Rights Upon Termination.........................................24
Section 16.4 - Continuance of Lease............................................25
Section 16.5 - Other Remedies..................................................25
Section 16.6 - Waiver of Rights of Redemption and Time for Service of Notice...25
Section l6.7 - Procedural Matters..............................................25
ARTICLE 17 - LANDLORD'S RIGHT TO PERFORM.......................................26
ARTICLE 18 - END OF TERM.......................................................26
Section 18.1 - Condition of Premises...........................................26
Section 18.2 - Holding Over....................................................26
Section 18.3 - Conditions of Termination.......................................26
ARTICLE 19 - QUIET POSSESSION..................................................26
ARTICLE 20 - RULES AND REGULATIONS.............................................27
ARTICLE 21 - NO WAIVER/ENTIRE AGREEMENT/MODIFICATION...........................27
ARTICLE 22 - LANDLORD'S DEFAULT/LIABILITY......................................27
Section 22.1 - Force Majeure...................................................27
Section 22.2 - Notice/Right to Cure............................................27
Section 22.3 - Limitation of Landlord's Liability..............................28
Section 22.4 - Sale by Landlord................................................28
ARTICLE 23 - NOTICES...........................................................28
Section 23.1 - Notices To Tenant...............................................28
Section 23.2 - Notices to Landlord.............................................28
Section 23.3 - Notices Generally...............................................28
ARTICLE 24 - SECURITY DEPOSIT..................................................28
ARTICLE 25 - BROKERAGE.........................................................29
ARTICLE 26 - MISCELLANEOUS.....................................................29
Section 26.1 - Capitals and Construction.......................................29
Section 26.2 - Definitions.....................................................29
</TABLE>
<PAGE> 6
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Section 26.3 - Successors and Assigns..........................................29
Section 26.4 - Landlord's Approval.............................................29
Section 26.5 - Joint and Several Liability.....................................29
Section 26.6 - Governing Law...................................................29
Section 26.7 - Severability....................................................29
Section 26.8 - Security Systems................................................30
iv
Section 26.9 - Time of the Essence.............................................30
Section 26.10 - Recordation....................................................30
Section 26.11 - Change of Name.................................................30
Section 26.12 - Estoppel Certificates..........................................30
Section 26.13 - Authority......................................................30
Section 26.14 - Attorneys' Fees................................................30
Section 26.15 - Waiver of Trial By Jury; Venue; Jurisdiction...................31
Section 26.16 - Substitution of Premises.......................................31
Section 26.17 - Binding Effect.................................................31
Section 26.18 - Signs..........................................................31
Section 26.19 - No Merger......................................................31
Section 26.20 - Acknowledgment of Waivers and Limitations......................31
Section 26.21 - Exhibits: Riders: Addenda......................................31
ARTICLE 27 - OPTION TO EXTEND..................................................31
Section 27.1 - Grant of Options................................................31
Section 27.2 - General Provisions..............................................31
Section 27.3 - Exercise........................................................32
Section 27.4 - Effect of Default or Occupancy..................................32
Section 27.5 - Option Term Rent................................................32
Section 27.6 - Options Personal................................................32
Section 27.7 - Time of Essence.................................................32
Article 28 - RIGHT OF FIRST OFFER..............................................32
LIST OF EXHIBITS
EXHIBIT A - Premises
EXHIBIT B - Project Description
EXHIBIT C - Confirmation of Lease Term
EXHIBIT D - Work Letter Agreement
EXHIBIT E - Rules and Regulations
EXHIBIT F - Sign Program
</TABLE>
v
<PAGE> 7
GENERAL LEASE PROVISIONS
ARTICLE 1 - PREMISES/COMMON AREAS/PARKING
Section 1.1 - Premises
Upon and subject to the terms, covenants and conditions hereinafter set
forth, Landlord hereby leases to Tenant and Tenant hereby hires from Landlord
the Premises comprising the area described in Paragraph F of the Summary of
Basic Terms, substantially as outlined on the floor plan(s) that have been
signed by Landlord and Tenant and comprise Exhibit A hereto. The plan(s) set
forth in Exhibit A are used solely for the purpose of identifying or designating
the Premises under the terms of this Lease and any markings, measurements,
dimensions, footages or notes of any kind contained thereon have no bearing upon
any of the terms, covenants, conditions, provisions or agreements of this Lease
and are not to be considered a part thereof.
Section 1.2 - Common Areas
1.2.1 Tenant shall have the right to the nonexclusive use of all areas
and facilities outside the Premises that are provided and designated by Landlord
from time to time for the general nonexclusive use of tenants at the Project,
and which are located (a) within the Building (herein called "Building Common
Areas"), and (b) outside the Building and outside other buildings designed for
occupancy by tenants (and constructed from time to time by Landlord), but within
the exterior boundary lines of the Project, including, without limitation,
parking areas, loading and unloading areas, roadways, walkways and landscaped
area (herein called "Project Common Areas"). The Building Common Areas (if any)
and the Project Common Areas collectively are sometimes herein called the
"Common Areas." Landlord shall at all times have the right to use such Common
Areas.
1.2.2 Landlord shall maintain the Common Areas in a manner comparable to
the manner other first-class properties similar in size, character and location
are maintained and operated. The manner in which the Common Areas are operated
and the expenditures therefor shall be at the sole discretion of Landlord. The
use of Common Areas shall be subject to the Rules and Regulations (as defined in
Article 20) and the provisions of any covenants, conditions and restrictions
affecting the Project, as Landlord shall make from time to time, as further
provided in Section 1.2.4 and Article 20.
1.2.3 Exhibit A and Exhibit B show the approximate location of the
Premises, Common Areas and Project and are not meant to constitute an agreement
as to the specific location of the Premises, Common Areas or the elements
thereof or of the means of access to the Premises, Building or the Project.
Landlord hereby reserves the right, at any time and from time to time, as long
as reasonable access to the Premises and Building remains available, to (a) use
the Common Areas while engaged in making alterations in or additions or repairs
to the Project, and (b) close temporarily any of the Common Areas for
maintenance purposes. Tenant agrees that no diminution of light, air, or view by
any structure that may be erected in, about or outside the Project after the
date hereof shall entitle Tenant to any reduction of Base Annual Rent or any
other Rent (as defined below) or result in any liability of Landlord to Tenant.
1.2.4 Landlord reserves the right, from time to time, to grant such
easements, rights and dedications as Landlord deems necessary or desirable, and
to cause the recordation of parcel maps and covenants, conditions and
restrictions in addition to the covenants, conditions and restrictions existing
as of the Reference Date affecting the Project. Unless required by governmental
authorities, Landlord shall not exercise its rights under this Section 1.2.4 if
such easements, rights, dedications, maps and covenants, conditions and
restrictions unreasonably interfere with Tenant's use of the Premises. At
Landlord's request, Tenant shall promptly join in the execution of any of the
aforementioned documents. The Building and the Project may be known by any name
that Landlord may choose, which name may be changed from time to time in
Landlord's sole discretion.
1.2.5 The rights of Tenant hereunder in and to the Common Areas shall at
all times be subject to the rights of Landlord specified under this Lease.
Tenant shall not use the Common Areas for its day-to-day business other than
using appropriately designated areas of the Common Areas for ingress and egress,
parking, or loading and unloading. Without limiting the generality of the
foregoing, storage, either permanent or temporary, of any materials, supplies,
equipment or refuse in the Common Areas is strictly prohibited. Should Tenant
violate this provision of the Lease, such violation shall be considered a
material violation of this Lease and Landlord may, at its option after
reasonable written advance notice to Tenant, remove said materials, supplies or
equipment from the Common Areas and place such items in storage, the cost
thereof to be paid by Tenant to Landlord as additional Rent under thus Lease
within ten (10) days after Landlord gives Tenant a statement therefor. All
subsequent costs in connection with the storage of said items shall be paid to
Landlord by Tenant as accrued. Tenant agrees that receiving and shipping goods
and merchandise and all removal of refuse shall be made only by way of the
designated loading areas immediately adjacent to and serving the Premises. If,
in the opinion of Landlord, unauthorized persons are using the Common Areas by
reason of the presence of Tenant in the Premises, Tenant, upon demand of
Landlord, shall correct such situation by appropriate action or proceedings
against all such unauthorized persons. Nothing herein shall affect the right of
Landlord at any time to remove any such unauthorized persons from said areas or
to prevent the use of any of said areas by unauthorized persons.
Section 1.3 - Parking
Tenant shall have the right for the benefit of Tenant and its employees,
customers and invitees to use of the number of "Parking Spaces" set forth in
Paragraph G of the Summary of Basic Terms on an unassigned, unreserved basis for
parking by vehicles no larger than full-sized passenger automobiles or pick-up
trucks on, and only on, those portions of the Project Common Areas provided and
designated by Landlord from time to time for parking.
<PAGE> 8
Tenant shall also be permitted to park vans and trucks on an overnight basis on
the ramp adjacent to the receiving dock area, subject to compliance with all
laws and conditions of approval for the Project. Tenant shall not at any time
park or
1
permit the parking of motor vehicles, belonging to it or to others, so
as to interfere with the walkways, roadways, or loading areas, or in any portion
of the parking areas not designated by Landlord for such use by Tenant.
ARTICLE 2 - TERM/CONSTRUCTION OF PREMISES
Section 2.1 - Term
2.1.1 The term of this Lease (the "Term") shall commence upon the date
of Substantial Completion (as defined below) of the Landlord-Provided
Improvements (as defined in the Work Letter described below), advanced for any
Tenant Delay as provided below (the "Commencement Date"), which the parties
estimate will occur on the Projected Commencement Date and, except as otherwise
provided herein or in any exhibit or addendum hereto, shall continue in full
force to and including the Expiration Date. Should the Commencement Date be a
date other than the Projected Commencement Date, Landlord and Tenant shall
promptly execute a Confirmation of Lease Term in the form set forth as Exhibit C
hereto, but the failure of either or both to do so shall not affect the
establishment of the Commencement Date, the Rent Commencement Date, and the
dates on which all adjustments of Base Annual Rent are to occur pursuant to
Paragraph I of the Summary of Basic Terms.
2.1.2 "Substantial Completion" shall mean, and each phase of the work to
be done by Landlord under the Work Letter in the Premises shall be deemed
"Substantially Complete", when the governmental entity responsible for issuing
certificates of occupancy or equivalent occupancy approvals has issued the same
or has provided Landlord with all documents or occupancy approvals (written or
oral) which are customarily given prior to the actual delivery of a certificate
of occupancy, whichever first occurs, including without limitation, a temporary
certificate of occupancy if so permitted hereunder or under the terms of the
Work Letter. Substantial Completion shall be deemed to have occurred
notwithstanding a requirement to complete "punchlist" or similar minor
corrective work. For purposes of establishing the commencement of Tenant's
obligations under this Lease which have not previously commenced, such date
shall be advanced to before the date of Substantial Completion by one day for
each day of Tenant Delay (as defined in the Work Letter and Construction
Agreement by and between Landlord and Tenant dated of even date herewith, a form
of which is set forth as Exhibit D hereto (the "Work Letter")).
Section 2.2 - Construction of Premises
2.2.1 Landlord shall perform the work and make the installations in the
Premises substantially as set forth in the Work Letter (the "Landlord's Work").
Landlord's Work shall be performed by Landlord's general contractor. Other than
Landlord's Work as described in the Work Letter or as specifically described
elsewhere in this Lease, Landlord has no obligation to improve, alter, repair or
remodel the Premises. All such installations shall immediately become and remain
the property of Landlord except as otherwise expressly stated herein or in the
Work Letter.
2.2.2 If Landlord shall be unable to give possession of the Premises on
the Rent Commencement Date by reason of the fact that Phase 1 of the Tenant
Improvements (as defined in the Work Letter) is not Substantially Complete, or
for any other reason, any such delay resulting therefrom shall be deemed excused
and Landlord shall not be subject to any liability for the failure to give
possession on said date. Except as expressly provided below, no such failure to
give possession on the Rent Commencement Date shall in any way affect or impair
the validity of this Lease or the obligations of Tenant hereunder, nor shall the
same be construed in any way to extend the Expiration Date. In the event that
Landlord has been unable to Substantially Complete the Tenant Improvements and
deliver possession of the Premises to Tenant on or before July 1, 1999, unless
such inability results from Tenant Delay (as defined in Work Letter) or is
otherwise caused by activities of Tenant, its agents, its representatives or its
contractors at the Project, Tenant shall have the option, exercisable in its
sole discretion, to terminate this Lease, by delivery to Landlord of written
notice of such election, effective upon delivery, at any time after July 1, 1999
and prior to Substantial Completion of the Tenant Improvements and delivery of
possession of the Premises. In the event of termination, Tenant shall
immediately surrender possession of the Premises to Landlord and Landlord shall
return all prepaid, unearned rent to Tenant and the Expiration Date shall be
deemed to the date of delivery of Tenant's notice of termination given pursuant
hereto.
2.2.3 Tenant shall have the right to enter into possession of and occupy
all or any portion of the Premises after the Commencement Date but prior to the
Rent Commencement Date solely for the purposes set forth immediately below,
provided that Tenant first requests Landlord's permission adequately in advance
of the proposed entry and provided that Tenant's entry in Landlord's opinion
will not (i) interfere with or cause any delay in Landlord's Work; (ii) violate
any applicable laws or regulations; or (iii) jeopardize any insurance maintained
in connection with the Premises or Project or increase the premiums with respect
thereto. If Tenant enters into the possession of and occupies all or any portion
of the Premises prior to the Rent Commencement Date, such occupancy shall be
deemed to be under all the terms, covenants, conditions, provisions and
agreements of this Lease, excluding Tenant's obligation to pay Base Annual Rent
and Tenant's Building Share of Building Costs and Tenant's Project Share of
Taxes and Project Costs until the Rent Commencement Date. Such early occupancy
shall be only for Tenant's installation in the Premises of its trade fixtures,
cabling or furniture, and shall be installed in a manner designated not to
interfere with the completion of Landlord's Work.
Section 2.3 - Acceptance by Tenant
<PAGE> 9
Neither Landlord nor Landlord's representatives have made any
representations or promises with respect to the Project, Building or the
Premises except as herein expressly set forth. Tenant acknowledges and agrees:
(a) that Tenant has been afforded ample opportunity to inspect the Premises and
the Building, and has investigated their condition to the extent Tenant desires
to do so, including their environmental condition, and (b) that Landlord has no
obligation to remodel or to make any repairs, alterations or improvements to the
Premises or the Building or remediate any condition therein, except as expressly
provided in the Lease. The taking of possession of the Premises by Tenant shall
be conclusive evidence, as against Tenant, that Tenant accepts same in its then
"AS-IS" condition
2
and that the Premises, the Building and the Project were in good and
satisfactory condition at the time such possession was so taken subject to: (i)
the delivery of all building systems, including without limitation, HVAC,
mechanical, plumbing, electrical, roof structure and membrane and structural
integrity of the Building, in good working order and condition as of the
Commencement Date and (ii) the repair of the any water damage to the floors of
the Premises; provided, however, that any defect, repair or damage to the
building systems, roof and the floor be reported to Landlord in writing prior to
the date thirty (30) days after the Tenant Improvements are completed, including
all punchlist items. As Tenant's sole right and remedy, and as Landlord's sole
obligation, with respect to such defects, Landlord shall, with reasonable
diligence, cause such items to be repaired at its own expense; Landlord shall
have no responsibility, liability, duty to indemnify, defend or hold Tenant
harmless from any damages, 1osses, claims, liabilities, awards or actions
related, directly or indirectly, to such items.
ARTICLE 3 - RENT: BASE ANNUAL RENT: TAXES. BUILDING COSTS AND PROJECT COSTS
Section 3.1 - Rent
Notwithstanding anything to the contrary, no Rent (as defined below)
shall be payable until the Rent Commencement Date set forth in Paragraph I of
the Summary of Basic Terms. The Rent Commencement Date shall be memorialized
when appropriate by execution of a Confirmation of Commencement of Rent in the
form attached as Exhibit C hereto by Landlord and Tenant, but failure to so
memorialize such date shall not affect its establishment pursuant to the terms
hereof. "Rent" as used herein shall refer to the Base Annual Rent (as defined in
Section 3.2, below), as it may be adjusted as hereinafter provided in this
Lease, plus all other sums and monetary obligations of Tenant payable to
Landlord under this Lease including, but not limited to the following:
(a) Any late charges or interest due pursuant to Sections 3.6.1 and
3.6.2;
(b) Tenant's Building Share of Building Costs due pursuant to this
Article 3;
(c) Tenant's Project Share of Taxes and Project Costs due pursuant to
this Article 3; and
(d) Any consideration received by Tenant which is due to Landlord
pursuant to Article 5.
Section 3.2 - Base Annual Rent
Tenant shall pay to Landlord commencing on the Commencement Date and
thereafter during the Term the Base Annual Rent set forth in the Summary of
Basic Terms, which sum shall be payable by Tenant in consecutive monthly
installments on or before the first day of each month ("Monthly
Installment(s)"), in advance, in the manner described more particularly in
Section 3.8.1, provided, however, that Tenant shall pay the amount of Advance
Rent set forth in Paragraph I of the Summary of Basic Terms concurrently with
Tenant's execution of this Lease, which shall be a credit against the first
Monthly Installments as they become due. If the Commencement Date should occur
on a day other than the first day of a calendar month, or the Expiration Date
should occur on a day other than the last day of a calendar month, then the
Monthly Installment for such fractional month shall be prorated on a daily basis
based upon a thirty (30) day calendar month. In addition to the Base Annual
Rent, Tenant shall pay the amount of any Rent, Rent increase or adjustment, and
additional payments when and as hereinafter provided in this Lease.
Section 3.3 - Adjustments to Base Annual Rent
3.3.1 On each of the Adjustment Dates specified in Paragraph I of the
Summary of Basic Terms, the Monthly Installments of Base Annual Rent payable by
Tenant under Section 3.2 shall be increased to an amount determined by
multiplying the then current Monthly Installment of Base Annual Rent which falls
due hereunder by One and 35/100 (1.035).
Section 3.4 - Taxes, Building Costs and Project Costs
3.4.1 Definitions. The following terms shall be defined as set forth
below:
(a) "Computation Year" shall mean the calendar year, provided that
Landlord, upon notice to Tenant, may change the Computation Year from time to
time to any other twelve (12) consecutive month period and, in the event of any
such change, Tenant's Building Share of Building Costs and Tenant's Project
Share of Taxes and Project Costs shall be equitably adjusted for the Computation
Years involved in any such change.
(b) "Tenant's Building Share" shall be Fifty One and 29/100 percent
(51.29 %) and has been computed by dividing the Rentable Area of the Premises by
the total Rentable Area of the Building. Rentable Area of the Premises shall be
41,902 square feet and Rentable Area of the Building shall be 81,702 square
feet.
<PAGE> 10
(c) "Tenant's Project Share" shall be Thirteen and 04/100 percent
(13.04 %) and has been computed by dividing the Rentable Area of the Premises by
the total Rentable Area of the Project. Rentable Area of the Project shall be
321,377 square feet. Tenant acknowledges that it has been given an opportunity
to verify the accuracy of the square footage figures set forth in the foregoing
Section 3.4.1(b) and this Section 3.4.1(c). Whether or not Tenant has taken the
opportunity to verify the foregoing figures, Tenant agrees to accept such square
footage figures as being accurate. Landlord reserves the right to increase or
decrease the size of the Project or the buildings therein designed for occupancy
by tenants, and to recalculate the Rentable Area contained therein, and in the
event of any such increase, decrease or recalculation, Landlord shall recompute
Tenant's Project Share.
(d) "Taxes" shall mean all taxes and assessments, general or special,
ordinary or extraordinary, unforeseen as well as foreseen, of any kind levied
upon or with respect to all or any portion of the Project and the areas used in
connection with the operation of the Project, on the Landlord with respect to
all or any portion of the Project or
3
areas used in connection with the operation of the Project, the Rent, and the
personal property contained in the Project and used in connection with the
management and maintenance of the Project imposed by federal, state or local
governments, governmental assessment districts, political subdivisions, public
corporations, or other political or public entity, authority or instrumentality.
Taxes shall not include Landlord's income, franchise, capital stock, estate or
inheritance taxes. Taxes shall include, without limitation, all general real
property taxes, general and special assessments, gross receipts taxes, annual or
periodic license or use fees, excise, transit charges, housing fund and child
care assessments, charges imposed for social services, police, fire, or
environmental protection, other business taxes and the cost of contesting by
appropriate proceedings any of the aforementioned Taxes (with respect either to
validity or amount). If, because of any change in the method of taxation of real
estate, any tax or assessment is imposed upon Landlord or upon the owner of the
land and/or the Building and/or the Project or any part thereof and/or the areas
used in connection with the operation of the Building and/or the Project or the
rents or income therefrom, in substitution for or in lieu of any tax or
assessment which would otherwise be a real estate tax or assessment, or with
respect to any subject matter which was during the fiscal year 1977 - 1978 the
subject of real estate tax or assessment, such other tax or assessment shall be
deemed to be included in Taxes. If any Taxes are specially assessed by reason of
the occupancy or activities of one or more tenants and not the occupancy or
activities of the tenants as a whole, such taxes shall be allocated by Landlord
to the tenant or tenants whose occupancy or activities brought about such
assessment and Tenant shall pay any such taxes so allocated to Tenant.
(e) "Building Costs" shall mean the aggregate amount of all Operating
Costs (defined below) to the extent the same are incurred with respect to the
Building, as distinguished from the portion of Operating Costs incurred solely
with respect to the Project Common Areas or solely with respect to the Project
generally.
(f) "Project Costs" shall mean the aggregate amount of (i) Insurance
Costs (defined below) plus (ii) Operating Costs, but for purposes of this
Section 3.4.1(f) shall exclude Building Costs from Operating Costs.
(g) "Insurance Costs" shall mean, with respect to all or any portion of
the Project, including, without limitation, the Building, other buildings and
improvements in the Project, Project Common Areas and the areas used in
connection with the Project, the aggregate amount of all costs, expenses and
expenditures paid or incurred by Landlord or Landlord's authorized
representatives of fire, extended coverage, all-risk, property damage, boiler,
sprinkler, rent, public liability or commercial general liability, earthquake or
other insurance and the deductible portion of any insured loss otherwise covered
by such insurance.
(h) No Double Counting. In no event shall any portion of Building Costs,
Project Costs or Insurance costs be assessed or counted against Tenant more than
once.
(i) "Operating Costs" shall mean, with respect to the Building or to
all or any portion of the Project and the areas used in connection therewith, as
the case may be, the aggregate amount of all costs, expenses and expenditures
paid or incurred, by Landlord or Landlord's authorized representatives of: (i)
wage and labor costs and expenses applicable to persons engaged in the
management, operation, maintenance, overhaul or repair, whether they be employed
by Landlord or as independent contractors (including, without limitation, the
cost effect of any increase or decrease in the hours of employment or the number
of paid holidays or vacation days, social security taxes, unemployment insurance
taxes and the cost (if any) of providing disability, hospitalization, medical,
welfare, pension, retirement, or other benefits applicable with respect to such
employees); (ii) utilities, utilities surcharges, water and sewer charges, fuel,
building supplies and materials, other supplies and materials, equipment, tools,
service contracts, security, or any costs levied, assessed or imposed by, or at
the direction of, or resulting from statutes or regulations or interpretations
thereof, promulgated by any federal, state, regional, municipal or local
government authority in connection with the use or occupancy of the Building or
the Common Areas or the Project, including, without limitation, the parking
facilities serving the Project; (iii) a management fee and costs incurred in or
associated with the management of the Project not to exceed four percent (4%) of
gross revenues generated by the Project (determined upon the greater of actual
occupancy or eighty five percent (85%) occupancy of the Project); (iv) the
repair, replacement and maintenance of the nonstructural portions of the Project
or any portion thereof, (including, without limitation, the plumbing, heating,
ventilating, air-conditioning, elevator, electrical, security, fire and
life-safety systems installed or furnished by Landlord and the nonstructural
portions of the roof of the Building); (v) costs incurred in or associated with
providing, operating, maintaining, repairing and replacing the Common Areas and
facilities therein; (vi) gardening and landscaping, maintenance of signs and
tenant directories, repairs, repainting, maintenance, resurfacing, painting,
lighting, cleaning, janitorial services, refuse removal or similar items; (vii)
appropriate reserves as determined by Landlord, association fees, assessments or
maintenance charges if the Landlord is obligated to pay such charges; (viii)
capital expenditures together with all costs, and interest thereon at an annual
rate equal to the reference rate of interest announced publicly from time to
time by Bank of America N.T. & S.A. (or any successor bank) at its San Francisco
Headquarters, or any successor rate of interest thereto (the "Reference Rate")
plus two (2) percentage points, but in no event in excess of the
<PAGE> 11
maximum rate of interest permitted to be contracted by law, all amortized over
their actual useful life; (ix) rental of personal property used in connection
with any to the foregoing; (x) the costs and expenses paid or incurred by
Landlord or Landlord's authorized representatives of legal, accounting and
consulting fees and to permits, certificates and licenses required in connection
with the Project or any portion thereof; (xi) amortized cost of personal
property used exclusively for the management or operation of the Project (or a
reasonable and equitable pro rata share of such amortized cost if such personal
property is not so exclusively used); (xii) any and all assessments levied
against or charged to the Project pursuant to any covenants, conditions and
restrictions, easements, or access and maintenance agreements now or hereafter
of record; and (xiii) such other items as are now or hereafter customarily
included in the cost and expense of managing, operating, maintaining,
overhauling and repairing all or any portion of the Project and areas used in
connection with the operation thereof. All such costs, expenses and expenditures
shall be determined (to the extent so covered) in accordance with generally
accepted accounting principles which shall be consistently applied (with
accruals appropriate to Landlord's business). Landlord agrees that in any event
the replacement to the following items at the Building shall be amortized over
their useful life with interest thereon at an annual rate equal to the Reference
Rate plus two (2) percentage points: (i) entire or the major portion of the roof
membrane (but not the patching of lesser portions of the roof membrane from time
to time), (ii) condenser, compressor, cooling coils
4
and blower which are part of the heating, ventilating and air conditioning
system, and (iii) ceiling or wall mounted space heaters. Operating Costs shall
not include "Operating Costs Exclusions" defined below.
(j) "Operating Costs Exclusions" shall mean (i) the initial
construction cost of the Project, the cost of Tenant Improvements to be paid
pursuant to this Lease or any other lease, and depreciation of such costs; (ii)
debt service (including, without limitation, interest, principal and any impound
payments) required to be made on any mortgage or deed of trust recorded with
respect to all or any part of the Project other than debt service and financing
charges imposed pursuant to Section 3.4.1(i)(viii); (iii) any rent payable under
any ground lease now or hereafter affecting the Project; (iv) leasing
commissions and other costs and expenses incurred in connection with
negotiations or disputes with prospective or present tenants in the Project; (v)
expenditures relating to the repair of the structural components of each of the
following: foundations, exterior walls, roof and any interior load bearing walls
of the Building (but with respect to the roof these provisions do not exclude
and Tenant shall, subject to Section 7.2, bear all other roof costs) or the
Premises; (vi) expenditures allocable to the first twelve (12) months of the
Term of this Lease for necessary repairs of the window glazing, roof membrane
and expenditures for repair of the heating, ventilating and air conditioning
system of the Building which exceed the cost of the contract for maintenance of
the heating, ventilating and air conditioning system; (vii) capital expenditures
relating to repairs, alterations or improvements to the Building required by
governmental authorities to comply with building code provisions existing as of
the Reference Date, including, without limitation, compliance with the Americans
With Disabilities Act of 1990, as amended; (viii) costs, expenses and
expenditures to the extent incurred with respect to other buildings designed for
occupancy by tenants in the Project, as distinguished from costs, expenses and
expenditures incurred solely with respect to Project Common Areas or solely with
respect to the Project generally; (ix) specific costs which, pursuant to other
provisions of this Lease, Tenant is obligated to pay in full, including without
limitation costs of Tenant's performance of obligations to be performed by
Tenant under this Lease and payments which Tenant is obligated to make directly
to any party, including, without limitation, providers of goods, services,
utilities or labor; and (x) costs of Landlord's compliance with any governmental
regulations applicable on or before the Reference Date relating to the Remedial
Work (as defined in Section 4.8.3 hereof) of Hazardous Materials (as defined in
Section 4.7 hereof) existing at, on or about the Project of which Landlord has
knowledge of on or before the Reference Date by reason of other than Tenant's
acts or occupancy of the Premises.
3.4.2 Tenant shall pay in advance on the first day of each month to
Landlord as additional Rent one twelfth (1/12) of each of (a) Tenant's Building
Share of Building Costs for each Computation Year and (b) Tenant's Project Share
of Taxes and Project Costs for each Computation Year, in an amount estimated by
Landlord and billed by Landlord to Tenant. Landlord shall have the right to
revise such estimate from time to time. Any assessments which are included as
Taxes shall be payable over the maximum allowable term that the same can be paid
without penalty or additional cost. With reasonable promptness after Landlord
has received the tax bills and support for Operating Costs for a Computation
Year, but not more than two hundred seventy (270) days after the close of such
year, Landlord shall furnish Tenant with a statement (herein called "Landlord's
Statement") showing a comparison of estimated Building Costs, Taxes and Project
Costs to the actual costs of the same for such Computation Year, and Tenant's
Building Share and Tenant's Project Share of those estimated and actual amounts.
If Tenant's Building Share of actual Building Costs and Tenant's Project Share
of actual Taxes and Project Costs for such Computation Year exceeds Tenant's
payments of the estimated amounts of such categories for such Computation Year,
Tenant shall pay to Landlord the difference within thirty (30) days after
Landlord's Statement is given to Tenant, and if the total amount of Building
Costs, Taxes and Project Costs respectively paid by Tenant for any such
Computation Year shall exceed Tenant's Building Share of actual Building Costs
and Tenant's Project Share of actual Taxes and Project Costs for such
Computation Year, such excess shall be credited against the next installments of
Tenant's Building Share of Building Costs and Tenant's Project Share of Taxes
and Project Costs due from Tenant to Landlord hereunder (or paid to Tenant if
after the Expiration Date and Tenant has surrendered the Premises). If there is
an increase in Taxes (by reason of an increase in assessed valuation or
otherwise) affecting prior Computation Year(s) at any time after rendition of
Landlord's Statement for such year(s), Tenant shall pay to Landlord the Tenant's
Project Share of such increase in Taxes attributable to such year(s) within
thirty (30) days after Landlord's Statement is given to Tenant. If there is a
reduction of the assessed valuation for any tax year which affects the Taxes in
any Computation Year for which Tenant shall have paid Tenant's Project Share of
Taxes, the amount of Tenant's Project Share of Taxes for the affected
Computation Year shall be recalculated on basis of the revised assessed
valuation and Landlord, after receiving a refund or after the delinquency date
of its next tax bill in the event Landlord is given a credit, will credit
against the amount of Tenant's Project Share of Taxes next becoming due from
Tenant such sums as may be due to Tenant by reason of the recalculation, less
the expenses incurred in effecting such reduction.
<PAGE> 12
In no event shall the amount of any such credit be in excess of the amount of
the Tenant's Project Share of Taxes actually paid to Landlord by Tenant for the
period covered by such credit.
3.4.3 If the Term shall commence or the Lease shall terminate on a date
other than the first or last day of a Computation Year, Tenant's Building Share
of Building Costs and Tenant's Project Share of Taxes and Project Costs for such
partial Computation Year shall be appropriately adjusted by Landlord. To the
extent such Building Costs, Taxes and Project Costs are not affected by Tenant's
occupancy of the Premises or by this Lease, Tenant's Building Share and Tenant's
Project Share of those items shall be in the proportion that the number of days
of the Term included in such partial Computation Year bears to 365. During such
partial Computation Year(s) Tenant shall pay Tenant's Building Share of Building
Costs and Tenant's Project Share of Taxes and Project Costs in the same time and
manner provided in Section 3.4.2 with the following exceptions that (i) if the
Commencement Date is not the first day of a Computation Year, on or before the
first day of the Term, or as soon thereafter as practicable, Landlord may bill
Tenant, and Tenant shall pay, an amount payable per month for the remainder of
the Computation Year which in the aggregate shall equal Tenant's Building Share
of estimated Building Costs and Tenant's Project Share of estimated Taxes and
Project Costs for the partial Computation Year; and (ii) if the Lease terminates
before the end of a Computation Year and if Landlord's Statement shows that (a)
Tenant has overpaid, Landlord shall remit the amount of such overpayment to
Tenant within fifteen (15) days after issuance of Landlord's Statement or (b)
Tenant has underpaid, Tenant shall pay Landlord the amount of such underpayment
to Landlord within fifteen (15) days after issuance of Landlord's Statement.
5
3.4.4 For purposes of calculating estimated and actual Taxes, Building
Costs and Project Costs for any period during which the Building or Project is
less than one hundred percent (100%) occupied there shall be added those
amounts of Taxes, Building Costs and Project Costs which Landlord determines, in
good faith, it would have incurred had the Project been one hundred percent
(100%) occupied during any such period.
Section 3.5 - Additional Taxes
In addition to the Base Annual Rent and other Rent to be paid by Tenant
hereunder, as additional Rent hereunder, Tenant shall reimburse Landlord, within
fifteen (15) days after demand, for any and all taxes payable by Landlord (other
than net income taxes) whether or not now customary or within the contemplation
of the parties hereto: (a) by reason of the manner of occupancy or activities of
Tenant; or (b) upon or with respect to the possession, leasing, operation,
management, maintenance, alteration, repair, use or occupancy by Tenant of the
Premises, the Building, the Project, or any portion thereof; or (c) upon the
value of Tenant's personal property located in the Premises or in any storeroom,
garage or another place in the Premises or the Building or the Project, or the
areas used in connection with the operation of the Building or Project, it being
the intention of Landlord and Tenant that, to the extent possible, such personal
property taxes shall be billed to and paid directly by Tenant; or (d) resulting
from overstandard tenant improvements to the Premises whether title thereto is
in Landlord or Tenant; or (e) upon this transaction; or (f) upon, allocable to,
or measured by the Rent payable hereunder, including without limitation, any
gross receipts tax or excise tax levied by any governmental or taxing body with
respect to the receipt of such Rent. The taxes described in this Section 3.5 may
be referred to as Additional Taxes". "Additional Taxes" paid by Tenant pursuant
to this Section 3.5 shall not be included in any computation pursuant to Section
3.4.
Section 3.6 - Late Payments: Charges: Interest: Default Rate
3.6.1 Tenant acknowledges that the late payment of Rent or any other sum
due from Tenant will cause Landlord to incur costs not contemplated by this
Lease, the exact amount of such costs being extremely difficult and impractical
to fix. Such costs include, without limitation, processing and accounting
charges, late charges that may be imposed on Landlord by the terms of any
encumbrance, or notes secured by any encumbrance, covering the Premises and the
cost of money used by Landlord in place of such Rent or other sum. Therefore, if
any installment of Rent or other sum due from Tenant is not received by Landlord
within five (5) days after the date the same is due, Tenant shall pay to
Landlord as additional Rent, without necessity of prior notice or demand, an
additional sum of five percent (5%) of said installment of Rent or other amount
as a late charge. The parties agree that this late charge represents a fair and
reasonable estimate of the costs that Landlord will incur by reason of late
payment by Tenant. Acceptance of any late charges shall not constitute a waiver
of Tenant's default with respect to the overdue amount, or prevent Landlord from
exercising any of the rights and remedies available to Landlord under this Lease
or under law or equity.
3.6.2 Notwithstanding any other provisions of this Lease, any Rent or
other sums due to Landlord hereunder not paid to Landlord when due hereunder
shall bear interest from the date such payment is due until the same have been
fully paid, at a rate (the "Default Rate") that is equal to the lesser of (i)
two (2) percentage points above the Reference Rate (defined in Section 3.4.1)
adjusted monthly on the first day of each month, and (ii) the highest rate
permitted to be contracted for by law. The payment of such interest shall not
constitute a waiver by Landlord of any default by Tenant hereunder.
Section 3.7 - Consideration
The Base Annual Rent has been established in contemplation that (i)
Tenant will occupy the Premises for the entire Term and (ii) in the event of any
Assignment or Sublet of this Lease or all or any portion of the leasehold estate
created hereby, Landlord and Tenant have agreed that Landlord shall have the
rights and options provided in Article 5, including, without limitation, the
right to terminate this Lease. Tenant expressly acknowledges and agrees that
this Section 3.7 was a material inducement to Landlord in establishing the Base
Annual Rent in the amount herein provided and that Landlord has relied on this
covenant and agreement in executing this Lease.
<PAGE> 13
Section 3.8 - Time and Manner of Payment in General
3.8.1 All Rent shall be payable in lawful money of the United States of
America at the address specified for Landlord in the Summary of Basic Terms, or
at such other place as Landlord shall designate, without any prior demand
therefor and without any abatement (except as otherwise expressly provided for
in this Lease), deduction or setoff whatsoever.
3.8.2 Except where a longer or shorter period is specifically provided
for in this Lease with respect to a particular expenditure, Tenant shall pay to
Landlord, within fifteen (15) days after notice by Landlord to Tenant of bills
or statements therefor: (a) any sum due hereunder for which a specific due date
is not otherwise provided; (b) sums equal to all expenditures made and monetary
obligations incurred by Landlord in connection with the remedying by Landlord of
Tenant's default, including, without limitation, expenditures made and
obligations incurred for reasonable legal counsel fees; (c) sums equal to all
losses, costs, liabilities, damages and expenses referred to in Article 9; and
(d) sums equal to all expenditures made and monetary obligations incurred by
Landlord collecting or attempting to collect the Base Annual Rent, or any other
Rent or sum of money accruing under this Lease or in enforcing or attempting to
enforce any rights of Landlord under this Lease or pursuant to law, including,
without limitation, expenditures made and obligations incurred for reasonable
legal counsel fees. Tenant's obligations under this Article 3 shall survive the
termination of this Lease.
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ARTICLE 4 - USE AND OCCUPANCY
Section 4.1 - Permitted Use
Tenant shall use and occupy the Premises only for the specific purposes
set forth in Paragraph J of the Summary of Basic Terms, and for no other
purpose. The character of the occupancy of the Premises, as restricted by this
Article 4 and as further restricted by Article 5, and any of the Rules and
Regulations attached to this Lease or hereafter adopted, is an additional
consideration and inducement to Landlord for the granting of this Lease.
Section 4.2 - Compliance with Law
4.2.1 Tenant, at Tenant's expense, shall comply with all laws, rules,
orders, ordinances, directions, regulations and requirements of federal, state,
county and municipal authorities pertaining to Tenant's use or occupancy of the
Premises, the Building and the Project and with the recorded covenants,
conditions and restrictions, regardless of when they become effective,
including, without limitation, all applicable federal, state and local laws,
regulations or ordinances pertaining to air and water quality, Hazardous
Materials, and waste disposal, air emissions and other environmental matters,
all zoning and other land use matters, and utility availability and with any
direction of any public officer or officers, pursuant to law, which shall impose
any duty upon Landlord or Tenant with respect to the use or occupancy of the
Premises. Without limiting the generality of the foregoing, Tenant shall at
Tenant's sole cost and expense take all proper and necessary action to cause the
Premises to be kept, maintained, used and occupied during the Term in compliance
with the Americans With Disabilities Act of 1990, as amended from time to time.
Notwithstanding the foregoing, Tenant shall have no obligation to make capital
expenditures relating to repairs, alterations or improvements to the Premises
required by governmental authorities to comply with building code provisions
existing as of the Reference Date, but to the extent required under the
Americans with Disabilities Act of 1990, as amended ("ADA"), as a result of the
Tenant Improvements, Landlord shall make such improvements as are required by
the ADA as described in the Work Letter Agreement as part of the Tenant
Improvements, and shall bear the expense of such improvements as follows
(separate and apart from and not included in Landlord's Maximum Contribution)
(1) all costs up to a maximum reimbursement of Ten Thousand and No/100 Dollars
($10,000.00) for such compliance on the first floor of the Premises and (2)
fifty percent (50%) of all costs up to a maximum reimbursement of Four Thousand
and No/100 Dollars ($4,000.00) on the second floor of the Premises. All costs in
excess of such costs for ADA compliance shall be borne by Tenant and shall be
paid to Landlord at the same time and in the same manner as the Tenant
Improvement Costs (other than Landlord's Maximum Contribution) are borne by
Tenant under the Work Letter Agreement. Additionally, in no event shall Tenant
be required to install or pay for the installation of an elevator at the
Premises for access from the first floor to the second floor.
4.2.2 Without limiting its obligations under Section 4.2.1, Tenant
covenants and agrees to comply with all laws, rules, regulations and guidelines
now or hereafter made applicable to the Premises by government or other public
authorities respecting the disposal of waste, trash, garbage and other matter
(liquid or solid), generated by Tenant, its employees, agents, contractors,
invitees, licensees, guests and visitors, the disposal of which is not otherwise
the express obligation of Landlord under this Lease, including, but not limited
to, laws, rules, regulations and guidelines respecting recycling and other forms
of reclamation (all of which are herein collectively referred to as "Waste
Management Requirements"). Tenant covenants and agrees to comply with all
non-discriminatory rules and regulations established by Landlord to enable
Landlord from time to time to comply with Waste Management Requirements
applicable to Landlord (i) as owner of the Premises and (ii) in performing
Landlord's obligations under this Lease, if any.
Section 4.3 - Compliance with Insurance Requirements
Tenant shall not do or permit to be done any act or thing in or upon the
Premises which will invalidate or be in conflict with any insurance policy
covering the Building or Project or any of the areas used in connection with the
operation thereof or its fixtures, appurtenances or equipment or the property
located therein, and shall not do, or permit anything to be done, in or upon the
Premises, or bring or keep anything therein, which shall increase the rates
<PAGE> 14
of any insurance on the Building or Project or any of the areas used in
connection with the operation thereof of its fixtures, appurtenances or
equipment or on property located therein. If by reason of the failure of Tenant
to comply with the provisions of this Article 4 any insurance premium shall at
any time be higher than it otherwise would be, then, without Landlord's waiving
any rights it has against Tenant hereunder as a result of such failure, Tenant
shall reimburse Landlord for that part of all such premiums thereafter paid by
Landlord which shall have been charged because of such violations by Tenant, and
shall make such reimbursement upon the first day of the month following such
expenditure by Landlord.
Section 4.4 - Certificates of Occupancy
Tenant shall not at any time use or occupy the Premises in violation of
the certificates of occupancy issued for the Premises, Building or Project. In
the event that any department of the city or county of the state in which the
Project is located shall hereafter at any time contend or declare that the
Premises are used for a purpose which is in violation of such certificate or
certificates of occupancy, Tenant shall immediately discontinue such use of the
Premises. Failure by Tenant to discontinue such use after such notice shall be
considered a default under this Lease and Landlord shall have the right to
exercise any and all rights and privileges and remedies given to Landlord by and
pursuant to the provisions of Article 16 hereof. Any statement in this Lease of
the nature of the business to be conducted by Tenant in the Premises shall not
be deemed or construed to constitute a representation or guaranty by Landlord
that such business is lawful or permissible or will continue to be lawful or
permissible under any certificate of occupancy issued for the Premises, Building
or Project or otherwise permitted by law.
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Section 4.5 - Life-Safety Systems
It there now is or shall be installed in the Building or Project a
sprinkler system, heat or smoke detection system or any other so-called
life-safety system and (i) any such system or any of its appliances shall be
damaged or injured or not in proper working order by reason of any act or
omission of Tenant or Tenant's agents, servants, employees, contractors,
visitors or licensees, Tenant shall forthwith restore the same to good working
condition; and (ii) if the Insurance Services Office or any similar body or any
bureau, department or official of the state, county or city government, or any
governmental authority having jurisdiction over the Premises, shall require or
recommend that any changes, modifications, alterations additional equipment be
made or supplied in or to any such system by reason of Tenant's specific
business, or the location of partitions, trade fixtures, or other contents of
the Premises, Tenant shall, at Tenant's expense, promptly make and supply such
changes, modifications, alterations, or additional equipment.
Section 4.6 - Prohibited Uses
4.6.1 Tenant shall not occupy or permit any portion of the Premises to
be occupied for a use which would be prohibited by any other portion of this
Lease (including but not limited to any Rules and Regulations then in effect) or
in violation of law. Nothing in this Section 4.6.1 shall expand the permitted
use of the Premises as set forth in Section 4.1.
4.6.2 Tenant shall not do or permit to be done any act or thing upon the
Premises which shall or might subject Landlord to any liability or
responsibility for injury to any person or persons or to any property by reason
of any business or operation being carried on upon the Premises or for any other
reason, and Tenant hereby indemnifies and agrees to protect, defend and hold
harmless Landlord against any such liability or responsibility. Business
machines and mechanical equipment shall be placed and maintained by Tenant at
Tenant's expense in settings sufficient to absorb and prevent vibration. Tenant
shall not install any machine or equipment which may adversely affect the
structure of the Building without obtaining Landlord's prior written consent,
which consent may be conditioned on such terms as Landlord may reasonably
require. Tenant shall not place a load upon any floor of the Premises exceeding
the floor load per square foot area which such floor was designed to carry and
which is allowed by law.
Section 4.7 - Definition of Hazardous Material
As used herein, the terms "Hazardous Material" or "Hazardous Materials"
shall mean any hazardous or toxic substance, material or waste which is or
becomes regulated by any local governmental authority, the State of California
or the United States Government and include, without limitation, any material or
substance which is (i) defined as "extremely hazardous waste" under Section
25115, "hazardous waste" under Section 25117, "restricted hazardous waste" under
Section 25122.7, or listed pursuant to Section 25140, of the California Health
and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law), (ii)
defined as a "hazardous substance" under Section 25316 of the California Health
and Safety Code, Division 20, Chapter 6.8 (Carpenter-Presley-Tanner Hazardous
Substance Account Act), (iii) defined as a "hazardous material", "hazardous
substance", or "hazardous waste" under Section 25501 of the California Health
and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response
Plans and Inventory), (iv) defined as a "hazardous substance" under Section
25281 of the California Health and Safety Code, Division 20, Chapter 6.7
(Underground Storage of Hazardous Substances), (v) petroleum, natural gas,
synthetic gas or any form or combination of any of the foregoing (vi) asbestos,
(vii) listed under Article 9 or defined as hazardous or extremely hazardous
pursuant to Article 11 of Title 22 of the California Administrative Code,
Division 4, Chapter 20, (viii) designated as a "hazardous substance" pursuant to
Section 1317 of the Federal Water Pollution Control Act (33 U.S.C. Section 1251
et seq.), (ix) defined as a "hazardous waste" pursuant to Section 6903 of the
Federal Resource Conservation and Recovery Act, (42 U.S.C. Section 6901 et
seq.), (x) defined as "hazardous substances" pursuant to Section 9601 of the
Comprehensive Environmental Response, Compensation and Liability Act, (42 U.S.C.
Section 9601 et seq.) or (xi) identified in Sections 66680 through 66685 of
Title 22 of the California Administrative Code, Division 4, Chapter 30, as all
of the foregoing may be amended from time to time.
<PAGE> 15
Section 4.8 - Tenant's Obligation
4.8.1 Tenant shall not use, generate, handle, manufacture, produce,
store, release, discharge or dispose of, on, under, in or about the Project or
Premises, or transport to or from the Project or Premises, any Hazardous
Material or allow its employees, agents, contractors, invitees or any other
person or entity to do so. Without in any way limiting, affecting or derogating
from the foregoing prohibition, Tenant shall be bound by, observe and perform
the conditions, covenants and provisions set forth in this Article 4 with
respect to Hazardous Materials. The foregoing prohibition of Hazardous Materials
shall not apply to any ordinary use and incidental storage of small and
insignificant amounts of substances in the regular and ordinary use of common
office business machines or in the ordinary course of Tenant's business in the
Premises provided the same do not constitute, give rise to, or create any
substantial risk of any occurrence, condition, or event as a consequence of
which pursuant to any Environmental Law: (i) Tenant, Landlord, or any owner,
occupant, or person having any interest in the Premises shall be liable, or (ii)
the Premises shall be subject to any legal restriction on use, ownership or
transferability, or (iii) any Remedial Work shall be required. Additionally,
Tenant shall provide Landlord with copies of all submissions, reports,
correspondence and other written information given to and received from all
governmental or regulatory agencies in connection with Tenant's use or storage
of Hazardous Materials on or about the Premises.
4.8.2 Tenant, at its sole cost, shall comply with all Environmental Laws
(defined below) relating to Hazardous Materials used in Tenant's operations on,
under or about the Project, Premises or Building, including the responsibility
to obtain and maintain current all permits required for its operations in
connection with Hazardous Materials. Any and all federal, state or local laws,
ordinances, rules or regulations, or requirements of governmental agencies or
instrumentalities, pertaining to Hazardous Materials or to health, industrial
hygiene or environmental conditions on, under, in or about the Premises,
Building or Project (collectively "Environmental Laws"), including,
8
without limitation, the following (as amended from time to time): the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, 42 U.S.C. Section 9601 et seq., ("CERCLA"); the Resource
Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901 et seq. ("RCRA");
the Clean Air Act, 42 U.S.C. Section 7401 et seq., the Porter Cologne Water
Quality Control Act, California Water Code Section 13000 et seq.; California
Hazardous Waste Control Act, Health and Safety Code Section 25100 et seq.,
Carpenter-Presley-Tanner Hazardous Substance Account Act, California Health and
Safety Code Section 25300 et seq., and those laws described in Section 4.7
hereof.
4.8.3 Tenant shall be responsible for and Tenant hereby indemnifies and
agrees to protect, defend and hold Landlord and the holders of any Superior
Interest or Subordinated Interest (as both terms are defined in Article 8
below), and the constituent shareholders, partners, members or other owners
thereof, and all of their employees, officers, directors, agents, contractors
and licensees (for purposes of this Article 4 collectively referred to as the
"Landlord Indemnitees") against and save Landlord Indemnitees harmless from and
against all claims, cost, expense, damage (consequential or otherwise), fines,
judgments, penalties, loss and liability, including, without limitation, (i)
diminution in value of the Premises, Building or Project, (ii) damages for the
loss or restriction on use of rentable or usable space or of any amenity on the
Premises, Building or Project, (iii) loss of rental income, (iv) cost of any
Remedial Work, (v) damages arising from any adverse impact on marketing of space
in the Building or Project, (vi) costs of the preparation and implementation of
any closure, remedial or other required plans, (vii) damage to natural resources
or to property other than the Premises, Building or Project or harm to any
person or animal, and (viii) sums paid in settlement of claims, attorneys' fees,
consultant fees and expert fees, arising (directly or indirectly) in any way
whatsoever out of or attributable to the use, generation, handling, manufacture,
production, storage, release, threatened release, discharge, disposal or
transportation of Hazardous Materials on, under, in or about the Project,
Premises or Building by Tenant or by any of its Agents (defined below)
(collectively, a "Release" or "Releases"). For purposes of this Article 4,
"Remedial Work" shall mean any or all investigation, monitoring, removal,
restoration, abatement, repair, clean-up, detoxification or other ameliorative
work of any kind or nature which is required by Landlord in order to restore the
Premises, Building and the Project to the condition existing prior to any
Release or in order to remediate the effects of any Release, or which is
required by Environmental Laws, Landlord Indemnitees, or by any private party.
For purposes of this Article 4, "Agents" shall mean any or all of the employees,
agents, contractors, assigns, subtenants, licensees, invitees, customers or
visitors of Tenant, or any person or entity claiming through or under Tenant
4.8.4 In the event of the occurrence of a Release, Tenant shall, at its
sole expense and within thirty (30) days after demand by Landlord (or such
shorter period of time as may be required under applicable laws, including,
without limitation, Environmental Laws, or by any governmental agencies or
instrumentalities) commence to perform and thereafter diligently prosecute to
completion the Remedial Work. All Remedial Work shall be performed in accordance
with the commercially reasonable requirements of Landlord, all requirements of
Landlord's lenders on the Project, and all applicable laws including, without
limitation, Environmental Laws, and with the requirements of governmental
agencies or instrumentalities. All Remedial Work shall be performed by one or
more contractors approved in advance in writing by Landlord, under the
supervision of a consulting engineer approved in advance in writing by Landlord,
and otherwise in accordance with the terms and conditions of this Lease. All
costs and expenses of such Remedial Work shall be paid by Tenant including,
without limitation, the charges of such contractor(s) and/or the consulting
engineer, and Landlord's reasonable attorneys' fees and costs incurred in
connection with monitoring or review of such Remedial Work. In the event Tenant
shall fail to timely commence, or cause to be commenced, or fail to diligently
prosecute to completion such Remedial Work, Landlord may, but shall not be
required to, cause such Remedial Work to be performed and all costs and expenses
thereof, or incurred in connection therewith, shall become immediately due and
payable.
4.8.5 Intentionally deleted.
<PAGE> 16
4.8.6 Upon the expiration or earlier termination of this Lease, Tenant
shall remove from the Premises, Building and Project all Hazardous Materials
placed or Released on, under, in or about the Premises, Building and Project by
Tenant or any of its Agents, and all trade fixtures, furnishings and/or
equipment associated with the use, storage or disposal of Hazardous Materials
brought on, under, in or about the Premises, Building or Project by Tenant or
any of its Agents and perform all Remedial Work. Removal and disposal of any and
all such Hazardous Materials, equipment or fixtures, and performance of all
related Remedial Work, shall be performed in accordance with the commercially
reasonable requirements of Landlord, all requirements of Landlord's lenders on
the Project, and all applicable laws, regulations and requirements of any
governmental entity or instrumentality, including, without limitation,
Environmental Laws.
4.8.7 In any matter covered by this Section 4.8 the Landlord Indemnitees
shall have the right to employ its or their own counsel at the expense of
Tenant. The Landlord Indemnitees shall have the right, but not the obligation,
at the expense of Tenant, to settle, adjust or compromise any claim, suit or
judgment against the Landlord Indemnitees arising out of the matters covered
herein.
4.8.8 Tenant shall give immediate written notice to Landlord of:
(a) Any action, proceeding or inquiry by any governmental authority
(including, without limitation, the California State Department of Health
Services, the State or any Regional Water Quality Control Board, the Bay Area
Air Quality Management District or any local governmental entity) with respect
to the presence or release or suspected presence or release of any Hazardous
Material on the Project, Premises or Building or the migration thereof from or
to other property;
(b) All demands or claims made or threatened by any third party against
Tenant or the Project, Premises or Building relating to any loss or injury
resulting from any Hazardous Materials; and
9
(c) Any spill, release, discharge or nonroutine disposal of Hazardous
Materials that occurs with respect to the Project, Premises or Building or
Tenant's operations, including, without limitation, those that would constitute
a violation of Health and Safety Code Section 25249.5 or any other Environmental
Law;
(d) All matters of which Tenant is required to give notice pursuant to
Section 25359.7 of the California Health and Safety Code; and
(e) Tenant's discovery of any occurrence or condition on, under, in or
about the Project, Premises or Building or any real property adjoining or in the
vicinity of the Project, Premises or Building which may cause the Premises,
Building or Project or any part thereof to be subject to any restrictions on the
ownership, occupancy, transferability or use under any Environmental Law
including without limitation, Tenant's discovery of any occurrence or condition
on, under or in any real property adjoining or in the vicinity of the Project,
Premises or Building that could cause the Project, Premises or Building or any
part thereof to be classified as "border-zone property" under the provisions of
California Health and Safety Code Sections 25220 et seq. or any regulation
adopted in accordance therewith, or to be otherwise subject to any restrictions
on the ownership, occupancy, transferability or use of the Project, Premises or
Building under any Environmental Law.
4.8.9 Tenant's obligations under this Article 4 shall survive the
termination of this Lease.
Section 4.9 - Landlord's Exculpation
4.9.1 Landlord and Tenant acknowledge that Landlord may become legally
liable for the costs of complying with Environmental Laws relating to Hazardous
Materials which are not the responsibility of Landlord or Tenant, including,
without limitation, the following: (i) Hazardous Materials present in the soil
or ground water on, under or in the Premises, Building or Project of which
Landlord has no actual knowledge as of the Reference Date; (ii) a change in
Environmental Laws which make Hazardous Materials which are present on, under or
in the Premises, Building or Project as of the Reference Date, whether known or
unknown to Landlord, a violation of such new Environmental Laws; (iii) Hazardous
Materials that migrate, flow, percolate, diffuse or in any way move to or under
the Premises, Building or Project; or (iv) Hazardous Materials present on,
under, or in the Premises, Building or Project as a result of any discharge,
dumping or spilling (whether accidental or otherwise) by prior lessees or
occupants of the Premises, Building or Project, or by other lessees or occupants
of the Building or Project, or by the employees, agents, contractors or invitees
of either, or by others.
4.9.2 In the event any of the circumstances described in Section 4.9.1
materialize, Landlord and Tenant agree that under such circumstances (i)
Landlord shall have no liability to Tenant for and no obligation to indemnify,
defend, protect and hold Tenant harmless from any damages, claims, penalties,
judgments, fines, costs, liabilities or losses (including, without limitation,
diminution in value of the Premises, Building or Project, damages for the loss
or restriction on use of rentable or usable space or of any amenity on or in the
Premises, Building or Project, loss of business, damages for harm to natural
resources or to property other than the Premises, Building or Project or injury
to persons or animals, and sums paid in settlement of claims, attorneys' fees,
consultant and expert fees) which Tenant may incur during or after the Term as a
result of such contamination, and (ii) the provisions of Article 10 shall apply
in the event there is any restriction on Tenant's use of the Premises.
Section 4.10 - Right of Contribution
Except if and as expressly provided in this Article 4 to the contrary,
neither Landlord nor Tenant shall be deemed to have waived any rights of
contribution which either party may have against the other party at law in
<PAGE> 17
connection with costs, claims, damages or liabilities arising out of or
resulting from the use, presence, release, disposal or clean-up of Hazardous
Materials in the Premises, Building or Project.
Section 4.11 - Monitoring
4.11.1 Entry for Inspection and Testing. Tenant expressly agrees that
Landlord shall have the right to enter the Premises to inspect the Premises
and/or to perform an environmental investigation and assessment of the Premises
(an "Environmental Assessment") upon reasonable notice to Tenant (which shall be
deemed to be twenty four (24) hours prior notice except in the event of an
emergency), and that this right of entry shall include, without limitation, the
right to test for any release, threatened release, discharge or disposal of any
Hazardous Material. Landlord's entry shall be carried out in a manner so as not
unreasonably to interrupt or interfere with Tenant's business operations. An
Environmental Assessment may include, without limitation, the review of any
documents, materials, inventory, financial data or notices or correspondence to
or from private parties or governmental authorities, the review of any storage,
use and disposal facilities and procedures associated with the storage, use and
disposal of Hazardous Materials, and the testing of the soils and groundwater at
or under the Premises. Tenant shall pay for the cost of such Environmental
Assessments if in the reasonable judgment of Landlord or its environmental
consultant, a release, threatened release, discharge or disposal to any
Hazardous Material caused by Tenant has occurred or in the event of a default by
Tenant in any of its obligations under Section 4.7 through Section 4.13. In all
other cases, the cost of such Environmental Assessments shall be borne by
Landlord. If Landlord so requires, Tenant shall comply, at its sole cost and
expense, with all recommendations contained in any Environmental Assessment,
including any recommendation with respect to the precautions which should be
taken with respect to activities of Tenant or any of its Agents on, under, in or
about the Premises, Building or Project or any recommendations for additional
testing and studies to detect the presence of Hazardous Materials Released or
brought on, under, in or about the Premises, Building or Project by Tenant or
any of its Agents.
4.11.2 Monitoring Wells Generally. Landlord and Tenant acknowledge and
agree that Landlord has previously installed on the Project a number of
permanent monitoring wells for the purpose of enabling Landlord to have tests
performed to detect the presence of Hazardous Materials and that Landlord may,
if it deems necessary, cause additional permanent monitoring wells to be
installed on the Project. To the best of Landlord's knowledge, the
10
five (5) monitoring wells currently existing on or about the Project should not
materially adversely affect or disrupt the conduct of Tenant's business
operations on or about the Premises. The cost of installing and constructing
such wells shall be borne by Landlord, unless such tests reveal the presence of
Hazardous Materials attributable to use generation, handling, manufacture,
production, storage or transportation of Hazardous Materials by Tenant or any of
its Agents on, under, in or about the Premises, Building or Project or any other
real estate, in which event such costs shall be borne entirely by Tenant.
Landlord may, if it deems necessary, cause tests to be made to detect the
presence of Hazardous Material at least once every twelve (12) months during the
Term by the use of such wells as are then customarily used for such purposes.
The cost of such tests and of the maintenance and repair of such wells,
including, without limitation, any additional wells installed after the
execution of this Lease shall be borne by Landlord, unless such tests reveal the
presence of Hazardous Materials attributable to the use, generation, handling,
manufacture, production, storage or transportation of Hazardous Materials by
Tenant or any of its Agents on, under, in or about the Premises, Building or
Project or any other real estate, in which event such costs shall be borne
entirely by Tenant. Tenant shall have no right to install wells or perform any
other tests relating to the presence of Hazardous Materials in the Project.
Section 4.12 - Abatement Activities
To the extent that any investigation, testing or monitoring demonstrates
that significant levels of contamination by Hazardous Materials at the Project
exist or are increasing, Landlord shall have the right but not the obligation to
identify the source of the contamination and seek to have it abated by the
responsible parties. Landlord may undertake, or cause to be undertaken,
voluntary Remedial Work to ameliorate or stabilize any Hazardous Materials in
the Project. The determination whether to undertake any Remedial Work shall be
made by Landlord in its sole and absolute discretion based upon its consultant's
or expert's recommendations and Landlord's determination of the feasibility of
the proposed activities, their cost, their projected efficiency, and the levels
of contamination of the Hazardous Materials in the Project in comparison with
the levels of contamination in other properties in the vicinity of the Project.
Tenant agrees to cooperate fully with Landlord and with any parties designated
by Landlord to perform testing, monitoring or Remedial Work in the Project
provided that, absent governmental or regulatory compulsion to perform testing,
monitoring or Remedial Work in a particular manner, Tenant shall not be required
to cooperate if such cooperation would materially and adversely affect its
business operations at the Premises.
Section 4.13 - Effect on Proposed Assignments and Sublets
Without in any way limiting or affecting Landlord's right to withhold
its consent for other reasons, it shall not be unreasonable for Landlord to
withhold its consent to any proposed transfer, assignment or sublease if (i) the
proposed transferee's anticipated use of the Premises or Project involves the
use, generation, handling, manufacture, production, storage, testing, treatment,
discharge or disposal of Hazardous Materials not commonly used by tenants with
operations similar to Tenant's or other occupants' within the Project; (ii) the
proposed transferee has been required by any prior Landlord, lender or
governmental authority to take remedial action in connection with Hazardous
Material contaminating a property if the contamination resulted from such
transferee's actions or use of the property in question; or (iii) the proposed
transferee is subject to an enforcement order issued by any governmental
authority in connection with the use, disposal or storage of Hazardous
Materials.
ARTICLE 5 - ASSIGNMENT/SUBLETTING/MORTGAGE
<PAGE> 18
Section 5.1 - Prohibition: Definitions
5.1.1 Subject only to the exceptions provided in Section 5.2 below,
neither Tenant nor Tenant's legal representatives, successors or assigns shall
assign this Lease ("Assign" or "Assignment"), or transfer, sublet, license or
permit the Premises or any part thereof to be used or occupied by others
(collectively, "Sublet" or "Sublease"); furthermore, in no event shall Tenant or
Tenant's legal representatives or assigns pledge, hypothecate, mortgage or
otherwise encumber this Lease (collectively, "Mortgage"). Any such Assignment,
Sublease or Mortgage, whether direct or indirect, voluntary or involuntary, by
operation of law or otherwise, shall be voidable at the option of Landlord, and
shall constitute a material breach of this Lease. No interest of Tenant in this
Lease or the Premises shall be assignable or assigned by operation of law and
Tenant shall not suffer or permit either such an assignment or any involuntary
assignment of any nature whatsoever. By way of example and not limitation it
shall be deemed an Assignment under this Lease and shall be subject to all the
provisions of this Article 5, if either (a) Tenant consists of more than one
party and there is a purported assignment from one such party to any other or
others of such parties constituting Tenant, or (b) there is any transfer of
control of Tenant, whether by transfer of shares of stock or partnership
interests, or by consolidation, merger, acquisition, reorganization or otherwise
or (c) there is a sale or transfer of a major portion of Tenant's assets but not
an assignment and assumption of this Lease in accordance with Section 5.2. As
used in the immediately preceding sentence, the term Tenant shall also mean any
entity that has guaranteed Tenant's obligations under this Lease. As used in
this Article and in Section 27.6 of this Lease, the term "control" or "controls"
or "controlled" shall mean either the possession, directly or indirectly,
through one or more intermediaries, of the power to direct or cause the
direction of the management and policies of the controlled Person (as defined
below) or the ownership, directly or indirectly, of fifty percent (50%) of the
voting power of, or the equity interests in, the controlled Person (as defined
below). The term Person shall mean individuals, groups, partnerships, firms,
associations, corporations, trusts or any other form of business or legal
entity. The Person who is the actual assignee, sublessee, licensee, occupant,
transferee or any other recipient of an Assignment or Sublease is herein
referred to as "Transferee."
5.1.2 If there is an Assignment or Sublet, whether in violation of or in
compliance with this Article, then (a) Landlord may collect rent from the
Transferee and apply the net amount collected to the rent herein reserved, but
no such collection shall be deemed either a waiver of the covenants and
conditions of this Article 5, or the acceptance of the Transferee as Tenant, or
a release of Tenant from the further performance by Tenant of the obligations on
the part of Tenant herein contained or an alteration of Tenant's primary
liability for such obligations; or (b) in the event of default by any
Transferee, or any other successor of Tenant, in the performance or observance
of any of the terms of
11
this Lease or any Sublease or Assignment agreement, Landlord may proceed
directly against Tenant without the necessity of exhausting remedies against
such Transferee or successor.
Section 5.2 - Assignments or Subleases Subject to Landlord's Prior Written
Consent
Notwithstanding any contrary provision of Article 5.1.1, Tenant may
Assign or Sublet only upon the following express conditions which are agreed to
be reasonable:
5.2.1 The proposed Assignment or Sublease shall be subject to and
conditioned on the prior written consent of Landlord, which consent will not be
unreasonably withheld or conditioned and, without limiting the generality of the
foregoing, it shall be deemed reasonable for Landlord to withhold, condition or
revoke such consent if among other things the following conditions are not
satisfied:
5.2.1.1 the use to be made of the Premises by the proposed Transferee is
the expressly permitted use under Section 4.1 and would not be prohibited by any
other portion of this Lease (including but not limited to any Rules and
Regulations then in effect) and would not create materially greater demands upon
the Facilities, systems or services of the Premises, the Building or Project or
any part thereof than the demands created by Tenant;
5.2.1.2 the character, business stability, reputation, history of timely
lease performance and financial responsibility of the proposed Transferee are
both (a) of high quality and (b) satisfactory to Landlord in the good faith
exercise of its business judgment, and in any event the proposed Transferee
demonstrates, by virtue of its net worth, ratio of assets to liabilities, net
income and cash flow, among other things, the ability to perform (i) all
obligations of Tenant in the case of an Assignment and (ii) the obligations of
Tenant allocable to the Sublease space in the case of a Sublease;
5.2.1.3 the proposed Transferee is then neither a prospective tenant of
the Project with whom Landlord is in negotiation for rental of space in the
Project nor a tenant of the Project;
5.2.1.4 Intentionally deleted;
5.2.1.5 any proposal for alterations to the Premises requested by the
proposed Transferee satisfies the covenants and conditions of Article 6; and
5.2.1.6 all of the conditions set forth below are satisfied.
5.2.2 Tenant shall pay to Landlord Landlord's then standard processing
fee (currently Seven Hundred Fifty Dollars ($750)) and any taxes or other
charges imposed upon Landlord or the Project as a result of such Assignment or
Sublease, and shall reimburse Landlord for all costs, including the reasonable
fees of attorneys, architects, engineers or other consultants incurred by
Landlord in connection with such Assignment or Sublease, whether or not such
proposed Assignment or Sublease is consented to by Landlord.
<PAGE> 19
5.2.3 Tenant shall deliver to Landlord with its request for Landlord's
consent the proposed Assignment or Sublease and current financial statements of
the proposed Transferee, prepared by an independent certified public accountant,
and promptly upon Landlord's request for same, any additional documents or
information reasonably related to the proposed transaction or Transferee.
5.2.4 Tenant shall deliver to Landlord an executed original counterpart
of the Assignment or Sublease, which by its terms shall be binding on Tenant and
the Transferee subject only to Landlord's consent being obtained and the
execution by Tenant, the proposed Transferee and Landlord of Landlord's consent.
Every Assignment or Sublease shall provide, among other things, that: (a) it is
and shall be subject and subordinate to the provisions of this Lease, (b) the
termination of this Lease shall, at Landlord's sole election, constitute
termination of every such assignment or sublease, and (c) the covenants and
conditions of this Lease shall be covenants and conditions of the Assignment or
Sublease, and the proposed Transferee shall assume for the benefit of Landlord,
and shall perform faithfully and shall be bound by, all of the covenants and
conditions to this Lease from and after the effective date of the Assignment or
Sublease, limited, in the case of a Sublease, to the extent they apply to the
space in question.
5.2.5 The consent by Landlord to an Assignment or Sublease shall not in
any way be construed to relieve Tenant or the assignee or sublessee from
obtaining the express consent in writing of Landlord with respect to any
subsequent Assignment or Sublease. Landlord may, but shall not be obligated to,
consent to subsequent Assignments or Subletting of this Lease or amendments or
modifications to this Lease with Transferees or other successors of Tenant,
without notifying Tenant, and without obtaining its consent thereto and such
action shall not relieve Tenant of liability under this Lease.
5.2.6 Tenant shall not be released from Tenant's obligations under this
Lease nor shall Tenant's primary liability to pay Rent and to perform all other
obligations to be performed by Tenant under this Lease be altered by (a) any
Assignment or Sublease, regardless of Landlord's consent, or (b) any failure by
Landlord after any Assignment or Sublease, regardless of Landlord's consent, to
give Tenant notice of default under or in respect of any of the terms,
covenants, conditions, provisions or agreements of this Lease.
Section 5.3 - Share of Proceeds of Assignment or Sublease
Fifty percent (50%) of that portion of rent and all other consideration
payable to or for the benefit of Tenant in connection with any Assignment or
Sublease which is in excess of the Rent (which for purposes of this Section 5.3
shall mean the Base Annual Rent plus those Building Costs, Project Costs and
Taxes payable by Tenant pursuant to Section 3.4) which Tenant is obligated to
pay Landlord under this Lease (in the event of a Sublease or Assignment of less
than the entire Premises, prorated to reflect obligations allocable to that
portion of the Premises that is the subject
12
of the Sublease or Assignment), after deduction for brokerage commissions and
tenant improvement costs incurred by Tenant, and in the case of a Sublease,
allocated equitably over the term of or portion of the Premises covered by such
Sublease, shall be payable to Landlord as additional Rent under this Lease
without affecting or reducing any other obligation of Tenant under this Lease.
Such excess shall be payable to Landlord at the same time as such rent or other
consideration is actually paid to Tenant, provided, however, that fifty percent
(50%) of the cash equivalent of any non-cash consideration payable to or for the
benefit of Tenant at any time in connection with an Assignment or Sublease shall
be paid by Tenant to Landlord at the time Landlord gives its consent.
Section 5.4 - Landlord Options to Terminate Lease
With respect to any Assignment or Sublet except any made in accordance
with Landlord's prior written consent, it is expressly agreed and understood
that in addition to Landlord's other rights set forth in this Article 5,
Landlord shall have the following options, exercisable in Landlord's sole
discretion: (a) in the event of a Sublease or Assignment of substantially all
the Premises, to terminate this Lease as of the date proposed by Tenant for the
commencement of the term of the proposed Sublease or Assignment; and (b) without
regard to the size of the portion of the Premises to be affected by the proposed
Sublease or Assignment, to declare this Lease to be so modified so as to exclude
therefrom, and to be terminated as to, the space subject to the proposed
Sublease or Assignment, such modification to become effective on the date
proposed by Tenant for the commencement of the term of the Sublease or
Assignment, with the Base Annual Rent, and amounts payable by Tenant pursuant to
Section 3.4 for Building Costs, Taxes and Project Costs, to be adjusted in
proportion to the reduction in Rentable Area of the Premises. If Landlord
exercises either of its options to terminate under this Section 5.4, the
provisions of this Lease applicable to Tenant's obligations on expiration or
termination shall apply to the space as to which the termination applies.
ARTICLE 6 - ALTERATIONS
Section 6.1 - Alterations
Tenant shall not make any alterations, additions or improvements
including, but not limited to, the initial tenant improvements in or to the
Premises or parking space configuration in the Project Common Areas
(collectively, "Alterations") without first meeting the following requirements:
(a) Prior to the commencement of any Alterations, Tenant shall submit
plans and specifications prepared by an architect and/or structural engineer
licensed by the state where Project is located for Landlord's approval, which
approval shall not be unreasonably withheld, and obtain any necessary
governmental permits and deliver a copy thereof to Landlord:
<PAGE> 20
(b) The Alterations shall be made at Tenant's sole cost and expense and
by a contractor or mechanic designated by Landlord or a contractor or mechanic
chosen by Tenant and approved by Landlord, which approval shall not be
unreasonably withheld;
(c) Tenant shall provide satisfactory evidence of contractor's
comprehensive general liability insurance covering Landlord, builder's risk
insurance, and workmen's compensation insurance all in form and substance
satisfactory to Landlord;
(d) Tenant shall provide a performance and payment bond satisfactory in
form and substance to Landlord for all Alterations which in Landlord's
reasonable judgment will cost more than Twenty Five Thousand Dollars ($25,000)
to complete, or such other security as Landlord may reasonably require to insure
payment for the completion of all Alterations free and clear of liens;
(e) Tenant shall give Landlord at least ten (10) business days' notice
before commencing any proposed Alterations so that Landlord can post and record
a notice of nonresponsibility and any other notice as may be permitted by law,
to protect Landlord from having its interest in Premises made subject to a
mechanic's or materialmen's lien;
(f) All Alterations shall be made in full compliance with all laws,
rules, orders, ordinances, directions, regulations and requirements of all
governmental agencies, offices, departments, bureaus and boards having
jurisdiction;
(g) All of Tenant's contractors, subcontractors, employees, servants and
agents must work in harmony with and shall not interfere with any labor employed
by Landlord, or Landlord's contractors;
(h) Tenant shall be fully responsible if any shutdown of plumbing,
electrical or air conditioning equipment jeopardizes or invalidates any
warranties covering the Building;
(i) Landlord expressly reserves the right to revoke its consent upon
notice to Tenant in the event of the breach of any of the terms or conditions
hereof, in which case all work on the Alterations shall immediately cease to the
extent directed by Landlord in such notice until the breach in question is cured
to Landlord's satisfaction;
(j) Tenant shall reimburse Landlord for any and all costs or expenses
reasonably incurred by Landlord in connection with the Alterations. including
without limitation architectural or engineers' fees and attorneys' fees; and
(k) Tenant shall provide Landlord with a cost and expense breakdown of
the Alterations.
6.1.1 Notwithstanding any provision of Section 6.1(a) to the contrary,
Tenant may make Alterations in or to the Premises which cost less than Five
Thousand Dollars ($5,000) in the aggregate per year, without obtaining
Landlord's prior written consent provided (i) such Alterations do not adversely
affect the foundations, structural
13
components, exterior walls, roof or roof membrane, or the heating, ventilating
and air conditioning systems of the Building, or its exterior appearance, (ii)
such Alterations do not impair the use of the Building or materially reduce the
value or marketability of the Premises and/or Building, and (iii) Tenant
complies with all other provisions of Section 6.1. Tenant shall have no right to
make any Alterations to the structure of the Building or the roof under this
Lease.
6.1.2 At the same time Tenant submits detailed specifications, floor
plans and necessary permits to Landlord for review for the purpose of obtaining
Landlord's consent to any proposed Alteration, Tenant may request Landlord to
indicate whether or not such proposed Alteration or addition is to be removed
from the Premises upon the expiration of the Term of this Lease and whether
Tenant is to perform all restoration made necessary by the removal of any such
Alteration. In the event Tenant does not request Landlord to make such
indication, or when Tenant does not obtain Landlord's prior consent to any
Alteration or addition pursuant to Section 6.1.1, Landlord shall have the right
to require Tenant to remove any such Alteration or addition upon expiration of
the Term of this Lease and to perform all restoration made necessary by such
removal. As to future Alterations made to the Premises by Tenant, Tenant shall
only be obligated to remove such Alterations if Landlord, at the time Landlord
grants its consent therefor, states in writing that they must be removed upon
expiration or earlier termination of the Lease. For Alterations for which
Landlord's consent is not required by the terms of the Lease, Landlord may
require Tenant to remove such Alterations upon expiration or earlier termination
of the Lease; provided, however, Tenant may at any time ask for a written
statement from Landlord stating whether or not such Alterations must be removed
upon expiration or earlier termination of the Lease and Tenant shall not be
required to remove such Alterations for which Landlord states in such written
notice that removal will not be required. All Alterations not removed by Tenant
upon expiration or earlier termination of the Lease shall become Landlord's
property.
Section 6.2 - Mechanics' Liens
Any mechanics' or materialmens' lien filed against the Premises,
Building or Project for work done or claimed to have been done by or materials
claimed to have been furnished to Tenant or its agents shall be discharged by
Tenant at its expense within ten (10) days thereafter by the filing of the bond
required by law, by payment, by satisfaction or otherwise. Failure to so
discharge any such lien shall constitute a default hereunder. If Tenant has not
caused the lien to be so released within such 10-day period, Landlord, in
addition to all other remedies provided in this Lease and by law, shall have the
right, but shall not be obligated, to cause the lien to be released by such
means
<PAGE> 21
as Landlord deems proper, including payment of the claim giving rise to the
lien. All payments made and expenses incurred by Landlord in connection with the
lien shall be considered additional Rent pursuant to Section 3.1 above.
Section 6.3 - Alterations as Landlord's Property
All Alterations, whether made and/or paid for by Tenant or Landlord,
shall immediately become a part of the realty and shall be and remain Landlord's
property, and shall not be removed without the written consent of Landlord.
Notwithstanding the foregoing, all goods, effects, personal property, cubicles,
partitions, local area network cabling, detachable walls, business and trade
fixtures, machinery and equipment owned by Tenant or installed at Tenant's
expense in the Premises shall remain the personal property of Tenant and may be
removed by Tenant at any time, and from time to time, during the Term of this
Lease provided Tenant shall, in removing any such property, repair all damage to
the Premises and the Project caused by such removal and shall restore the
Premises and the Project to their condition prior to the making of the
Alterations, ordinary wear excepted, or, at Landlord's option, Tenant shall pay
to Landlord the cost of such repair and restoration.
Section 6.4 - Indemnification
Tenant's indemnity obligations under Article 9 of this Lease shall
include any matter arising out of or connected with (i) the making, maintenance,
repair, installation, removal or existence of any Alterations (including, but
not limited to, claims or liability for breach of warranty, worker's
compensation, personal injury or property damages) and (ii) Tenant's performance
and observance of, or failure to timely perform and observe, its obligations
under this Article 6. Notwithstanding the previous sentence, Landlord shall have
no right to settle mechanics' or materialmen's liens within the ten (10) day
period described in Section 6.2 or any liens which are bonded over.
Section 6.5 - Survival
Tenant's obligations under this Article 6 shall survive the expiration
or earlier termination of this Lease.
ARTICLE 7 - REPAIRS
Section 7.1 - Tenant's Obligations/Procedures
7.1.1 Subject to the provisions of Section 7.1.2, Section 7.2, Article
10 and Article 11, Tenant shall operate maintain, keep clean, provide janitorial
services for, and take good care of the Premises and the fixtures therein
(including, without limitation, the floor and window coverings), and provide for
the disposal of trash, garbage, and waste arising in connection with Tenant's
use or occupancy, all at Tenant's sole cost and expense and, further subject to
the provisions of Article 6 hereof, shall make all repairs and replacements, at
its sole cost and expense as and when Landlord deems reasonably necessary to
preserve in good working order and condition the Premises and every part
thereof, including, without limitation, all plumbing, electrical and lighting
facilities and equipment, fixtures, interior walls, interior surfaces of
exterior walls, ceilings, roof, doors, windows, plate glass, skylights, glazing
for windows, plate glass and skylights and the heating, ventilating and air
conditioning systems located within the Premises or serving the Premises and
located within or on the Building, except if and to the extent any of such
Building systems are located within the premises of any other tenant of the
Building and to such extent, after reasonable written notice to Landlord,
Landlord shall cause such work to be performed at Tenant's sole cost and
expense. Tenant shall maintain, repair and operate the Premises, the fixtures
therein and such Building systems serving the Premises in a
14
good condition comparable to the manner other buildings in first-class projects
similar in size, character and location are maintained and operated. All repairs
and replacements shall be in quality and class equal to the original work. Upon
the expiration or other termination of the Term of this Lease, Tenant shall
surrender the Premises to Landlord in as good order, condition and repair as
they were received by Tenant, ordinary wear excepted. All repairs and
replacements made by Tenant pursuant to this Section 7.1 shall be subject to the
conditions set forth in Article 6. Notwithstanding the foregoing, Tenant shall
only be responsible for its pro rata share of the cost of any repair or
replacement which under generally accepted accounting practices would be
classified as a capital improvement for the period that such capital
improvement's useful life, as reasonably determined by Landlord, falls within
the Term of this Lease. Landlord shall reimburse Tenant for Landlord's share of
such cost within thirty (30) days of receipt of reasonable written evidence
therefor, upon the same conditions as payment of the Tenant Improvement
Allowance hereunder.
7.1.2 At Landlord's option exercisable from time to time, either
Landlord or Tenant shall procure and maintain, at Tenant's expense (payable by
Tenant directly to the provider of such service), a heating, ventilating and air
conditioning system maintenance contract to provide for inspection, maintenance
and repair of such systems. If Landlord elects to have Tenant obtain such
contract, the form and substance of the contract and the qualifications of the
service provider shall be satisfactory to Landlord. Without limiting the
generality of the foregoing, such contract shall name Landlord as an express
third party beneficiary of the contract, shall be assignable to Landlord, shall
be terminable upon thirty (30) days advance written notice, shall provide for
inspections, repairs and maintenance to be performed at a minimum frequency of
once every three (3) months, shall provide for a written report to Landlord of
each such occasion of inspection, maintenance or repair, and an original of such
contract shall be delivered to Landlord. If Landlord elects to procure and
maintain such maintenance contract, Tenant shall pay to Landlord from time to
time, within fifteen (15) days after delivery of a statement therefor, the cost
of such contract.
7.1.3 Supplementing the provisions of Sections 7.1.1 and 7.1.2 and not
in limitation or derogation thereof, Tenant shall be obligated to pay directly
to the parties entitled thereto all direct and indirect fees, costs and
expenses, in connection with performance of Tenant's obligations set forth in
Sections 7.1.1 and 7.1.2, including, without limitation, the following: (i) all
wage and labor costs and expenses paid or incurred by Tenant or Tenant's
authorized
<PAGE> 22
representative and applicable to the persons engaged in the operation,
maintenance, overhaul or repair of all or any portion of the Premises or
fixtures therein, whether they be employed by Tenant or as independent
contractors (including, without limitation, the cost effect of any increase or
decrease in the hours of employment or the number of paid holidays or vacation
days, social security taxes, unemployment insurance taxes and the cost (if any)
of providing disability, hospitalization, medical, welfare, pension, retirement,
or other benefits applicable with respect to such persons); (ii) the cost and
expense of utilities, utility surcharges, water and sewer charges, fuel,
building supplies and materials, services contracts, janitorial services, or any
costs levied, assessed or imposed by, or at the direction of, or resulting from
statutes or regulations or interpretations thereof, promulgated by any federal,
state, regional, municipal or local government authority in connection with the
use or occupancy of the Premises.
Section 7.2 - Landlord's Obligations and Rights
Landlord, subject to reimbursement pursuant to Article 3 and further
subject to the provisions of Article 10 and Article 11, shall keep in good
condition and repair the following: (a) the foundations, exterior walls,
structural condition of interior bearing walls and roof and all roof components,
including the roof membrane, of the Premises; (b) the Common Areas, including,
without limitation, the parking lots, loading areas, utilities installations,
roadways, walkways, landscaping, fences and Project signs; and (c) only during
the first twelve (12) months of the Term of the Lease, the window glazing and
the heating, ventilating and air conditioning system of the Building.
Additionally, to the extent and only to the extent that any of the eight (8)
HVAC units serving the Premises as of the Commencement Date require replacement
during the term of this Lease, Landlord shall replace up to three (3) HVAC units
in any consecutive twelve (12) month period. If Tenant desires to replace any
additional HVAC units during any such twelve (12) month period, Landlord shall
do so at Tenant's written request and at Tenant's sole cost and expense, payable
within fifteen (15) days after demand therefor. Notwithstanding the foregoing,
(i) Landlord shall not be responsible for any such maintenance, upkeep, repair
or replacement to the extent that the same may be made necessary by or arise
from placement or servicing of, or other activities in relation to the location
of, equipment on the roof of the Premises or the Building, or penetration of the
roof by such equipment, regardless of Tenant's having obtained, prior to the
placement of any such equipment, the written approval of Landlord, unless and
until Tenant pays Landlord therefor, including at Landlord's option advance
payment on an estimated basis, the full cost of any such maintenance, upkeep,
repair or replacement; (ii) Landlord shall not, unless and except as otherwise
expressly provided in the Work Letter, if any, be obligated to paint the
exterior or interior surface of exterior walls, nor shall Landlord be required
to maintain, repair or replace doors, windows or plate glass of the Premises;
and (iii) Landlord shall have no obligation to repair, but without obligation to
do so may elect to repair, at the expense of Tenant, all damage or injury to the
Premises, or to the Building or Project and its fixtures, appurtenances or
equipment or to any of the areas used in connection with the operation of the
Building or Project, caused or done by Tenant or Tenant's agents, servants,
employees, contractors, visitors or licensees or caused by moving property of
Tenant in or out of the Building or the Project, or by the installation or
removal to furniture or other property, or resulting from fire, heating,
ventilating or air conditioning unit or system, short circuits, overflow or
leakage of water, steam, gas, sewage or odors, or by frost or by bursting or
leaking of pipes or plumbing works, or gas, or from any other source, due to the
carelessness, negligence, or improper conduct of Tenant or Tenant's agents,
servants, employees, contractors, visitors or licensees. If any component of or
system serving the Premises is covered by a third party warranty, Landlord
shall, at the written request of Tenant, make a claim against such warranty for
repair work so covered and use reasonable efforts to enforce its warranty rights
for the benefit of Tenant. Landlord shall, if so requested by Tenant, deliver to
Tenant copies of all such written warranties in Landlord's possession
15
Section 7.3 - Statutory Waivers
Tenant hereby waives all rights under the provisions of Sections
1932(1), 1941 and 1942 of the California Civil Code, and all rights under any
law in existence during the Term authorizing a tenant to make repairs at the
expense of a Landlord or to terminate the lease.
Section 7.4 - No Liability of Landlord
Unless and except to the extent caused by Landlord's gross negligence or
willful misconduct, or that of its employees, agents or contractors, and except
as provided in Article 10 hereof, there shall be no allowance to Tenant for
diminution of rental value, and no liability on the part of Landlord by reason
of inconvenience, annoyance or injury to business arising from the making of, or
the failure to make, any repairs, alterations, decorations, additions or
improvements in or to any portion of the Premises, Building or the Project (or
any of the areas used in connection with the operation thereof or in or to any
fixtures, appurtenances or equipment), or by reason of the active or passive
negligence of Tenant or any other tenant or occupant of the Building or Project.
In no event shall Landlord be responsible for any consequential damages arising
or alleged to have arisen from any of the foregoing matters. Notwithstanding the
foregoing, if Landlord receives, as the result of any interruption in services
or as a result of the making of or failure to make any of the above-mentioned
repairs, alterations, decorations, additions or improvements, when any of the
foregoing prevented Tenant's use of the Premises, rental insurance proceeds,
then to the extent of such proceeds received, Tenant's Rent shall be abated.
ARTICLE 8 - SUBORDINATION/PROTECTION OF LENDERS
Section 8.1 - Subordination and Attornment
8.1.1 This Lease shall be subject and subordinate to all ground or
underlying leases, mortgages and deeds of trust which now or hereafter encumber
or otherwise affect the real property of which the Premises forms a part or
encumber or affect the ground or underlying leases and all renewals,
modifications, consolidations, replacements
<PAGE> 23
and extensions of any of the foregoing (any of the foregoing being a "Superior
Interest"), without the necessity of executing any instrument to effectuate such
subordination; provided, however, upon Landlord's request, Tenant, or Tenant's
successors-in-interest, shall execute and deliver any and all instruments
desired by Landlord evidencing such subordination in the manner requested by
Landlord, provided that Tenant shall receive customary non-disturbance covenants
from the holder of such Superior Interest for the benefit of Tenant. Tenant
acknowledges that it has received and executed a subordination instrument with
the current holder of a Superior Interest in a form satisfactory to Tenant.
8.1.2 Tenant agrees that, at the option of the lessor under any ground
or underlying lease which is a Superior Interest, Tenant shall attorn to said
lessor in the event of the termination or cancellation of such ground or
underlying lease and, if requested by said lessor, shall enter into a new lease
with said lessor (or a successor ground lessee designated by said lessor) for
the balance of the Term then remaining hereunder upon the same terms and
conditions as those herein provided.
8.1.3 In the event of foreclosure or exercise of power of sale under any
mortgage or deed of trust which is a Superior Interest, the holder of any such
Superior Interest or purchaser at any sale pursuant thereto (any of the
foregoing referred to herein as a "Purchaser") shall have the option (a) to
require Tenant to attorn to such Purchaser, and to enter into a new lease with
such Purchaser (as Landlord) for the balance of the term then remaining
hereunder upon the same terms and conditions as those herein provided, or (b)
notwithstanding the foregoing provisions, to make the election and proceed
pursuant to Section 8.2.
Section 8.2 - Superiority of Lease and Attornment
Notwithstanding the foregoing, the holder of a Superior Interest may at
any time elect to subordinate its Superior Interest to this Lease (any such
encumbrance subordinated to this Lease being a "Subordinated Interest") and upon
giving notice of such election to Tenant, this Lease shall be superior to any
such Subordinated Interest, without the necessity of any further documentation.
If the interest of Landlord in the Project or any portion thereof is transferred
to a Purchaser pursuant to or in lieu of proceedings for enforcement of any
Subordinated Interest, Tenant shall immediately and automatically attorn to the
Purchaser, without execution of any further instruments, and in such event, for
the remaining Term, this Lease shall continue in full force and effect as a
direct lease between the Purchaser and Tenant on the terms and conditions set
forth herein which are applicable to such remaining Term. Notwithstanding the
foregoing, Tenant shall, upon request of Landlord or the holder to any
Subordinated Interest, execute and deliver to Landlord a document evidencing
either or both of the subordination of the Subordinated interest to this Lease
or Tenant's attornment to the Purchaser.
Section 8.3 - Lender's Right to Cure
If Landlord is in default, Tenant will accept cure of any default by any
holder (a "Holder") of a Superior interest or of a Subordinated Interest whose
name and address shall have been furnished to Tenant in writing. Tenant may not
terminate this Lease for Landlord's default unless Tenant gives notice of such
intent to terminate to each such Holder and the default is not cured within
thirty (30) days after the time period given to Landlord to cure any such
default in this Lease or within such greater time as may be reasonably necessary
to cure such default. A default which cannot reasonably be cured within said
thirty (30) day period shall be deemed cured within said period if work
necessary to cure the default is commenced within such time and the Holder
proceeds diligently thereafter with such work until the default is cured.
16
Section 8.4 - Tenant's Financial Statements
8.4.1 Tenant agrees that Landlord is hereby authorized to request a
credit report on Tenant at any time and from time to time subsequent to the
Reference Date from any third party, but in the absence of a proposed transfer
or refinancing of the Building or the Project, no more often than once each
calendar year.
8.4.2 Upon default under this Lease by Tenant, or upon any request by
Tenant for Landlord's approval of an Assignment or Sublease pursuant to Article
5 above, or upon request of Landlord made not more than once during any
Computation Year for any reason whatsoever, Tenant agrees to promptly provide
Landlord with a full, true and correct current audited annual financial
statement (certified by Tenant's regular certified public accountant) or, if a
current annual audited financial statement should not be available, a full, true
and correct current unaudited annual financial statement (certified by the chief
financial officer of Tenant), covering the financial condition of Tenant, the
same to be accompanied by all financial statements of any kind issued by Tenant
to any bank or other financial institution or credit reporting service at any
time during the twelve (12) months next immediately preceding the date of said
current financial statement.
8.4.3 Within ten (10) days after Landlord's written request, Tenant
shall deliver to Landlord, or to any actual or prospective Holder that Landlord
designates, the most recent quarterly financial statements as are available to
verify the financial condition of Tenant, or any Transferee or guarantor of
Tenant, to facilitate the financing or refinancing of the Building or Project,
or the creation, extension or renewal of any underlying or ground lease
affecting the Project.
8.4.4 Tenant represents and warrants to Landlord and such Holder that
each financial statement delivered by Tenant is or shall be, as the case may be,
accurate in all material respects to the best of Tenant's knowledge as of the
date of such statement.
Section 8.5 - Lease Modifications
<PAGE> 24
If at any time or times Landlord desires to obtain financing for the
Building or any part thereof, if any lender which intends to take, or is
holding, a mortgage or deed of trust encumbering the Building or any part
thereof, should require, as a condition to such financing, either execution by
Tenant of an agreement requiring Tenant to send such lender written notice of
any default by Landlord under this Lease, giving such lender the right to cure
such default until such lender has completed foreclosure, and preventing Tenant
from terminating this Lease unless such default remains uncured after
foreclosure has been completed, or any modification of the agreements,
covenants, conditions or provisions of this Lease, or both of them, then Tenant
agrees to execute and deliver such agreement and to modify this Lease as
required by such lender; provided, however, that no such modification shall
affect the length of term hereof, increase the rent payable by Tenant hereunder
or otherwise materially and adversely affect the use of or the conduct of
Tenant's operations in the Premises as otherwise permitted herein. Tenant
acknowledges and agrees that its failure to execute any such agreement or
modification required by such lender may cause Landlord serious financial damage
by causing the failure of a financing transaction and giving Landlord all of its
rights and remedies under Article 16 hereof, including its right to damages
caused by the loss of said financing. In addition to such rights and remedies,
if Tenant shall fail or refuse to execute any such agreement or modification
within ten (10) days after receipt thereof, Landlord, at its option, may, upon
written notice to Tenant, terminate this Lease and, upon giving such termination
notice, Landlord shall refund to Tenant any unearned rent and/or security
deposit held by Landlord in excess of amounts which Tenant then owes to
Landlord, and this Lease shall terminate.
ARTICLE 9 - LIABILITY/INDEMNIFICATION
Section 9.1 - Landlord's Exculpation and Limitation of Liability
Landlord, its employees, its agents, and the holders of any Superior
Interest or Subordinated Interest shall not be liable to Tenant and Tenant
hereby waives all claims against such parties for any injury to or death of any
person or for loss of use of or damage to or destruction of property in or about
the Premises or the Project from any cause whatsoever, including without
limitation, that occasioned by or through the acts or omissions of persons
occupying any part of the Project, or occasioned by burst, stopped or leaking
pipes or apparatus for the distribution or collection of water, wastewater, gas
or steam, or by leakage from the roof, walls or subsurface, or by falling
plaster or ceiling panels, or by electrical wiring. The foregoing waiver shall
not apply to the extent caused by the gross negligence or willful misconduct of
Landlord, its employees or agents, provided, however, the foregoing shall not
diminish or affect the waivers by Tenant and Landlord pursuant to Section 14.3
and in no event shall Landlord, its employees and agents, and the holders of any
Superior Interest or Subordinated Interest be liable for any loss of profits or
damages from business interruptions or any other consequential damages. Landlord
shall defend (with counsel reasonably acceptable to Tenant), indemnify and hold
harmless Tenant and its officers, directors, shareholders, subsidiaries,
employees, agents and representatives from and against any and all claims,
actions, lawsuits (including, but not limited to, claims, actions and lawsuits
brought by the government or third parties), losses, costs (including, but
limited to, court costs, costs of appeal, and cleanup, removal and remediation
costs associated with any Hazardous Materials), liabilities, contribution
claims, damages and expenses including, but not limited to, attorneys' fees and
court costs, arising, whether before or after the expiration or earlier
termination of the Lease, out of or in connection with (i) the gross negligence
or willful misconduct of Landlord or Landlord's employees, agents or
contractors, (ii) any breach of the Lease by Landlord, and (iii) the presence,
release, discharge, spill, removal, remediation, use, storage, disposal,
transportation or existence of any Hazardous Materials to, from, on, under or
about any part of the Project existing or arising solely and directly as a
result of the activities of Landlord or Landlord's employees, agents or
contractors on or about the Project. Landlord's indemnity obligations set forth
herein shall survive the expiration or earlier termination of the Lease.
17
Section 9.2 - Tenant's Liability, Indemnification and Hold Harmless
Tenant hereby indemnifies and agrees to protect, save, defend and hold
Landlord and the holders of any Superior Interest or Subordinated Interest, and
the constituent shareholders, partners or other owners thereof, and all of their
employees, officers, directors, agents, contractors and licensees (hereinafter
collectively referred to as the "Indemnitees") against and save Indemnitees
harmless from any and all loss, cost, liability, damage, expense and claims,
including, without limitation, penalties, tines and reasonable attorneys' fees
and costs incurred, and any claims by any persons by reason of injury to or
death of any person or for loss of use of or damage to or destruction of
property, in connection with or arising from: (a) any matter expressly
referenced elsewhere as being included within Tenant's indemnity obligation
under this Article 9, or (b) any failure of Tenant timely to perform or observe
any obligation, condition, covenant or representation of this Lease on Tenant's
part to be performed or observed, or (c) the use or occupancy or manner of use
or occupancy of the Premises by Tenant or any person or entity claiming through
or under Tenant, or (d) any acts, omissions or negligence of Tenant, or the
employees, agents, contractors, subtenants, assigns, licensees, invitees or
visitors of Tenant, or of any person or entity claiming through or under Tenant,
in, on or about the Premises or the Project, either prior to the commencement
of, during, or after the expiration of the Term, including, without limitation,
any acts, omissions or negligence in the making or performing of any
alterations, construction or installation of Tenant's fixtures, equipment or
other personal property. Provided, however, Tenant shall not be obligated to
protect, defend, indemnify and save harmless Indemnitees as set forth above to
the extent that any such loss, cost, liability, damage, expense or claim has
been caused by the gross negligence or willful misconduct of Landlord, its
employees, contractors or its agents. In the event any action or proceeding is
brought or threatened against any of the Indemnitees for any claim against which
Tenant is obligated to indemnify Indemnitees hereunder, Tenant upon notice from
Landlord shall defend such action or proceeding pursuant to this Article 9 by
counsel (i) previously approved in writing by Landlord in its reasonable
discretion, and (ii) willing to cooperate with counsel of Landlord's choice in
connection with such defense. Landlord reserves the right to settle, compromise
or dispose of any and all claims, actions or proceedings related to the
foregoing indemnities in its sole discretion and the exercise of said right
shall not reduce Tenant's obligations hereunder.
<PAGE> 25
Section 9.3 - Survival and Conflicts with other Indemnity Provisions
The foregoing provisions of this Article 9 shall not diminish either
party's rights and obligations set forth in Article 4 and Section 6.4 hereof, as
applicable. The provisions of this Article 9 shall survive the expiration or
other termination of this Lease. Any waiver of claims against any party, release
of any party and/or indemnification of any party pursuant to the terms of this
Lease, including without limitation the terms of this Article 9, shall in no
event be deemed to apply to such party's fraud, willful injury to the person or
property of another, or violation of any law, whether willful or negligent, to
the extent such waiver or indemnity would violate California Civil Code Section
1668.
ARTICLE 10 - DAMAGE/DESTRUCTION
Section 10.1 - Destruction and Repair
If the Premises shall be damaged by fire or other casualty, and if
Tenant shall give prompt notice to Landlord of such damage, Landlord, at
Landlord's expense, shall repair such damage and restore the Premises to
substantially the condition it was in prior to such fire or casualty; provided,
however, that Landlord shall have no obligation to repair any damage to or to
replace Tenant's personal property, trade fixtures or equipment, Alterations or
any other property or effects of Tenant. Notwithstanding the foregoing, Landlord
shall have no obligation to repair such damage and restore the Premises to
substantially the condition it was in prior to such fire or casualty: (i) to the
extent there are governmental restrictions which preclude Landlord from
repairing and restoring the Premises or the Building to substantially the
condition it was in prior to such fire or other casualty; or (ii) if Tenant is
in default under this Lease. Except as otherwise provided in this Article 10, if
the entire Premises shall be rendered untenantable by reason of any such damage,
the Base Annual Rent and Tenant's Building Share of Building Costs and Tenant's
Project Share of Taxes and Project Costs shall abate for the period from the
date of such damage to the date when such damage to the Premises shall have been
repaired, and if only a part of the Premises shall be rendered untenantable, the
Base Annual Rent and Tenant's Building Share of Building Costs and Tenant's
Project Share of Taxes and Project Costs shall abate for such period in the
proportion that the area of the part of the Premises so rendered untenantable
bears to the total area of the Premises; provided, however, if, prior to the
date when all of such damage shall have been repaired, any part of the Premises
so damaged shall be rendered tenantable or shall be used or occupied by Tenant
or any person or persons claiming through or under Tenant, then the amount by
which Base Annual Rent and Tenant's Building Share of Building Costs and
Tenant's Project Share of Taxes and Project Costs shall abate shall be equitably
apportioned for the period from the date of any such use or occupancy to the
date when all such damage shall have been repaired.
Section 10.2 - 180 Day and 60 Day Repair Criteria
10.2.1 Notwithstanding the provisions of Section 10.1, if prior to or
during the Term, the Premises or the Building (whether or not the Premises has
been damaged or rendered untenantable) shall be so damaged by fire or other
casualty that, in Landlord's architect's or contractor's opinion determined in
its reasonable discretion, it will take longer than one hundred eighty (180)
days from the date of the casualty to substantially complete the repair and
restoration of the Premises or Building, then Landlord shall give to Tenant as
soon as possible but in no event later than sixty (60) days after the casualty,
notice of such opinion ("the 180 Day Notice"). If such repairs and restoration
cannot in Landlord's architect's or contractor's opinion be substantially
completed within one hundred eighty (180) days after the date of the casualty,
Landlord and Tenant shall each have the right to terminate this Lease by giving
written notice to the other within thirty (30) days after Tenant's receipt of
the 180 Day Notice.
10.2.2 Notwithstanding any provision herein to the contrary, Landlord
and Tenant shall each have the right to terminate this Lease in the event the
Premises is damaged by a fire or other casualty during the last year of the
18
Term of this Lease if in Landlord's architect's or contractor's opinion
determined in its reasonable discretion it will take longer than sixty (60) days
to substantially complete the repair and restoration of the Premises. Landlord
shall give notice of such opinion (the "60 Day Notice") as soon as possible, but
in no event later than thirty (30) days after such casualty. In the event either
party elects to terminate this Lease pursuant to this Section 10.2.2 such party
shall give written notice to the other, which must be received by the other
party no later than ten (10) days after Tenant's receipt of the 60 Day Notice.
10.2.3 In the event Landlord or Tenant delivers such a written
termination notice pursuant to Section 10.2.1 or Section 10.2.2, this Lease and
the Term shall terminate thirty (30) days thereafter with the same effect as if
the expiration of such thirty (30) day period was the Expiration Date, and Rent
shall be apportioned as of such date. In the event that this Lease is not so
terminated and the actual time to substantially complete the repair and
restoration of the Premises takes longer than one hundred eighty (180) days (or
sixty (60) days in the event Landlord gives a 60 Day Notice), Tenant shall have
no claim or remedy of any kind whatsoever against Landlord for any costs,
damages, losses, liabilities or penalties it incurs, provided Landlord
diligently prosecutes the repair and restoration of the Premises to substantial
completion. No such delay not caused by Tenant shall affect Tenant's right to
abatement of Base Annual Rent and Tenant's Building Share of Building Costs and
Tenant's Project Share of Taxes and Project Costs under Section 10.1.
Section 10.3 - Lack of Insurance Proceeds
Notwithstanding anything contained in this Article 10 to the contrary,
in no event shall Landlord be required to spend for any repair, replacement or
reconstruction of the Premises an amount greater than the insurance proceeds
actually received by Landlord (plus the amount of reimbursement of deductibles
actually received from
<PAGE> 26
Tenant (and other tenants) as Building Costs or Project Costs) as a result of
the fire or other casualty causing such loss, damage or destruction. If Landlord
can not repair and restore the Premises to the condition otherwise required
under this Article 10 with the proceeds actually received by Landlord and elects
not to so repair and restore the Premises, this Lease shall terminate upon such
written election made by Landlord and delivered to Tenant within fifteen (15)
days of receipt of such insufficient proceeds.
Section 10.4 - No Release of Liability
Except to the extent expressly provided otherwise in this Lease, nothing
contained in this Lease shall relieve Tenant of any liability to Landlord or to
its insurance carriers that Tenant may have under law or under the provisions of
this Lease in connection with any damage to the Premises or the Project by fire
or other casualty.
Section 10.5 - Tenant's Negligence
Notwithstanding the provisions of Section 10.1, if any such damage is
due to the fault or neglect of Tenant, any person claiming through or under
Tenant, or any of their employees, suppliers, shippers, customers or invitees,
then there shall be no abatement of Base Annual Rent and Tenant's Building Share
of Building Costs and Tenant's Project Share of Taxes and Project Costs by
reason of such damage, unless Landlord is reimbursed for such abatement of Base
Annual Rent and Tenant's Building Share of Building Costs and Tenant's Project
Share of Taxes and Project Costs pursuant to any rental insurance policies that
Landlord may, in its sole discretion, elect to carry.
Section 10.6 - Express Agreement Re Damage and Destruction
The provisions of this Lease, including this Article 10, constitute an
express agreement between Landlord and Tenant with respect to any and all damage
to, or destruction of, all or any part of the Premises, the Building or any
other portion of the Project, and it is agreed that any statute or regulation of
the State of California, including, without limitation, Sections 1932(2) and
1933(4) of the California Civil Code, with respect to any rights or obligations
concerning damage or destruction in the absence of an express agreement between
the parties, and any similar statute or regulation, now or hereafter in effect,
shall have no application to this Lease or to any damage to or destruction of
all or any part of the Premises, the Building or any other portion of the
Project.
ARTICLE 11 - EMINENT DOMAIN
Section 11.1 - Partial or Total Taking
If all or substantially all of the Premises or Building is condemned or
taken in any manner for public or quasi-public use, including, but not limited
to, a conveyance or assignment in lieu of a condemnation or taking, this Lease
shall automatically terminate as of the earlier of the date of the vesting of
title or the date of dispossession of Tenant as a result of such condemnation or
other taking. If less than all or substantially all of the Premises or Building
is so condemned or taken, this Lease shall automatically terminate only as to
the portion of the Premises so taken as of the earlier of the date of the
vesting of title or the date of dispossession of Tenant as a result of such
condemnation or taking. If such portion of the Premises or Building is condemned
or otherwise taken so as to require, in the reasonable opinion of Landlord, a
substantial alteration or reconstruction of the remaining portions thereof, this
Lease may be terminated by Landlord, as of the earlier of the date of the
vesting of title or the date of dispossession of Tenant as a result of such
condemnation or taking, by written notice to Tenant given within sixty (60) days
following notice to Landlord of the date on which said vesting or dispossession
will occur. Tenant hereby waives any right which it may have during the Lease
Term under California Code of Civil Procedure Sections 1265.110 through
1265.140, and any similar law now or hereafter in effect, including, without
limitation, the right to petition a court to terminate this Lease in the event
of a partial taking of the Premises.
19
Section 11.2 - Award
Landlord shall be entitled to the entire award in any condemnation
proceeding or other proceeding for taking for public or quasi-public use,
including, without limitation, any award made for the value of the leasehold
estate created by this Lease and Alterations which are the property of Landlord.
No award for any partial or entire taking shall be apportioned, and Tenant
hereby assigns to Landlord any award that may be made in such condemnation or
other taking, together with any and all rights of Tenant now or hereafter
arising in or to same or any part thereof; provided, however, that nothing
contained herein shall be deemed to give Landlord any interest in, or to require
Tenant to assign to Landlord, any award made to Tenant specifically for its
relocation expenses, the taking of personal property and trade fixtures
belonging to Tenant, or the interruption of or damage to Tenant's business, or
for a temporary taking during the Term of this Lease, if such award is made
separately to Tenant and not as part of the damages recoverable by Landlord.
Section 11.3 - Sale to Condemning Authority
Landlord may, without any obligation to Tenant and without obtaining
Tenant's consent, agree to sell and/or convey to the condemnor the Premises,
Building or Project or any portion thereof sought by the condemner, without
first requiring that any action or proceeding be instituted or, if instituted,
pursued to a judgment.
Section 11.4 - Proration/Abatement of Base Annual Rent
In the event of an automatic or elective termination of this Lease
pursuant to Section 11.1 or of sale pursuant to Section 11.3, the Rent shall be
equitably prorated as of the date of termination of this Lease. In the event
<PAGE> 27
of a partial condemnation or taking that is permanent, but does not result in a
termination of this Lease as to the entire Premises pursuant to Section 11.1,
the Rent shall abate in proportion to the portion of the Premises taken by such
condemnation or other taking.
Section 11.5 - Temporary Taking
If all or any portion of the Premises is condemned or otherwise taken
for public or quasi-public use for a limited or temporary period of time, this
Lease shall remain in full force and effect and Tenant shall continue to perform
all terms, conditions and covenants of this Lease. The apportionment of any
award shall be governed by the provisions of Section 11.2.
ARTICLE 12 - UTILITIES
Section 12.1 - Utilities
12.1.1 Tenant shall pay directly to the providers of all services for
separately metered or directly billed water, gas, heat, light, power, telephone
and other utilities and services supplied to the Premises, all fees, costs and
expenses of such services, together with any Taxes thereon. Landlord makes no
representation with respect to the adequacy or fitness of the heating,
ventilating or air conditioning equipment in the Project to maintain
temperatures that may be required for, or because of, any equipment of Tenant,
and Landlord shall have no liability for loss or damage in connection therewith.
12.1.2 In the event any governmental entity promulgates or revises any
statute, ordinance or building, fire or other code or imposes mandatory or
voluntary controls or guidelines on Landlord, the Project or any part thereof,
relating to the use or conservation of energy, water, gas, light or electricity
or the reduction of automobile or other emissions or the provision of any other
utility or service provided with respect to this Lease, or in the event Landlord
is required or elects to make alterations to the Project or any other part
thereof in order to comply with such mandatory or voluntary controls or
guidelines, Landlord may, in its sole discretion, require Tenant to comply with
such mandatory or voluntary controls or guidelines or Landlord may, in its sole
discretion, make such alterations to the Project or any other part thereof. All
costs incurred by Landlord in connection with such laws, ordinances, guidelines
or controls, including alterations to the Project shall be included in Operating
Costs and assessed to Tenant pursuant to Section 3.4, except to the extent that
such costs are to be entirely the responsibility of Tenant pursuant to this
Lease, in which latter case such costs shall be entirely assessed to Tenant.
Neither such compliance nor the making of such alterations shall in any event
entitle Tenant to any damages, relieve Tenant of the obligation to pay the full
Rent reserved hereunder or constitute or be construed as a constructive or other
eviction of Tenant.
ARTICLE 13 - LANDLORD'S RIGHT OF ENTRY
Landlord and Landlord's agents shall have the right to enter the
Premises at all times, to examine the same and to make such repairs or
alterations, decorations, additions or improvements as Landlord may reasonably
deem necessary or desirable, including without limitation the use and
maintenance of pipes and conduits in and through the Premises, and Landlord and
Landlord's agents shall be allowed to take all material into and upon the
Premises that may be required therefor without the same constituting an eviction
of Tenant in whole or in part, and subject to the provisions of Article 10, the
Base Annual Rent reserved shall in no way abate while said repairs, alterations,
decorations, additions or improvements are being made, by reason of
inconvenience, annoyance or injury to the business of Tenant because of the
prosecution of any such work, or otherwise. Landlord and Landlord's agents are
expressly granted permission to inspect the Premises at any reasonable time and
to show the Premises at any reasonable time to prospective tenants, mortgagees,
purchasers, lessees of the Building or Project and other persons with a business
interest therein. If Tenant shall not be personally present to open and permit
Landlord's entry into the Premises, at any time, when for any reason entry
therein shall be necessary or permissible hereunder, Landlord or Landlord's
agents may enter the same by a master key, or may forcibly enter the same,
without rendering Landlord or such agents liable therefor (if during such entry
Landlord or Landlord's agents shall observe all applicable laws and requirements
under this Lease and accord reasonable care to Tenant's property), and without
in any manner affecting
20
the obligations, terms, covenants, conditions, provisions or agreements of this
Lease. Nothing herein contained, however, shall be deemed or construed to impose
upon Landlord any obligation, responsibility or liability whatsoever, for the
care, supervision or repair of the Project or the Building or any part thereof,
other than as otherwise provided in this Lease. Notwithstanding any provision in
this Article 13 to the contrary, Landlord agrees to provide Tenant with at least
24 hours prior notice (except when Landlord reasonably determines that an
emergency situation exists) and Tenant shall have the right to accompany
Landlord or Landlord's employees, agents, contractors and representatives when
Landlord enters the Premises. Landlord shall use reasonable efforts to
accommodate Tenant's desire to have all entry into the Premises during normal
business hours.
ARTICLE 14 - TENANT'S INSURANCE
Section 14.1 - Tenant's Insurance
Tenant shall carry at its expense and maintain in force during the Term
and during such periods, if any, as Tenant shall have possession or conduct
activities in, on or about the Premises prior to or after the Term hereof, the
following insurance:
(a) Commercial Liability Insurance with a Broad Form Liability
Endorsement (including protective liability coverage on operations of
independent contractors engaged in construction and also blanket contractual
<PAGE> 28
liability insurance) on an "occurrence" basis against claims for "personal
injury" liability, including without limitation bodily injury, death or property
damage liability with a limit of not less than Two Million Dollars ($2,000,000)
in the event of "personal injury " to any number of persons or of damages to
property arising out of any one " occurrence "; such insurance shall cover
Tenant's indemnity obligations hereunder (excluding the indemnity obligations
relating to Hazardous Materials, so long as such indemnity obligations are not
generally insured for by tenants in the vicinity of the Project) and may be
furnished under a "primary" policy and an "umbrella" policy, provided that it is
primary insurance and not excess over or contributory with any insurance in
force for Landlord;
(b) insurance against loss or damage by fire and such other risks and
hazards as are insurable under present and future standard forms of fire and
extended coverage insurance policies, to the personal property, furniture,
furnishings and fixtures belonging to Tenant located in the Premises for not
less than 100% of the actual replacement value thereof;
(c) Worker's Compensation and Employee's Liability Insurance (as
required by state law); and
(d) such other insurance as is generally required by owners or lenders
on buildings similar in size, character, age and location as the Building, as
may change from time to time.
Section 14.2 - General Requirements of Tenant's Insurance
14.2.1 All such insurance shall name Landlord, any mortgagee and/or
ground or underlying lessor as additional insureds and shall provide that
Landlord and any additional insureds shall receive thirty (30) days' (or ten
(10) days' in case of nonpayment of premium) written notice from the insurer
prior to any cancellation or change of coverage, and shall contain a cross
liability or severability clause.
14.2.2 All insurance required to be carried by Tenant hereunder shall be
written only as primary insurance and non-contributing and shall be effected
with only such companies as are licensed to do business in the State of
California and as Landlord shall approve, but in any event not with any company
of less repute than those having a general policy rating of A and a financial
rating of XV as rated in the most current available "Best's Insurance Reports".
In the event "Best's Insurance Reports" is not currently published, such minimum
standard shall be that published by any other nationally recognized publisher of
such information. Landlord's approval shall be deemed to have been given unless
Landlord in writing disapproves such company (i) not later than one month after
submission of a policy or certificate to Landlord or (ii) at any time due to
claims experience. Any insurance carried by Landlord shall not be contributory.
14.2.3 Tenant shall deliver original certificates of the policies of
insurance required hereunder to Landlord at least ten (10) days before the
Commencement Date, and thereafter at least thirty (30) days before the
expiration dates of expiring policies.
14.2.4 In the event Tenant shall fail to procure such insurance, or to
deliver such policies or certificates, Landlord may, at its option, without
waiving any rights or remedies which Landlord may have for Tenant's default
hereunder, procure such insurance for the account of Tenant, and the cost
thereof shall be paid to Landlord within fifteen (15) days after delivery to
Tenant of bills therefor. Nothing contained in this Article 14 shall be
construed as a limitation of Tenant's liability hereunder.
Section 14.3 - Waiver of Subrogation
(a) Subject to the rights of Landlord under Article 3 to collect,
utilize and replenish Building Costs and Project Costs for the purposes therein
set forth, Landlord waives any and all rights of recovery against Tenant for or
arising out of damage to or destruction of the Premises, the Building or the
Project, or any part thereof, from causes then included under standard "all
risk" coverage owner's property insurance policies or endorsements whether or
not such policies are in effect covering Landlord or Tenant and whether or not
such damage or destruction shall have been caused by the negligence of Tenant,
its agents, employees, contractors, visitors or licensees, but only to the
extent that Landlord's insurance policies then in force permit such waiver.
Tenant waives any and all rights of recovery against Landlord for or arising out
of damage to or destruction of any property of Tenant, from causes then included
under standard "all risk" coverage property insurance policies or endorsements
whether or not such policies are then in effect covering Landlord or Tenant and
whether or not caused by the negligence of Landlord, its agents,
21
employees, contractors, visitors or licensees, but only to the extent that
Tenant's insurance policies then in force permit such waiver. Landlord and
Tenant represent that their present insurance policies now in force permit such
waiver. Landlord and Tenant agree to seek and procure policies of insurance with
full mutual waivers of subrogation to the extent available at commercially
reasonable rates.
(b) If at any time during the Term of this Lease either party shall give
no less than five (5) days prior notice to the other certifying that any
insurance carrier which has issued any such policy covering any of the property
above mentioned has refused to consent to the aforesaid waiver of subrogation,
or such carrier revokes a consent previously given or cancels or threatens to
cancel any policy previously issued and then in force and effect because of such
waiver of subrogation, then, in any of such events, the waiver in this Article
14 shall thereupon be of no further force and effect as to the loss, damage or
destruction covered by such policy and such party shall immediately pursue an
insurance carrier who will consent to such waiver; provided, however, that if at
any time thereafter such consent shall be obtained therefor from any existing or
substitute insurance company, the waiver hereinabove provided for shall again
become effective. The cost of obtaining any such waiver shall be deemed a cost
of such policy.
<PAGE> 29
Section 14.4 - Landlord's Insurance
Landlord shall procure, at Tenant's cost and expense as an Operating
Cost under Article 3, the following insurance:
(a) Commercial Liability Insurance (including protective liability
coverage on operations of independent contractors engaged in construction and
also blanket contractual liability insurance) in commercially reasonable amounts
on an "occurrence" basis for the benefit of Landlord as named insured against
claims for "personal injury" liability, including, without limitation, bodily
injury, death or property damage liability;
(b) Insurance in commercially reasonable amounts against loss or damage
by fire and such other risks and hazards as are insurable under present and
future standard forms of fire and extended coverage insurance policies, covering
the real property improvements which make up the Premises; and
(c) Landlord may, but is not obligated to carry such other insurance
(including, without limitation, insurance against loss of rents and/or
earthquake insurance) with respect to the Landlord or the Premises, Building
and/or Project, as is generally carried by owners of, or required by lenders on,
buildings or projects similar in size, character and location as the Building or
Project.
Tenant shall be entitled to obtain at its own cost and expense any
additional insurance Tenant reasonably desires to protect itself as a result of
Tenant agreeing to the exculpatory language in Articles 6 and 9 or otherwise.
ARTICLE 15 - INSOLVENCY OR BANKRUPTCY
Section 15.1 - Insolvency or Bankruptcy
15.1.1 In addition to the occurrences set forth in Section 16.1
hereinafter, the following events shall constitute a default under this Lease:
(i) Tenant admits in writing its inability to pay its debts as they mature; (ii)
Tenant makes an assignment for the benefit of creditors or takes any other
similar action for the protection or benefit of creditors; (iii) Tenant gives
notice to any governmental body of insolvency or pending insolvency, or
suspension or pending suspension of operations; (iv) Tenant files a voluntary
petition in bankruptcy or has an involuntary petition filed against him, her or
it and such petition has not been dismissed within sixty (60) days; (v) Tenant
files any petition or answer seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or other similar relief
under any present or future bankruptcy statute, regulation or law; (vi) a court
of competent jurisdiction enters an order, judgment or decree approving a
petition filed against Tenant seeking any relief described in the preceding
subparagraph (v) and such order, judgment or decree shall remain unvacated and
unstayed for an aggregate of sixty (60) days from the date of entry thereof;
(vii) a trustee, receiver, conservator or liquidator of Tenant or of all or any
substantial part of its property or its interest in the Premises is employed or
appointed and such receivership remains undissolved for sixty (60) days; or
(viii) this Lease or any estate of Tenant hereunder is levied upon under any
writ of attachment or execution, and such writ shall remain unvacated and
unstayed for ten (10) days.
15.1.2 Upon the filing of a petition by or against Tenant under the
United States Bankruptcy Code, Tenant, as debtor in possession, and any trustee
who may be appointed agree to:
(a) perform each and every obligation of Tenant under this Lease until
such time as this Lease is either rejected or assumed by order of the United
States Bankruptcy Court;
(b) pay in the manner and at the time provided hereunder as reasonable
compensation for use and occupancy of the Premises;
(c) reject or assume this Lease within sixty (60) days of the filing of
such petition under any Chapter of the Bankruptcy Code;
(d) give Landlord at least forty-five (45) days prior written notice of
any abandonment of the Premises; any such abandonment to be deemed a rejection
of this Lease; and
(e) do all other things of benefit to Landlord otherwise required under
the Bankruptcy Code.
Tenant, as debtor in possession, and any such trustee shall be deemed to
have rejected this Lease in the event of the failure to comply with any of the
above requirements and to have consented to the entry of an order by an
22
appropriate Bankruptcy Court requiring compliance with any of the above
requirements, waiving all rights to notice of the entry of such order.
Section 15.2 - Measure of Damages
In the event of the termination of this Lease pursuant to Section 15.1,
Landlord shall be entitled to the same rights and remedies as those set forth in
Sections 16.3 and 16.5 and in Article 18 of this Lease.
<PAGE> 30
Section 15.3 - Provision of Services and Assumption of Lease
In the event of the occurrence of any of those events specified in
Section 15.1, if Landlord shall not choose to exercise, or by law shall not be
able to exercise, its rights hereunder to terminate this Lease upon the
occurrence of such events, then, in addition to any other rights of Landlord
hereunder or by law, (i) Landlord shall not be obligated to provide Tenant with
any of the services specified in Article 12, unless Landlord has received
compensation in advance for such services, and the parties agree that Landlord's
estimate of the compensation required with respect to such services shall
control, and (ii) neither Tenant, as debtor-in-possession, nor any trustee or
other person (hereinafter collectively called the "Assuming Tenant") shall be
entitled to assume this Lease unless, on or before the date of such assumption,
the Assuming Tenant (x) cures, or provides adequate assurance that the latter
will promptly cure, any existing default under this Lease, (y) compensates, or
provides adequate assurance that the Assuming Tenant will promptly compensate,
Landlord for any pecuniary loss (including, without limitation, attorneys' fees
and disbursements) resulting from such default, and provides adequate assurance
of future performance under this Lease, it being covenanted and agreed by the
parties that, for such purposes, any cure or compensation shall be effected by
the immediate payment of any monetary default or any required compensation, or
the immediate correction or bonding of any nonmonetary default; any "adequate
assurance" of such cure or compensation shall be effected by the establishment
of an escrow fund for the amount at issue or by bonding and "adequate assurance"
of future performance shall be effected by the establishment of an escrow fund
for the amount at issue or by bonding, it being covenanted and agreed by
Landlord and Tenant that the foregoing provision was a material part of the
consideration for this Lease.
ARTICLE 16 - DEFAULT/REMEDIES
Section 16.1 - Events of Default
It shall be deemed conclusively a material breach of this Lease, and the
occurrence of any of the following shall constitute a default by Tenant:
(a) Tenant fails to make any payment of Rent pursuant to this Lease when
due provided, however, that Landlord agrees to provide Tenant no more than once
during any consecutive twelve (12) month period of the Term a written courtesy
notice of Tenant's failure to pay rent when due hereunder, by which Tenant shall
have five (5) days after receipt of such notice to pay such overdue rent before
delivery of any statutorily required notice is given by Landlord seeking
forfeiture of the Lease; or
(b) Tenant fails timely to perform or observe any obligation, covenant,
condition or representation required to be performed or made by Tenant under
this Lease (other than those described above in Section 16.1(a) and except as
otherwise provided below in Sections 16.1 (c) through 16.1 (h)) and shall fail,
for a period of fifteen (15) days after written notice from Landlord specifying
such failure ("Landlord's Nonmonetary Default Notice"), to cure said failure,
unless such failure cannot be cured within said fifteen (15) days, in which case
it shall be deemed an event of default under this Lease if Tenant either (i)
fails to commence to cure the applicable default within such fifteen (15) day
period, and (ii) fails, after commencing to cure within such fifteen (15) day
period, to use due diligence to cure the applicable default within such period
of time as may be reasonably necessary; or
(c) Tenant abandons the Premises or Tenant vacates the Premises and/or
removes substantially all of Tenant's furniture or other property therefrom for
a period of thirty (30) days, and Tenant fails to (i) give Landlord fifteen (15)
days prior written notice of such intent to vacate and (ii) keep in place all
signage it has erected or constructed in the Common Areas, Premises, Building or
Project; or
(d) [Intentionally omitted]
(e) [Intentionally omitted]
(f) Any of the events described in Section 15.1.1 shall occur; or
(g) Tenant Assigns, Sublets or transfers, by operation of law or
otherwise, or enters into an agreement to Assign, Sublet or transfer any or all
of its interests under this Lease without obtaining Landlord's prior written
consent (other than as expressly permitted under Article 5 hereof) or permits,
commits, suffers or maintains any unlawful act, nuisance or waste on or about
the Premises, the Building or the Project or areas used in connection therewith
which remains unrectified after fifteen (15) days written notice of such
occurrence or event; or
(h) Tenant fails to pay, or deposit with Landlord, timely any amount of
money due to Landlord pursuant to Exhibit D or Tenant Delay under Exhibit D
exceeds thirty (30) days; or
(i) Tenant fails to move into or take possession of the Premises within
fifteen (15) days after the Rent Commencement Date (subject to the issuance of
an appropriate certificate of occupancy).
23
Section 16.2 - Termination of the Right to Possession
In the event that Tenant is in default as specified in Section 16.1
hereof, Landlord may elect to terminate this Lease by giving notice of such
election to Tenant. Said notice may consist of a three (3) days' notice to pay
rent or quit pursuant to California Code of Civil Procedure Section 1161, in
which event, at the expiration of said three (3) day period (unless Tenant cures
the default within said three (3) day period) Tenant's right to possession shall
be terminated (including, without limitation, for purposes of California Civil
Code Section 1951.2) and this Lease shall
<PAGE> 31
thereby terminate and Tenant shall vacate and deliver possession of the Premises
to Landlord, but Tenant shall remain liable as hereinafter provided.
Section 16.3 - Rights Upon Termination
In the event of Landlord's termination of this Lease as a result of
Tenant's default under this Lease, Landlord shall have:
(a) The right, subject to applicable law, to re-enter the Premises and
dispossess Tenant and the legal representatives of Tenant and all other
occupants of the Premises by unlawful detainer or other summary proceedings, or
otherwise as permitted by law, and remove their property and regain possession
of the Premises (but Landlord shall not be obligated to effect such removal) and
said property may, at Landlord's option, be stored or otherwise dealt with as
provided within this Lease or as applicable law may then provide or permit,
including but not limited to the right of Landlord to sell or otherwise dispose
of the same or to store the same, or any part thereof, in a warehouse or
elsewhere at the expense and risk of and for the account of Tenant.
(b) The rights and remedies provided by California Civil Code Section
1951.2 to recover from Tenant upon termination of the Lease:
(i) the worth at the time of award of the unpaid Rent and other
charges which had been earned at the time of termination;
(ii) the worth at the time of award of the amount by which the
unpaid rent and other charges which would have been earned after
termination until the time of award exceeds the amount of such rental
loss that Tenant proves could have been reasonably avoided;
(iii) subject to Subdivision (c) of the California Civil Code
Section 1951.2, the worth at the time of award of the amount by which
the unpaid rent and other charges for the balance of the Term after the
time of award exceeds the amount of such rental loss that Tenant proves
could be reasonably avoided; and
(iv) 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 therefrom.
The "worth at the time of award" of the amounts referred to in
clauses (i) and (ii) of this Section 16.3 shall be computed by allowing
interest at the Default Rate. The "worth at the time of the award" of
the amount referred to in clause (3) of this Section 16.3 shall be
computed by discounting such amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of award plus 1%.
(c) The right to enforce, to the extent permitted by the laws of the
State of California then in force and effect, any other rights or remedies set
forth in this Lease or otherwise applicable hereto by operation of law or
contract.
Section 16.4 - Continuance of Lease
In the event of any breach or default under this Lease by Tenant (and
regardless of whether or not Tenant has abandoned the Premises), this Lease
shall not terminate unless Landlord, at Landlord's option, elects at any time
when Tenant is in breach of this Lease to terminate Tenant's right to possession
as provided in Subsection 16.2 of this Article 16 or, at Landlord's further
option, by the giving of any notice (including but not limited to any notice
preliminary or prerequisite to the bringing to legal proceedings in unlawful
detainer) terminating Tenant's right to possession. For so long as this Lease
continues in effect, Landlord shall have the rights and remedies provided by
California Civil Code Section 1951.4 and Landlord may enforce all of Landlord's
rights and remedies under this Lease, including the right to recover all Rent as
it becomes due hereunder. For the purpose of this Section 16.4, the following
shall not constitute termination of Tenant's right to possession: (i) acts of
maintenance or preservation or efforts to relet the Premises, or (ii) the
appointment of a receiver upon initiative of Landlord to protect Landlord's
interest under this Lease.
Section 16.5 - Other Remedies
In the event of a breach or default by Tenant under any of the terms,
covenants, conditions, provisions or agreements of this Lease, or threat
thereof, Landlord shall additionally have the right of injunction if available
under law. Provision in this Lease of any particular remedy shall not preclude
Landlord from any other remedy, at law or in equity.
Section 16.6 - Waiver of Rights of Redemption and Time for Service of Notice
To the extent and only to the extent permitted by law, Tenant hereby
expressly waives any and all rights (i) to require that Landlord serve a notice
of default for unpaid rent within one year after such rent becomes due, as
provided in California Code of Civil Procedure Section 1161, subsection 2, and
(ii) to relief from forfeiture,
24
redemption or reinstatement granted by or under any present or future law
(including, without limitation, California Code of Civil Procedure Sections 1174
and 1179) in the event of Tenant's being evicted or dispossessed for any cause,
or in the event of Landlord's obtaining the right to possession of the Premises,
by reason of the violation by Tenant of any of the terms, covenants, conditions,
provisions or agreements of this Lease, or otherwise.
<PAGE> 32
Section l6.7 - Procedural Matters
(a) Tenant hereby waives the requirement that any notice of default
served pursuant to this Article 16 or under the California unlawful detainer
statutes shall be required to be served on any subtenant in possession or actual
occupation of the Premises. Tenant also waives its right to require under
California Civil Code Section 1164 that any subtenant in actual occupation of
the Premises when the complaint and unlawful detainer be filed need be made a
party defendant.
(b) Exercise by Landlord of any one or more remedies granted herein or
otherwise available shall not be deemed to be an acceptance of surrender of the
Premises by Tenant, whether by agreement or by operation of law, it being
understood that such surrender can be effected only by the written agreement of
Landlord and Tenant.
(c) The voluntary or other surrender or termination of this Lease, or a
mutual termination or cancellation thereof, shall not work a merger and shall,
at the option of Landlord, either (i) terminate all or any existing assignments,
subleases or subtenancies, or (ii) operate as an assignment to Landlord of any
or all of such assignments, subleases or subtenancies.
(d) Notwithstanding any other provision of this Lease, a notice to
Tenant given under this Article 16 or pursuant to California Code of Civil
Procedure Section 1161 or Article 23 of this Lease and any notice served by mail
shall be deemed served, and the requisite waiting period deemed to begin under
said Code of Civil Procedure Section upon mailing, without any additional
waiting requirement under Code of Civil Procedure Section 1011 et seq. or by
other law. For purposes of Code of Civil Procedure Section 1162, Tenant's "place
of residence", "usual place of business", "the property" and "the place where
the property is situated" shall mean and be the Premises, whether or not Tenant
has vacated same at the time of service.
ARTICLE 17 - LANDLORD'S RIGHT TO PERFORM
If Tenant shall default in the timely performance of any obligation on
Tenant's part to be performed under this Lease, Landlord may immediately, or at
any time thereafter, with notice to Tenant, perform the same for the account of
Tenant. If Landlord at any time is compelled to pay or elects to pay any sum of
money or do any act which will require the payment of any sum of money
(including but not limited to employment of attorneys or incurring of costs) by
reason of the failure of Tenant to comply with any term, covenant, condition,
provision or agreement hereof, the sum or sums so paid or incurred by Landlord
with interest at the Default Rate shall be due from Tenant to Landlord promptly
upon demand by Landlord, as additional rent.
ARTICLE 18 - END OF TERM
Section 18.1 - Condition of Premises
Upon the expiration or other termination of the Term, Tenant shall quit
and surrender the Premises to Landlord, broom clean, in as good order, condition
and repair as it now is or may hereafter be placed, ordinary wear excepted.
Tenant shall remove all property of Tenant, as required by this Lease.
Additionally, as provided in Section 3 of the Work Letter Agreement, Tenant may
remove the conductive floor tile installed by Tenant in the Premises. Subject to
Section 6.1.2, at Landlord's option, Landlord may require Tenant to remove any
Alterations installed on Tenant's behalf in the Premises. If Tenant shall remove
any such property or Alterations permitted or required to be removed from the
Premises, Tenant shall repair all damage to the Premises and the Project caused
by such removal and shall restore the Premises and the Project to their
condition prior to installation of such personal property or trade fixtures,
ordinary wear excepted, or, at Landlord's option, Tenant shall pay to Landlord
the cost of such repair or restoration. Any property left on the Premises at the
expiration or other termination of this Lease, or after expiration of any cure
periods without cure for any events of default set forth in Article 16, may, at
the option of Landlord, either be deemed abandoned or be placed in storage at a
public warehouse in the name of and for the account of and at expense and risk
of Tenant or otherwise disposed of by Landlord in the manner provided by law.
Tenant expressly releases Landlord of and from any claims and liability for
damage to or destruction or loss of property left by Tenant upon the Premises at
the expiration or other termination of the Lease and Tenant hereby indemnifies
Landlord against any and all claims and liability with respect thereto.
Section 18.2 - Holding Over
If Tenant holds over after the Term with the express written consent of
Landlord, such tenancy shall be from month to month only and shall not be a
renewal hereof, and Tenant shall pay as Rent to Landlord for the use and
occupancy of the Premises for each month Tenant holds over an amount agreed to
be one and one-half (1.5) times the Rent which is due on the last month of the
Term, and Tenant shall also comply with all of the terms, covenants, conditions,
provisions and agreements of this Lease for the time during which Tenant holds
over. If without the express written consent of Landlord, Tenant shall fail to
vacate the Premises after the expiration of the Term or sooner termination of
this Lease for any cause or after Tenant's right to occupy the Premises ceases,
thereafter, and notwithstanding anything to the contrary contained elsewhere in
this Lease, Tenant's continued possession shall be on the basis of a tenancy at
sufferance and Tenant shall otherwise comply with all of the terms, covenants,
conditions, provisions and agreements of this Lease for the time during which
Tenant holds over, except that Tenant shall pay as Rent to Landlord for the use
and occupancy of the Premises for each month Tenant holds over an amount agreed
to be (i) one and one-half (1.5) times the Rent which is due on the last month
of the term for the first two (2) months of such holdover period and (ii) two
(2) times the Rent which is due on the last month of the Term after such first
two
25
(2) month period. If the Premises are not surrendered at the end of the Term
or of a
<PAGE> 33
permitted hold over period, Tenant hereby indemnifies and agrees to hold
Landlord harmless from and against all claims, liability, loss, damages, costs
or expenses, including reasonable attorney's fees and costs of defending same,
incurred by Landlord and arising directly or indirectly from Tenant's failure to
timely surrender the Premises, including without limitation, (i) any rent
payable by, or any loss, cost, or damages, including without limitation lost
profits, claimed by, any prospective tenant of the Premises or any portion
thereof, and (ii) Landlord's damages as a result of such prospective tenant
rescinding or refusing to enter into the prospective lease of the Premises or
any portion thereof by reason of such failure to timely surrender the Premises.
Tenant's obligation to observe or perform all of the terms, covenants,
conditions, provisions and agreements of this Article shall survive termination
of this Lease.
Section 18.3 - Conditions of Termination
In the event that this Lease terminates for any reason prior to the
Expiration Date, including but not limited to termination by Landlord, such
termination will terminate any and all agreements for the extension of this
Lease, whether expressed in an option, exercised or not, or in a collateral
document or otherwise. Any right herein contained on the part of Landlord to
terminate this Lease shall continue during any extension hereof. Any option on
the part of Tenant herein contained for an extension hereof shall not be deemed
to give Tenant any option for a further extension beyond the first extended
term. 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 such surrender shall be valid unless in writing signed by Landlord. No
employee of Landlord or Landlord's agents shall have any power to accept the
keys of the Premises prior to the termination of this Lease.
ARTICLE 19 - QUIET POSSESSION
Landlord hereby expressly covenants and agrees with Tenant, in lieu of
any implied covenant of quiet possession, that upon Tenant's paying Rent and all
other charges and observing and performing all the terms, covenants, conditions,
provisions and agreements of this Lease on Tenant's part to be observed or
performed, Tenant shall have quiet possession of the Premises for the Term as to
anyone claiming by, through or under Landlord, subject, however, to the terms of
this Lease and of any ground leases, underlying leases, mortgages, deeds of
trust, and covenants, conditions and restrictions affecting all or any portion
of the Project or any of the areas used in connection with the operation of the
Project.
ARTICLE 20 - RULES AND REGULATIONS
Tenant and Tenant's agents, employees, contractors, visitors and
licensees shall observe faithfully and comply with the Rules and Regulations set
forth as Exhibit E hereto, and such other and further reasonable Rules and
Regulations as Landlord or Landlord's representatives may from time to time
adopt. Any addition or change in the Rules and Regulations shall become
effective within five (5) days after written notice thereof given by Landlord or
its representatives. Landlord shall not be responsible for the performance of,
and shall not be liable to Tenant for violation of, any of said Rules and
Regulations, or the breach of any term, covenant, condition, provision or
agreement in any lease or in any covenants, conditions and restrictions
affecting the Project, by any other tenant in the Project or other Person.
ARTICLE 21 - NO WAIVER/ENTIRE AGREEMENT/MODIFICATION
The failure of Landlord to seek redress for violation of, or to insist
upon the strict performance of any term, covenant, condition, provision or
agreement of this Lease, or any of the Rules and Regulations attached to this
Lease or hereafter adopted by Landlord, shall not prevent a subsequent act,
which would have originally constituted a violation, from having all the force
and effect of any original violation. No provision of this Lease shall be deemed
to have been waived by Landlord, unless such waiver be in writing signed by
Landlord. The acceptance by Landlord of Rent with knowledge of the breach of any
term, covenant, condition, provision or agreement of this Lease shall not be
deemed a waiver of such breach. No payment by Tenant or receipt by Landlord of a
lesser amount than the Monthly Installment shall be deemed to be other than on
account of the earliest stipulated Rent, nor shall any endorsement or statement
on any check or any letter accompanying any check or payment as Rent be deemed
an accord and satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of such Rent or
pursue any other remedy in this Lease provided. This Lease contains the entire
agreement between the parties, and recites the entire consideration given and
accepted by the parties. There are no oral agreements between Landlord and
Tenant affecting this Lease, and this Lease supersedes and cancels any and all
prior negotiations, arrangements, correspondence, communications, brochures,
agreements and understandings, if any, whether oral or written, between Landlord
and Tenant or displayed by Landlord to Tenant with respect to the subject matter
of this Lease. There are no representations between Landlord and Tenant other
than those contained in this Lease and all reliance with respect to any
representations is based solely upon the terms of this Lease. Any agreement
hereafter made shall be ineffective to change, modify, waive or discharge any
provision of this Lease in whole or in part unless such agreement is in writing
and signed by the party against whom enforcement of the change, modification,
waiver or discharge is sought. This Lease may be executed in one or more
duplicates or counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
<PAGE> 34
ARTICLE 22 - LANDLORD'S DEFAULT/LIABILITY
Section 22.1 - Force Majeure
This Lease and the obligation of Tenant to pay Rent and all other sums
due hereunder to keep, observe and perform all of the other terms, covenants,
conditions, provisions and agreements of this Lease on the part of Tenant as
well as Landlord's obligations under this Lease to be kept, observed or
performed shall in no way be affected, impaired or excused because Landlord or
Tenant, respectively, is unable to fulfill any of its obligations under this
Lease, or is delayed or curtailed in any way from doing so, by reason of any
cause beyond Landlord's or Tenant's,
26
respectively, reasonable control, including, but not limited to, acts of God,
strike or labor troubles, fuel or energy shortages, governmental preemption or
curtailment in connection with a national emergency or in connection with any
rule, order, guideline or regulation of any department or governmental agency or
by reason of the conditions of supply and demand which have been or are affected
by a war or other emergency. Any such prevention, delay or curtailment shall be
deemed excused on a day for day basis equivalent to each day of force majeure
delay and neither Landlord nor Tenant shall be subject to any liability
resulting therefrom. Tenant waives and releases its right to terminate this
Lease under Section 1932(1) of the California Civil Code or under any similar
law or statute now or hereafter in effect. Notwithstanding any contrary
implications herein, Tenant's inability to perform any monetary obligations to
Landlord hereunder shall never be subject to or excused by a force majeuere
delay claimed by Tenant.
Section 22.2 - Notice/Right to Cure
Landlord shall not be deemed to be in default in the performance of any
obligation required to be performed by it hereunder unless and until it has
failed to perform such obligation within thirty (30) days after written notice
by Tenant to Landlord specifying the nature of Landlord's failure to perform
such obligation; 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 shall commence such
performance within such thirty (30) day period and thereafter shall diligently
prosecute the same to completion. All rights to cure provided to Landlord under
this Section 22.2 shall also be accorded to any mortgagee, ground lessor or
beneficiary under a deed of trust encumbering the Building or the Project. No
default by Landlord shall permit Tenant to terminate this Lease except in the
sole event that Tenant is unable either to access or to use the Premises and
exercise all of Tenant's rights and privileges granted hereunder as permitted in
this Lease by reason of Landlord's actions or by reason of the illegality of
such use under the then existing circumstances.
Section 22.3 - Limitation of Landlord's Liability
The liability of Landlord hereunder or in connection with the Premises,
Building or Project shall be limited to its interest in the Project, and in no
event shall any other assets of Landlord be subject to any claim arising out of
or in connection with the Lease, Premises, Building or Project, and neither
Landlord nor its partners, joint venturers or shareholders shall have personal
liability with respect to any obligations or payments due or which may become
due from Landlord hereunder.
Section 22.4 - Sale by Landlord
In the event that the original Landlord hereunder, or any successor to
the Landlord's interest in the Building, shall sell, convey, transfer or assign
the Landlord's interest in the Building, all liabilities and obligations on the
part of the original Landlord, or such successor, under this Lease shall
thereupon and thereby be released, and thereupon all such liabilities and
obligations shall be binding upon the new owner and Tenant shall look solely to
such new owner for the performance of any of Landlord's obligations hereunder.
This Lease and Tenant's rights and obligations hereunder shall not otherwise be
affected by any such sale, conveyance, transfer or assignment and Tenant agrees
to attorn to such new owner, and such transferee agrees to recognize Tenant
under this Lease as if transferee were the original landlord party hereto.
ARTICLE 23 - NOTICES
Section 23.1 - Notices To Tenant
Except as otherwise in this Lease provided, a bill, demand, statement,
consent, notice or communication which Landlord may desire or be required to
give to Tenant shall be deemed sufficiently given or rendered if in writing,
delivered personally to Tenant or sent by certified, registered or express
United States mail, return receipt requested and postage prepaid, or sent
prepaid by overnight or same day carrier or courier service which maintains
records of delivery, attempts at delivery and receipts in a manner similar to
those records kept by the U.S. Postal Service for its certified mail, return
receipt requested service, with such return receipt service requested from such
carrier or courier, addressed to Tenant at the address set forth in Paragraph K
of the Summary of Basic Terms, or at such other address as Tenant shall
designate by notice given as herein provided.
Section 23.2 - Notices to Landlord
Any notice, request, demand or communication by Tenant to Landlord must
be in writing and delivered personally to Landlord or sent by certified,
registered or express United States mail, return receipt requested and postage
prepaid or sent prepaid by overnight or same day carrier or courier service
which maintains records of delivery, attempts at delivery and receipts in a
manner similar to those records kept by the U.S. Postal Service for its
certified mail, return receipt requested service, with such return receipt
service requested from such carrier or courier, addressed to Landlord, at the
address set forth in Paragraph K of the Summary of Basic Terms, or at such
<PAGE> 35
other address as Landlord shall designate by notice given as herein provided. If
Tenant is notified of the identity and address of Landlord's mortgagee or
beneficiary under a deed of trust, or ground or underlying lessor, Tenant shall
give such party notice of any default by Landlord hereunder in the same manner
Tenant is to give Landlord notice hereunder, and if an opportunity to cure such
default is provided hereunder, such party shall have a reasonable opportunity to
cure such default before Tenant's exercising any remedy available to it.
Notwithstanding, Tenant may pursue a cause of action for recovery of damages
from Landlord at any time.
Section 23.3 - Notices Generally
Rejection or refusal to accept a notice, request, demand or
communication given in the manner required by this Article, or the inability to
deliver same because of a changed address of which no notice was given, shall be
27
deemed to be a receipt of the notice, request or demand sent. Notwithstanding
any provision to the contrary contained in this Lease, no provision in this
Lease shall preclude service of notices in accordance with any state or local
law.
ARTICLE 24 - SECURITY DEPOSIT
Tenant shall deposit in cash with Landlord the sums specified in this
Article as security for the faithful performance by Tenant of all the terms,
covenants and conditions of this Lease (the "Security Deposit"). Paragraph M of
the Summary of Basic Terms sets forth the initial amount of Tenant's Security
Deposit, which Tenant shall deposit with Landlord upon Tenant's execution of
this Lease. Tenant shall increase the initial amount of the Security Deposit by
depositing in cash with Landlord an additional amount equal to the amount per
month of all increases in Monthly Installments which Tenant becomes obligated to
pay pursuant to Section 3.3.1, which deposit shall be made within thirty (30)
day, after notice from Landlord to Tenant of the amount of such increase.
Landlord shall have the right, without waiving any of Landlord's other rights
and remedies under this Lease, upon the occurrence of any of the events of
default described in Article 16, to apply the Security Deposit to remedy any
failure by Tenant to repair or maintain the Premises or to perform any other
terms, covenants or conditions of this Lease. If Tenant has kept and performed
all terms, covenants and conditions of the Lease during the Term, Landlord will
within thirty (30) days following the termination hereof return the Security
Deposit to Tenant or the last permitted assignee of Tenant's interest hereunder
at the expiration of the Term. Should Landlord use any portion of the Security
Deposit to cure any default by Tenant hereunder, Tenant shall replenish the
Security Deposit to the full amount within ten (10) days after notice. Landlord
shall not be required to keep the Security Deposit separate from its general
funds, and Tenant shall not be entitled to interest on any portion of the
Security Deposit. Upon any sale or transfer of its interest in the Building,
Landlord may transfer the Security Deposit to its successor in interest and
thereupon Landlord shall be released from any liability or obligation with
respect thereto.
ARTICLE 25 - BROKERAGE
Tenant represents and warrants that the broker or brokers specified in
Article N of the Summary of Basic Terms was/were the sole broker or brokers who
negotiated and brought about the consummation of this Lease, and that no
discussions or negotiations were had with any other broker, agent or finder
concerning the leasing of the Premises. Each party hereby agrees to indemnify,
protect, defend and hold the other harmless from and against any claims for
brokerage commissions made by any broker, agent or finder not specified in
Article N of the Summary of Basic Terms arising out of any dealings, actions,
discussions, negotiations or contracts allegedly had with or on behalf of such
party, and from and against any and all losses, costs, expenses, liabilities and
damages suffered or incurred by such party as a consequence thereof, including,
without limitation, attorneys' fees and costs. In reliance on the foregoing
representation, warranty and indemnification by Tenant, Landlord hereby agrees
with Tenant that Landlord shall pay such commission or compensation due to said
broker or brokers in connection with the consummation of this Lease pursuant to
any separate agreement between Landlord and such broker. The provisions of this
Article 25 shall survive the expiration or earlier termination of this Lease.
ARTICLE 26 - MISCELLANEOUS
Section 26.1 - Capitals and Construction
The marginal notes and headings are inserted only as a matter of
convenience and for reference and in no way define, limit or describe the scope
or intent of this Lease nor do they in any way affect this Lease. The language
in all parts of this Lease shall be construed according to its normal and usual
meaning and not strictly for or against either Landlord or Tenant.
Section 26.2 - Definitions
The term "Landlord" as used in this Lease means only the owner or
mortgagee in possession or grantee in possession under a deed of trust, or the
owner of a lease of the Project (or part thereof in which the Premises is
situated) for the time being. The words "re-enter" and "re-entry" as used in
this Lease are not restricted to their technical legal meaning.
Section 26.3 - Successors and Assigns
The covenants contained in this Lease shall bind and inure to the
benefit of Landlord and Tenant and their respective legal representatives and
successors, and, except as otherwise provided in this Lease, their assigns.
Section 26.4 - Landlord's Approval
<PAGE> 36
The review, approval, inspection or examination by Landlord of any item
to be reviewed, approved, inspected or examined by Landlord under the terms of
this Lease or the Exhibits attached hereto shall not constitute the assumption
of any responsibility by Landlord for either the accuracy or sufficiency of any
such item or the quality or suitability of such items for its intended use, and
shall not constitute an assumption of risk with respect to same, nor a
representation or certification by Landlord nor an estoppel against Landlord
that such matter is safe or reasonable or in compliance with applicable laws.
Any such review, approval, inspection or examination by Landlord is for the sole
purpose of protecting Landlord's interests in the Project and under this Lease,
and no third parties, including, without limitation Tenant or any person or
entity claiming through or under Tenant, or the contractors, agents, employees,
visitors or licensees of Tenant or any such person or entity, shall have any
rights hereunder.
Section 26.5 - Joint and Several Liability
If a partnership or more than one legal person at any time constitutes
Tenant, (1) each partner and each legal person is jointly and severally liable
for the keeping, observing and performing of all of the terms, covenants,
28
conditions, provisions and agreements of this Lease to be kept, observed or
performed by Tenant, and (2) the term "Tenant" as used in this Lease shall mean
and include each such partner or legal person jointly and severally and the act
of or notice from or notice or refund to, or the signature of, any one or more
of them, with respect to this Lease, including but not limited to any renewal,
extension, expiration, termination or modification of this Lease, shall be
binding upon each and all of the persons executing this Lease as Tenant with the
same force and effect as if each and all of them had so acted or so given or
received such notice or refund or so signed.
Section 26.6 - Governing Law
This Lease shall be governed by and construed in accordance with the
laws of the State of California.
Section 26.7 - Severability
In the event any term, covenant, condition, provision or agreement
herein contained is held to be invalid or void by any court of competent
jurisdiction, the invalidity of any such teem, covenant, condition, provision or
agreement shall in no way affect any other term, covenant, condition, provision
or agreement herein contained, unless the elimination of such term materially
and adversely affects the fundamental rights and benefits of either party to
this Lease.
Section 26.8 - Security Systems
Landlord shall not be obligated to provide or maintain any security
patrol or security system. However, if Landlord elects to provide such patrol or
system in the Building or the Common Areas, the cost thereof shall be included
in Operating Costs as defined in Section 3.4.1. Landlord shall not be
responsible for the quality of any patrol or system which is presently or in the
future provided in the Premises, Building or Project, or for damage or injury to
Tenant, its employees, invitees or others due to the failure, action or inaction
of such patrol or system.
Section 26.9 - Time of the Essence
Time is of the essence with respect to the performance of each and every
provision of this Lease to be performed by Tenant and Landlord.
Section 26.10 - Recordation
Neither this Lease, nor without Landlord's consent, which shall not be
unreasonably withheld, any notice or memorandum regarding the terms hereof,
shall be recorded by Tenant. Any such unauthorized recording shall give Landlord
the right to declare a breach of this Lease and pursue the remedies provided
herein. Tenant agrees to execute and acknowledge, at the request of Landlord, a
memorandum of this Lease, in recordable form. In the event a memorandum of this
Lease is recorded, either at the request of Landlord or Tenant, upon expiration
of the Term or earlier termination as provided herein, Tenant agrees to execute
and deliver, in recordable form, a quitclaim deed releasing all of its interest
in the Premises and the Project to Landlord.
Section 26.11 - Change of Name
If the name of Tenant or any successor or assign shall be changed during
the term of this Lease, such party shall promptly notify Landlord thereof, which
notice shall be accompanied by a certified copy of the document effecting such
change of name.
Section 26.12 - Estoppel Certificates
Tenant shall at any time and from time to time upon not less than ten
(10) days' prior notice from Landlord, execute, acknowledge and deliver to
Landlord a statement in writing certifying to those facts for which such
estoppel certificate has been reasonably requested by Landlord or any current or
prospective purchaser, mortgagee (or beneficiary under a deed of trust), ground
lessor or underlying lessor, including without limitation (a) that this Lease is
unmodified and in full force and effect (or, if modified, adequately identifying
such modification and certifying that this Lease, as so modified, is in full
force and effect) and (b) the dates to which the Base Annual Rent, additional
payments and other charges are paid, (c) whether or not there is any default by
Landlord to the best
<PAGE> 37
of Tenant's knowledge, or by Tenant, in the performance of any term, covenant,
condition, provision or agreement contained in this Lease and (d) whether or not
to the best of Tenant's knowledge, there are any setoffs, defenses or
counterclaims against enforcement of the obligations to be performed under this
Lease and, if there are, specifying each such default, setoff, defense or
counterclaim. Any such statement may be conclusively relied upon by any
prospective purchaser or lessee, encumbrance or ground lessor of the Premises or
of all or any portion of the Project. Tenant's failure to deliver such statement
within such time shall be deemed a statement that this Lease is in full force
and effect, without modification except as may be represented by Landlord, that
there are no uncured defaults in Landlord's performance, nor any setoffs,
defenses or counterclaims, and that no more than one month's Base Annual Rent
has been paid in advance. Additionally, upon not less than ten (10) days' prior
written notice from Tenant, Landlord shall execute and deliver to Tenant a
statement in writing certifying, to the best of Landlord's knowledge, whether
(a) this Lease is unmodified and in full force and effect and (b) Tenant is not
in default of its obligations under this Lease. Any such statement may be
conclusively relied upon by any prospective sublessee or assignee or any person
who may be succeeding to the interest of Tenant under this Lease, and any
failure by Landlord to so deliver such a statement shall be deemed to certify
that this Lease is unmodified and in full force and effect and that Tenant is
not in default hereunder.
29
Section 26.13 - Authority
If Tenant or Landlord signs as a corporation, partnership, limited
liability company or other legal entity, each of the persons executing this
Lease on behalf of Tenant or Landlord does hereby covenant and warrant that the
party on whose behalf such person(s) sign is a duly authorized and existing
entity, has and is qualified to do business in the state where the Project is
located, has full right and authority to enter into this Lease, and that each
and every person signing on behalf of such party is authorized to do so. Upon
Landlord's or Tenant's request, the other party shall provide the requesting
party with evidence satisfactory to the requesting party confirming the
foregoing covenants and warranties.
Section 26.14 - Attorneys' Fees
In the event that either Landlord or Tenant fails timely to perform any
of its obligations under this Lease or in the event a dispute arises concerning
the meaning or interpretation of any provision of this Lease or the right of
either party under this Lease, the matter shall be settled by judicial
proceedings and the defaulting party or the party not prevailing in such matter,
shall, in addition to any other relief, pay all reasonable fees, costs and
expenses of the other party with respect to such proceeding, including without
limitation, court costs, expert witness fees, costs and expenses of
investigation, and all reasonable attorneys' fees, costs and expenses, in
enforcing or establishing the other party's rights hereunder in any such
proceeding, including without limitation, in any action or participation in or
in connection with any case or proceeding under Chapters 7, 11 or 13 of the
Bankruptcy Code, 11 United States Code Sections 101 et seq., or any successor
statutes, in appellate proceedings or in connection with the enforcement or
collection of any judgment obtained in any such proceeding. The parties hereto
expressly agree that (i) all fees, costs and expenses, including without
limitation, attorneys' fees, costs and expenses incurred in connection with the
enforcement or collection of any judgment obtained in any such proceeding shall
be payable as a separate item and a further obligation severable from the other
items payable under this Section, and (ii) the provisions of this sentence shall
survive the entry of any judgment in any such proceeding and shall not merge or
be deemed to have merged into any such judgment.
Section 26.15 - Waiver of Trial By Jury; Venue; Jurisdiction
The respective parties hereto hereby waive trial by jury and any
objection to venue in the county in which the Project is located, and agree and
consent to personal jurisdiction of the courts of the State of California, in
any action, proceeding or counterclaim brought by either of the parties hereto
against the other on any matter whatsoever arising out of or in any way
connected with this Lease, the relationship of Landlord and Tenant, Tenant's use
or occupancy of the Premises, or any claim of injury or damage, or the
enforcement of any remedy under any statute, emergency or otherwise.
Section 26.16 - Substitution of Premises
[Intentionally omitted]
Section 26.17 - Binding Effect
Submission of this instrument for examination or signature by Tenant
does not constitute an offer to lease, or a reservation of or option for a
lease, and it is not effective as a lease or otherwise until execution by and
delivery to both Landlord and Tenant.
Section 26.18 - Signs
Tenant shall have the right to display and maintain, at Tenant's
expense, on the exterior of the Premises, or in the interior of the Premises if
visible from the exterior of the Premises, only such signs, names, insignia,
trademarks and other descriptive, symbolic or decorative material of any kind
("Sign" or "Signs"): (a) as shall have first received the written approval of
Landlord as to type, size, color, location and other design features; (b) as
shall comply with the provisions and criteria of the Sign Program set forth in
Exhibit F hereto to the extent applicable; and (c) for which Tenant has first
obtained, at Tenant's expense, all required governmental approvals. Landlord's
review of Signs shall be made in accordance with the provisions and criteria set
forth in Exhibit F to the extent applicable. Notwithstanding any other provision
of this Lease, in no event shall Tenant make any alteration or
<PAGE> 38
addition to or improvement on or visible from the exterior of the Premises
without Landlord's prior written consent, which may be withheld in Landlord's
sole and absolute discretion.
Section 26.19 - No Merger
The voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation thereof, shall not work a merger, and shall, at the option of
Landlord terminate all or any existing subleases or subtenancies, or may, at the
option of Landlord, operate as an assignment to it of any or all such subleases
or subtenancies.
Section 26.20 - Acknowledgment of Waivers and Limitations
TENANT SPECIFICALLY ACKNOWLEDGES THAT THIS LEASE CONTAINS CERTAIN
WAIVERS OF CERTAIN STATUTORY AND COMMON LAW RIGHTS AND CERTAIN LIMITATIONS ON
DAMAGES AND THAT TENANT HAS AGREED THERETO.
Section 26.21 - Exhibits: Riders: Addenda
This lease consists of pages 1 through 33, inclusive, together with the
Summary of Basic Terms and Exhibits A through F, all of which are made a part
hereof as though fully set forth herein.
30
ARTICLE 27 - OPTION TO EXTEND
Section 27.1 - Grant of Options
Landlord hereby grants Tenant one (1) option to extend the Term of this
Lease, for an additional period of five (5) years (such period may be referred
to as the Option Term ), as to all (but not part) of the Premises as such may
then exist, upon and subject to the terms and conditions set forth in this
Article 27 (the Option To Extend).
Section 27.2 - General Provisions
The Option Term shall commence immediately after the expiration of the
initial Term of the Lease. Tenant's hiring of the Premises during the Option
Term shall be upon and subject to the same terms and conditions contained in the
Lease except that (a) the Base Annual Rent shall be equal to the Option Term
Base Rent, defined and determined in the manner set forth in Section 27.5 below,
(b) Tenant shall accept the Premises, Building and Project in an AS IS condition
without any obligation of Landlord to repaint, remodel, improve or alter the
Premises, Building or Project or to provide Tenant any allowance for any of the
foregoing and (c) there shall be no further option or right to extend the Term
of the Lease, or any right to renew this Lease during the Option Term. If Tenant
timely and properly exercises the Option To Extend, references in the Lease to
the Term shall be deemed to mean the Option Term unless the context clearly
requires otherwise.
Section 27.3 - Exercise
Tenant's election to exercise the Option To Extend must be given to
Landlord in writing no later than One Hundred Eighty (180) days prior to the
expiration of the initial Term of the Lease.
Section 27.4 - Effect of Default or Occupancy
Notwithstanding anything to the contrary contained herein, all rights of
Tenant pursuant to the Options to Extend shall automatically terminate without
notice and shall be of no further force and effect, whether or not Tenant has
timely exercised the Option to Extend granted herein, if (a) at the time of
exercise of the Option To Extend or at the time of commencement of the Option
Term, there exists a default, as defined in Section 16.1 of the Lease, or any
act or omission on the part of Tenant, which, with the passage of time or the
giving of notice, or both, would constitute a default under Section 16.1 of the
Lease, or (b) Landlord has given Tenant two (2) or more notices of the existence
of a default, as defined in Section 16.1 of the Lease, during the initial Term
of the Lease, whether or not such default is subsequently cured, or (c) a late
charge has become payable pursuant to Section 3.6.1 of the Lease three (3) or
more times during the initial Term of the Lease, or (d) Tenant does not occupy
all of the Premises at the time of exercise of an Option To Extend or at the
time of commencement of the Option Term. In the event of a termination of the
Option To Extend pursuant to this Section 27.4, Tenant shall reimburse Landlord
for all cost and expense Landlord incurs in connection with Tenant's exercise of
the Option to Extend, including, without limitation, with respect to any
brokerage commissions.
Section 27.5 - Option Term Rent
The Option Term Base Rent for the Premises for the Option Term shall
mean the greater of (a) the Base Annual Rent payable by Tenant under this Lease
for the twelve (12) month period immediately prior to the commencement of the
Option Term (the Preceding Base Rent ); or (b) the Market Base Rent, which as
used herein shall mean the amount of Base Annual Rent, including any annual or
other periodic escalations, that Landlord, under commercially reasonable
circumstances, could obtain from a third party desiring to lease the Premises
under a lease containing terms and conditions substantially identical to those
of this Lease, including without limitation additional rent payable by Tenant
with respect to Building Costs, Project Costs, Taxes and Additional Taxes
pursuant to Article 3 of the Lease, for the Option Term under market leasing
conditions then existing, and taking into account the following: the length of
term; the size, location, configuration and floor levels of the Premises; the
type and quality of improvements in or amenities available to the Premises,
Building and Project; age and location
<PAGE> 39
of the Building and Project; services to be provided by Landlord or by Tenant;
the rent, all other monetary payments and escalations then obtainable for new
leases of space comparable to the Premises in the locality of the Project; and
other factors that would be relevant to a prospective lease by a third party of
the Premises for the Option Term in determining what such party would be willing
to pay therefor; but in each instance disregarding "Tenant Concessions" if any,
then being offered to prospective new tenants of comparable space in the Project
and in the locality of the Project. For purposes of the preceding sentence, the
term "Tenant Concessions" shall include, without limitation, so-called free
rent, tenant improvement allowances, moving allowances and lease takeovers. The
determination of Market Base Rent based upon the foregoing criteria, shall be
made by Landlord, in Landlord's sole discretion. Within thirty (30) days after
Tenant's exercise of the Option To Extend, Landlord shall notify Tenant of
Landlord's determination of Option Term Base Rent for the Premises. If
Landlord's determination of the Option Term Base Rent is greater than the
Preceding Base Rent, and if Tenant, in Tenant's sole discretion, disagrees with
the amount of Option Term Base Rent determined by Landlord, Tenant may elect to
revoke and rescind the exercise of the Option to Extend by giving written notice
thereof to Landlord within ten (10) days after notice of Landlord's
determination of Option Term Base Rent.
Section 27.6 - Options Personal
The Option to Extend is personal to Smartflex Systems, Incorporated, a
Delaware corporation, or to a Person who controls, is controlled by or is under
common control with Smartflex Systems, Incorporated, a Delaware corporation
(such Person shall be referred to herein as an "Affiliated Person"), and shall
not be transferable or Assignable, by operation of law or otherwise, either in
connection with an Assignment of the Lease, or a Sublease of all or part of the
Premises, or otherwise, except to an Affiliated Person. Any purported Assignment
of the Option To
31
Extend other than an Affiliated Person shall be void and a material breach of
this Lease, and shall constitute a default under this Lease.
Section 27.7 - Time of Essence
Without limiting the generality of Section 26.9 of this Lease, time is
of the essence to each and every term and condition of this Article 27.
Article 28 - Right of First Offer
Prior to Landlord's leasing of any space in the remainder of Building 4,
980 Mission Court, Fremont, California, which comes available during the Term
and the Option Term, Landlord shall notify Tenant, in writing, of the space so
available in the configuration that Landlord intends to place on the market for
lease. Tenant shall have ten (10) business days after receipt of such notice to
notify Landlord, in writing, of Tenant's interest in leasing such space and, if
so interested Landlord shall exclusively negotiate with Tenant, in good faith,
for a period not to exceed twenty (20) business days after receipt of Tenant's
notice to come to terms on the lease of such space. Such lease negotiations
shall proceed on the basis that the lease terms are intended to reflect market
conditions at that time. If Tenant fails to notify Landlord of its interest in
such space within the 10-day period noted above, or affirmatively declines its
interest therein, Landlord shall be free to market such space to the general
public and enter into a lease with any person on any terms and conditions
Landlord finds acceptable in its sole, absolute and arbitrary discretion. If
Tenant does indicate interest in such space as provided above, but Landlord and
Tenant have not executed a binding agreement respecting the lease of such space
prior to the expiration of such 20-day period, Landlord shall be free to market
such space to the general public and enter into a lease with any person on
similar terms and conditions to which Landlord offered such space to Tenant or
on more favorable terms to Landlord. In the event of such failed negotiations,
and if Landlord fails to enter into any lease with a third party within ninety
(90) days after Landlord first markets the space to the general public, Landlord
shall re-offer the space to Tenant pursuant to this Article 28. This right of
first offer set forth above is personal to Smartflex Systems, Incorporated, a
Delaware corporation and to an Affiliated Person, and may not be transferred or
Assigned to other than an Affiliated Person and any such attempted transfer
Assignment shall be void and a material breach of this Lease and shall
constitute a default under this Lease.
IN WITNESS WHEREOF, Landlord and Tenant have respectively executed this
Lease as of the day and year set forth in Paragraph A of the Summary of Basic
Terms.
TENANT: LANDLORD:
SMARTFLEX SYSTEMS, INCORPORATED, a MISSION COURT PROPERTIES, INC., a
Delaware corporation California corporation
By: /s/ James C. Cogan By: /s/ Sam Yip
----------------------------------- -----------------------
James C. Cogan Sam Yip
----------------------------------- -----------------------
Print Name: Print Name:
Its: VP & GM, EMS Business Unit Its: VP of Finance
----------------------------------- -----------------------
By: /s/ Joe L. Pendergrass By:
----------------------------------- -----------------------
Joe L. Pendergrass
----------------------------------- -----------------------
Print Name: Print Name:
Its: Director of Logistics Its:
----------------------------------- -----------------------
32
<PAGE> 40
EXHIBIT A
DESCRIPTION OF PREMISES
[SCHEMATIC DRAWING OF FLOOR PLAN]
EXHIBIT A
Page 1 of 1
<PAGE> 41
EXHIBIT B
PROJECT DESCRIPTION
[SCHEMATIC DRAWING OF PROJECT]
EXHIBIT B
Page 1 of 1
<PAGE> 42
EXHIBIT C
CONFIRMATION OF LEASE TERM
OR
CONFIRMATION OF COMMENCEMENT OF RENT
THIS MEMORANDUM is made on __________, 1999, between MISSION COURT
PROPERTIES, INC., a California corporation ("Landlord"), and Smartflex Systems,
Incorporated, a Delaware corporation ("Tenant"), who entered into a lease dated
for reference purposes as of March 1, 1999, covering certain premixes located at
980 Mission Court, Fremont, California, as more particularly described in the
Lease. All capitalized terms, if not defined herein, shall be defined as they
are defined in the Lease.
1. The parties to this Memorandum hereby agree that the date of
__________, 1999 is [Mark One] ____ the "Commencement Date" or ____ the "Rent
Commencement Date".
2. Tenant hereby confirms the following:
(a) That it has accepted possession of the Premises pursuant to
the terms of the Lease;
(b) That the improvements required to be furnished according to
the Lease by Landlord have been Substantially Completed, except as follows:
(c) That Landlord has fulfilled all of its duties of an
inducement nature;
(d) That the Lease has not been modified, altered or amended,
except as follows:
(e) That there are no offsets or credits against rentals, nor
has any security deposit been paid except as provided by the Lease terms;
(f) That the total cost of the Tenant Improvements through the
date marked in Paragraph 1 above was $________________. Landlord has contributed
$__________________ to such improvements through such date, which sum has been
paid; and
(g) That the Lease is in full force and effect.
3. This Memorandum, each and all of the provisions hereof, shall inure
to the benefit, or bind, as the case may require, the parties hereto, and their
respective heirs, successors, and assigns subject to the restrictions upon
assignment and subletting contained in the Lease.
<TABLE>
<S> <C>
TENANT: LANDLORD:
SMARTFLEX SYSTEMS INCORPORATED, a Delaware MISSION COURT PROPERTIES, INC., a California
corporation corporation
By: /s/ James C. Cogan By: /s/ Sam Yip
----------------------------------- --------------------------------------
James C. Cogan Sam Yip
----------------------------------- --------------------------------------
Print Name: Print Name:
Its: VP & GM, EMS Business Unit Its: VP of Finance
----------------------------------- --------------------------------------
By: /s/ Joe L. Pendergrass By:
----------------------------------- --------------------------------------
Joe L. Pendergrass
----------------------------------- --------------------------------------
Print Name: Print Name:
Its: Director of Logistics Its:
----------------------------------- --------------------------------------
</TABLE>
DETAILS OF THIS EXHIBIT WILL BE COMPLETED WITHIN TEN (10) DAYS AND ALL BLANK
ITEMS, NOW EMPTY, WILL BE COMPLETED.
EXHIBIT C
Page 1 of 1
<PAGE> 43
EXHIBIT D
WORK LETTER AND CONSTRUCTION AGREEMENT
(Allowance)
This agreement (the "Work Letter") supplements the Lease dated March 21,
1999 executed concurrently herewith by MISSION COURT PROPERTIES, INC., a
California corporation, as Landlord and SMARTFLEX SYSTEMS, INCORPORATED, a
Delaware corporation, as Tenant (the "Lease").
1. Design Matters.
1.1 Landlord, through its architects and/or space planners ("Landlord's
Architect"), shall prepare the Design Documents (defined below) and the
Construction Drawings (defined below), as they may be modified as provided
herein, in accordance with the design specified by Tenant and reasonably
approved by Landlord.
1.2. Tenant shall be responsible for the suitability for the Tenant's
needs and business of the design and function of all Tenant Improvements
(defined below). Tenant, at its own expense, shall devote such time and provide
such instructions as may be necessary to enable Landlord to complete the matters
described below and to obtain:
(a) Upon execution of the Lease, Tenant's written approval of the
Design Documents approved in writing by Tenant; and
(b) Within seven (7) days after execution of the Lease, Tenant's
written approval of a nonbinding preliminary estimate of Phase 1 of the Tenant
Improvements ("Phase 1 Preliminary Estimate") provided by Landlord of the cost
of Phase 1 of the Tenant Improvements shown on the Construction Drawings or the
Design Documents; and
(c) Within fourteen (14) days after execution of the Lease,
Tenant's written approval of the Construction Drawings relating to Phase 1 of
the Tenant Improvements approved in writing by Tenant; and
(d) Within seven (7) days after execution of the Lease, Tenant's
written approval of a nonbinding preliminary estimate of Phase 2 of the Tenant
Improvements ("Phase 2 Preliminary Estimate") provided by Landlord of the cost
of Phase 2 of the Tenant Improvements shown on the Construction Drawings or the
Design Documents; and
(e) Within fourteen (14) days after execution of the Lease,
Tenant's written approval of the Construction Drawings relating to Phase 2 of
the Tenant Improvements approved in writing by Tenant.
1.3. Certain Definitions. The following definitions shall apply for
purposes of this Work Letter:
(a) "Construction Drawings" shall mean the final architectural
and engineering plans and specifications for the real property improvements to
be constructed by Landlord in the Premises, which may be prepared in phases
relating to Phase 1 and Phase 2 of the Tenant Improvements, including all of the
Tenant Improvements and the Landlord-Provided Improvements, in sufficient detail
to be submitted for governmental approvals and building permits and to serve as
the detailed construction drawings and specifications for the contractor, and
shall include among other things, the location of all partitions, doors, HVAC
(heating, ventilating and air conditioning systems) distribution, ceiling
systems, light fixtures, plumbing installations, electrical installations and
outlets, telephone and network outlets and other installations required by
Tenant, as well as wall finishes and floor coverings;
(b) "Design Documents" shall mean layout plans and specifications
for the Tenant Improvements to be constructed by Landlord in the Premises which
are the final product of the preliminary space planning and which include, among
other things, the location of all partitions, doors, HVAC (heating, ventilating
and air conditioning systems) distribution, ceiling systems, light fixtures,
plumbing installations, electrical installations and outlets, telephone and
network outlets and other installations required by Tenant, as well as wall
finishes and floor coverings, in sufficient detail for Landlord to commence
preparation of the Construction Drawings (defined below);
(c) "Landlord-Provided Improvements" shall mean the repair of all
floor drains in the Premises, and the repair and sealing of all floors currently
existing in the Premises (and in addition to any other repair work to be done by
Landlord pursuant to Section 2.3 of the Lease) all at the sole cost and expense
of Landlord. The construction and installation of the Landlord-Provided
Improvements is sometimes referred to herein or in the Lease as "Landlord's
Work"; and
(d) All real property improvements, to be constructed by Landlord
as shown on the Construction Drawings (other than the Landlord-Provided
Improvements, as noted therein), as they may be modified as provided herein,
shall be defined as "Tenant Improvements," and the construction and installation
of such Tenant Improvements is sometimes referred to herein or in the Lease as
"Landlord's Work". The Tenant Improvements shall be constructed and installed in
two (2) phases, "Phase 1" and "Phase 2," as noted in the Construction Drawings.
The contemplated Tenant Improvements and the two phases hereof hereby are
generally as described in Schedule 1 attached to and made a part of this Work
Letter
EXHIBIT D
Page 1 of 6
<PAGE> 44
2. Construction: Landlord's Contribution; Tenant Improvement Costs.
2.1. Construction: Landlord's Contribution. Landlord shall complete the
construction of the Tenant Improvements in a good and workmanlike manner, up to
a maximum cost to Landlord of Two Hundred Thousand Five Hundred Ten and No/100
Dollars ($209,510.00) ("Landlord's Maximum Contribution").
2.2 Tenant Improvement Costs. The cost of the Tenant Improvements
("Tenant Improvement Costs") to be paid by Landlord from, but not in excess of,
Landlord's Maximum Contribution shall include:
(a) The costs of Landlord's Architect and any other consultants
retained by Landlord in connection with the preparation of Design Documents and
Construction Drawings, and engineering costs associated with completion of the
State of California energy utilization calculations under Title 24 legislation;
(b) All costs of obtaining from the City of Fremont and any other
governmental authority building and occupancy permits, if any;
(c) All costs of interior design and finish schedule plans and
specifications;
(d) All direct and indirect costs of procuring, installing and
constructing the Tenant Improvements, including without limitation: (i) the
construction fee for overhead and profit and the cost of all on-site supervisory
and administrative staff, office, equipment and temporary services rendered or
provided by Landlord in connection with construction of the Tenant Improvements
which shall be equal to seven percent (7%) of the total cost of the construction
and installation of the Tenant Improvements, and (ii) the cost of any services
or utilities made available by Landlord, and
(e) All fees payable to Landlord's architectural and engineering
firm if it is required by Tenant to redesign any portion of the Tenant
Improvements following Tenant's approval of the Construction Drawings.
In no event shall the Tenant Improvement Costs include (i) any costs of
procuring or installing in the Premises any trade fixtures, equipment,
furniture, furnishings, telephone equipment or other personal property
("Personal Property") to be used in the Premises by Tenant, and the cost of such
Personal Property shall be paid by Tenant, or (ii) any costs or expenses of any
consultants retained by Tenant with respect to design, procurement, installation
or construction of improvements or installations, whether real or personal
property, for the Premises. Landlord and Tenant acknowledge that no as-built
drawings of the Premises will be made.
2.3. Limitations of Landlord's Obligations. Upon Substantial Completion
of the Tenant Improvements in compliance with the Construction Drawings,
Landlord shall have no further obligation to construct improvements or construct
modifications to or changes in the Tenant Improvements or, except as provided in
Section 2.3 of, or elsewhere in, the Lease, to complete or repair the Tenant
Improvements. If Landlord's Maximum Contribution exceeds Tenant Improvement
Costs, then Landlord shall apply such excess as a credit to Tenant's next
payments of Base Annual Rent coming due.
3. Costs of Tenant Improvements in Excess of Landlord's Maximum
Contribution. As soon as reasonably available after completion of the
Construction Drawings, Landlord shall notify Tenant in writing of the costs of
the Tenant Improvements in excess of the Landlord's Maximum Contribution (such
notification shall be referred to as "Landlord's Cost Statement"). Within five
(5) days after receipt of Landlord's Cost Statement, Tenant shall, in writing,
give Landlord authorization to complete the Tenant Improvements in accordance
with the Construction Drawings and Tenant shall accompany said authorization
with a good check made payable to the order of Landlord in the amount of the
excess cost authorized by Tenant of the Tenant Improvements over Landlord's
Maximum Contribution. In such authorization, Tenant may, pursuant to Section 4,
request a Change Order (defined below) to the approved Construction Drawings to
reduce or delete all or part of such excess costs, but any delay in completion
of the Premises resulting from such request for a Change Order or from the
changes so made or necessitated shall be chargeable as Tenant Delay as provided
in Section 5. If such written authorization and check (if applicable) are not
received by Landlord, Landlord shall not be obligated to commence work on the
Premises and any resulting delay in the completion of the Premises shall be
chargeable against Tenant as Tenant Delay as provided in Section 5 of this Work
Letter. Additionally, and regardless of whether the cost of the Tenant
Improvements exceeds Landlord's Maximum Contribution, the acquisition and
installation of conductive floor tile as part of the Tenant Improvements shall
be made at Tenant's sole cost and expense. Notwithstanding any contrary
implication or expression in the Lease, such conductive floor tile shall be and
remain throughout the Term of the Lease and thereafter Tenant's personal
property, and Tenant may remove the same upon the expiration or earlier
termination of the Lease.
4. Changes. If Tenant shall request any change, addition or alteration
in the approved Construction Drawings, Landlord shall promptly give Tenant a
written estimate of (a) the cost of engineering and design services and the
construction contractor services to prepare a change order (the "Change Order")
in accordance with such request, (b) the cost of work to be performed pursuant
to such Change Order, and (c) the time delay expected because of such requested
Change Order. Within three (3) business days following Tenant's receipt of the
foregoing written estimate, Tenant shall notify Landlord in writing whether it
approves such written estimate. If Tenant approves such written estimate and if
such cost is in excess of Landlord's Maximum Contribution, Tenant shall
accompany such approval with a good check made payable to the order of Landlord
in the amount of the estimated
<PAGE> 45
cost of preparing the Change Order and performing the work thereto, and the
foregoing shall constitute Tenant's authorization to proceed. If such written
authorization, and check if required, are not received by Landlord within such
three (3) business day period, Landlord shall not be obligated to prepare the
Change Order or perform any work in connection therewith. Upon completion of the
work of the Change Order and submission of the final cost thereof by Landlord to
EXHIBIT D
Page 2 of 6
Tenant, Tenant shall promptly pay to Landlord any such additional amounts in
excess of Landlord's Maximum Contribution.
5. Tenant Delay. If the completion of the Tenant Improvements in the
Premises is delayed (i) at the request of Tenant, (b) by Tenant's failure timely
to comply with the provisions of this Work Letter, (iii) by Tenant's failure
timely to approve, pursuant to Section 1.2, Construction Drawings which are
consistent with the Design Documents, or by Tenant's request for change,
addition or alteration in the Construction Drawings which is not consistent with
the Design Documents, (iv) by all changes or alterations in the work ordered by
Tenant or by extra work ordered by Tenant, or (v) because Tenant chooses to have
additional work performed by Landlord, then Tenant shall be responsible for all
costs and any expenses occasioned by such delay including, without limitation,
any costs and expenses attributable to increases in labor or materials; and each
such event shall be a "Tenant Delay" and as provided in Section 2.1 of, or
elsewhere in, the Lease, for purposes of establishing the commencement of
Tenant's obligations under the Lease which have not commenced prior to
Substantial Completion, including, without limitation, the Rent Commencement
Date, the date on which such obligations commence shall be advanced one day for
each day of Tenant Delay.
6. Entry By Tenant. Tenant may, with Landlord's written consent, enter
the Premises after the Commencement Date but prior to the Rent Commencement Date
solely for the purpose of installing Tenant's Personal Property as long as such
entry will not interfere with the orderly construction and completion of the
Phase 1 of the Tenant Improvements. Tenant shall notify Landlord of its desired
time(s) of entry and shall submit for Landlord's approval the scope of the work
to be performed and the name(s) of the contractor(s) who will perform such work.
Tenant hereby indemnifies and agrees to protect, defend and hold Landlord, any
mortgagee, ground lessor or beneficiary of a mortgage, ground lease or deed of
trust related to the Premises, the Building or the Project harmless from and
against any and all suits, claims, actions, losses, costs or expenses (including
claims for worker's compensation) of any nature whatsoever, together with
reasonable attorneys' fees for counsel of Landlord's choice, arising out of or
in connection with the installation of Tenant's Personal Property (including but
not limited to claims for breach of warranty, personal injury or property
damage). Landlord shall have the right, in Landlord's sole and exclusive
discretion, to settle, compromise, or otherwise dispose of any and all suits,
claims, and actions related to the installation of Tenant's Personal Property or
equipment, to the extent such claims are made against Landlord. Any defense made
by Tenant under this Section 6 shall be made only with counsel (i) previously
approved in writing by Landlord, and (ii) willing to cooperate with counsel of
Landlord's choice in connection with such defense. The obligations of Tenant
under this Section 6 of this Work Letter shall survive the expiration or earlier
termination of the Lease and the performance of Landlord's Work and the
installation of Tenant's Personal Property under this Work Letter. Additionally,
after the Rent Commencement Date, to the extent that Landlord has not completed
both Phases of the Tenant Improvements, Landlord shall continue with Landlord's
Work as if Tenant were not occupying the Premises in an effort to complete the
Tenant Improvements as otherwise provided herein. Further, during the conduct of
Landlord's Work, absent Landlord's or its employee's, agents' or contractors'
gross negligence or willful misconduct, Landlord shall not be liable in any way
for any injury, loss, or damage which may occur to any items of work constructed
by Tenant or other property of Tenant that may be placed in the Premises by
Tenant, or the interference with Tenant's operations in the Premises, all being
at Tenant's sole risk.
7. Timing of Work. Subject to extension for Tenant Delay, Landlord shall
use commercially reasonable and diligent efforts to substantially complete the
construction and installation of (i) the Landlord-Provided Improvements by March
21, 1999, (ii) Phase 1 of the Tenant Improvements by April 21, 1999 (which may
be evidenced by the issuance of a temporary certificate of occupancy or
equivalent from the City of Fremont), and (iii) Phase 2 of the Tenant
Improvements by May 7, 1999. As provided in Section 2.2.2 of the Lease,
Landlord's failure to complete any aspect of Landlord's Work on or before the
dates provided above shall in no manner affect the validity of the Lease or
incur any liability on the part of Landlord, but shall permit Tenant the right
to terminate the Lease i certain circumstances as provided in Section 2.2.2 of
the Lease.
8. Defined Terms. Capitalized terms used in this Work Letter and not
otherwise defined, other than terms capitalized in the ordinary course of
punctuation, shall, unless otherwise specified herein, have the same meanings
and definitions set forth in the Lease.
9. Force and Effect. The terms and conditions of this Work Letter
supplement the Lease and shall be construed to be a part of the Lease and shall
be deemed incorporated in the Lease by this reference. Should any inconsistency
arise between this Work Letter and the Lease as to the specific matters which
are the subject of this Work Letter, the terms and conditions of this Work
Letter shall control.
EXHIBIT D
Page 3 of 6
<PAGE> 46
IN WITNESS WHEREOF, the Parties hereto have executed this Work Letter as
of the date first set forth in the Lease.
<TABLE>
<S> <C>
TENANT: LANDLORD:
SMARTFLEX SYSTEMS INCORPORATED, a Delaware MISSION COURT PROPERTIES, INC., a California
corporation corporation
By: /s/ James C. Cogan By: /s/ Sam Yip
----------------------------------- --------------------------------------
James C. Cogan Sam Yip
----------------------------------- --------------------------------------
Print Name: Print Name:
Its: VP & GM, EMS Business Unit Its: VP of Finance
----------------------------------- --------------------------------------
By: /s/ Joe L. Pendergrass By:
----------------------------------- --------------------------------------
Joe L. Pendergrass
----------------------------------- --------------------------------------
Print Name: Print Name:
Its: Director of Logistics Its:
----------------------------------- --------------------------------------
</TABLE>
EXHIBIT D
Page 4 of 6
<PAGE> 47
SCHEDULE 1
[General Description of Tenant Improvements]
ASSUMPTIONS:
- ------------
1. Floor will be repaired and moisture sealed up to 9 lbs.
2. All HVAC units will be repaired and delivered in good working condition.
3. All internal lighting will be repaired and usable.
4. Electrical requirements will be sufficient for equipment operation.
5. Roof clean and any leaks repaired. All downspout cleaned.
6. Balance of building in acceptable condition.
7. Provide keys for all locking doors.
8. Tile areas of current offices will be carpeted over. (Reference Only)
NEW TENANT IMPROVEMENTS: (see new layout)
- ------------------------
PHASE I -- Production
1. In rear of building, we need a wall constructed, open top, to enclose the
space from the employee door to the current office line, for employee
lockers and smock storage.
2. All three overhead doors will need to be enclosed fully with a dual swinging
door access. This provided weather protection and a HVAC conservation. (See
layout)
3. An additional 200 feet of 20 foot high chain link fence will need to be
installed.
4. All offices and production area walls will need to be repainted. (See color
spec below)
5. All current offices and non production hallways will need to be re-carpeted
and new cove base installed. (See spec below)
6. New walls installed in two offices where marked. New doors moved or
installed in two locations. (See Layout)
7. Panels next to men's urinals to be replaced. One in each bathroom.
8. Floor tile and cove needs to be replaced in every bathroom, men's
particularly. Match cove color as close as possible.
9. Removal of North portion of wall, after arch opening, in current lunchroom
needs to be done.
10. New wall to be constructed, with 3' access door to production floor, to
close off back access stair from the production floor. Access door to have
glass panel.
11. Build cover with access door over large transformer in computer room. (Per
layout, we think a 4' access area is required.
12. New outside roof access, since this building has no current access. Install
secure metal ladder in locked pad area in rear of building.
13. Re-key locks for new tenant on all outside security doors.
PHASE II -- New Offices:
14. Enclose the current entry way as the new lobby. Entry doors style the same
as current and a new glass wall on north side to large pillar. Carpeted
floor.
15. Structure the current lobby to contain a conference room, with pocket door,
an access aisle and the current two alcoves. Provide locking folding doors
on two alcoves on North side of current lobby.
16. Glass Windows on South side on current entry are replaced with a single wide
glass door and one glass panel.
17. New layout of offices to be installed across the front glass window portion
of the building. Consisting of one large conference room, two small
bathrooms, one small kitchenette with cabinet storage, one small conference
room and seven offices. These offices will have glass panels beside or above
doors for light transmission. A wall in front of these offices will separate
the offices from the production floor. One double door, with glass panels
from this area to production floor, per layout.
18. New electrical distribution to support changes to offices.
19. Mini blinds for all required office windows and glass panels beside doors.
Same color as walls.
SPECS:
- ------
Paint - Everguard coatings
Walls 597T white 4200 series
Accent wall 640V D4200
Door and Trim 640V D6900
Carpet - Windsor Blue, United Tech products, contact Chris Hughes 800-225-6052
or other brand or product closer to the same color and quality, if this
specified carpet is not readily available.
Cove Base - Burke 4" 323-p bluebonnet
Counter tops - Brittany blue d-321-6
Ceiling tile - Armstrong 769a
EXHIBIT D
Page 5 of 6
<PAGE> 48
The following is an assessment of ADA requirements and a list of items need
corrective work in order to comply with the ADA codes:
FIRST FLOOR
Drinking Fountain
- -----------------
Bubbler height requirement is maximum 36" above floor, existing height is 37".
Bottom of drinking fountain is required to be 27" minimum. Existing is 26-1/2".
Width of alcove is required to be minimum 32" wide, existing is 31-1/2" wide.
Women's Restroom
- ----------------
The maximum toe clearance for lavatories is 6" from wall. The installed
lavatories are at 12".
Handicap toilet compartment requires 48" in front of water closet. Measured
dimension is 47".
Toilets need to be replaced. The maximum allowable height of the toilet is 19",
existing seat is 19-1/2". The flush valve must be located on the approach side
of tank. Existing valve is on the wall side. Does not comply.
Sanitary Napkin Dispenser maximum height must be 40", existing is installed at
45".
Men's Restroom
- --------------
Lavatory counter height must not exceed 34". Existing height is 35". The
maximum toe clearance for lavatories is 6" from wall. The installed lavatories
are at 12".
Handicap stall grab bars are located 50" from rear wall. Requirement is 52".
Coat hook currently installed at 65". Requirement is 40" maximum.
Toilets need to be replaced. The maximum allowance height of the toilet is 19",
existing seat is 19-1/2". The flush valve must be located on the approach side
of tank. Existing valve is on the wall side. Distance between center line of
water closet and side wall is required to be 18", existing condition is 17-1/2".
SECOND FLOOR
Women's Restroom
- ----------------
Lavatory counter height must not exceed 34", existing height is 35". The
maximum toe clearance for lavatories is 6" from wall. The installed lavatories
are at 12". 30" X 48". Clear floor space not provided without obstruction of
door.
Handicap toilet compartment requires 48" in front of water closet. Measured
dimension is 41-1/2".
Toilets need to be replaced. The maximum allowable height of the toilet is 19",
existing seat is 19-1/2". The flush valve must be located on the approach side
of tank. Existing valve is on the wall side. Distance between center line of
water closet and side wall is required to be 18", existing condition is 17-1/2".
Grab bars above toilet tank are required to be 36" above floor, existing is 35".
Men's Restroom
- --------------
Lavatory counter height must not exceed 34", existing height is 35". The
maximum toe clearance for lavatories is 6" from wall. The installed lavatories
are at 12". 30" X 48" clear floor space not provided without obstruction of
door.
Toilets need to be replaced. The maximum allowable height of the toilet is 19".
Existing seat is 19-1/2". The flush valve must be located on the approach side
of tank. Existing valve is on the wall side. Does not currently comply.
Distance between center line of water closet and side wall is required to be
18". Existing condition is 17-1/2". Coat is installed at 66", requirement is
40". Grab bar installed at 33-1/2", requirement is 33".
Stairwells
- ----------
The handrail at the both stairwells will have to be extended to meet the
minimum extension requirement.
EXHIBIT D
Page 6 of 6
<PAGE> 49
EXHIBIT E
RULES AND REGULATIONS
1. No sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors or halls shall be obstructed or encumbered by Tenant or
used for any purpose other than ingress and egress to and from the Premises or
the Building and Tenant shall further, at Tenant's own expense, keep the
sidewalks and curb directly in front of the Premises clean and free from
rubbish.
2. No awning or other projection shall be attached to the outside walls
or windows of the Building or Project without the prior written consent of
Landlord. No curtains, blinds, shades, drapes or screens shall be attached to or
hung in, or used in connection with any window or door of the Premises, without
the prior written consent of Landlord which consent will not be unreasonably
withheld or delayed. Such awnings, projections, curtains, blinds, shades,
drapes, screens and other fixtures must be of a quality, type, design, color,
material and general appearance approved by Landlord, and shall be attached in
the manner approved by Landlord. All electrical fixtures hung in offices or
spaces along the perimeter of the Premises must be fluorescent, of a quality,
type, design, bulb color, size and general appearance approved by Landlord.
3. No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by Tenant on any part of the outside or inside of
the Premises or of the Building or Project, without the prior written consent of
Landlord at Landlord's sole and exclusive discretion. In the event of the
violation of the foregoing by Tenant, Landlord may remove same without any
liability, and may charge the expense incurred by such removal to Tenant.
Interior signs on doors and the directory tablet shall be inscribed, painted or
affixed for Tenant by Landlord at the expense of Tenant, and shall be of a
quality, quantity, type, design, color, size, style, composition, material,
location and general appearance acceptable to Landlord.
4. The sashes, sash doors, skylights, windows and doors that reflect or
admit light or air into the halls, passageways or other public places in the
Building or Project shall not be covered or obstructed by Tenant, nor shall any
bottles, parcels or other articles be placed on the window sills or in the
public portions of the Building or Project.
5. No show cases or other articles shall be put in front of or affixed
to any part of the exterior of the Building or Project nor placed in public
portions thereof without the prior written consent of Landlord.
6. The water and wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags or other substances shall be thrown therein. All
damages resulting from any misuse of the fixtures shall be borne by Tenant to
the extent that Tenant or Tenant's agents, servants, employees, contractors,
visitors or licensees shall have caused the same.
7. Landlord shall have the right to prohibit any advertising or business
conducted by Tenant referring to the Building or the Project which, in
Landlord's opinion, tends to impair the reputation of the Building or Project or
its desirability as a first-class building for offices, research and development
and/or commercial services and upon notice from Landlord, Tenant shall refrain
from or discontinue such advertising.
8. If the Premises is or becomes infested with vermin as a result of the
use or any misuse or neglect of the Premises by Tenant, its agents, servants,
employees, contractors, visitors or licensees, Tenant shall forthwith at
Tenant's expense cause the same to be exterminated from time to time to the
satisfaction of Landlord and shall employ such licensed exterminators as shall
be approved in writing in advance by Landlord.
9. Tenant shall install and maintain, at Tenant's sole cost and expense,
an adequate visibly marked (at all times properly operational) fire extinguisher
next to any duplicating or photocopying machine or similar heat producing
equipment, which may or may not contain combustible material, in the Premises.
10. Tenant shall not use the name of the Building or Project for any
purpose other than as the address of the business to be conducted by Tenant in
the Premises, nor shall Tenant use any picture of the Building or Project in its
advertising, stationery or in any other manner without the prior written
permission of Landlord. Landlord expressly reserves the right at any time to
change said name without in any manner being liable to Tenant therefor.
EXHIBIT E
Page 1 of 1
<PAGE> 50
EXHIBIT F
MISSION CORPORATE CENTER
SIGN PROGRAM
(1) Each tenant occupying more than 50% of a building shall have a
maximum of one building mounted tenant identification sign. Signage for tenants
occupying 50 % or less than 50 % of a building shall be approved on an
individual basis.
(2) Building mounted tenant identification signs shall conform to the
following specifications:
Sign: Maximum height is 4' and maximum length is 12', including
company name and logo, not to exceed 30 sq.ft.
Letters/Logo: Company name must be 1-1/2" thick high density
foam, with plastic face. Entire color shall be black if the sign
location is designated to be on the concrete wall (Building 4 only), and
white if on the glass spandrel area (all other buildings). The logo must
be the same material. Logo color may vary, but color must be approved by
Landlord.
Location: In a location approved by Landlord.
(3) "Shipping" and "Receiving" signs may be painted on an exterior wall
adjacent to truck doors. Such signs shall be black and shall be no larger than
6" by 24".
(4) The sign contractor and the detailed sign drawing are to be approved
in writing by Landlord.
(5) Signs may be lighted from exterior at ground level in a manner
approved by Landlord.
(6) All signs must conform to the City of Fremont sign ordinance.
This signage program is intended to maintain the high quality
uncluttered image of the business park. Any deviation from the program must be
approved in writing by the Landlord.
EXHIBIT F
Page 1 of 1
<PAGE> 1
EXHIBIT 10.6
LEASE
VECTRON TECHNOLOGY, INC., a Delaware corporation with an address of 267
Lowell Road, Hudson, New Hampshire, (hereinafter, the "Landlord"), hereby leases
to Methuen Acquisition Corporation, a Massachusetts corporation, with an address
of 126 Merrimack St, Methuen MA 01844 (hereinafter the "Tenant") and Tenant
hereby leases from Landlord the Premises on the following terms and conditions:
1. PREMISES:
That portion of the building situated on Lot 37/Map 7 (the "Building")
as shown on Hillsborough County Registry of Deeds Plan #21758 in Hudson, New
Hampshire (the "Property") hatch-marked in red on the plan attached hereto as
Exhibit A, and consisting of approximately 31,400 square feet (the "Premises");
together with the right to use in common with Landlord and others entitled
thereto the common driveways, walkways and grounds necessary for pedestrian and
vehicular access to the Premises and the right to use in common with others
entitled thereto the common lavatories and corridors in the Building except as
they shall be marked for the exclusive use of Tenant on Exhibit A; together with
the right to park a total of ninety nine (99) vehicles in striped but
non-assigned parking spaces in the following areas: Twelve (12) parking spaces
adjacent to the tenant's proposed main entrance to the Premises, Twelve (12)
parking spaces adjacent to the employee entrance to the Premises; and
Seventy-Five (75) parking spaces in the upper parking lot on the Property; and
together with the right to use one bay of the two-bay loading dock located at
the northwestern corner of the Building.
2. TERM:
Tenant shall have and hold the Premises for a term of five (5) years
which term shall commence on April 1, 1999 (the "Commencement Date") and shall
end on April 1, 2004 (the "Term"), unless such Term shall be sooner terminated
as hereinafter provided. Notwithstanding the foregoing, Landlord shall provide
Tenant access to the Premises prior to the Commencement Date and beginning on
February 1, 1999 on a base rent-free basis for the purpose of Tenant's
effectuating Tenant's Work as defined and provided in Paragraph 8 hereof;
provided, however, that Tenant shall : a) be responsible for ( and shall pay to
Landlord promptly upon receipt of an invoice for same) Additional Rent payable
by Tenant to Landlord as provided in Paragraph 7 hereof during the access period
prior to the Commencement Date, and 2) comply with all other provisions of this
lease during such period.
3. OPTIONS TO EXTEND:
There are no express options to renew or extend hereunder. Without
obligating the Landlord to renew or extend hereunder, on or about twelve (12)
months prior to the lease expiration date, upon the request of Tenant, Landlord
shall advise Tenant of the availability of all or a portion of the Premises for
future lease.
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4. BASE RENT:
A. For Lease Year One of the Term (as hereinafter defined),
Tenant shall pay an annual base rent of One Hundred Fifty Seven Thousand Dollars
in equal monthly installments of Thirteen Thousand Eighty-Three and 34/100
Dollars ($13,083.34), without offset or deduction except as expressly set forth
in this Lease, to Landlord at 267 Lowell Road, Hudson, New Hampshire prior to or
on the first (1st) day of the Term and on the fifteenth (15th) day of each month
thereafter (with the rent for any fraction of a 30/31 day month to be prorated).
For purposes of this Lease, "Lease Year One" shall mean the period from April 1,
1999 through April 1, 2000; thereafter, "Lease Year" shall refer to each
successive twelve (12) month period.
B. For lease year Two of the term, tenant shall pay an annual
base rent of One hundred Seventy Two Thousand Seven Hundred Dollars in equal
monthly installments of Fourteen Thousand Three Hundred Ninety One and 67/100
Dollars ($14,391.67) without offset or deduction except as expressly set forth
in this Lease to Landlord on the same basis as provided in paragraph A above.
C. For Lease Years Three through Five of the Term, inclusive,
the annual base rent shall be re-computed annually effective on each one year
anniversary date of the Commencement Date and shall be an amount determined by
multiplying the annual base rent for the preceding Lease Year by a fraction, the
numerator of which shall be the Consumer Price Index (as hereinafter defined)
for the last complete month prior to the expiration of such preceding Lease
Year, and the denominator of which shall be the Consumer Price Index for the
month prior to the month in which the preceding Lease Year began; provided,
however, that if such fraction results in a number which is less than one, the
base rent will not be decreased in any given Lease Year. As used herein, the
term "Consumer Price Index" shall mean (i) the Consumer Price Index for all
Urban Consumers - (CPI - U) - U.S. City (All Cities) Average All Items (1982 -
1984 =100) published by the Bureau of Labor Statistics of the United States
Department of Labor, or (ii) if the publication of such Consumers' Price Index
shall be discontinued, the comparable index most clearly reflecting diminution
of the real value of the annual base rent herein provided for. In the event of a
change in the base for the Price Index, the numerator and denominator of the
fraction referred to above shall be appropriately adjusted to reflect continued
use of the 1982-1984 base of the Consumers' Price Index or in the case of such
comparable index, the continued use of the base period in effect at the time of
its adoption for use hereunder.
A late payment penalty of five (5%) percent of the rent owed shall be
assessed on any rent not paid within five (5) days when due.
5. SECURITY DEPOSIT:
Concurrent with the execution of this lease, Tenant has delivered to
Landlord the sum of Fourteen Thousand Three Hundred Ninety One Dollars and
67/100 Dollars ($14,391.67) which amount shall be held by the Landlord as the
"Security Deposit". The Security Deposit may be
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used by the Landlord to cure any default or breach of Tenant under this Lease,
and to the extent not so used shall be returned to Tenant upon the termination
of this Lease as provided for herein. In no event shall the Security Deposit be
considered prepaid rent.
6. NO PREPAYMENT:
Tenant shall have no right to prepay rent except on Landlord's
authorization.
7. ADDITIONAL RENT:
A. Tenant shall pay to the Landlord as Additional Rent,
Tenant's Share (as hereinafter defined) of the following:
1) Operating Expenses. Common area expenses incurred
by Landlord for the operation, cleaning, maintenance and repair of the Property
and including, without limitation, maintenance of lawn and landscaping, lighting
and snowplowing of all walks, driveways and loading areas of the Building;
2) Real Estate Taxes and Assessments. All real estate
taxes relating to the Premises, all other taxes which may be levied in lieu of
real estate taxes, assessments and other governmental charges or levies, general
and specific, ordinary and extraordinary, unforeseen as well as foreseen, of any
kind and nature, for public improvements which are assessed, levied, confirmed,
or become a lien upon the Premises; and
3) Insurance. The premium charged for fire insurance.
B. Tenant's Share shall be determined by a formula of which
the numerator is the amount of square feet held by the Tenant (31,400) and the
denominator is the total amount of rentable square feet in the building
(121,364), or Twenty-Six Percent (26%) ("Tenant's Share"). Tenant's Share shall
be paid in monthly installments, in amounts estimated from time to time by
Landlord on the first day of each and every calendar month, in advance,
commencing with the Commencement Date.
C. Upon Tenant's request, within sixty (60) days after the end
of each calendar year during the term hereof, Landlord shall furnish to Tenant a
statement, prepared by Landlord, in reasonable detail setting forth the
computation of such Additional Rent; thereupon there shall be a prompt
adjustment between Landlord and Tenant with payment to, or repayment by
Landlord, as the case may require. Tenant shall have the right to inspect
Landlord's books and records relative to such Additional Rent charges during
normal business hours and upon reasonable prior notice.
D. Tenant shall pay such Additional Rent to Landlord,
commencing on the Commencement Date (which amount of Additional Rent may include
any additional amount of Additional Rent owing by Tenant during the period of
access by Tenant prior to the
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Commencement Date for effectuating Tenant's Work) and continuing on the first of
each month thereafter at the time the monthly payment of base rent is due
pursuant to the terms hereof. For Year Lease One, the Tenant's Share of
Additional Rent on a monthly basis is Three Thousand Eight Hundred Fifty and
00/100 Dollars ($3,850.00).
8. TENANT IMPROVEMENTS:
Landlord acknowledges that Tenant intends to perform certain leasehold
improvements to the Premises following the execution of this lease and beginning
on or about January 1, 1999 ("Tenant's Work"). Tenant shall prepare complete
plans and specifications necessary for Tenant's Work, together with a complete
list of equipment to be installed in the Premises by Tenant (collectively
"Tenant's Plans") and Tenant shall submit Tenant's Plans to Landlord for
Landlord's approval. Tenant shall not be permitted to commence Tenant's Work
until such approval is granted. Tenant shall cause Tenant's Work to be performed
in a good and workmanlike and shall complete the work at Tenant's sole cost and
expense.
9. UTILITIES:
This Lease is totally net except as otherwise provided in this Lease.
Landlord shall provide in such capacities as hereinafter set forth and Tenant
shall pay for water/sewer, heat, electricity (including air conditioning), and
gas either by separate meter established for the Premises, when possible, in
which case Tenant shall pay for such service(s) by direct payment to the utility
provider, or by proration, in which case Tenant shall pay Tenant's Share to
Landlord as Additional Rent. In the case of electrical service to the Premises,
Landlord shall provide Tenant with a maximum capacity as follows: 1000 Amps
service, 480 V, 3 phase. Should Tenant require any additional electrical
capacity in excess of the foregoing amounts, Tenant may, subject to the review
and written consent of Landlord, arrange for the provision of increased
electrical capacity to the Premises at Tenant's sole expense. Landlord shall be
entitled to monitor and/or meter all non-separately metered utility functions
and usages on the Premises. In the event that Tenant's usage of any
non-separately metered utility is disproportionately greater than Landlord's
usage, Landlord shall be entitled to install separate meters.
Landlord shall supply reasonable heat, light and air-conditioning to
common areas of the Building at the prorated expense of Tenant in accordance
with Paragraph 7 hereof. All utilities are provided subject to interruption due
to any accident, to the making of repairs, alterations or improvements, to labor
difficulties, to trouble in obtaining fuel, electricity, service or supplies
from the sources from which they are usually obtained for the Building, or to
any cause beyond the Landlord's control. Landlord agrees to use reasonable
efforts to cause the cessation of any such interruption and to the extent
reasonably possible to effect repairs during nonbusiness hours and upon
reasonable notice to Tenant.
Landlord shall not be responsible for procuring or the cost or fees
associated with any sewer, wastewater discharge or any other required permits or
licenses required by Tenant in the conduct of its business on the Premises, all
of which shall be at Tenant's sole cost and expense.
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10. USE OF PREMISES:
Tenant shall use the Premises for electronic manufacturing and other
uses incidental thereto. Tenant shall not permit or suffer the Premises to be
occupied or used for any unlawful, illegal, disreputable or extrahazardous
business, use or purpose, nor in such mariner as to constitute a nuisance.
Tenant shall procure any and all licenses or permits required by state, federal
or local law regulation or authorities in the use of the Premises by Tenant,
including but not limited to, permits or licenses required for air quality,
wastewater, sewer discharge and the like. In its use of the Premises and the
Common Areas, Tenant agrees for itself, its employees, agents and invitees, to
conduct itself in a businesslike manner at all times, consistent with standards
established by the Landlord for the operation of a first class business
operation and to follow and abide by the rules and regulations established by
the Landlord from time to time. With the exception of the right to park and
maintain a tractor-trailer truck at the loading dock bay which has been assigned
to Tenant hereunder, Tenant shall not park, store or maintain any
tractor-trailer trucks, construction vehicles or any other types of commercial
trucks or transports on the Property.
11. FIRE INSURANCE:
Landlord shall procure and Tenant shall pay for (pursuant to Paragraph
7 hereof) such amount of fire and extended coverage insurance of the building in
which the Premises are located in an amount equal to the full replacement value
of the building. Upon Tenant's request, Landlord shall provide to Tenant
evidence of such insurance coverage. Personal property insurance shall be the
responsibility of Tenant, and Landlord shall not be liable to Tenant for loss or
damage from any cause whatsoever to machinery, equipment, appurtenances,
furniture and furnishings, trade fixtures, goods, wares, merchandise, inventory
and other property of Tenant or others in the Premises.
12. LIABILITY INSURANCE:
Tenant shall maintain with respect to the Premises comprehensive public
liability insurance on an occurrence basis in the amount of $2,000,000.00 per
occurrence and $1,000,000.00 per individual in case of personal injury or death
and $500,000.00 in case of loss, destruction or damage to personal property. The
Tenant shall deposit with the Landlord certificates for such insurance at or
prior to the expiration of any such policies. All such insurance certificates
shall provide that such policies shall not be canceled without at least thirty
(30) days prior written notice to each assured therein.
13. MAINTENANCE AND REPAIRS:
Landlord shall keep, at its sole cost and expense, the foundation,
exterior walls, roof, floor slabs and the structural parts of the Building in
good condition and repair throughout the
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term of this Lease. Tenant shall be responsible for the maintenance and repair,
at Tenant's expense, of the floor, coverings, drainage systems, and interior
walls constructed by Tenant on the Premises, and Tenant shall also be
responsible for the general maintenance and repairs of the Premises and all
mechanical, electrical, plumbing and nonmechanical installations and systems
therein (whether or not constructed by Tenant's Landlord) in good condition and
repair, by making repairs to, and performing maintenance of, the Premises as
needed (including plate glass), interior painting and repainting, the repair of
floors and carpets, the keeping of windows and doors watertight and the
maintenance in good operating condition of all plumbing, electrical, heating,
sprinkling, air-conditioning and other utility systems exclusively serving the
Premises, and at the expiration or earlier termination of this Lease for any
cause herein provided shall deliver up the Premises to Landlord in the same
condition and state of repair as they were at the beginning of the term hereof,
or as they may be put during the term, reasonable wear and tear and damage by
casualty and taking by eminent domain excepted. Tenant shall not permit the
Premises to be overlooked, damaged, stripped, or defaced, nor suffer any waste.
Landlord shall maintain such heating, cooling, electrical, plumbing and sewer
installations which do not exclusively serve the Premises, and cause all
existing parking areas, driveways, grounds and walkways to be maintained in good
repair and clean condition, subject to Tenant's obligation to pay its Tenant's
Share in accordance with Paragraph 7 hereof.
14. ALTERATIONS ADDITIONS SIGNS:
A. Except as specified in Tenant's Work and as approved by
Landlord, Tenant shall not make structural or non-structural alterations or
additions to the Premises without the prior written consent of the Landlord
which consent shall not be unreasonably withheld or delayed. All such
alterations shall be at Tenant's expense and shall be in quality at least equal
to the present construction. Tenant shall not permit any mechanics' liens, or
similar liens, to remain upon the Premises for labor and material furnished to
Tenant or claimed to have been furnished to Tenant in connection with work of
any character performed or claimed to have been performed at the direction of
Tenant and shall cause any such lien to be released of record forthwith without
cost to Landlord. Any alterations or improvements made by the Tenant shall, at
the option of the Landlord unless otherwise agreed in writing or otherwise
provided for in this Lease, be removed by Tenant and the Premises restored to
their prior condition by Tenant at its expense or shall become the property of
the Landlord at the termination or occupancy as provided herein. Tenant may,
without Landlord's prior consent, from time to time, and at its own expense,
make such alterations, restorations, changes, replacements, additions or
installations of a nonstructural nature in and to the interior of the Premises,
the cost of which shall not exceed ten thousand dollars ($10,000.00) in each
instance, provided Tenant has first delivered plans and specifications therefor
to Landlord. Within fifteen (15) days after Landlord's receipt of such plans,
Landlord shall advise Tenant in writing of any such work which must be removed
at the expiration or sooner termination of this Lease. If Landlord has not
responded within said fifteen (15) days Tenant shall have no obligation to
remove said work, but may at its option.
B. Tenant shall not affix any sign to any part of the Premises
without the prior written consent of Landlord, which consent shall not be
unreasonably withheld or delayed. Any
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approved sign or signage shall be at Tenant's expense. Tenant's name may appear
on each door immediately servicing the Premises and on the building directory in
the size, style and color first approved in writing by Landlord. Landlord may
remove any sign it has not approved.
15. ENVIRONMENTAL MATTERS:
A. The Tenant represents and warrants that except for: (i) the
use of de minimis quantities of substances or materials which in a nonoffice
setting or in greater quantities or concentrations would otherwise be defined as
Hazardous Materials or Hazardous Wastes; and (ii) the use of certain substances
and materials in the ordinary course of Tenant's electronic assembly business
which are or may be Hazardous Materials or Hazardous Wastes (in which event,
Tenant agrees to comply with all state, federal and local governmental statutes,
ordinances and regulations applicable to the use thereof), Tenant shall not use
the Premises (or any area outside of the Premises in the Building or outside of
the Building on the Property) for the Storage, Treatment or Disposal of
Hazardous Materials or Hazardous Wastes, and hereby certifies that its
operations or other use of the Premises will not involve same. Any spill,
discharge or release in or about the Premises or within the Building or on the
Property caused by Tenant, its employees, agents or invitees, shall be the sole
and exclusive responsibility of Tenant, and Tenant shall be exclusively liable
for any such incident or event as hereinafter provided. For the purposes of this
Lease, the terms "Hazardous Materials", "Hazardous Wastes", "Storage",
"Treatment", "Disposal" and "Generator" are defined by cumulative reference to
the following sources as amended from time to time: (1) the Resource
Conversation and Recovery Act of 1976, 42 U.S.C. ss.6901 et seq (RCRA); (2) EPA
Federal Regulations promulgated under RCRA and codified in 40 C.F.R. Parts
260265 and Parts 122124; (3) the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. ss.9601 (CERCLA), as amended by the
Superfund Amendments and Reauthorization Act of 1986 (SARA); (4) New Hampshire
R.S.A. Ch 147, 147A; and 147B; and (5) New Hampshire regulations promulgated
thereunder by any agency or department of the State of New Hampshire.
B. The Tenant agrees to indemnify, demand and hold
harmless its Landlord, its successors and assigns and its officers, directors,
employees from and against any liability, claim, causes of action, damages,
loss, cost or expense (including, without limitation, reasonable attorneys' fees
and related expenses) arising from:
(1) the imposition or recording of a lien for
expenditures from the New Hampshire Hazardous Waste Clean Up Fund under NH RSA
147B, as amended, with respect to any disposal at the Premises caused by the
Tenant;
(2) any loss of value in the Premises as a result of
any such lien referred to in subparagraph (B)(1) above;
(3) containment of the Hazardous Wastes or Hazardous
Materials generated or produced by Tenant at the Premises;
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(4) necessary cleanup of Hazardous Waste or Hazardous
Materials and restoration of the Premises and the surrounding environment;
(5) removal of the Hazardous Wastes or Hazardous
Materials generated or produced by tenant at the premises;
(6) such actions as may be necessary to monitor,
assess and evaluate the release or threat of release of a Hazardous Waste or
Hazardous Material generated or produced by tenant at the premises; or to
mitigate damage to the public health or welfare that may otherwise result from a
release or threat of release;
(7) any breach by Tenant of any representation or
warranty set forth in this Section 15;
(8) any failure to implement and complete its
responsibilities identified in this Section 15;
(9) any administrative or civil actions brought or
issued by any regulatory authority against Landlord with respect to the
responsibilities of Tenant covered in this Section 15;
(10) any civil action in a federal or state court
that may be commenced by third parties with respect to environmental matters
pursuant to the private party suit provisions of applicable environmental laws
including but not limited to those laws set forth in subparagraph (A) above; and
(11) the release by Tenant of any Hazardous Materials
or Hazardous Wastes into the environment.
C. In connection with the indemnity provisions set forth in
subparagraph B above and elsewhere in this Lease, Tenant hereby agrees to: 1)
provide Landlord as of the date hereof with a copy of its audited financial
statements from its previous fiscal year and thereafter on an annual basis
within ninety (90) days of the end of its fiscal year. Landlord agrees to
maintain Tenant's financial statements in strict confidence; 2) notify Landlord
within ten (10) business days of any change in ownership of Tenant; any change
in Tenant's principal bank; and any adverse change in Tenant's financial
condition.
D. The Tenant shall obtain all environmental permits, licenses
and approvals required by local, state and federal laws, ordinances, rules and
regulations in connection with its electronic assembly business and in Tenant's
capacity, if at all, as a Generator of Hazardous Wastes or Hazardous Materials
with regard to air emissions or discharges into the groundwater, and further
covenants and agrees to notify the Landlord immediately of all notices of
violations or adverse inspection reports from any governmental authority.
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E. Tenant's indemnity obligations in this Section shall
survive: (i) the expiration or termination of this Lease Agreement; and (ii) any
transfer of the title to the Premises (whether by sale, foreclosure, deed in
lieu of foreclosure or otherwise).
F. Tenant represents and warrants that Tenant:
(1) shall operate the pretreatment water process
located at the Premises, if any, ("Wastewater Treatment Process") in a
workmanlike manner in accordance with generally recognized standards for
wastewater treatment;
(2) shall comply with all applicable federal, state
and local laws and regulations pertaining to the operation of the Wastewater
Treatment Process and the discharge of wastewater into the Hudson municipal
sewer; and
(3) shall not bring to the Premises any wastes or
wastewater from offsite sources.
G. In the event of a spill, leak, discharge, or other release
of Hazardous Wastes or Hazardous Materials to the environment in a reportable
quantity by the Tenant at the Premises, the Tenant shall immediately notify the
Landlord. Any such notice to Landlord shall be given verbally and in writing to
the Landlord's Facility Manager. Tenant shall be solely responsible for
notifying governmental authorities of releases of such substances at the
Premises. In addition, Landlord shall make available to Tenant any records of
other spills that are prepared by Tenant. Tenant not responsible for any
environmental conditions that predate the lease.
16. INDEMNIFICATION AND LIABILITY:
Unless the following damages are caused by Landlord's negligence or
wrongful willful acts, Landlord shall not be liable to Tenant for any injury or
damage to the Premises or to any property of Tenant or to any property of any
third person, firm, association or corporation on or about the Premises, and
Tenant shall indemnify and save Landlord harmless from and against any and all
liability and damages and from and against any and all suits, claims and demands
of any kind or nature, by and on behalf of any person, firm, association or
corporation, arising out of or based upon any incident, occurrence, injury or
damage which shall or may happen on or about the Premises and from and against
any matter or thing growing out of the condition, maintenance, repair,
alteration, use, occupation or operation of the Premises or the installation of
any property therein or the removal of any property therefrom.
17. DESTRUCTION: WHOLE AND PARTIAL:
If the Premises shall be so damaged that repairs and restoration cannot
be accomplished within a period of one hundred eighty (180) days from start of
repair or restoration unless the destruction or damage is caused by Tenant or
persons for whose conduct it is responsible and is not insured against by a
policy benefiting Landlord (in which case this lease in Landlord's sole
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discretion, shall not automatically terminate), this lease shall automatically
terminate without further act of either party hereto, and each party shall be
relieved of any further obligation to the other except for the rights and
obligations of the parties under Paragraph 18 and except Tenant shall be liable
for and shall promptly pay Landlord any rent then in arrears or Landlord shall
promptly rebate to Tenant the pro rata portion of any rent paid in advance. If
the Premises shall be so damaged that repairs and restoration can be
accomplished within said period one hundred eighty (180) days, this lease shall
continue in effect in accordance with its terms and Landlord shall diligently
proceed to adjust the loss with insurance carrier(s), obtain building permit(s),
commence to repair and complete the same within said one hundred eighty (180)
day period; provided, however, unless such damage is caused by Tenant or persons
for whose conduct it is responsible and is not insured against by a policy
benefiting Landlord (in which case, in Landlord's sole discretion, Tenant's rent
shall not abate), that until such repairs and restoration have been accomplished
a portion of the rent shall abate equal to the proportion of the Premises
rendered unusable by the damage. Landlord shall be entitled to all fire
insurance proceeds except insurance specifically insuring property of Tenant and
shall in no event be obligated to undertake repairs the cost of which exceeds
the proceeds.
18. EMINENT DOMAIN:
In the event that the Premises shall be lawfully condemned or taken by
a public authority either in their entirety or in such proportion that they are
no longer suitable for the intended use by the Tenant, then this Lease shall
automatically terminate without further act of either party hereto on the date
when possession of the Premises shall be taken by such public authority, and
each party hereto shall be relieved of any further obligation to the other
except that the Tenant shall be liable for and shall promptly pay to the
Landlord any rent then in arrears or the Landlord shall promptly rebate the
Tenant a pro rata portion of any rent paid in advance and the Security Deposit,
subject to the provisions of Paragraph 5 hereof. In the event the proportion of
the Premises so condemned or taken is such that they are still suitable for use
by the Tenant, then this Lease shall continue in effect in accordance with its
terms and a portion of the rent shall abate equal to the proportion of the
rental value of the Premises so condemned or taken. In either of the above
events, the award for the property so condemned or taken will be payable solely
to the Landlord, except that tenant may apply for a separate award so long as
award does not diminish the value of the landlord's award.
19. SUBORDINATION:
Tenant agrees that this Lease and all rights of Tenant hereunder are
and shall be subject and subordinate to the lien of (1) any mortgage
constituting a first lien on the Premises, or any part thereof, at the date
hereof, and (2) the lien of any mortgage hereafter executed conveying the
Premises or any part thereof, and (3) any renewal, modification, consolidation
or extension of any mortgage referred to in clause (1) or clause (2). Tenant
shall, on demand at any time or times, execute, acknowledge and deliver to
Landlord at the cost and expense of Tenant, any and all instruments that may be
necessary or proper to subordinate this lease and all rights of Tenant hereunder
to the lien of any mortgage, or other instrument referred to in clause (3)
above.
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Landlord will use its best efforts to obtain a nondisturbance agreement
from its present mortgagee in favor of the Tenant. "Best efforts" shall not
include the expenditure of funds by Landlord or the incurring of liability of
Landlord. Landlord agrees that the subordination of this Lease to any future
mortgagee and Tenant's obligation to attorn to any future mortgagee shall be
conditional upon any such mortgagee agreeing not to disturb Tenant's use and
occupancy of the Premises and to recognize Tenant's rights under this Lease so
long as Tenant is not in default hereunder. In the event Landlord is unable to
obtain any future mortgagee's nondisturbance agreement Tenant shall have the
right, upon thirty (30) days' written notice to Landlord to cancel this Lease;
provided, however, that Tenant is not in default hereunder which default is not
cured or in the process of being cured Tenant is at least in the same position
financially as it is at the time of the execution of this Lease.
20. SURRENDER:
At the expiration or on the earlier termination of this Lease for any
cause herein provided for, Tenant shall peaceably and quietly quit the Premises
and deliver possession of the same to Landlord, together with all alterations
and additions thereto except those alterations and additions made by Tenant at
Tenant's expense and as otherwise set forth in this Lease, in the same condition
as they were at the beginning of the term or as they were put during the term,
fair wear and tear and any damage by casualty and taking by eminent domain
excepted, together with all keys and locks thereto. Tenant shall remove all its
goods and effects from the Premises including all signs and lettering. If Tenant
fails to remove any of its property from the Premises, Landlord is authorized,
without liability to Tenant for loss or damage thereto, and at the sole risk of
Tenant, to remove and store any of the property or to sell at public or private
sale with ten (10) days notice to Tenant, any and all of the property not so
removed and to apply the net proceeds of such sale to the payment of any sum
due, or to destroy such property.
21. ASSIGNMENT; SUBLEASING:
Tenant shall not assign or sublease any portion or the whole of the
Premises without the prior written consent of Landlord which consent shall not
be unreasonably withheld or delayed. In connection with any request by Tenant
for such consent to assignment or subletting, Tenant shall submit to Landlord in
writing in the name of the proposed assignee or subtenant, (ii) such information
as to its financial responsibility and standing as Landlord may reasonably
require, and (iii) all of the terms and provisions upon which the proposed
assignment or subletting is to be made. Upon receipt from Tenant of such request
and information Landlord shall have an option to be exercised in writing within
twenty (20) days after its receipt from Tenant of such request and information
if the request is to assign the Lease or to sublet all of the Premises, to
cancel or terminate this Lease, or, if the request is to sublet a portion of the
Premises only, to cancel and terminate this Lease with respect to such portion,
in each case as of the date set forth in Tenant's request submitted to Landlord;
in the event Landlord shall exercise such option, Tenant shall surrender
possession of the entire Premises, or the portion which is the subject of the
option, as the case may be, on the date set forth in such notice in accordance
with the provisions of this Lease relating to surrender of the Premises at the
expiration of the Lease. If
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this Lease shall be canceled as to a portion of the Premises only, the annual
base rent shall thereafter be abated proportionately according to the ratio that
the number of rentable square feet in the portion of the space surrendered bears
to the rentable square feet of the Premises. In the event Landlord shall not
exercise its option to cancel this Lease pursuant to the foregoing provisions,
Landlord shall not unreasonably withhold its consent to the requested assignment
or subletting, provided that: (1) the terms and provisions of such assignment or
subletting shall specifically make applicable to the assignee or subtenant all
of the provisions of this Paragraph 19 so that Landlord shall have against the
assignee or subtenant all rights with respect to any further assignment and
subletting which are set forth herein; (2) no assignment or subletting shall
affect the continuing primary liability of Tenant (which, following assignment,
shall be joint and several with assignee); (3) no consent to any of the
foregoing in a specific instance shall operate as a waiver in a subsequent
instance; and (4) no assignment shall be binding upon Landlord or any of
Landlord's mortgagees, unless Tenant shall deliver to Landlord an instrument in
recordable form which contains a covenant of assumption by the assignee running
to Landlord and all persons claiming by, through or under Landlord, but the
failure or refusal of the assignee to execute such instrument of assumption
shall not release or discharge assignee from its liability as Tenant hereunder.
In the event Landlord shall not exercise its option to cancel this Lease
pursuant to the foregoing provisions, Landlord shall be entitled to receive
fifty percent of all amounts received by Tenant in excess of annual base rent
and additional rent reserved in this Lease applicable to the space being so
assigned or sublet.
22. LANDLORD'S ACCESS:
Landlord or its representative shall have free access to the Premises
at reasonable intervals during normal business hours and upon reasonable notice
to Tenant for the purpose of inspection, or for showing the premises to
prospective purchasers or tenants, or for the purpose of making repairs which
Tenant is obligated to make hereunder but has failed or refused to make and
shall have access at any time and without notice for emergency repairs. The
preceding sentence shall not impose upon Landlord any obligation to make
repairs. Landlord shall also be entitled to install video cameras on, within or
about the access doors to the Premises including but not limited to, the points
of ingress and egress to and from the Building for security related purposes.
Neither Tenant, nor its employees, agents or invitees shall have any access
whatsoever to those portions of the Building other than the Premises as defined
herein.
23. HOLDING OVER:
If Tenant shall hold over after the expiration of the term hereof, such
holding over shall not extend the term of this Lease but shall create a month to
month tenancy upon all terms and conditions of the Lease except that the rent
shall be equal to 150% the then current base and additional rent. This inclusion
of the preceding sentence shall not be construed as Landlord's permission for
Tenant to hold over.
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<PAGE> 13
24. ATTORNMENT:
Tenant shall in the event of sale or assignment of Landlord's interest
in the Premises or in the event of foreclosure of any mortgage to which this
Lease is subject, on request of the purchaser, attorn to him and recognize such
purchaser as Landlord under this Lease, provided that tenant shall have received
from such purchaser or transferee a non disturbance agreement.
25. NOTICE:
Any notice from Landlord to Tenant relating to the Premises or its
occupancy shall be deemed duly served, if left at the Premises addressed to the
Tenant, and mailed to Tenant: by registered or certified mail, return receipt
requested, postage prepaid. Any notice from the Tenant to Landlord relating to
the Premises or the occupancy thereof, shall be deemed duly served, if mailed to
the Landlord by registered or certified mail, return receipt requested, postage
prepaid, addressed to the Landlord at such address as the Landlord may from time
to time designate in writing. All rent and notices shall be paid and sent to the
Landlord at 267 Lowell Road, Hudson, New Hampshire 03051.
26. DEFAULT:
If (a) any installment of base rent or any additional rent shall not be
paid within ten (10) days of its due date; or (b) Tenant defaults in the
performance or observance of any other covenant or condition in this Lease and
such default remains unremedied for thirty (30) days after written notice
specifying a default or defaults hereunder has been given to Tenant by Landlord
provided that if such default is of such a nature that it cannot be cured prior
to the expiration of such thirty (30) day period, then such default shall not be
deemed to continue so long as Tenant proceeds to cure the default as soon as
reasonably possible and continued to take all steps necessary to complete such
cure; or (c) Tenant makes an assignment for the benefit of creditors, files a
voluntary petition in bankruptcy, is adjudicated insolvent or bankrupt,
petitions or applies to any tribunal for any receiver or any trustee of or for
Tenant or substantial part of its property, commences any proceeding relating to
Tenant or any substantial part of its property under any reorganization,
arrangement, readjustment of debt, dissolution or liquidation law or statute or
any jurisdiction, whether now or hereafter in effect, or there is commenced
against Tenant any such proceeding which remains undismissed for a period of
sixty (60) days, or any order approving the petition in any such proceeding is
entered, or Tenant by any act indicates its consent to, or acquiescence in, any
such proceeding or the appointment of any receiver of or trustee for Tenant or
any substantial part of its property, or suffers any such receivership or
trusteeship to continue undischarged for a period of sixty (60) days, then, in
any of such events, Landlord may immediately or at any time thereafter and
without demand or notice enter upon the Premises or any part thereof in the name
of the whole and repossess the same and expel Tenant and those claiming through
or under Tenant and remove their effects if necessary, without being deemed
guilty of any manner of trespass and without prejudice to any remedies which
might otherwise be used for arrears of rent or breach of covenant, and upon such
entry this Lease shall
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<PAGE> 14
terminate and Tenant covenants that Tenant shall remain and continue liable to
Landlord in an amount equal to the total rent reserved for the balance of the
term less the net amounts (after deducting the expenses of reletting, repair,
renovation or demolition) which Landlord realizes from the reletting of the
Premises. If Landlord relets the Premises after Tenant's default, then any
payment received will be deemed on account, as to Tenant's obligation and Tenant
shall be responsible for any deficiency as it becomes due during the remaining
term of this Lease. If the Premises are relet for more than the rent hereunder,
then Tenant will not be entitled to any additional amounts and said amounts will
be the sole property of Landlord. Tenant shall have the right to present
prospective Tenant(s) to Landlord in an effort to assist Landlord in its
obligation to mitigate damages.
27. TENANT'S MANUFACTURING PROCESS:
Tenant hereby agrees to provide Landlord with a list of all chemicals
used or to be used on the Premises prior to the delivery, use or storage of such
chemicals on the Premises, and Landlord shall have the right to approve all
chemicals prior to Tenant's use thereof on the Premises. Attached hereto as
Exhibit B is a complete list of all chemicals Tenant shall be using or storing
on the Premises as of the Commencement Date. The foregoing obligation to notify
Landlord of any additional chemicals to be brought onto the Premises and
Landlord's right to approve same is an ongoing obligation and right hereunder.
Tenant agrees that it will take whatever action is reasonably necessary to
control and minimize any elevated noise levels, excess vibration, noxious fumes
or odors which would be reasonably likely to negatively impact workplace safety,
air quality and other life safety criteria on the Premises and in the Building.
In the event Tenant's manufacturing process at any time negatively affects the
Landlord and/or its operations and/or other portions of the Building, Tenant,
upon notice from Landlord, shall proceed immediately to take such steps as are
reasonably necessary, at Tenant's sole cost and expense, to reduce such noise,
vibration, fumes, odors or other intrusive or disruptive activities to levels
acceptable to Landlord. Tenant hereby agrees to indemnify Landlord for any and
all losses incurred by Landlord as a result of Tenant's failure to comply with
this Paragraph 27.
28. COSTS:
In the event either party hereto commences litigation against the other
to enforce its rights hereunder, the prevailing party in such litigation shall
be entitled to recover from the other its reasonable attorney's fees and
expenses incidental to such litigation.
29. WAIVER:
Any consent, express or implied, by Landlord to any breach by Tenant of
any covenant or condition of this Lease shall not constitute a waiver by
Landlord of any prior or succeeding breach by Tenant of the same or any other
covenant or condition of this Lease. Acceptance by Landlord of rent or other
payment with the knowledge of a breach or a default under any term hereof by
Tenant shall not constitute a waiver by Landlord of such breach or default.
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<PAGE> 15
30. QUIET ENJOYMENT:
Tenant, on paying the rents and performing all of the covenants and
conditions hereof, shall peaceably and quietly enjoy the Premises, subject
nevertheless to the terms of this Lease.
31. INTEGRATION:
All representations, statements and agreements heretofore made are
merged in this Lease which is the full expression of the parties' obligations
and neither party, in entering this Lease, has relied upon any statement or
representation not set forth herein.
32. GOVERNING LAWS:
This Lease is made in and shall be interpreted and enforced according
to the law of New Hampshire.
33. BROKER'S COMMISSION:
Landlord and Tenant represent and warrant to the other that neither of
them has had any contact with any real estate broker or finder in connection
with this transaction with the exception of Hunneman Commercial Company whose
commission Landlord shall pay pursuant to a separate agreement between Landlord
and said broker. Each party agrees to indemnify the other against and hold
harmless the other for any cost, claim, loss, liability, damage or expense
(including reasonable attorney's fees) arising from any breach of the foregoing
warranty and representation.
34. ARBITRATION:
Either party may, upon ten (10) days written notice to the other party,
require that any or all claims or disputes arising out of or relating to this
Lease (with the exception of nonpayment of rent) shall be determined by
arbitration under the rules, then obtaining of the American Arbitration
Association. A decision of an arbitrator made in accordance with the provisions
of this Paragraph shall be final and binding upon the parties hereto and
enforceable in a court of law.
35. COVENANTS TO RUN WITH THE LAND:
The covenants and agreements of Landlord and Tenant shall run with the
land and be binding upon and inure to the benefit of them and their respective
heirs, executors, administrators, successors and assigns. Landlord shall have
the right to sell, assign, transfer, or otherwise alienate its interest in the
Building and this lease, and upon such sale, assignment, transfer, or
alienation, the new owner shall succeed to all of Landlord's obligations
hereunder,
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<PAGE> 16
and Tenant shall be bound to the new owner to the same extent as it
was bound to Landlord. At such time, Landlord shall be entirely freed and
relieved of any obligation, duty or responsibility under this lease.
36. GUARANTY:
Smartflex Systems, Inc., a California corporation, with an address of
14312 Franklin Ave. Tustin CA 92781-2085 (hereinafter the "Guarantor"), the
parent company of the Tenant named herein, hereby unconditionally agrees to
guaranty all of the Tenant's obligations hereunder.
37. AUTHORITY:
Landlord, Tenant and Guarantor represent and warrant to each other that
the individual(s) executing this Lease are duly authorized to execute and
deliver this Lease on behalf of Landlord, Tenant and Guarantor, respectively,
and upon the request of any party, the parties shall furnish to the other
written evidence of such authority.
DATED: February 4, 1999
WITNESS: /s/ Sal D. Lucci
LANDLORD:
VECTRON TECHNOLOGY, INC.
/s/ Ronald De Bacco
-----------------------------------
By: Ronald De Bacco
Its: Treasurer
TENANT:
METHUEN ACQUISITION CORPORATION
/s/ Thomas B. Glasheen
-----------------------------------
By: Thomas B. Glasheen
Its: General Manager
GUARANTOR:
SMARTFLEX SYSTEMS, INC.
/s/ Joe Pendergrass
-----------------------------------
By: Joe Pendergrass
Its: Director of Logistics
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<PAGE> 17
EXHIBIT A
PREMISES
[Diagram of Premises with hatch-marks across
Methuen Acquisition Corp's space]
<PAGE> 18
EXHIBIT B
---------
LIST OF TENANT'S CHEMICALS
CHEMICAL NAME USAGE
- ------------- -----
(1) 311-62CN FLUX 170 GALLONS PER YEAR
(2) 3310 THINNER 200 GALLONS PER YEAR
(3) ISOPROPYL ALCOHOL 50 GALLONS PER YEAR
(4) FRY PURE SUPER L.D.C. SOLDER BARS 3600 LBS PER YEAR
(5) WS609 WATER SOLUBLE PASTE 136 LBS PER YEAR
WASTE TREATMENT
---------------
EXHIBIT B
---------
CHEMICAL NAME USAGE
- ------------- -----
(1) SOLDER DROSS 55 GALLONS PER YEAR
(2) DI WATER FROM WASHER 200 GALLONS PER YEAR
<PAGE> 1
EXHIBIT 10.7
LEASE AGREEMENT
BETWEEN
185 MONMOUTH PARKWAY ASSOCIATES, L.P., LANDLORD
AND
SMARTFLEX NEW JERSEY, INC., TENANT
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
1. GENERAL..................................................................... 1
2. LEASE PARTICULARS........................................................... 2
3. LEASE AND RENT.............................................................. 4
4. USE......................................................................... 5
5. CERTAIN REPRESENTATIONS AND WARRANTIES...................................... 5
6. ACCEPTANCE.................................................................. 6
7. COMPLIANCE WITH LAWS AND INSURANCE REQUIREMENTS............................. 6
8. PERSONAL PROPERTY TAXES..................................................... 8
9. COMMON CHARGES ............................................................. 8
10. HEATING, VENTILATION AND AIR CONDITIONING................................... 10
11. UTILITIES; TRASH REMOVAL; RECYCLING......................................... 10
12. RULES AND REGULATIONS....................................................... 10
13. ENTRY....................................................................... 11
14. MAINTENANCE................................................................. 12
15. ALTERATIONS................................................................. 12
16. TRANSFERS OF TENANT'S INTEREST.............................................. 13
17. SURRENDER................................................................... 14
18. HOLDING OVER................................................................ 15
19. TENANT ELECTRIC............................................................. 15
20. QUIET ENJOYMENT............................................................. 15
21. AIR AND LIGHT............................................................... 16
22. DEFAULT..................................................................... 16
23. SUBORDINATION, NONDISTURBANCE, ETC......................................... 17
24. CASUALTY AND CONDEMNATION................................................... 18
25. CHANGES SURROUNDING BUILDING................................................ 19
26. TENANT'S PROPERTY........................................................... 19
27. NOTICE...................................................................... 20
28. DISCLAIMER BY AND INDEMNIFICATION OF LANDLORD............................... 20
29. INSURANCE................................................................... 20
30. TENANT'S LIABILITY.......................................................... 21
31. SECURITY DEPOSIT............................................................ 21
32. MISCELLANEOUS............................................................... 22
33. TRANSFER OF LANDLORD'S INTEREST............................................. 24
34. MANAGING AGENT.............................................................. 24
35. LANDLORD'S RIGHT TO MODIFY.................................................. 24
36. USE OF HELIPORT............................................................. 24
37. CORPORATE TENANTS........................................................... 24
38. GUARANTY.................................................................... 24
39. SUBMITTAL OF FINANCIAL STATEMENT............................................ 25
40. NO PARTNERSHIP.............................................................. 25
41. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS............................... 25
42. COSTS OF SUIT............................................................... 25
43. SUBMISSION NOT AN OPTION.................................................... 25
44. SUCCESSORS & ATTACHMENTS.................................................... 25
</TABLE>
i
<PAGE> 3
This LEASE is made as of the 26th day of April, 1999 between 185
Monmouth Parkway Associates, L.P., a New Jersey limited partnership, 63 West
Main Street, P. O. Box 5008, Freehold, New Jersey 07728, hereinafter referred to
as "Landlord" and Smartflex New Jersey, Inc., a Delaware Corporation, whose
address is 185 Monmouth Parkway, West Long Branch, New Jersey 07764, hereinafter
referred to as "Tenant".
W I T N E S S E T H:
For and in consideration of the covenants herein contained, and upon the
terms and conditions herein set forth, Landlord and Tenant agree as follows:
1. GENERAL.
1.1 Definitions: Except where the context otherwise connotes, for all
purposes of this Lease and all agreements supplemental thereto or modifying this
Lease, the following terms shall have the meanings specified:
(a) "Additional Rent" shall mean all sums other than Basic Rent payable
by Tenant to Landlord pursuant to the various Articles herein in which said term
is used.
(b) "Basic Rent" shall mean the rent per annum so designated in Section
2.1 hereof, which may be payable in equal monthly installments on the first day
of each month during the Term, in advance, in the amount per month set forth in
Section 2.1 hereof, except that Tenant shall pay the first monthly installment
upon the signing of this Lease. The Basic Rent shall be paid at the office of
Landlord, or such other place as Landlord may designate, without any set-off or
deduction whatsoever (except for abatement as may be allowed by this Lease).
(c) "Broker" shall mean the real estate broker, if any, named in Section
2.2 hereof.
(d) "Building" shall mean the building designated in Section 2.3 hereof.
(e) "Building Holiday" shall mean President's Day, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, Christmas Day and New Year's Day,
as each of said holidays are celebrated in the State in which the Real Property
is located.
(f) "Building Hours of Operation" shall mean weekdays between the hours
of 8 a.m. through 6 p.m. excluding Building Holidays.
(g) "Commencement Date" shall mean the date so designated in Section 2.4
hereof.
(h) Intentionally omitted.
(i) "Excusable Delay" shall mean a delay caused by strike, lockout, act
of God, inability to obtain labor, materials, governmental restrictions, enemy
action, civil commotion, fire, unavoidable casualty or any other cause similar
or dissimilar, beyond the reasonable control of either Landlord or Tenant, or
due to the passing of time while waiting for an adjustment of insurance
proceeds.
(j) "Governmental Authority" shall mean the municipal, county, state or
federal government, or any agency or quasi-governmental agency, or any fire
insurance rating organization having jurisdiction over the Real Property.
(k) "Parking Spaces" shall mean the parking spaces made available for
Tenant's unreserved, nonexclusive use on the Real Property.
(l) "Premises" shall mean the area cross-hatched on the floor plan of
the Building annexed hereto as Exhibit A and made a part hereof.
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<PAGE> 4
(m) "Real Property" shall mean the land upon which the Building is
located and the Building, collectively.
(n) "Rentable Area of Building" shall mean the number of square feet so
designated in Section 2.5 hereof, measured in accordance with the Standard
Method for Measuring Floor Area in Office Buildings, published by the Building
Owners and Managers Association (hereinafter the "BOMA Standards"), and
including an agreed upon 5% floor factor.
(o) "Rentable Area of the Premises" shall mean the number of square feet
so designated in Section 2.7 hereof, measured in accordance with BOMA Standards
and including the agreed upon 5% floor factor.
(p) "Security Deposit" shall mean the sum so designated in Section 2.10
hereof which is being deposited by Tenant with Landlord simultaneously herewith.
(q) "Structural Repairs" shall mean repairs and, if required,
replacements, to the roof, foundation and permanent exterior walls and support
columns of the Buildings.
(r) "Term" shall mean a period of time beginning on the Commencement
Date containing the number of consecutive months set forth in Section 2.11
hereof, not including any portion of a month for which Rent is prorated as per
Section 1.2.
(s) "Termination Date" shall mean the last day of the Term.
1.2 Proration: In the event the Commencement Date shall fall on a day
other than the first day of the month, the Basic Rent and Additional Rent
payable hereunder for the balance of the calendar month in which the
Commencement Date falls shall be apportioned based on the number of days
remaining in that month.
1.3 Entire Agreement: This Lease consists of this Lease Agreement and
the attachments listed in the last Section of this Lease Agreement.
2. LEASE PARTICULARS.
Listed below are particulars of this Lease referred to in other Sections
hereof:
2.1 Basic Rent: For the first year of the Term, the annual Basic Rent
shall be $6.25 per square foot, payable in monthly installments of $26,041.67.
The Basic Rent for the second and subsequent lease years shall be adjusted
annually, in accordance with the formula attached hereto as Exhibit B.
2.2 Broker: Byron Real Estate Co., Inc. The Broker represents the
Landlord only.
2.3 Building: Building D, 185 Monmouth Parkway, West Long Branch, New
Jersey.
2.4 Commencement Date: April 26, 1999.
2.5 Rentable Area of Building: 60,480 Square Feet.
2.6 Rentable Area of all Buildings on Real Property: 330,000 Square
Feet.
2.7 Rentable Area of Premises: Approximately 50,000 Square Feet measured
in accordance with BOMA Standards, and including an agreed upon 5% floor factor.
The rent figures and percentages included in this Section 2 are all based upon
50,000 Square Feet. Promptly following the full execution of this Lease, Tenant
shall finalize its floor plan, which will include approximately 50,000 rentable
Square Feet, subject to the Tenant leaving the remaining space in Building D in
a functional layout with immediate access to the exterior of the Building. If
the actual rentable area of the Premises is greater or less than 50,000 square
feet, all of the rent and percentage figures herein shall be adjusted
accordingly, retroactive to the Commencement Date. The parties shall execute a
lease amendment to confirm their approval of Exhibit A, and of the revised
numbers.
2
<PAGE> 5
2.8 Tenant's Proportionate Share of Building: 82.7%
2.9 Tenant's Proportionate Share of Real Property: 15.2%
2.10 Security Deposit: $39,062.50
2.11 Number of Consecutive Months in Term: Ninety (90) months.
2.12 Uses: Manufacturing , assembly, warehousing, distribution, service
and sales of electronics and electro-mechanical products, , and administrative
offices related to same.
2.13 Initial Electric Service Contribution: $20,000.00; the first
month's payment shall be remitted on or before May 3, 1999.
2.14 Insurance: $2,000,000.00 combined single limit for personal injury
(including death) and for property damage, arising out of a single incident.
2.15 Preparation of Premises:
a. The Premises shall be prepared for Tenant's occupancy in the manner
and according to the materials and work described in the attached Exhibits C and
D. Any and all installations, materials and work that are listed on the attached
Exhibit C shall be completed by Landlord at the Landlord's sole cost and
expense. Any and all installations, materials and work that are listed on the
attached Exhibit D shall be completed at the Tenant's sole cost and expense. In
consideration for the Tenant's preparation of the Premises as set forth on
Exhibit D, and with the understanding that the Landlord will have no further
monetary obligation for tenant improvements with respect to the Tenant's
continued occupancy of the Premises, Landlord shall contribute the sum of
$50,000.00 toward the improvements described on Exhibit D. Any additional
installations, materials and work to be done at the Premises shall be requested
in the manner provided in Section 15 of the Lease, entitled "Alterations".
b. Landlord and Tenant agree that Landlord's affiliate, G.B.
Contracting, Inc., shall be retained to complete the work described on the
attached Exhibit D, at not to exceed market rates. The contract with G.B.
Contracting, Inc. shall be administered by the Landlord, but both Landlord and
Tenant shall be parties thereto, and shall execute same to confirm their
respective responsibilities for payment. The $50,000.00 to be paid by Landlord
toward the Exhibit D work shall be paid as progress payments are made, in
proportion to the total cost of the entire job (i.e., if the total cost of the
work on Exhibit D is $150,000.00, then the Landlord shall remit one-third of
each progress payment, up until Landlord has paid the maximum of $50,000.00).
Any change orders presented by the contractor shall be approved and signed off
on by both Landlord and Tenant.
2.16 Access to Building: Notwithstanding the Building hours defined
above, Landlord and Tenant acknowledge that Tenant may have access to the
Building at any time, twenty-four (24) hours a day, seven (7) days a week.
2.17 Space Options:
a. Throughout the initial Term of this Lease, Tenant shall have the
first right and option to rent all of the remainder of Building D. Throughout
the initial Term of this lease, Tenant shall also have the first right and
option to rent anywhere from a minimum of twenty-five (25%) percent of the Annex
Building, up to all of the Annex Building, which consists of 25,000 rentable
square feet of space that is to the north of Building D, and is connected to
Building D by a hallway. Provided, however, that if Tenant wishes to rent space
in the Annex Building, it must first have exercised, or it must simultaneously
exercise, its right and option to rent all of the remainder of Building D.
Tenant shall notify Landlord in writing of its desire to rent such space, and
such space shall become a part of the Premises on the first day of the month
following the date of Tenant's notice. The terms and conditions of this Lease
shall also govern any additional space that the Tenant subsequently rents. The
Basic Rent for the additional space in Building D shall be calculated at the
same rate that Tenant is then paying for the initial Premises, and Basic Rent
increases shall be calculated in
3
<PAGE> 6
accordance with Exhibit B, and Tenant's proportionate shares shall be adjusted
accordingly. The Basic Rent for the Additional Space in the Annex Building shall
be calculated at the Fair Market Rent for that space, as determined in
accordance with the attached Exhibit F, and Tenant's proportionate shares shall
be adjusted accordingly.
b. At any time during the initial Term of this Lease, if Landlord shows
either all or a portion of the Annex, or the remaining space in Building D to
another prospective tenant, and that prospective tenant shows interest in
renting such space, Landlord shall so notify this Tenant in writing, and this
Tenant will have ten (10) business days to respond to Landlord in writing, if
they want to rent the space in question. If Tenant does choose to rent such
space, it must do so in accordance with the provisions of paragraph (a) above
concerning the order of rental, and the Basic Rent will be calculated in
accordance with paragraph (a) above.
c. At any time during the initial Term of this Lease, if Tenant opts to
rent less than fifty (50%) percent of the Annex Building, then it shall be the
Tenant's responsibility to construct the demising walls to separate its space
from the remainder of the Annex Building. At any time during the initial Term of
this Lease, if Tenant opts to rent more than fifty (50%) percent of the Annex
Building, then it shall be the Landlord's responsibility to construct the
demising walls to separate Tenant's space from the remainder of the Annex
Building.
2.18 Temporary Use of Additional Space: Following the full execution of
this Lease, and for so long as the Landlord, Tenant and their contractor are
moving continuously and expeditiously toward completing the improvements
described on Exhibit D, Tenant shall be permitted to use the Annex Building and
the remaining square footage in Building D that it is not renting, at no charge,
to enable it to keep its production line operational while the Premises are
being renovated Thereafter, once the work described on Exhibit D has been
substantially completed or is not being pursued on a continuing basis, Tenant
shall not utilize either space for any purpose, unless and until it has
exercised its option to rent same. Tenant acknowledges that the unrented area of
Building D will not be separated from its Premises by demising walls, unless and
until Landlord rents the space to another tenant. If Tenant uses any portion of
this space after the Exhibit D work is substantially completed or is not being
pursued on a continuing basis, without having exercised its first option to rent
same, it shall nevertheless pay Basic Rent, common charges and utilities for
that space from the date that it started using it, until the date on which it
ceases to use the space in question.
2.19 Renewal Option: At the expiration of the initial lease Term, Tenant
shall have one option to renew this Lease (including any Space Options duly
exercised by Tenant pursuant to Section 2.17) for an additional Term of ninety
(90) months, provided that Tenant may only exercise this option if it is not
then in default hereunder, and if it has not been in default more than three
times during any 18 month period. If Tenant wishes to exercise this renewal
option, it shall do so by so notifying the Landlord in writing in accordance
with the "Notices" provision of this Lease, not less than six (6) months prior
to the expiration of the initial Term. If Tenant exercises this renewal option,
this tenancy shall continue to be governed by the same terms and conditions as
set forth herein, including annual Basic Rent increases each year, compounded,
including the first year of the renewal Term. Any additional space that Tenant
is renting pursuant to Section 2.17 or 2.18 shall be included as a part of the
Premises during the renewal Term, and Tenant's rental obligations shall be
calculated accordingly.
2.20 Building B Space: Tenant agrees to vacate entirely the
approximately 8,500 square feet that it has been occupying in Building B, which
space includes the cafeteria, on or before the Commencement Date of this Lease.
3. LEASE AND RENT.
3.1 Duration: Landlord hereby leases to Tenant and Tenant hereby rents
from Landlord the Premises for the Term.
3.2 Rent: Tenant hereby covenants and agrees to pay, when due, the Basic
Rent and all Additional Rent as herein provided.
4
<PAGE> 7
3.3 Late Payment:
(a) Should any installment or installments of Basic Rent or Additional
Rent not be paid and received at the Landlord's office on or before the 5th day
of the month, the Tenant agrees to pay to the Landlord on demand a service
charge equal to five (5%) percent of the overdue amount. All unpaid rent plus
service charges thereon shall accrue interest at the rate of one (1%) percent
per month until paid, starting from the sixth (6th) day after such payment was
due. The service charge and any amounts due as a result of applying the default
interest rate shall be deemed to be Additional Rent. Tenant acknowledges and
agrees that such late payment by Tenant will cause Landlord to incur costs and
expenses not contemplated by this Lease, the exact amounts of which will be
extremely difficult to ascertain, and that such service charge represents a fair
estimate of the costs and expenses that Landlord would incur by reason of
Tenant's late payment. Tenant further agrees that such service charge shall
neither constitute a waiver of Tenant's default with respect to such overdue
amount nor prevent Landlord from exercising any other right or remedy available
to Landlord.
(b) Following any three consecutive late payments of either Rent and/or
Additional Rent (collectively, "Rent"), Landlord may, upon notice to Tenant,
require that, beginning with the first payment of Rent due following the date
the third late payment was due, Rent shall no longer be paid in monthly
installments when due but shall be payable three (3) months in advance, with
each subsequent month's payment being for such period as is then three (3)
months in advance.
4. USE.
The Premises shall be used only for those uses listed in Section 2.12
hereof and for no other purposes. Tenant shall not at any time use or occupy, or
do or permit anything to be done in the Premises, in violation of any law,
statutes or regulations of any Governmental Authority having jurisdiction over
the use and occupation of the Premises or the Building. Furthermore, Tenant
shall not use or occupy the Premises or any part thereof for any purposes that
would be deemed extra hazardous, on account of fire or other potential casualty.
5. CERTAIN REPRESENTATIONS AND WARRANTIES OF LANDLORD.
Landlord represents and warrants to Tenant that:
(a) There are no liens, encumbrances, leases, mortgages, deeds of trust
or other matters encumbering or affecting Landlord's right, title or interest in
or to the Real Property that will materially and adversely affect Tenant's quiet
use and enjoyment of the Premises, for which a non-disturbance agreement
reasonably acceptable to Tenant has not been obtained.
(b) Tenant's use of the Premises as stated in the Lease will not result
in the increase of any premium for, or the cancellation of, any insurance policy
maintained by Landlord pursuant to the Lease.
(c) To Landlord's knowledge, the Premises and all of the currently
existing improvements thereto, and all building systems therein are in good
condition and repair, and in compliance with all current applicable laws,
ordinances, regulations and rules relating to the Premises, the Building and/or
the Real Property.
(d) To Landlord's knowledge, no underground or above-ground storage
tanks or surface impoundments are located on or under any part of the Building,
Premises or the Real Property.
(e) Since Landlord took control of the Real Property on April 1, 1989,
to the best of Landlord's knowledge, information and belief, neither Landlord
nor any tenant or occupant of any part of the Building, Premises or the Real
Property or any nearby property, has generated, used, treated, spilled, stored,
transferred, disposed, released or caused a threatened release in, at, under,
into, from, to or on any part of the Building, Premises or Real Property, of any
Hazardous Materials, except as may have been permitted by applicable laws and
regulations then in effect.
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(f) Landlord has not received any notice or claim to the effect that
either Landlord or any part of the Building, Premises or the Real Property or
any nearby property is or may be liable to any governmental authority or private
party as a result of the release or threatened release of any Hazardous
Materials.
6. ACCEPTANCE.
Tenant has already taken possession of the Premises. Tenant accepts the
Premises as being satisfactory and in good condition as of the Commencement Date
except for the work to be done at the Premises as described in Exhibits C and D,
subject to latent defects and subject to the contractor's punch list items as
per the construction contract with G.B. Contracting, Inc.
7. COMPLIANCE WITH LAWS AND INSURANCE REQUIREMENTS.
7.1 During the Term hereof, Tenant shall promptly comply with all laws,
ordinances, rules, regulations, requirements and directives of the federal,
state and municipal governments or public authorities and all of their
departments, bureaus and subdivisions, applicable to and affecting the Premises,
its use and occupancy. During the Term hereof, Landlord shall promptly comply
with all laws, ordinances, rules, regulations, requirements and directives of
the federal, state and municipal governments or public authorities and all of
their departments, bureaus and subdivisions, applicable to and affecting the
Building and the Real Property, its use and occupancy.
7.2 Notwithstanding anything to the contrary in this Lease, unless
caused by Tenant or Tenant's employees, agents or contractors (collectively,
"Tenant's Agents"), Tenant shall not have any responsibility for (i) existing
violations of any law, statute, ordinance or governmental rule or regulation now
in force ("Current Laws") relating to any part of the Premises, Building or Real
Property as of the date Tenant took possession of the Premises, including, but
not limited to, violations of any building codes, laws relating to Hazardous
Materials (as defined below) and the Americans With Disability Act; (ii) any
Hazardous Materials present in, on, under or above any part of the Premises,
Building or Real Property as of the date Tenant took possession of the Premises
or that were brought into, onto, about, or under any part of the Premises,
Building or Real Property after the date Tenant took possession of the Premises,
except for Hazardous Materials brought onto the Premises, Building or Real
Property by Tenant or Tenant's Agents; or (iii) without limiting the generality
of subparts (i) and (ii) above, the cleanup, remediation, or removal of any
Hazardous Materials present in, on, under or about any part of the Premises,
Building or Real Property as of the date Tenant took possession of the Premises
or that were or are brought into, onto, about, or under any part of the
Premises, Building or Real Property after the date Tenant takes possession of
the Premises, except for Hazardous Materials brought onto the Premises, Building
or Real Property by Tenant or Tenant's Agents.
7.3 Tenant shall not do, or permit anything to be done in or to the
Premises, or bring or keep anything therein which will, in any way, increase the
cost of fire or public liability insurance on the Real Property or invalidate or
conflict with the fire insurance or public liability insurance policies covering
the Real Property, and Building fixtures or any personal property kept therein,
or obstruct or interfere with the rights of Landlord or of other tenants, or in
any other way interfere with the other tenants' rights to quiet enjoyment, or
subject Landlord to any liability for injury to persons or damage to property,
or interfere with the good order of the Building, or conflict with the present
or future laws, rules or regulations of any Governmental Authority. Tenant
agrees that any increase in fire insurance premiums on the Building or contents
caused by the occupancy of Tenant and any expense or cost incurred in
consequence of negligence, carelessness or willful action of Tenant, Tenant's
agents, servants, employees, invites, or licensees, shall be reimbursed to
Landlord within ten (10) days of demand therefore. Landlord shall have all the
rights and remedies for the collection of same as are conferred upon Landlord
for the collection of the Basic Rent provided to be paid pursuant to the terms
hereof. Landlord will maintain a generally accepted business policy.
7.4 As may be mandated by federal and state statutes and regulations,
Tenant and Tenant's Agents are expressly forbidden from releasing, threatening
to release, dumping, discharging, placing on or in the Real Property,
generating, storing, treating, using or disposing of, on the Property, any
hazardous materials. Provided, however, that Tenant may store, use and dispose
of commonly used products that contain hazardous materials, so long as they are
stored, used and
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disposed of in accordance with all applicable governmental regulations. For
purposes of this Lease, "Hazardous Materials" means any substance or material
giving rise to liability or responsibility under the Resource Conservation and
Recovery Act (RCRA) 42 USC Sec. 6901 et seq.; The Comprehensive Environmental
Response Compensation and Liability Act (CERCLA) 42 USC Section 9601 et seq. as
amended by the Superfund Amendment and Reauthorization Act of 1987 (SARA), 42
USC Sec. 9601 et seq.; The Federal Clean Water Act, 33 USC Sec. 1301 et seq.; as
well as the New Jersey Spill Compensation and Control Act N.J.S.A. 58:10-23.11
et seq.; The New Jersey Solid Waste Management Act, N.J.S.A. 13:1E-1 et seq.;
and the New Jersey Water Pollution Control Act, N.J.S.A. 58:10A-1 et seq.; and
any and all regulations promulgated pursuant to said federal and state laws, or
under any municipal ordinances, or any common law theory of nuisance or strict
liability.
7.5 Tenant shall indemnify, defend (with counsel reasonably acceptable
to Landlord) and save harmless the Landlord and its officers, directors,
shareholders, subsidiaries, employees, agents and representatives from all
fines, suits, proceedings, claims and actions of any kind arising out of or in
any way connected with any spills or discharges of hazardous substances or
wastes at the Real Property which are attributable to Tenant's acts or
omissions; and from all fines, suits, proceedings, claims and actions of any
kind arising out of Tenant's failure to provide all information, make all
submissions and take all actions required by the provisions of this Section. If
Tenant fails to comply in any material respect with the provisions of this
Section, Tenant shall be responsible for any and all damages, costs of
remediation and other costs, penalties, fines, losses and/or expenses (including
but not limited to actual attorney's fees and other professional and
consultants' fees) arising from or attributable to Tenant's non-compliance.
Tenant's obligations and liabilities under this Section shall continue so long
as Landlord remains responsible for any spills or discharges of hazardous
substances or wastes at the Real Property caused by Tenant or Tenant's agents.
Should Tenant fail to abide by the terms of this section, Landlord may obtain
compensation or relief in regard to any such violation by the institution of an
appropriate civil action against the Tenant, or such equitable remedies as
Landlord shall demonstrate that it is entitled to, including, without
limitation, mandatory or prohibitive injunction.
7.6 Landlord shall defend (with counsel reasonably acceptable to
Tenant), indemnify and hold harmless Tenant and its officers, directors,
shareholders, subsidiaries, employees, agents and representatives from and
against any and all claims, third-party claims, actions, lawsuits (including,
but not limited to, claims, actions and lawsuits brought by the government or
third parties), for losses, harm, costs (including, but not limited to, court
costs, costs of appeal, and cleanup, removal and remediation costs associated
with any Hazardous Materials) liabilities, contribution claims, damages and
expenses including, but not limited to, attorneys' fees and court costs,
arising, whether before or after the expiration or earlier termination of the
Lease, out of or in connection with the presence, release, discharge, spill,
removal, remediation, use, storage, disposal, transportation or existence of any
Hazardous Materials to, from, in, on, under or about any part of the Building,
Premises or the Real Property other than Hazardous Materials brought onto the
Building, Premises or the Real Property by Tenant or Tenant's Agents. Landlord's
indemnity obligations set forth herein shall survive the expiration or earlier
termination of the Lease shall become the responsibility of any of Landlord's
successors. Landlord represents that at the present time, to the best of its
information and belief, there are no existing Hazardous Materials conditions
anywhere in the Building or the Real Property that would give rise to liability
or responsibility under any of the laws cited in Section 7.4 above.
7.7 Tenant shall, at Tenant's own expense, comply with the Industrial
Site Recovery Act ("ISRA") , N.J.S.A. 13:1K-6, et seq., and the regulations
promulgated thereunder, or any successor statute, to the extent that any action
or responsibility is imposed on Landlord or Tenant by the application of such
laws to Tenant or its business operations, whether or not at the Premises. In
that event, Tenant shall make all submissions to, provide all information to,
and comply with all requirements of, the Bureau of Industrial Site Evaluation
(the "Bureau") of the New Jersey Department of Environmental Protection
("NJDEP"). Should the Bureau or any other division of NJDEP determine that a
cleanup plan must be prepared and that a cleanup must be undertaken because of
any spills or discharges of hazardous substances or wastes at the Real Property
which occur due to the act or omission of Tenant, Tenant's agents, invitees,
licensees, or employees, then Tenant shall, at Tenant's own expense, prepare and
submit the required plans and financial assurances, and carry out the approved
plans. Tenant's obligations under this paragraph shall also
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arise if there is any closing, terminating or transferring of operations of the
Tenant's industrial establishment at the Real Property which are subject to
ISRA. Such submissions to the Bureau shall be made no less than six (6) months
before the end of the Tenant's occupancy of the Premises. Landlord shall be kept
advised of each step in the ISRA submission process, and the Tenant shall
diligently pursue any cleanup plan required by the NJDEP either before or
immediately after the expiration of its lease term.
7.8 Landlord shall, at no expense to Tenant, cause compliance with ISRA
and the regulations promulgated thereunder, or any successor statute, to the
extent that any action or responsibility is imposed on the Landlord or the Real
Property by the application of such laws, relative to the termination of the
tenancies of EA Industries and Tanon Manufacturing, Inc. (hereinafter
collectively referred to as "Tanon"), and of A.T.&T. at the Premises. Landlord
shall supply to Tenant a complete copy of the final report and determinations
rendered by the environmental consultant hired to effectuate this ISRA
compliance, and with the final report and determinations, if any, rendered by
the Bureau and any other division of NJDEP in this regard.
7.9 At no expense to Landlord, Tenant shall promptly provide all
information reasonably requested by Landlord for preparation of ISRA
applicability or other affidavits and shall promptly sign such affidavits when
requested by Landlord. At no expense to Landlord, Tenant agrees to promptly
provide any information reasonably requested by Landlord regarding Tenant's use
and occupancy at the Leased Premises, as may be needed to evidence compliance
with the terms of applicable laws and insurance policies; and Tenant agrees to
promptly execute any affidavits or other documents needed in confirmation of
same.
8. PERSONAL PROPERTY TAXES.
Tenant agrees to pay all taxes imposed on the personal property of
Tenant, the conduct of its business and its use and occupancy of the Premises.
9. COMMON CHARGES.
9.1 Net Lease. This is an absolutely net Lease and it shall be the
Tenant's responsibility to pay for all charges and expenses attributable to the
Premises, and Tenant shall pay its proportionate share of all Common Charges
(herein so called) for the Building and the Real Property, except as
specifically limited or excluded from Common Charges as set forth in Section 9.2
below. The Tenant's obligation to pay for Common Charges for the Building and
the Real Property shall be calculated in accordance with the Tenant's
proportionate shares, as set forth in Sections 2.8 and 2.9.
9.2 Common Charges Defined. The Tenant hereby agrees to pay as
Additional Rent its proportionate shares of all Common Charges, including but
not limited to the following:
(a) "Real Estate Taxes" as set forth in this Section 9.2 shall mean
those taxes attributable to the Real Property, provided that, if because of any
change in the method of taxation of real estate, any other tax or assessment is
imposed upon Landlord or the owner of the land or the Building or both or upon
or with respect to the Landlord of the Building or of the rents or income
therefrom in substitution for or in lieu of any tax or assessment which would
otherwise be a real estate tax, such other tax or assessment shall be deemed
real estate taxes for the purposes of this Section.
(b) All utility charges for the common areas of the Real Property.
(c) All costs of maintaining and managing the entire Real Property,
including but not limited to landscaping, cleaning services for the common
areas, snow removal, maintenance and cleaning of the parking lot, repairs of any
kind for which Landlord is not reimbursed, painting, replacement of worn out or
damaged mechanical equipment, management fees not to exceed four (4%) percent of
annual gross rents paid by Tenant, building and janitorial supplies , sales or
use tax on supplies or services, wages and salaries (which shall be prorated for
part-time employees) of all persons engaged by Landlord in the operation,
maintenance, management and repair of the Real Property, and any other expense
or cost incurred in accordance with standard management practices for commercial
buildings comparable to the Real Property.
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(d) All costs for repairs to the common areas and utility service
systems, including but not limited to repairs to the parking area and to the
roof. Provided, however, that specifically excluded are costs reimbursed by
insurance, the cost of work performed specifically for a tenant in any building
on the Real Property for which such tenant has reimbursed Landlord, the cost of
replacing the roof or sections of the roof that are larger than 1,000 square
feet, costs in connection with preparing space for a new tenant, and real estate
brokers' commissions.
(e) The cost of all capital replacements, which under generally accepted
accounting principles would not be considered as an ordinary operating expense,
shall be amortized over the useful life of the specific item, at interest
calculated at prime plus one percent (1%) per annum, as the prime rate is set in
the "Money Rates" column of the Wall Street Journal on the first day of the
month in which the capital replacement in question has been completed. Excluded
from Landlord's Common Charges are capital improvement costs (provided that if
such capital improvement results in a decrease in Landlord's Common Charges,
Landlord may to the extent of such savings include the expense for such item in
Landlord's Common Charges. The term "capital improvement" shall mean any item(s)
which is new and added to the property or the improvements thereon; the term
"capital replacement" shall mean the improvement or replacement of any item
which is no longer useful because of wear and tear, damage or otherwise.
(f) Notwithstanding anything to the contrary set forth in this Lease,
Common Charges shall not include: (i) depreciation, interest or amortization on
mortgages or ground lease payments; (ii) legal fees incurred in negotiating and
enforcing tenant leases; (iii) real estate brokers' leasing commissions; (iv)
initial improvements or alterations to tenants' spaces; (v) the cost of
providing any service directly to and paid directly by any tenant; (vi) any
costs expressly excluded from Common Charges elsewhere in this Lease; (vii)
costs of any items for which Landlord receives reimbursement from insurance
proceeds or a third party; (viii) costs of clean-up, remediation, and/or
investigation of hazardous materials, unless the presence or suspected presence
thereof was caused by Tenant or its agents, employees or contractors; (ix)
earthquake insurance premiums; (x) any bad debt loss, rent loss or reserves for
bad debt or rent loss; (xi) interest or penalties resulting from late payment of
any Common Charges by Landlord due to Landlord's negligence or willful
misconduct; (xii) advertising promotional expenditures primarily directed toward
leasing tenant space at the Real Property; (xiii) expenses, costs and
disbursements relating to, or arising directly or indirectly from, the testing
for or analysis, handling, removal, treatment, disposal, remediation or
replacement of asbestos or asbestos-containing materials in, on, around,
beneath, or from the Premises, the Real Property or the Building; or (xiv) costs
incurred because the Real Property, the Building or the Common Areas are in
violation of any law that is applicable thereto that was in effect on the
Commencement Date.
9.3 Monthly Contribution Payments. On the first day of each month
following the Commencement Date of this Lease, Tenant shall pay to Landlord on a
monthly basis an estimated amount toward its share of the Landlord's Common
Charges. The estimated monthly amount to be paid initially shall be $8,333.00.
That estimated amount may change from time to time, based upon Landlord's
evaluation of anticipated or actual increases or decreases in Common Charges.
These payments of Additional Rent shall be due and payable with each monthly
installment of Basic Rent.
9.4 Year-End Reconciliation. Within ninety (90) days after the end of
the calendar year, Landlord shall submit to Tenant a statement showing
Landlord's Common Charges for the year. If Landlord's statement shows that
Tenant's proportionate share of Landlord's Common Charges is greater or less
than the amounts paid by Tenant during the year pursuant to Section 9.3 hereof,
the deficiency or excess, as the case may be, shall either be payable by Tenant
to Landlord within thirty (30) days as Additional Rent, or credited by Landlord
to Tenant. Tenant or its representative shall have the right to examine
Landlord's books and records with respect to the items on the foregoing
Landlord's statement during normal business hours at any time within thirty (30)
days following the delivery by Landlord to Tenant of such Landlord's statement.
Unless Tenant shall take written exception to any item contained therein within
forty-five (45) days after the delivery of same, such Landlord's statement shall
be considered as final and accepted by Tenant.
9.5 Limitation on Annual Increases in Common Charges. Landlord and
Tenant agree that Tenant's responsibility for its apportioned percentage shares
of Common Charges shall be subject to a cap of five (5%) percent per year on
increases in Common Charges that are controllable by the Landlord, on a
cumulative and compounded basis. Common Charge items that would be outside of
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the Landlord's control would include real property taxes, utility costs,
insurance premiums, and the cost of capital replacements or Structural Repairs
that are governmentally mandated. The monthly contribution payments made by
Tenant and the amount due from Tenant pursuant to Landlord's year end
reconciliations shall reflect any limitations imposed by this annual cap.
9.6 Modification of Proportionate Share. Notwithstanding the foregoing,
in the event that Landlord undertakes certain repairs or replacements to the
common areas of the Real Property or of the Building, that benefit only this
Tenant, or this Tenant and some but not all other tenants at the Real Property,
then Landlord may, in its reasonable discretion, apportion the cost of such
repairs or replacements among only those tenants benefitted thereby. This
Tenant's share of such costs shall be calculated by dividing the total square
footage of the Premises by the total rentable square footage of the Building or
the Real Property that is also benefitted by the repair or replacement in
question, and multiplying the cost of said repair or replacement by that
percentage. Amounts due to the Landlord for such costs shall be payable at any
time upon demand, or may be included in the annual reconciliation provided for
in Section 9.4 above; if such costs are included in the annual reconciliation,
they shall not be subject to the cap set forth in Section 9.5 above.
9.7 Limitation and Survival: In no event shall any adjustment in
Tenant's obligation to pay Additional Rent under this Section 9 result in a
decrease in the Basic Rent payable hereunder. Tenant's obligation to pay
Additional Rent becoming due prior to the end of the Term, and Landlord's
obligation to credit to Tenant any amount referred to in this Section 9, for the
final year of the Term, shall survive the Termination Date.
10. HEATING, VENTILATION AND AIR CONDITIONING.
10.1 As set forth in Exhibit C, Landlord shall be responsible for
placing the heating, ventilating and air conditioning systems in good working
order within sixty (60) days following the Commencement Date. Landlord shall
have the entire system inspected, and shall make the necessary repairs and
replacements. Within ten (10) days following the Commencement Date, Landlord
shall provide to Tenant a copy of the inspection report and service report for
the entire system. Thereafter, once Landlord has done any work necessary to
place the systems in good working order, throughout the Term of this Lease
Tenant shall maintain in effect a service contract for all heating, ventilating
and air conditioning equipment that services the Premises, and Tenant shall be
fully responsible for any and all necessary repairs and maintenance to same
during the Term.
10.2 If at any time during the Term of this Lease, any components of the
heating, ventilating and air conditioning systems servicing the Premises should
require replacement, Landlord shall make any necessary replacements, and the
cost thereof shall be passed through to the Tenant, amortized over the useful
life of the replaced item, and including interest at the prime rate plus one
(1%) percent per annum, as published in the Wall Street Journal on the first day
of the month following the date that the replacement in question was completed.
11. UTILITIES; TRASH REMOVAL; RECYCLING.
11.1 Tenant shall pay when due all charges for utilities supplied, i.e.,
water, sewer, gas and electricity, including utilities for Tenant's heat,
ventilation and air conditioning requirements, to or for the benefit of the
Premises. If the Premises are separately metered, Tenant shall maintain its own
accounts with the suppliers of these utility services, and payment shall be made
directly to the supplier. If there is no separate metering, all applicable
charges will be paid to Landlord by Tenant, as Additional Rent.
11.2 Tenant shall arrange and pay for its own refuse removal in
accordance with any reasonable plan set by Landlord for this Real Property.
Tenant shall fully comply with all state, county and municipal laws regulating
refuse disposal and recycling.
12. RULES AND REGULATIONS.
12.1 The Rules and Regulations attached hereto as Exhibit E are
expressly made a part hereof. Tenant agrees to comply with such Rules and
Regulations and any reasonable amendments, modifications or additions thereto as
may hereafter be adopted and published by notice to Tenant,
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and to cause its concessionaires, agents, contractors and employees to comply
therewith, and that the violation of any of the material Rules and Regulations
by any of them shall constitute a default by Tenant under this Lease. Tenant
shall use its reasonable efforts to cause its customers, invitees and licensees
to comply with the Rules and Regulations. Further, Tenant shall be deemed to
have read these Rules and Regulations and to have agreed to abide by them as a
condition to Tenant's occupancy of the Premises. If there is a conflict between
the Rules and Regulations and any of the provisions of this Lease, the
provisions of this Lease shall prevail. Landlord shall not be responsible to
Tenant for the non-performance by any other tenant or occupant of the Real
Property of any of the Rules and Regulations.
12.2 The Tenant shall be permitted to use the Parking Spaces in the
parking area of the Building of which the Premises form a part. There shall be
no charge for the use of these Parking Spaces. The Landlord reserves the right
from time to time to make reasonable rules and regulations as in its judgment
may be desirable for the safety, care and cleanliness of the parking lot and for
the preservation of good order therein, and when so made and notice thereof has
been given to the Tenant, such rules and regulations shall have the same force
and effect as if originally made a part of this Lease.
13. ENTRY.
13.1 Landlord's Right of Entry: Landlord and Landlord's agents and
representatives shall have the right to enter into or upon the Premises, or any
part thereof, at all reasonable hours, and upon not less than twenty-four (24)
hours notice except in the event of an emergency, for the following purposes:
(a) Examining the Premises and making such repairs or alterations
therein as may be necessary in Landlord's reasonable judgment for the safety and
preservation thereof, there being no obligation, however, upon Landlord to make
such examination and repairs.
(b) Erecting, maintaining, repairing or replacing wires, cables,
conduits, vents or plumbing equipment running in, to or through the Premises.
(c) Showing the Premises to prospective new tenants during the last six
(6) months of the Term, or to any present or future mortgagees at any time.
13.2 Notices: Landlord shall give Tenant reasonable prior written notice
of at least 48 hours, before commencing any non-emergency repair or alteration.
13.3 Emergencies: Landlord may enter upon the Premises at any time in
case of emergency, without prior notice to Tenant.
13.4 No Eviction: In exercising any of its rights under this Section 13,
the Landlord shall not be deemed guilty of an eviction, partial eviction or
disturbance of Tenant's use or possession of the premises and shall not be
liable to Tenant for same, except in the event of the negligence or willful
misconduct of Landlord or its agents, employees or contractors.
13.5 Interference: All work performed by or on behalf of Landlord in or
on the Premises pursuant to this Section 13 shall be performed with as little
inconvenience to Tenant's business as possible, and in such manner as not to
unreasonably interfere therewith.
13.6 Damages: The Landlord shall be responsible for any damages to the
Tenant's property or business incurred by the Tenant due to the negligence or
improper conduct of the Landlord or any of the Landlord's agents, servants,
employees, invitees, contractors, etc. who have entered the Premises under this
Section 13, but nothing hereunder shall afford Tenant the right to withhold any
rent.
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14. MAINTENANCE
14.1 Maintenance by Tenant:
(a) The Tenant shall take good care of the Premises and at the Tenant's
own cost and expense, make all repairs and replacements, including painting and
decorating, and shall maintain the Premises in good condition and state of
repair, and at the end of the Term hereof, shall deliver up the rented Premises
in good order and condition, wear and tear from a reasonable use thereof, and
damage by the elements not resulting from the neglect or fault of the Tenant,
excepted. The Tenant shall neither encumber nor obstruct the sidewalks,
driveways, yards, entrances, hallways, and stairs, but shall keep and maintain
the same in a clean condition, free from debris, trash and refuse.
(b) In case of the destruction of or damage of any kind whatsoever to
the said Premises, caused by the negligence or improper conduct on the part of
the Tenant or the Tenant's agents, employees, guests, licensees, invitees,
subtenants or assignees, the Tenant shall repair the said damage or replace or
restore any destroyed parts of the Premises, as speedily as possible, at the
Tenant's own cost and expense.
14.2 Maintenance by Landlord:
(a) Landlord shall be responsible for all Structural Repairs when
required, and maintain and make repairs to the common areas, and the exterior of
the Building, all of which work shall be done by Landlord. The cost of
Structural Repairs other than repairs to the roof, shall not be included in
Landlord's Common Charges. All other repairs made by Landlord, including repairs
to the roof, shall be included in Landlord's Common Charges subject to the
provisions of Section 9 above. Provided, however, that if the need for such
repair work arises out of the negligence or improper conduct of the Tenant, its
agents, employees, guests, licensees, invitees, subtenants, or assignees, the
Tenant shall be fully responsible for the necessary repairs or restoration of
any structural damage, damage to the common areas, and/or damage to the exterior
of the Building, and Tenant shall cause the same to be repaired or restored as
quickly as possible, at Tenant's own cost and expense.
(b) Landlord's obligation to keep the sidewalks and parking area free of
snow and ice shall be strictly limited to reasonable activity considering the
weather, the availability at such time and under then existing circumstances of
men and equipment, and other factors outside the control of Landlord.
15. ALTERATIONS.
15.1 Changes and Additions. Tenant shall make no changes or additions in
or to the Premises of any nature without Landlord's prior written consent, which
consent shall not be unreasonably withheld. If Landlord consents to Tenant's
proposed alterations, installations, and/or additional improvements in or to
the Premises (collectively "Alterations"), then in that event Landlord shall
cause such alterations to be completed in a good and workmanlike manner at
Tenant's sole cost and expense. The initial fit up work completed for Tenant in
accordance with Exhibits C and D, excluding the conductive floor tile installed
in the Premises, shall become the property of the Landlord and be surrendered
with the Premises upon the expiration or sooner termination of this Lease. All
subsequent Alterations shall, at the option of the Landlord, become the property
of the Landlord and shall be surrendered with the Premises as a part thereof
upon the expiration or sooner termination of this Lease. Provided, however, that
with respect to all subsequent Alterations, at the time Landlord consents to the
making of same, it may condition its consent upon the Tenant's agreement to
remove such Alterations and restore the Premises to their prior condition, at
the expiration or earlier termination of this Lease, at Tenant's expense.
15.2 Trade Fixtures and Equipment. Nothing in this Section 15 shall be
construed to give Landlord title to or to prevent Tenant's removal of trade
fixtures, moveable office furniture and equipment. On or before the Termination
Date, the Tenant shall remove its trade fixtures, furniture and equipment, at
Tenant's own expense, and Tenant shall repair any damage caused by such removal.
Tenant shall be entitled, but not required, to remove the conductive floor tile,
at Tenant's own expense, and Tenant shall repair any damage cause by such
removal and restore the flooring beneath the conductive floor tile to its prior,
usable condition.
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15.3 Abandoned Property. All property permitted or required to be
removed at the end of the Term and remaining on the Premises after the
Termination Date shall be deemed abandoned and may, at the election of Landlord,
either be retained as Landlord's property or may be removed from the Premises by
Landlord at Tenant's expense.
15.4 Permits: Prior to the commencement of any Alterations, Landlord
shall obtain at Tenant's cost all required permits, approvals and certificates
required by all governmental authorities and upon completion of the Alterations,
certificates of final approval thereof. Landlord shall deliver to Tenant
promptly upon its receipt duplicates of same. Landlord shall carry and will
cause its contractors and subcontractors to carry sufficient workmen's
compensation, general liability, personal and property damage insurance.
16. TRANSFERS OF TENANT'S INTEREST.
16.1 Prohibition: Tenant shall not assign this Lease or sublet all or
part of the Premises, or permit all or part of said Premises to be used by
others, without first obtaining the prior written consent of the Landlord.
Except as otherwise permitted in this Section 16, Landlord shall not
unreasonably withhold, condition or delay its consent to a proposed assignment
or subletting. In addition, the Tenant shall not mortgage or otherwise encumber,
or permit to be encumbered, its right, title and interest under this Lease or in
and to the Premises or both.
16.2 Consent: Landlord shall not be required to consent to Tenant's
assigning this Lease or subletting all or a part of the Premises if:
(a) Tenant shall be in default under any of the terms, covenants,
conditions, provisions and agreements of this Lease at the time of any notice or
request for consent under the terms of this Section 16 or and on the effective
date of such subletting or assigning; or
(b) If the proposed tenant shall be or shall seek to use any portion of
the Premises for a use not consistent with other uses in the Building, or which
violates any exclusive use granted to any other tenant of the Real Property.
16.3 Consent Procedure: If Tenant requests Landlord's consent to an
assignment of this Lease or a subletting of all or any part of the Premises,
Tenant shall submit to Landlord the name of the proposed assignee or subtenant,
the terms of the proposed assignment or subletting, the nature of the proposed
tenant's business, and such information as to the assignee's or subtenant's
financial responsibility and general reputation as Landlord may reasonably
require. Upon receipt of such request and information from Tenant, Landlord
shall have the option to be exercised in writing within thirty (30) days after
such receipt, to do one of the following:
(a) Cancel and terminate this Lease if the request is to assign this
Lease or to sublet all of the Premises; or
(b) If the request is to sublet a portion of the Premises only, to
cancel and terminate this Lease with respect to such portion; or
(c) To grant said request; or
(d) To deny the Tenant's request.
In the event Landlord shall cancel this Lease, Tenant shall surrender possession
of the Premises, or the portion of the Premises which is the subject of the
cancellation, as the case may be, on the date set forth in such notice in
accordance with the provisions of this Lease relating to surrender of the
Premises. If the Lease shall be canceled as to a portion of the Premises only,
the Basic Rent and Additional Rent payable by Tenant hereunder shall be reduced
proportionately according to the ratio that the number of square feet in the
portion of space surrendered bears to the square feet in the Rentable Area of
the Premises. In the event that Landlord shall consent to a sublease or
assignment pursuant to the request from Tenant, Tenant shall cause to be
executed by its assignee or subtenant an agreement to perform faithfully and to
assume and be bound by all of the terms, covenants,
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conditions, provisions, and agreements of this Lease for the period covered by
the assignment or sublease, to the extent of the affected portion of the
Premises. An executed copy of each sublease or assignment and assumption of
performance by the sublessee or assignee shall be delivered to Landlord not less
than five (5) days prior to the commencement of occupancy set forth in such
assignment or sublease. No such assignment or sublease shall be binding on
Landlord until Landlord has received such copies as required herein.
16.4 Corporate or Partnership Transfers. If the Tenant is a privately
held corporation, a limited liability company, an unincorporated association or
partnership, or any other entity formed, in part, for the limiting of potential
liability, the cumulative or aggregate transfer, assignment or hypothecation of
fifty percent (50%) or more of the total stock or interest in such entity shall
be deemed an assignment or transfer within the meaning and provisions of this
Section. This Section shall not, however, apply to transactions with (i) any
entity formed by Tenant, provided that Tenant owns or beneficially controls a
majority of the outstanding ownership interest in such entity, (ii) any parent,
subsidiary, or affiliate entity of Tenant, (iii) any person or entity that
acquires all or substantially all of Tenant's assets or stock, or (iv) any
entity with which Tenant merges or consolidates, regardless of whether Tenant is
the surviving entity, provided that, in any of such events:
(a) The successor of Tenant has a net worth, computed in accordance with
generally accepted accounting principles, at least equal to that which is
reasonably required to perform its financial obligations under this Lease
(whether or not comparable to the net worth of the original tenant;
(b) Proof satisfactory to Landlord of such net worth shall have been
delivered to Landlord at least ten (10) days prior to the effective date of such
transaction; and
(c) Any assignment, sublease or transfer shall be subject to all of the
terms and provisions of this Lease, and such assignee, sublessee or transferee
shall assume, in a written document reasonably satisfactory to Landlord and
delivered to Landlord promptly upon the assignment, sublease or transfer, all
the obligations of Tenant under this Lease.
In addition, an assignment or sublet shall not include, and Landlord's
consent shall not be required for, (i) any initial or subsequent public offering
by Tenant, or (ii) if Tenant is a public company, any sale or transfer of
Tenant's stock or the sale or transfer of Tenant's stock to take Tenant private.
16.5 Costs of Assignment: Tenant shall reimburse Landlord, promptly on
demand, for Landlord's reasonable costs (including attorney's fees) incurred in
conjunction with the processing and documentation of any such transfers of
Tenant's interests pursuant to this Section, not to exceed $2,500.00.
16.6 Tenant not Released: In no event shall any assignment, subletting
or transfer to which Landlord may consent, or to which Landlord's consent is not
required, release or relieve Tenant from its obligations to fully perform all of
the terms, covenants and conditions of this Lease on its part to be performed
for the balance of the Term, but excluding any then unexercised option or
extension periods.
17. SURRENDER.
On the Termination Date, or prior expiration of this Lease, Tenant shall
peaceably and quietly quit and surrender to Landlord the Premises, broom clean,
in as good condition as they were on the Commencement Date, ordinary wear and
tear, loss by fire, casualty and other causes beyond Tenant's control, and
alterations, additions and improvements permitted hereunder, excepted. Tenant's
obligation to observe or perform this covenant shall survive the Termination
Date or prior expiration of the Term. If the Termination Date falls on a Sunday
or a legal holiday, this Lease shall expire at 12 noon on the business day next
preceding said date.
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18. HOLDING OVER.
If Tenant holds possession of the Premises beyond the Termination Date
or prior expiration of the Term, Tenant shall become a tenant from
month-to-month at such maximum annual rent as is allowed by N.J.S.A. 2A:42-6,
AND upon all other terms and conditions of this Lease, and shall continue to be
such month-to month tenant until such tenancy shall be terminated by Landlord
and such possession shall cease. Nothing contained in this Lease shall be
construed as a consent by Landlord to the occupancy or possession by Tenant of
the Premises beyond the Termination Date or prior expiration of the Term, and
Landlord shall be entitled to the benefit of all legal remedies that now may be
in force or may be hereafter enacted relating to the speedy repossession of the
Premises.
19. TENANT ELECTRIC.
19.1 The electric service to the Premises may be separately metered at
Tenant's expense, or submeters for a computerized measuring system known as
"EMON" shall be installed to measure this Tenant's electric usage. Tenant shall
advise Landlord promptly of its preference, and Landlord shall cause this work
to be done. If Tenant opts for the EMON system, then its electric usage shall be
calculated and payable in the manner hereinafter set forth in Section 19.2.
Tenant may subsequently request that the Premises be separately metered, and
Landlord shall then cause this work to be done at Tenant's expense. At such time
that the Premises are separately metered, Tenant's electric service shall be
billed directly to Tenant by the utility company.
19.2 Unless and until the Premises are separately metered, the Landlord
shall compute the Tenant's use of electricity via a computerized measuring
system known as "EMON", and shall compute the cost thereof for the quantity so
determined at prevailing retail rates taking into consideration all factors,
including but not limited to peak demand usages. Tenant shall pay to Landlord
the cost of such electric energy on a monthly basis, on the first day of each
month in advance, initially in the amount set forth in Section 2.13 above, which
monthly estimated amount may be modified based upon actual billings as they are
received. Landlord shall submit to Tenant the results of its electric measuring
computation on a periodic basis, and shall reconcile the amounts owed with the
amounts paid by Tenant, and the same shall be deemed binding upon Tenant unless
Tenant shall object to same within forty-five (45) days of the date that
Landlord shall furnish Tenant with the results of the computation.
19.3 Landlord shall not be liable in any way to Tenant for any failure
or defect in the supply or character of electric energy furnished to the
Premises by reason of any requirement, act or omission of the public utility
serving the Building with electricity, or for any other reason other than
Landlord's fault, negligence or failure to perform its obligations under this
Lease, or that of its agents, employees or contractors.
19.4 Tenant's use of electric energy in the Premises shall not at any
time exceed the capacity of any of the electrical conductors and equipment in or
otherwise serving the Premises. In order to insure that such capacity is not
exceeded and to avert possible adverse effects upon the Building electric
service, Tenant shall not, without Landlord's prior written consent in each
instance (which shall not be unreasonably withheld), make any alteration or
addition to the electric system of the Premises existing on the Commencement
Date. Should Landlord grant such consent, all additional risers, i.e. additional
electrical lines necessary to deliver electric energy from its point of entry
into the Building to the Premises, or other equipment required therefor shall be
provided by Landlord and the cost thereof shall be paid by Tenant upon
Landlord's demand.
20. QUIET ENJOYMENT.
Landlord covenants and agrees that, upon the performance by Tenant of
all of the covenants, agreements and provisions hereof on Tenant's part to be
kept and performed, Tenant shall have, hold and enjoy the Premises, subject and
subordinate to the rights set forth in Section 23, free from any interference
whatsoever by, from or through the Landlord. Provided, however, that under no
circumstances does Landlord's violation of this Section 20 entitle or authorize
the Tenant to withhold all or any part of the Basic Rent or Additional Rent to
which Landlord is otherwise entitled, nor shall any such violation entitle or
authorize the Tenant to any abatement or deduction in the said
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rent; but Tenant's sole remedy to obtain compensation or relief in regard to any
such violation shall be by the institution of an appropriate civil action
against the Landlord, or such equitable remedies as Tenant shall demonstrate
that it is entitled to, including, without limitation, mandatory or prohibitive
injunction.
21. AIR AND LIGHT.
This Lease does not grant any right to air and light. However, at no
time shall Landlord build any improvements over or on top of the Premises.
22. DEFAULT.
22.1 Event of Default: Each of the following shall constitute an event
of default hereunder:
(a) The filing of a petition by or against Tenant for adjudication as a
bankrupt, or for reorganization, or for an arrangement or for relief under any
bankruptcy or insolvency laws;
(b) The commencement of any action or proceeding for the dissolution or
liquidation of Tenant, whether instituted by or against Tenant, or for the
appointment of a receiver or trustee of the property of Tenant under any state
or federal law or statute for relief of debtors;
(c) The making by Tenant of an assignment for the benefit of creditors;
(d) Intentionally omitted.
(e) The filing of a tax lien or a mechanics' lien against any property
of Tenant in the Premises only;
(f) Failure by Tenant to pay Landlord within five (5) days after written
notice, provided, however, that Tenant shall be entitled to written notice not
more than twice in any twelve (12) month period, and this notification
requirement shall not effect the imposition of late charges, of Tenant's
obligation to pay the Basic Rent, the Additional Rent herein reserved, or any
other sum required to be paid by the terms of this Lease;
(g) The creation or imposition of a lien or encumbrance on or against
the Tenant's interest under this Lease or in or to the Premises whether or not
the Tenant consents thereto;
(h) A failure by Tenant to perform any non-monetary term, covenant,
agreement or condition of this Lease on the part of Tenant to be performed,
after written notice thereof and allowing Tenant a minimum of thirty (30) days
to cure, or such longer time period as is reasonably required in the exercise of
due diligence.
22.2 Rights and Remedies Upon Default: If an event of default occurs,
Landlord shall be entitled to take such action as it deems advisable, from time
to time, under any one or more of the provisions of this Section 22.2.
(a) Landlord may proceed in a commercially reasonable manner, at law or
in equity, to enforce the provisions of this Lease or to collect damages for the
breach thereof, or both;
(b) Landlord may notify Tenant that this Lease shall terminate on a date
specified in the notice, and this Lease shall terminate on the date so
specified; notwithstanding such termination, Tenant's liability for its failure
to comply with any provision of this Lease shall continue, provided that
Landlord shall make reasonable efforts to mitigate its damages;
(c) Landlord may re-enter the Premises and any improvements located
thereon, may repossess itself (by summary proceedings, ejectment or other legal
proceedings), may dispossess Tenant, and may remove Tenant from the Premises,
without further notice to Tenant following the expiration of cure periods set
forth in Section 22.1; and Tenant waives any right to the service of any notice
of Landlord's intention to re-enter provided for by any present or future law;
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(d) Landlord may relet the Premises, as a whole or in part, for such
term or terms (which may be greater or less than the period which would have
constituted the balance of the Term if the Lease had not been terminated) and on
such conditions (which may include concessions or free rent) as are commercially
reasonable in the exercise of diligence by Landlord and provided that Landlord
shall make reasonable efforts to mitigate its damages. Any commercially
reasonable expenses of reletting the Premises such as brokers' fees,
advertising, decorating, repairs, replacements and alterations shall be payable
by Tenant as Additional Rent;
(e) The Landlord may remove any subtenant of the Tenant from the
Premises, or at Landlord's election, may take over any or all subleases and
collect the rent and other charges due under any subleases;
(f) Intentionally omitted.
(g) Intentionally omitted.
22.3 Advances, Etc. by Landlord: If any event of default occurs,
Landlord may pay any amount payable by Tenant under any provision of this Lease
or comply with any provision of this Lease on the part of Tenant to be complied
with, and make such expenditures in connection therewith as are commercially
reasonable; and Tenant shall pay Landlord on demand, in addition to Basic Rent,
each amount so paid or expended by landlord, with interest calculated at the
prime rate plus two (2%) percent per annum of First Union National Bank, for the
applicable time period; but no such payment or compliance by Landlord shall
constitute a waiver of Tenant's failure to make such payment or to comply with
such provision, or affect any right or remedy of Landlord with respect thereto.
Each such payment by Landlord shall be deemed Additional Rent due from Tenant
under this Lease.
22.4 Additional Remedies, Waivers, Etc.: With respect to the rights and
remedies of, and waivers by, Landlord:
(a) The rights and remedies of Landlord under Section 22.2 shall be in
addition to every other right and remedy now or hereafter provided by law, and
all such rights and remedies shall be cumulative and not exclusive one of the
other; and Landlord may exercise such rights and remedies at such times, to such
extent, and as often, as is commercially reasonable, and without regard to
whether the exercise of one right or remedy precedes, concurs with or succeeds
the exercise of another;
(b) A single or partial exercise of a right or remedy shall not preclude
a further exercise thereof, or the exercise of another right or remedy from time
to time;
(c) No delay or omission by Landlord in exercising a right or remedy
shall exhaust or impair the same, or constitute a waiver of, or acquiescence in,
a default;
(d) No waiver of a default shall extend to or affect any other default
or impair any right or remedy with respect thereto;
(e) No action or inaction by Landlord, whether it be the acceptance of
Basic Rent or otherwise, shall constitute a waiver of a default; and
(f) No waiver of a default shall be effective, unless it be in writing.
23. SUBORDINATION, NONDISTURBANCE, ATTORNMENT, AND ESTOPPEL
CERTIFICATES.
23.1 Subordination, Nondisturbance, and Attornment:
(a) Nondisturbance Agreement. Within thirty (30) days following the
Commencement Date hereof, Landlord shall secure from all mortgagees, lienholders
and any ground lessors that have property rights affecting the Premises, an
appropriate form of subordination, nondisturbance and
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attornment agreement, stating that so long as Tenant is not then in default
hereunder, it will not be named as a defendant in any foreclosure action, and in
such event, Tenant may continue in possession of the Premises undisturbed,
notwithstanding any foreclosure or other action that may be brought and would
affect Landlord's right to possession of the Real Property. Landlord shall also
secure an appropriate form of subordination, nondisturbance and attornment
agreement for Tenant's benefit, from all future mortgagees, lienholders and
ground lessors.
(b) Subordination. Tenant agrees that this Lease is and shall be subject
and subordinate to the lien of any mortgages that may now or hereafter be placed
upon the Real Property, and to all present or future advances under the
obligations secured thereby, and all renewals, amendments, modifications,
consolidations, replacements and extensions thereof, to the full extent of all
amounts secured by such mortgages from time to time. Said subordination shall
have the same force and effect as if such mortgages and any such renewals,
modifications, consolidations, replacements and extensions thereof had been
executed, acknowledged, delivered and recorded prior to the execution of this
Lease.
(c) Attornment. Tenant agrees that in the event of a foreclosure of any
mortgage by the lender holding same, or the acceptance of a deed in lieu of
foreclosure by the lender, or any other succession of said lender to fee
ownership, Tenant will attorn to and recognize that lender as its landlord under
this Lease for the remainder of the term of this Lease (including all extension
periods which have been or are hereafter exercised) upon the same terms and
conditions as are set forth in this Lease, and Tenant hereby agrees to pay and
perform all of the obligations of Tenant pursuant to the Lease following any
such foreclosure or proceeding in lieu thereof. To the extent not prohibited by
law, Landlord and Tenant hereby waive the provisions of any statute or rule of
law, now or hereafter in effect, which may give or purport to give Landlord or
Tenant any right or election to terminate or otherwise adversely affect this
Lease and the obligations of Landlord and Tenant hereunder, in the event any
foreclosure proceeding is brought, prosecuted or completed.
(d) Further Assurances. The provisions of this section shall be
self-operative and no further instrument shall be required; provided, however,
in confirmation thereof Landlord and Tenant shall execute such further
assurances as may be required from time to time. Refusal by the Landlord or
Tenant to execute such instruments within ten (10) business days of written
request shall entitle the other party to the option of declaring a default
hereunder, and/or seeking monetary damages and/or injunctive relief.
23.2 Estoppel Certificates: Within ten (10) business days after either
party shall have requested the same, the other party (as applicable below) shall
deliver a certificate to it certifying:
(a) The Tenant has accepted the Premises, has made no advancement for or
on behalf of the Landlord for which it has a right to deduct from or offset
against future rentals as of the date of certification and has not paid rent for
more than one month in advance of the month in which certificate is made;
(b) The Lease is in full force and effect, free from any default by
either party, and has not been changed, modified or amended except as stated in
the certification;
(c) The Tenant's Premises as shown on Exhibit A has been substantially
completed as per the work, etc., required by Exhibits C and D;
(d) If a corporation, Tenant's Board of Directors has duly authorized
execution of the lease and other documents; and
(e) Any other provisions as may be reasonably requested by a mortgagee
provided any such additional provisions do not vary the terms of this Lease in
any material manner.
24. CASUALTY AND CONDEMNATION.
24.1 Damage by Fire or other Casualty: If the Premises shall be damaged
by fire or other casualty not arising from the fault or negligence of Tenant, or
its servants, agents, employees, invitees or licensees the following shall
apply:
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(a) Except as otherwise provided in subsection (c) hereof, the damage
shall be repaired by and at the expense of Landlord (which expense will not be
included as part of Landlord's Operating Expenses), and if any of the Premises
is unusable, the Basic Rent and Additional Rent shall be equitably apportioned
according to the part of the Premises which continues to be usable by Tenant, in
Tenant's reasonable discretion, provided that the remainder of the Premises
shall be suitable for the conduct of Tenant's business, until such repairs shall
be made. Notwithstanding anything below, Tenant shall not pay rent if Tenant
cannot use the space. Tenant shall, in its discretion, repair or replace its own
furniture, furnishings and equipment.
(b) If the Premises are totally damaged, or are rendered wholly
untenantable, or if Landlord's architect certifies that the damage cannot be
repaired within one hundred eighty (180) days of the casualty, or if Landlord
shall decide not to restore or repair the same only during the last eighteen
(18) months of the Term, then either party shall be entitled to terminate this
Lease upon written notice to the other, received within thirty (30) days
following such determination. If either party elects to terminate, the Term
shall expire as of the date of the casualty loss and Tenant shall vacate the
Premises and surrender the same to Landlord.
(c) If the Premises are to be repaired and restored, Landlord shall
complete the repair and restoration of the Premises within six (6) months from
the date of the casualty, subject, however, to Excusable Delays. If the Premises
are not repaired or restored within said period plus extensions for Excusable
Delays, Tenant shall have the right to cancel and terminate this Lease upon the
delivery of a notice to Landlord delivered within thirty (30) days after the
expiration of the aforesaid six (6) month period, as extended.
(d) Landlord agrees that it shall diligently pursue all repair and
restoration work required on its part to be completed at Landlord's expense.
(e) Nothing in this Section 24.1 shall require or obligate Landlord to
repair or replace any of Tenant's personal property, trade fixtures or
Alterations.
24.2 Condemnation: If the Premises shall be acquired by eminent domain
proceedings, or conveyance in lieu thereof, (a "Taking"), the Term shall cease
and terminate from the date possession of the taken area is transferred to the
condemnor. If only a portion of the Premises or the Building or Tenant's parking
shall be so acquired or condemned and such taking materially interferes with
Tenant's ability to conduct its business, this Lease shall cease and terminate.
If, however, Tenant may continue to conduct its business without material
interference in the remaining portion of the Premises, then this Lease shall not
terminate and an equitable adjustment of the Basic Rent and Additional Rent
payable by Tenant for the remaining portion of the Premises shall be made. In
the event of Taking, whether or not this Lease terminates, Tenant shall have no
claim against Landlord for the value of any unexpired Term or any other losses
resulting from the Taking (other than for the adjustment of the Basic Rent and
Additional Rent as herein before mentioned), nor shall Tenant be entitled to any
portion of any amount that may be awarded as damages or paid as a result of such
proceedings or for a conveyance resulting from any agreement made by the
condemning authority with Landlord. Notwithstanding the foregoing, Tenant shall
be entitled to pursue a separate award from the condemning authority for all
damages suffered by Tenant in connection with any Taking.
25. CHANGES SURROUNDING BUILDING.
This Lease shall not be affected or impaired by any change in any
sidewalk, alley or street, parking (so long as Tenant's parking is not
diminished) or common areas adjacent to or around the Building or by changes to
any other buildings on the Property, so long as Tenant shall have access to its
parking and to the Building, and so long as Tenant's rights under this Lease
shall not be frustrated or diminished thereby.
26. TENANT'S PROPERTY.
26.1 The Tenant hereby assumes the risk of loss or damage, including all
consequential losses and damage, to any real or personal property, constructed,
used, kept, placed, or stored by
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Tenant in or at the Premises, or real or personal property used, kept, placed,
or stored by Tenant in or at other property of the Landlord of which the
Premises form a part, including the Real Property, caused by fire, water, theft,
war, vermin, flood or any other casualty or peril normally included in
multi-peril all risk insurance with minimum allowable specific peril or casualty
exclusions, agrees not to look to the Landlord or its allied or affiliated
corporations, partnerships, or individuals for indemnification for the same, and
hereby releases the Landlord from any liability for any such loss or damage,
provided that such loss or damage shall not have been caused by or attributable
to the negligence or misconduct of Landlord or its agents, employees or
contractors. Except as provided in the preceding sentence, the Tenant agrees to
look solely to third parties, its insurer, if any, or itself for compensation
for such loss or damage.
26.2 Tenant may look to Landlord for indemnification for damages caused
by the gross negligence or willful misconduct of Landlord or its agents,
servants, employees, invitees, contractors, etc., if the resulting loss and
damages are not covered by Tenant's commercially acceptable business insurance
policy.
27. NOTICE.
All notices required under the terms of this Lease shall be sent by
personal delivery, reputable overnight courier (e.g., Federal Express), or by
mailing such notices by certified or registered mail, return receipt requested,
to the Landlord at the address shown at the head of this Lease, and to Tenant at
the Premises, or to such other address of the Landlord or Tenant as may be
designated by them in writing, which notice of change shall be given in the same
manner. Copies of all notices from Landlord to Tenant shall simultaneously be
sent to Smartflex Systems, Inc., 14312 Franklin Avenue, P.O. Box 2085, Tustin,
California 92781-2085, Attention: Joe Pendergrass. Facsimile machine
transmission of notices is not deemed adequate notice or service. Notices sent
by personal delivery shall be effective upon actual receipt at the address of
the addressee. Notices sent by overnight courier shall be effective as of the
day following the date deposited with the courier service for next day delivery.
Notices sent by certified mail or registered mail shall be effective as of the
date that is three (3) days after the date deposited with and postmarked by the
U.S. Postal Service, properly addressed, with postage thereon prepaid.
28. DISCLAIMER BY AND INDEMNIFICATION OF LANDLORD.
Subject to the provisions of Section 13.6 and other provisions of this
Lease or applicable law relating to the negligence or misconduct of Landlord or
its employees, agents, contractors, etc., the Landlord shall not be responsible
for the loss of or damage to property, or injury to persons, occurring in or
about the Premises and Real Property, by reason of any existing or future
condition, defect, matter or thing in the Premises or Real Property, or for the
acts, omissions or negligence of other persons or tenants in and about the
Premises and the Real Property. The Tenant agrees to indemnify and save the
Landlord harmless from all claims and liability for losses of or damage to
property, or injuries to persons, occurring in or about the Premises and the
Real Property, provided that such liability is attributable to the negligence or
misconduct of Tenant or its employees, agents, contractors, etc.
29. INSURANCE.
29.1 Tenant shall provide on or before the Commencement Date for the
benefit of Landlord and Tenant a normally commercially available comprehensive
policy of liability insurance insuring against accident on or about the Premises
and the Real Property or any appurtenances thereto. Such policy is to be written
by good and solvent insurance companies reasonable satisfactory to Landlord, and
the limits of liability thereunder shall not be less than the amount set forth
in Section 2.14 hereof for personal injury, including death, in respect of any
one person, in respect of any one occurrence, and in respect of property damage.
Such insurance may be carried under a blanket policy covering other locations of
Tenant, if any. Landlord shall be named insured under such policy. Prior to the
time such insurance is first required by this Section 29 to be carried by
Tenant, and thereafter, at least fifteen (15) days prior to the expiration of
any such policy, Tenant agrees to deliver to Landlord a certificate evidencing
such insurance, which certificate shall provide that such insurance may not be
canceled except upon thirty (30) days prior notice to Landlord. Upon failure at
any time on the part of Tenant to procure and deliver to Landlord the
certificate of
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insurance, as hereinabove provided, with evidence that the premium has been
paid, from the issuing company at least fifteen (15) days before the expiration
of the prior insurance policy or certificate, if any, or to pay the premiums
therefor, Landlord shall be at liberty, from time to time, as often as such
failure shall occur, to procure such insurance and to pay the premium therefor,
and any sums paid for insurance by Landlord shall be and become, and are hereby
declared, to be Additional Rent hereunder for the collection of which Landlord
shall have all the remedies provided for in this Lease or by law for the
collection of rent. Payment by Landlord of such premium or the carrying by
Landlord of any such policy shall not be deemed to waive or release the default
of Tenant with respect thereto. Tenant's failure to provide and keep in force
the aforementioned insurance shall be regarded as an Event of Default hereunder
entitling Landlord to exercise any or all of the remedies as provided in this
Lease.
29.2 In no event shall Tenant be required to obtain or pay for flood
and/or earthquake insurance.
29.3 Landlord and Tenant waive all rights of recovery against each other
for any loss, damages or injury of any nature whatsoever to property or persons,
for which the waiving party is insured. In addition, during the Term, Landlord
and Tenant shall each maintain in effect in each insurance policy required under
this Lease that relates to property damage, a waiver of subrogation in favor of
the other party from its then current insurance carriers, and shall upon written
request of the other party furnish evidence of such currently effective waiver
of subrogation, which shall be in customary form.
30. TENANT'S LIABILITY.
In addition to the other obligations and liabilities of the Tenant set
forth herein, Tenant shall reimburse Landlord for all expenses, damages or
fines, incurred or suffered by Landlord by reason of any breach, violation or
nonperformance by Tenant, its agents, servants, employees, or licensees of any
covenant or provision of this Lease, or by reason of damage to persons or
property caused by moving property of or for Tenant in or out of the Building,
or by the installation or removal of furniture or other property of or for
Tenant or by reason of or arising out of the carelessness, negligence or
improper conduct of Tenant, or its agents, servants, employees, and licensees in
the use or occupancy of the Premises or the Common Areas. Any such expense, if
any, which Tenant is required to pay to Landlord shall be deemed Additional
Rent, due on the first day of the next calendar month after it is incurred.
31. SECURITY DEPOSIT.
31.1 Use and Disposition: If an event of default occurs, Landlord may
use, apply or retain the whole or any part of the Security Deposit to the extent
required for the payment of any Basic Rent, Additional Rent or any other sum as
to which Tenant is in default or for any sum which Landlord may expend or may be
required to expend by reason of Tenant's default in respect of any of the terms,
covenants or conditions of this Lease, including but not limited to any damages
or deficiency accruing before or after summary proceedings or other re-entry by
Landlord. In the event that Tenant shall fully and faithfully comply with all of
the terms, covenants and conditions of this Lease, the Security Deposit shall be
returned to Tenant without interest within thirty (30) days after the
Termination Date and after delivery of possession of the entire Premises to
Landlord.
31.2 Transfer of Deposit: In the event of a sale of the Real Property or
a leasing thereof, Landlord shall have the right to transfer the Security
Deposit to the vendee or lessee, as the case may be, and Landlord shall
thereupon be released by Tenant from all liability for the return of such
Security Deposit. Tenant agrees to look solely to the new Landlord for the
return of the Security Deposit, provided that in each instance, Tenant has
received a written notice (i) of the transfer or assignment and (ii) that the
transferee or assignee has received or been credited with the Security Deposit;
and it is agreed that the provisions hereof shall apply to every transfer or
assignment made of the Security Deposit to a new owner or lessee. Tenant further
covenants that it will not assign or encumber or attempt to assign or encumber
the Security Deposit and that neither Landlord nor its successors or assigns
shall be bound by any such assignment, encumbrance, attempted assignment or
attempted encumbrance.
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32. MISCELLANEOUS.
32.1 Reservation of Rights: Landlord reserves the following rights:
(a) Intentionally omitted.
(b) To maintain pass keys to the Premises;
(c) To enter upon the Premises (upon not less than twenty-four hours
advance notice except in the event of an emergency) and exercise the foregoing
rights hereby reserved without being deemed to have caused an eviction or
disturbance of Tenant's use and possession of the Premises;
(d) The Landlord shall not exercise its rights hereunder unless the
Landlord's activities will not interfere with the use and occupancy of the
Tenant and unless the Tenant has failed to object after reasonable notice in
writing by the Landlord.
32.2 Mechanics' Liens: Any mechanics', materialmen's, or laborer's lien
filed against the Real Property for work claimed to have been done for, or
materials claimed to have been furnished to Tenant, shall be bonded or otherwise
removed by Tenant, at Tenant's expense, within ten (10) days.
32.3 Notice of Fire and Accidents: Tenant shall give Landlord immediate
notice in case of fire or accident on the Premises or, if involving Tenant, its
servants, agents, employees, invitees, or licensees, in the Building or on the
Real Property.
32.4 Signs: Tenant shall be permitted to use the middle third of the
space on the two main directory signs located on Route 36 and Eatontown
Boulevard. Tenant may also place a sign at the entrance to their Premises, and
on the Building. The size, style and exact location of all signs shall be
subject to the Landlord's prior written approval, which shall not be
unreasonably withheld or delayed, and to the applicable limitations and
requirements of the West Long Branch land use ordinances.
32.5 Force Majeure:
(a) If by reason of an Excusable Delay, including, without limitation, a
strike, labor troubles or other causes beyond Landlord's control, or
governmental preemption in connection with a national emergency or any rule,
order or regulation of any Governmental Authority, or conditions of supply and
demand which are affected by war or other emergency, Landlord shall be unable to
fulfill its obligations under this Lease or shall be unable to supply any
service which Landlord is obligated to supply, such failure shall be excused on
a day for day basis, and Tenant's obligation to pay Basic Rent and Additional
Rent hereunder shall abate during that time period to the extent that they
cannot use the Premises.
(b) If by reason of an Excusable Delay, including, without limitation, a
strike, labor troubles or other causes beyond Tenant's control, or governmental
preemption in connection with a national emergency or any rule, order or
regulation of any Governmental Authority, or conditions of supply and demand
which are affected by war or other emergency, Tenant shall be unable to fulfill
its obligations under this Lease, such failure shall be excused on a day for day
basis, for the period of time during which the condition in question persists.
32.6 Broker: Landlord and Tenant represent to each other that they have
not dealt with any real estate broker in connection with this Lease, other than
the Broker listed in Section 2.2 hereof. Landlord shall be responsible for the
payment of commissions to the broker listed in Section 2.2 hereof. Landlord and
Tenant shall indemnify and hold each other harmless of and from any and all
claims, liabilities, costs or damages that the other party may incur as a result
of their breach of this representation.
32.7 Construction: The following rules shall be employed in interpreting
this Lease:
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(a) Whenever in this Lease any words of obligation or duty are used,
such words or expressions shall have the same force and effect as though made in
the form of covenants;
(b) Words of any gender used in this Lease shall be held to include any
other gender, and words in the singular number shall be held to include the
plural, when the sense requires;
(c) All pronouns and any variations thereof shall be deemed to refer to
the neuter, masculine, feminine, singular or plural as the identity of the
Landlord or Tenant requires;
(d) No remedy or election given by an provision in this Lease shall be
deemed exclusive unless so indicated, but each shall, wherever possible, be
cumulative with all other remedies in law or equity except as otherwise
specifically provided;
(e) If, and to the extent that, any of the provisions of any Exhibits to
this Lease conflict or are otherwise inconsistent with any of the preceding
provisions of this Lease, or of the Rules and Regulations appended to this
Lease, such conflict shall be resolved in favor of this Lease and with said
Rules and Regulations.
(f) The parties mutually agree that the headings and captions contained
in this Lease are inserted for convenience of reference only, and are not to be
deemed part of or to be used in construing this Lease;
(g) Intentionally omitted.
(h) This Lease has been executed and delivered in the State of New
Jersey and shall be construed in accordance with the laws of the State of New
Jersey;
(i) Landlord has made no representations or promises with respect to the
Premises or the Real Property, except as expressly contained herein. Tenant has
inspected the Premises and agrees to take the same in an "As Is" condition
except as otherwise expressly set forth. Landlord shall have no obligation,
expressed or implied, except as herein set forth, to do any work in and to the
Premises to render them ready for occupancy and use by Tenant; and
(j) The terms, conditions, covenants and provisions of this Lease shall
be deemed to be severable. If any clause or provision herein contained shall be
adjudged to be invalid or unenforceable by a court of competent jurisdiction or
by operation of any applicable law, it shall not affect the validity of any
other clause or provision herein, but such other clauses or provisions shall
remain in full force and effect.
32.8 No Recordation: Tenant shall not record this Lease or a memorandum
hereof.
32.9 Landlord's Liability: Notwithstanding anything herein contained to
the contrary, it is specifically understood and agreed that there shall be no
personal liability on the part of the Landlord, its successors or assigns, with
respect to any of the terms, provisions, covenants and conditions of this Lease,
and that Tenant shall look solely to the estate, property and equity of Landlord
in the Real Property, subject to the prior rights of any mortgagee or ground
lessee, for the satisfaction of each and every remedy of Tenant in the event of
any breach by Landlord of any of the terms, provisions, covenants and conditions
of this Lease to be performed by Landlord, and for any other reason whatsoever.
This exculpation of personal liability shall be absolute and without exception.
32.10 Building Maintenance: Landlord agrees in good faith to maintain
the Building in a commercially reasonable manner for a manufacturing and
research and development facility with office space.
32.11 Waiver of Jury Trial: Landlord and Tenant hereby mutually waive
any and all rights which either may have to request a jury trial in any
proceeding at law or in equity in any court of competent jurisdiction.
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33. TRANSFER OF LANDLORD'S INTEREST.
If the Landlord hereinbefore named in this Lease, or a successor
Landlord, as hereinafter defined, transfers title to the Premises, Building or
Real Property, or leases the Real Property to another, and in connection
therewith assigns this Lease to such transferee or lessee, then from and after
the date of such assignment, provided that the transferee or lessee shall have
assumed Landlord's obligations in writing, it shall be the successor Landlord,
all of the obligations of the Landlord shall devolve upon its successor and the
Landlord or successor Landlord making the transfer or lease and assignment shall
be entirely freed and relieved of all of the thereafter accruing obligations of
the Landlord herein.
34. MANAGING AGENT.
34.1 Designation of Managing Agent: The parties hereby acknowledge that
at this time and until further notice, G.B. Ltd. Oper. Co., Inc., shall be the
managing agent for the Landlord. All payments of rent and additional rent and
any other payments required under the terms of this Lease shall be made payable
to 185 Monmouth Parkway Associates, L.P., and shall be delivered c/o G.B. Ltd.
Oper. Co., Inc., 63 West Main Street, P.O. Box 5008, Freehold, New Jersey 07728.
Furthermore, the Tenant shall direct all written communication with respect to
this tenancy to G.B. Ltd. Oper. Co., Inc., at the aforementioned address, or
otherwise by telephoning (732) 780-8888.
34.2 Change of Managing Agent: At any time and from time to time during
the term of this Lease, Landlord may designate a different firm or entity as
managing agent, and/or Landlord may change its directions to Tenant as to where
Basic Rent and Additional Rent payments shall be made. Landlord shall send
Tenant advance written notice, advising of any such changes in managing agent or
rent payment instructions.
35. LANDLORD'S RIGHT TO MODIFY.
Anything contained in the within Lease to the contrary notwithstanding,
it is specifically understood and agreed by and between the parties hereto that
Landlord retains the sole and uncontrolled right and discretion to vary, modify
or alter the size of the Property and/or the buildings, to add thereto or to
subtract therefrom, or to make any modifications thereto, additions thereto,
deletions therefrom or expansion thereof as Landlord may in its sole discretion
elect to do; provided always, however, that no such variation, modification, or
alteration shall operate so as to affect the Premises in such a way as would
vary, modify or alter the size thereof or as would materially and adversely
affect Tenant's use and enjoyment thereof or of the common areas associated
therewith, or Tenant's parking areas. Landlord retains and shall retain in its
sole discretion the right to enlarge or diminish the common areas.
36. USE OF HELIPORT.
Landlord and Tenant acknowledge that situate on the Property is a
helipad/helistop. This Lease does not give Tenant any rights to use the
heliport. If Tenant so desires to utilize the heliport, Tenant must make
separate arrangements with Landlord.
37. CORPORATE TENANTS.
In the event Tenant is a corporation, the persons executing this Lease
on behalf of Tenant hereby covenant and warrant that: Tenant is a duly
constituted corporation qualified to do business in the State of New Jersey; all
of Tenant's franchise and corporate taxes have been paid to date; all future
forms, reports, fees and other documents necessary for Tenant to comply with
applicable laws will be filed by Tenant when due; and such persons are duly
authorized by the board of directors of such corporation to execute and deliver
this Lease on behalf of the corporation.
38. GUARANTY.
If this Lease shall have been guaranteed, any such guaranty shall be
deemed a material part of the consideration for Landlord's execution of this
Lease. If the guarantor under any such guaranty is or becomes bankrupt or
insolvent, makes an assignment for the benefit of creditors, or institutes
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or is the subject of any proceeding under the Bankruptcy Act or other similar
law for the protection of creditors (or, if the guarantor is a partnership or
consists of more than one person or entity, or if any partner of the partnership
or such other person or entity is or becomes bankrupt or insolvent, institutes
any such proceeding, or makes an assignment for the benefit of creditors), then
Landlord shall have the option to terminate this Lease upon thirty (30) days'
written notice unless Tenant, within such thirty (30) day period, provides
Landlord with either (i) a substitute or additional guarantor satisfactory to
Landlord and any mortgagee of Landlord, or (ii) adequate assurance of the
performance of each and every obligation of Tenant hereunder, satisfactory to
Landlord and such mortgagee, provided, however, that no such termination of this
Lease shall become effective without the prior written consent of such
mortgagee.
39. SUBMITTAL OF FINANCIAL STATEMENT
At any time and from time to time during the term of this Lease, within
fifteen (15) days after request therefor by Landlord, Tenant shall supply to
Landlord and/or any mortgagee a current financial statement or such other
financial information as may be reasonably required by any such party.
40. NO PARTNERSHIP.
Nothing herein contained, either in the method of computing Rent or
otherwise, shall create between the parties hereto, or be relied upon by others
as creating, any relationship or partnership, association, joint venture, or
otherwise. The sole relationship of the parties hereto shall be that of landlord
and tenant.
41. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS.
This Lease contains all of the agreements of the parties hereto with
respect to any matter covered or mentioned in this Lease, and no prior
agreement, negotiations, brochures, arrangement or understanding pertaining to
any such matter shall be effective for any purpose unless expressed herein. No
provisions of this Lease may be amended or added to, except by an agreement in
writing signed by the parties hereto or their respective successors in interest.
42. COSTS OF SUIT.
If either party brings action for relief against the other, declaratory
or otherwise, arising out of this Lease, including any suit by Landlord for the
recovery of Rent or possession of the Premises, the unsuccessful party shall pay
the successful party its reasonable costs incurred in connection with and in
preparation for said action, including its attorneys' fees (which costs shall be
deemed to have accrued on the commencement of such action and shall be paid
whether or not such action is prosecuted to judgment, it being agreed that to be
the successful party a party need not necessarily have recovered a judgment, but
shall be that party which, in light of all the facts and circumstances of the
case, shall be deemed to be without fault or to have a lesser degree of fault
than the other party). Any such amounts due from Tenant to Landlord shall be
considered as additional rent.
43. SUBMISSION NOT AN OPTION.
The submission of this lease for examination does not constitute an
option or offer to lease the Premises described herein. This Lease shall have no
binding effect on the parties unless and until it is executed by both Landlord
and Tenant, and a fully executed copy is delivered to both parties.
44. SUCCESSORS & ATTACHMENTS.
44.1 The terms and conditions of this Lease and attachments shall inure
to and be binding upon the parties hereto and their respective heirs or
successors and assigns.
44.2 The exhibits and other attachments to this Lease are the following:
(a) Exhibit A - Floor plan of the building, showing the Premises area
cross-hatched.
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(b) Exhibit B - Basic Rent Adjustment Formula
(c) Exhibit C - Description of fit up work to be completed at Landlord's
cost.
(d) Exhibit D - Description of fit up work to be completed at Tenant's
cost.
(e) Exhibit E - Rules and Regulations.
(f) Exhibit F - Fair Market Rent Formula
IN WITNESS WHEREOF, the parties hereto have executed this Lease on the
day and year first above written.
WITNESS/ATTEST: 185 MONMOUTH PARKWAY ASSOCIATES, L.P.,
LANDLORD,
By: 185 M.P.A., Inc., General Partner
By: /s/ CARL P. GROSS
---------------------------- -----------------------------------
CARL P. GROSS, President
SMARTFLEX NEW JERSEY INC.,
TENANT
By: /s/ JAMES C. COGAN
---------------------------- -----------------------------------
JAMES C. COGAN
VP and GM -- EMS 4/29/99
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<PAGE> 29
EXHIBIT A
Floor Plan of Premises
<PAGE> 30
EXHIBIT B
Basic Rent Adjustment Formula
On the first anniversary of the Commencement Date of this Lease, and
thereafter on each annual anniversary date of this Lease, the total amount of
annual Basic Rent due and the monthly payment amounts for the coming lease year
shall be adjusted as follows:
a. The percentage increase in the Consumer Price Index over the
twelve-month period from sixteen months prior to the anniversary date to four
months prior to the anniversary date shall be calculated.
b. The total amount of Basic Rent to be paid for the then ending lease
year shall be multiplied by this percentage increase in the Consumer Price Index
to arrive at the rental increase. The resulting increase shall be added to the
Basic Rent paid in the then ending lease year and the total sum shall constitute
the new annual Basic Rent, which shall be payable in equal monthly installments
on the first day of each month in advance.
c. The Consumer Price Index that shall be used in calculating the
increase shall be the Consumer Price Index for Urban Consumers (CPI-U), U.S.
Cities Index All Items (1982-84=100.0).
d. The annual percentage increases in Basic Rent provided for by this
paragraph shall be cumulative.
e. The increases in Basic Rent provided for by this formula shall be
independent of any required increases in additional rent for increases in
Tenant's apportioned percentage share of real property taxes, operating
expenses, etc.
<PAGE> 31
EXHIBIT C
Fit up work to be Completed at Landlord's Cost
1. Construct a new exterior facade with windows and an entrance similar to the
existing facade in front of the day care center, SRBI and GBT. The new facade
will begin where the day care center facade ends, and will extend back to where
Tenant's office area ends. Landlord will also install a canvas canopy, similar
to the one by the entrance to the GBT space. Landlord will also construct a wall
perpendicular to the end of the new facade, extending out to the end of the
loading dock, to visually shield the loading area.
2. Within ten (10) days following the Commencement Date, Landlord shall provide
to Tenant a copy of a current roof inspection report, showing the present
condition of the roof and any repairs needed at this time. Within sixty (60)
days following the Commencement Date, shall make any necessary repairs so as to
assure that the roof is water tight.
3. Within sixty (60) days following the Commencement Date, assure that the HVAC
systems serving the Premises are in good working order, as more particularly
described in Section 10.1 of the Lease.
4. Remove piles of sand, dirt, metal and other debris behind the Building.
5. ADA access to the Premises will be provided. Landlord and Tenant shall
jointly endeavor to minimize the necessary work, to the extent permitted by law
and using the available facilities. If any work must be done to Buildings B or
D, or to the common areas to comply with ADA access requirements, Landlord shall
complete same promptly.
6. If and when it becomes necessary due to the rental of the remainder of
Building D to a third party, Landlord shall construct demising walls.
<PAGE> 32
EXHIBIT D
Fit up work to be Completed at Tenant's Cost
Construct and/or modify office space, a bathroom, a conference room and
a cafeteria, subject to plans to be mutually agreed upon by Landlord and Tenant.
<PAGE> 33
EXHIBIT E
RULES AND REGULATIONS
1. The common areas shall consist of the parking areas, sidewalks and
canopies, exterior walls and windows, landscaped areas, streets, passenger
vehicle roadways; interior passageways and concourses, service corridors, ramps
and stairs not contained in any tenant's premises; telephone booths, public and
common washrooms and service areas, and any other facilities available for
common use, all as they may from time to time exist at the commencement of the
term hereof and by addition and substitution by the Landlord thereafter.
Landlord may at any time close any common areas to effect construction, repairs,
alterations, additions or changes thereto, and may do such other acts in and to
the common areas as in its judgment may be desirable or necessary to improve the
utility thereof and, except in cases of emergencies, Landlord will endeavor to
notify Tenant of any such closure. This right of the Landlord shall not be
construed as an obligation of the Landlord to bear the cost of any such
construction, repairs or renovations.
2. The common areas shall be used by Tenant, its agents, employees,
customers and invitees, in common with agents, employees, customers and invitees
of Landlord and parties to whom the right to use the common areas has been
granted by the Landlord, including the other tenants from time to time, provided
that no other use of the common areas by others shall interfere with Tenant's
use thereof.
3. Tenant's right to use the common areas shall terminate upon the
termination of this Lease by lapse of time or otherwise.
4. Tenant shall not make any use of the common areas which shall
interfere in any way with the use of the common areas by others.
5. Tenant's use of all parking areas and other common areas shall be
subject to the rules and regulations set forth herein and from time to time
approved by the Landlord pursuant to the provisions of the Tenant's Lease.
Tenant shall utilize the parking spaces designated by Landlord for the use of
Tenant, its employees and agents, with respect to both commercial and
non-commercial vehicles.
6. Tenant shall not affix or maintain outside the Premises including the
exterior of the glass panes and supports of the show windows, doors and the
exterior walls of the Premises, or any place within the Premises if intended to
be seen from the exterior of the Premises, any signs, advertising placards,
names, insignia, notices, trademarks, descriptive material or any other such
like item or items except such as shall have first received written approval of
the Landlord as to size, type, color, location, copy, nature and display
qualities.
7. No awning or other projections shall be attached to the exterior
walls of the Premises or the Building of which they form a part, without the
prior written approval of the Landlord.
8. No radio or television or other similar device shall be installed,
and no aerial shall be erected on the roof, on exterior walls of the Premises or
the Building, or on the grounds, without in each instance having obtained
Landlord`s prior written approval, which approval Landlord may withhold in
Landlord's sole discretion. Any such device or aerial so installed without such
prior written approval shall be subject to removal without notice at Tenant's
expense at any time.
9. No loudspeakers, television sets, phonographs, radios or other
devices shall be used in a manner so as to be heard or seen outside of the
Premises without the prior written consent of Landlord.
10. Tenant shall keep the Premises at a temperature sufficiently high to
prevent freezing of water in pipes and fixtures.
11. Tenant shall not place any merchandise or permit any obstructions in
the service corridors, sidewalks, entrances, passages, courts, corridors,
elevators or stairways.
<PAGE> 34
12. Tenant shall not alter any lock or install any new or additional
locks or any bolts on any door of the Premises without receiving the prior
written consent of Landlord and forwarding copies of all such keys to Landlord
(except as to safes and vaults of Tenant).
13. The toilet rooms and urinals, wash bowls and other apparatus therein
shall not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever shall be placed
therein; the expenses of any breakage, stoppage or damage resulting from the
violation of this rule shall be borne by the tenant who, or whose employees,
invitees, contractors or agents, shall have caused it.
14. All keys of offices, rooms and toilet rooms shall be obtained from
Landlord and Tenant shall not duplicate or obtain such keys from any other
sources. Upon termination of the Lease, Tenant shall deliver to Landlord the
keys to the offices, rooms and toilet rooms which were previously furnished to
Tenant, failing which Tenant shall pay Landlord the cost of replacing same or of
changing the lock or locks opened by any unreturned key if Landlord deems it
necessary to make such changes.
15. Intentionally omitted.
16. Tenant shall be responsible for assuring that doors to the Premises
are not left unlocked during nonbusiness hours, except while moving furniture or
other items in or out of the Premises.
17. Tenant shall not canvass or solicit in the Building or the Real
Property and Tenant shall cooperate to prevent any such canvassing and/or
solicitation.
18. Tenant and its authorized representatives and invitees shall not
loiter in the parking or other Common Areas. They shall in no way obstruct the
sidewalks, entry passages, pedestrian passageways, driveways, entrances and
exits; they shall use them only as ingress and egress from the work areas.
19. Tenant and its authorized representatives and invitees shall not
throw cigar or cigarette butts or other substances or litter of any kind in or
about the Building or the Real Property, except in receptacles placed in it for
that purpose.
20. Tenant shall not make or permit any noise or odor which Landlord
reasonably deems objectionable to emanate from the Premises and no person shall
use the Premises as sleeping quarters, sleeping apartments or lodging rooms.
21. Tenant shall obtain all permits or licenses necessary to conduct its
business.
22. Tenant shall not make noises, cause disturbances or vibrations or
use or operate any electrical or electronic devices or other devices that emit
sound or other waves or disturbances, or create odors, any of which may be
offensive to other tenants or occupants of the Real Property or that would
interfere with the operation of any device or equipment or radio or television
broadcasting or reception from or within the Real Property or elsewhere.
23. The plumbing apparatus shall not be used for any other purposes than
those for which they were constructed, nor shall any sweepings, rubbish, rags,
or any other improper articles be thrown into same.
24. Tenant must, upon termination of its tenancy, return all keys for
the Premises and the Building and appurtenances.
25. Landlord will not be held responsible to the Tenant for loss or
damage to property in the Leased Premises by theft or otherwise, occasioned
wholly or in part by any acts or omissions of any employee or employees of the
Landlord, except in the event of the negligence or misconduct of Landlord or its
agents, employees and contractors. The Landlord will not be responsible for any
articles delivered to or left with any employee of the Landlord.
26. The Tenant shall give immediate notice to the Landlord of any
incident or injury to the Leased Premises, including damage to water pipes, gas
pipes or any other fixtures in the building.
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27. Maximum speed of vehicles in the parking areas is 15 miles per hour.
28. The Tenant shall promptly report to the Landlord the presence of any
insects or vermin in or around the Real Property. If such infestation is
attributable to Tenant, Tenant shall promptly arrange for the necessary
extermination and the repair of any damage caused by the infestation. If Tenant
did not cause the infestation, the Tenant shall cooperate with the Landlord in
admitting an exterminator of the Landlord's choosing for the purpose of
exterminating any infestations that are found.
<PAGE> 36
EXHIBIT F
FAIR MARKET RENT FORMULA
If Tenant wishes to rent additional space in the Annex Building during
the Term, the initial annual Basic Rent shall be calculated at the then fair
market rental value for the additional space, with annual increases over the
remaining months of the Term calculated in accordance with Exhibit B. If the
Landlord and Tenant cannot agree upon the fair market rental value for the space
to be added to the Premises, then the following formula shall be utilized to
make this determination:
(i) Within sixty (60) days of Landlord's receipt of Tenant's notice that
it will rent additional space, Landlord shall furnish to Tenant a notice in
writing (hereinafter called "Landlord's Notice") stating what Landlord perceives
to be the fair market rent for the additional space projected over the remainder
of the Term. Landlord's Notice shall be accompanied by a certification by an MAI
or New Jersey State Certified Real Estate Appraiser as to the fair market rent
for the additional space for the remainder of the Term. If the Tenant accepts
this fair market rent, it shall be effective throughout the remainder of the
Term for the additional space, with annual increases as provided in Exhibit B.
(ii) If Tenant disagrees with the estimate of fair market rent submitted
by Landlord with Landlord's Notice, then within thirty (30) days after the date
of Landlord's Notice, Tenant shall submit to Landlord an appraisal by an MAI or
New Jersey State Certified Real Estate Appraiser of the fair market rent over
the remainder of the Term. If the two estimates are within 5% of one another,
the fair market rent shall be established as the average of the two appraisals.
(iii) If the two appraisals are not within 5% of one another, the two
appraisers, acting on behalf of Landlord and Tenant, shall within fifteen (15)
days after Tenant's appraisal has been submitted, jointly appoint a third MAI or
New Jersey State Certified Real Estate Appraiser (the "Third Appraiser") If the
two appraisers are unable to agree upon the selection of the Third Appraiser
then the Third Appraiser shall be selected within fifteen (15) days thereafter,
by an arbitrator pursuant to the rules of the American Arbitration Association.
The Third Appraiser shall furnish to the Landlord and Tenant, not later than the
date which is thirty (30) days after his selection, a written appraisal of the
fair market rent for the additional space over the remainder of the Term. If the
estimate as to fair market rent submitted by the Third Appraiser is not greater
than the higher of the first two appraisals, nor less than the lower of the
first two appraisals, then the appraisal of the Third Appraiser shall establish
the fair market rent which shall be binding upon the Landlord and Tenant for the
additional space for the remainder of the Term. If the estimate as to fair
market rent of the Third Appraiser is greater then the higher of the first two
appraisals or less than the lower of the first two appraisals, then the estimate
as to fair market rent by the Third Appraiser shall be disregarded and the
average of the first two appraisals shall establish the fair market rent which
shall be binding upon Landlord and Tenant.
(iv) Landlord and Tenant shall pay for their own appraisals and in the
event of a third appraisal, the cost shall be shared equally by Landlord and
Tenant.
(v) It is agreed and understood that the fair market rent shall be based
on dollars per rentable square foot per annum, and that once the fair market
rent has been established, it shall be effective retroactive to the date that
Tenant rented the additional space in question in the Annex Building.
<PAGE> 1
EXHIBIT 10.8
STANDARD OFFICE LEASE--GROSS
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. BASIC LEASE PROVISIONS ("Basic Lease Provisions").
1.1 PARTIES: This Lease, dated for reference purposes only, August 12,
1996, is made by and between the Decathlon Building, a Partnership (herein
called "Lessor") and Logical Services Incorporated, a California Corporation
doing business under the name of _____________________ (herein called "Lessee").
1.2 PREMISES: Suite Number(s) 210, 2nd floor, consisting of
approximately 11,492 rentable square feet, more or less, as defined in paragraph
2 and as shown on Exhibit "A" hereto (the "Premises").
1.3 BUILDING: Commonly described as being located at 3235 Kifer Road, in
the City of Santa Clara, County of Santa Clara, State of California, as more
particularly described in Exhibit A hereto, and as defined in paragraph 2.
1.4 USE: General Office, subject to paragraph 6.
1.5 TERM: Sixty (60) months commencing February 1, 1997 ("Commencement
Date") and ending January 31, 2002, as defined in paragraph 3.
1.6 BASE RENT: $16,088.80 per month, payable on the 1st day of each
month, per paragraph 4.1.
1.7 BASE RENT INCREASE: On February 1, 1998 & every year thereafter the
monthly Base Rent payable under paragraph 1.6 above shall be adjusted as
provided in paragraph 50 below.
1.8 RENT PAID UPON EXECUTION: $16,088.80 for one months rent (February
1, 1997 through February 28, 1997).
1.9 SECURITY DEPOSIT: $18,387.20 paid pursuant to paragraph 51 below.
1.10 LESSEE'S SHARE OF OPERATING EXPENSE INCREASE: 32.38% as defined in
paragraph 4.2.
2. PREMISES, PARKING AND COMMON AREAS.
2.1 PREMISES: The Premises are a portion of a building, herein sometimes
referred to as the "Building" identified in paragraph 1.3 of the Basic Lease
Provisions. "Building" shall include adjacent parking structures used in
connection therewith. The Premises, the Building, the Common Areas, the land
upon which the same are located, along with all other buildings and improvements
thereon or thereunder, are herein collectively referred to as the "Office
Building Project." Lessor hereby leases to Lessee and Lessee leases from Lessor
for the term, at the rental, and upon all of the conditions set forth herein,
the real property referred to in the Basic Lease Provisions, paragraph 1.2, as
the "Premises," including rights to the Common Areas as hereinafter specified.
2.2 VEHICLE PARKING: So long as Lessee is not in default, and subject to
the rules and regulations attached hereto, and as established by Lessor from
time to time, Lessee shall be entitled to rent and use N/A parking spaces in the
Office Building Project at the monthly rate applicable from time to time for
monthly parking as set by Lessor and/or its licensee.
2.2.1 If Lessee commits, permits or allows any of the prohibited
activities described in the Lease or the rules then in effect, then Lessor shall
have the right, without notice, in addition to such other rights and remedies
that it may have, to remove or tow away the vehicle involved and charge the cost
to Lessee, which cost shall be immediately payable upon demand by Lessor.
2.2.2 The monthly parking rate per parking space will be $ N/A per
month at the commencement of the term of this Lease, and is subject to change
upon five (5) days prior written notice to Lessee. Monthly parking fees shall be
payable one month in advance prior to the first day of each calendar month.
2.3 COMMON AREAS - DEFINITION. The term "Common Areas" is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the Office Building Project that are provided and designated by the Lessor
from time to time for the general non-exclusive use of Lessor, Lessee and of
other lessees of the Office Building Project and their respective employees,
suppliers, shippers, customers and invitees, including but not limited to common
entrances, lobbies, corridors, stairways and stairwells, public restrooms,
elevators, escalators, parking areas to the extent not otherwise prohibited by
this Lease, loading and unloading areas, trash areas, roadways, sidewalks,
walkways, parkways, ramps, driveways, landscaped areas and decorative walls.
2.4 COMMON AREAS - RULES AND REGULATIONS. Lessee agrees to abide by and
conform to the rules and regulations attached hereto as Exhibit B with respect
to the Office Building Project and Common Areas, and to cause its employees,
suppliers, shippers, customers, and invitees to so abide and conform. Lessor or
such other person(s) as Lessor may appoint shall have the exclusive control and
management of the Common Areas and shall have the right, from time to time, to
modify, amend and enforce said rules and regulations. Lessor shall not be
responsible to Lessee for the noncompliance with said rules and regulations by
other lessees, their agents, employees and invitees of the Office Building
Project.
2.5 COMMON AREAS - CHANGES. Lessor shall have the right, in Lessor's
sole discretion, from time to time:
(a) To make changes to the Building interior and exterior and Common
Areas, including, without limitation, changes in the location, size, shape,
number, and appearance thereof, including but not limited to the lobbies,
windows, stairways, air shafts, elevators, escalators, restrooms, driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, decorative walls, landscaped areas and walkways;
provided, however, Lessor shall at all times provided the parking facilities
required by applicable law;
(b) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available;
(c) To designate other land and improvements outside the boundaries
of the Office Building Project to be part of the Common Areas, provided that
such other land and improvements have a reasonable and functional relationship
to the Office Building Project;
(d) To add additional buildings and improvements to the Common
Areas;
(e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Office Building Project, or any
portion thereof;
(f) To do and perform such other acts and make such other changes
in, to or with respect to the Common Areas and Office Building Project as Lessor
may, in the exercise of sound business judgment deem to be appropriate.
3. TERM.
3.1 TERM. The term and Commencement Date of this Lease shall be as
specified in paragraph 1.5 of the Basic Lease Provisions.
3.2 DELAY IN POSSESSION. Notwithstanding said Commencement Date, if for
any reason Lessor cannot deliver possession of the Premises to Lessee on said
date and subject to paragraph 3.2.2, Lessor shall not be subject to any
liability therefor, nor shall such failure affect the validity of this Lease or
the obligations of Lessee hereunder or extend the term hereof; but, in such
case, Lessee shall not be obligated to pay rent or perform any other obligation
of Lessee under the terms of this Lease, except as may be otherwise provided in
this Lease, until possession of the Premises is tendered to Lessee, as
hereinafter defined; provided, however, that if Lessor shall not have delivered
possession of the Premises within sixty (60) days following said Commencement
Date, as the same may be extended under the terms of a Work Letter executed by
Lessor and Lessee, Lessee may, at Lessee's
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option, by notice in writing to Lessor within ten (10) days thereafter, cancel
this Lease, in which event the parties shall be discharged from all obligations
hereunder; provided, however, that, as to Lessee's obligations, Lessee first
reimburses Lessor for all costs incurred for Non-Standard Improvements and, as
to Lessor's obligations, Lessor shall return any money previously deposited by
Lessee (less any offsets due Lessor for Non-Standard Improvements); and provided
further, that if such written notice by Lessee is not received by Lessor within
said ten (10) day period, Lessee's right to cancel this Lease hereunder shall
terminate and be of no further force or effect.
3.2.1 POSSESSION TENDERED - DEFINED. Possession of the Premises
shall be deemed tendered to Lessee ("Tender of Possession") when (1) the
improvements to be provided by Lessor under this Lease are substantially
completed, (2) the Building utilities are ready for use in the Premises, (3)
Lessee has reasonable access to the Premises, and (4) ten (10) days shall have
expired following advance written notice to Lessee of the occurrence of the
matters described in (1), (2) and (3), above of this paragraph 3.2.1
3.2.2 DELAYS CAUSED BY LESSEE. There shall be no abatement of rent,
and the sixty (60) day period following the Commencement Date before which
Lessee's right to cancel this Lease accrues under paragraph 3.2, shall be deemed
extended to the extent of any delays caused by acts or omissions of Lessee,
Lessee's agents, employees and contractors.
3.3 EARLY POSSESSION. If Lessee occupies the Premises prior to said
Commencement Date, such occupancy shall be subject to all provisions of this
Lease, such occupancy shall not change the termination date, and Lessee shall
pay rent for such occupancy.
3.4 UNCERTAIN COMMENCEMENT. In the event commencement of the Lease term
is defined as the completion of the improvements, Lessee and Lessor shall
execute an amendment to this Lease establishing the date of Tender of Possession
(as defined in paragraph 3.2.1) or the actual taking of possession by Lessee,
whichever first occurs, as the Commencement Date.
4. RENT.
4.1 BASE RENT. Subject to adjustment as hereinafter provided in
paragraph 4.3, and except as may be otherwise expressly provided in this Lease,
Lessee shall pay to Lessor the Base Rent for the Premises set forth in paragraph
1.6 of the Basic Lease Provisions, without offset or deduction. Lessee shall pay
Lessor upon execution hereof the advance Base Rent described in paragraph 1.8 of
the Basic Lease Provisions. Rent for any period during the term hereof which is
for less than one month shall be prorated based upon the actual number of days
of the calendar month involved. Rent shall be payable in lawful money of the
United States to Lessor at the address stated herein or to such other persons or
at such other places as Lessor may designate in writing.
4.2 OPERATING EXPENSE INCREASE. Lessee shall pay to Lessor during the
term hereof, in addition to the Base Rent, Lessee's Share, as hereinafter
defined, of the amount by which all Operating Expenses, as hereinafter defined,
for each Comparison Year exceeds the amount of all Operating Expenses for the
Base Year, such excess being hereinafter referred to as the "Operating Expense
Increase," in accordance with the following provisions:
(a) "Lessee's Share" is defined, for purposes of this Lease, as the
percentage set forth in paragraph 1.10 of the Basic Lease Provisions, which
percentage has been determined by dividing the approximate square footage of the
Premises by the total approximate square footage of the rentable space contained
in the Office Building Project. It is understood and agreed that the square
footage figures set forth in the Basic Lease Provisions are approximations which
Lessor and Lessee agree are reasonable and shall not be subject to revision
except in connection with an actual change in the size of the Premises or a
change in the space available for lease in the Office Building Project.
(b) "Base Year" is defined as the calendar year in which the Lease
term commences.
(c) "Comparison Year" is defined as each calendar year during the
term of this Lease subsequent to the Base Year; provided, however, Lessee shall
have no obligation to pay a share of the Operating Expense Increase applicable
to the first twelve (12) months of the Lease Term (other than such as are
mandated by a governmental authority, as to which government mandated expenses
Lessee shall pay Lessee's Share, notwithstanding they occur during the first
twelve (12) months). Lessee's Share of the Operating Expenses Increase for the
first and last Comparison Years of the Lease Term shall be prorated according to
that portion of such Comparison Year as to which Lessee is responsible for a
share of such increase.
(d) "Operating Expenses" is defined, for purposes of this Lease, to
include all costs, if any, incurred by Lessor in the exercise of its reasonable
discretion, for:
(i) The operation, repair, maintenance, and replacement, in
neat, clean, safe, good order and condition, of the Office Building Project,
including but not limited to, the following:
(aa) The Common Areas, including their surfaces, coverings,
decorative items, carpets, drapes and window coverings, and including parking
areas, loading and unloading areas, trash areas, roadways, sidewalks, walkways,
stairways, parkways, driveways, landscaped areas, striping, bumpers, irrigation
systems, Common Area lighting facilities, building exteriors and roofs, fences
and gates;
(bb) All heating, air conditioning, plumbing, electrical
systems, life safety equipment, telecommunication and other equipment used in
common by, or for the benefit of, lessees or occupants of the Office Building
Project, including elevators and escalators, tenant directories, fire detection
systems including sprinkler system maintenance and repair.
(ii) Trash disposal, janitorial and security services;
(iii) Any other service to be provided by Lessor that is
elsewhere in this Lease stated to be an "Operating Expense";
(iv) The cost of the premiums for the liability and property
insurance policies to be maintained by Lessor under paragraph 8 hereof;
(v) The amount of the real property taxes to be paid by Lessor
under paragraph 10.1 hereof;
(vi) The cost of water, sewer, gas, electricity, and other
publicly mandated services to the Office Building Project;
(vii) Labor, salaries and applicable fringe benefits and costs,
materials, supplies and tools, used in maintaining and/or cleaning the Office
Building Project and accounting and a management fee attributable to the
operation of the Office Building Project;
(viii) Replacing and/or adding improvements mandated by any
governmental agency and any repairs or removals necessitated thereby amortized
over its useful life according to Federal income tax regulations or guidelines
for depreciation thereof (including interest on the unamortized balance as is
then reasonable in the judgment of Lessor's accountants);
(ix) Replacement of equipment or improvements that have a useful
life for depreciation purposes according to Federal income tax guidelines of
five (5) years or less, as amortized over such life.
(e) Operating Expenses shall not include the costs of replacements
of equipment or improvements that have a useful life for Federal income tax
purposes in excess of five (5) years unless it is of the type described in
paragraph 4.2(d)(viii), in which case their cost shall be included as above
provided.
(f) Operating Expenses shall not include any expenses paid by any
lessee directly to third parties, or as to which Lessor is otherwise reimbursed
by any third party, other tenant, or by insurance proceeds.
(g) Lessee's Share of Operating Expense Increase shall be payable by
Lessee within ten (10) days after a reasonably detailed statement of actual
expenses is presented to Lessee by Lessor. At Lessor's option, however, an
amount may be estimated by Lessor from time to time in advance of Lessee's Share
of the Operating Expense Increase for any Comparison Year, and the same shall be
payable monthly or quarterly, as Lessor shall designate, during each Comparison
Year of the Lease term, on the same day as the Base Rent is due hereunder. In
the event that Lessee pays Lessor's estimate of Lessee's Share of Operating
Expense Increase as aforesaid, Lessor shall deliver to Lessee within sixty (60)
days after the expiration of each Comparison Year a reasonably detailed
statement showing Lessee's Share of the actual Operating Expense Increase
incurred during such year. If Lessee's payments under this paragraph 4.2(g)
during said Comparison Year exceed Lessee's Share as indicated on said
statement, Lessee shall be entitled to credit the amount of such overpayment
against Lessee's Share of Operating Expense Increase next falling due. If
Lessee's payments under this paragraph during such Comparison Year were less
than Lessee's Share as indicated on said statement, Lessee shall pay to Lessor
the amount of the deficiency within ten (10) days after delivery by Lessor to
Lessee of said statement. Lessor and Lessee shall forthwith adjust between them
by cash payment any balance determined to exist with respect to that portion of
the last Comparison Year for which Lessee is responsible as to Operating Expense
Increases, notwithstanding that the Lease term may have terminated before the
end of such Comparison Year.
4.3 RENT INCREASE. (Omitted)
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5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution
hereof the security deposit set forth in paragraph 1.9 of the Basic Lease
Provisions as security for Lessee's faithful performance of Lessee's obligations
hereunder. If Lessee fails to pay rent or other charges due hereunder, or
otherwise defaults with respect to any provision of this Lease, Lessor may use,
apply or retain all or any portion of said deposit for the payment of any rent
or other charge in default for the payment of any other sum to which Lessor may
become obligated by reason of Lessee's default, or to compensate Lessor for any
loss or damage which Lessor may suffer thereby. If Lessor so uses or applies all
or any portion of said deposit, Lessee shall within ten (10) days after written
demand therefor deposit cash with Lessor in an amount sufficient to restore said
deposit to the full amount then required of Lessee. If the monthly Base Rent
shall, from time to time, increase during the term of this Lease, Lessee shall,
at the time of such increase, deposit with Lessor additional money as a security
deposit so that the total amount of the security deposit held by Lessor shall at
all times bear the same proportion to the then current Base Rent as the initial
security deposit bears to the initial Base Rent set forth in paragraph 1.6 of
the Basic Lease Provisions. Lessor shall not be required to keep said security
deposit separate from its general accounts. If Lessee performs all of Lessee's
obligations hereunder, said deposit, or so much thereof as has not heretofore
been applied by Lessor, shall be returned, without payment of interest
obligations hereunder, said deposit, or so much thereof as has not heretofore
been applied by Lessor, shall be returned, without payment of interest or other
increment for its use, to Lessee (or, at Lessor's option, to the last assignee,
if any, of Lessee's interest hereunder) at the expiration of the term hereof,
and after Lessee has vacated the Premises. No trust relationship is created
herein between Lessor and Lessee with respect to said Security Deposit.
6. USE.
6.1 USE. The Premises shall be used and occupied only for the purpose
set forth in paragraph 1.4 of the Basic Lease Provisions or any other use which
is reasonably comparable to that use and for no other purpose.
6.2 COMPLIANCE WITH LAW.
(a) Lessor warrants to Lessee that the Premises, in the state
existing on the date that the Lease term commences, but without regard to
alterations or improvements made by Lessee or the use for which Lessee will
occupy the Premises, does not violate any covenants or restrictions of record,
or any applicable building code, regulation or ordinance in effect on such Lease
term Commencement Date. In the event it is determined that this warranty has
been violated, then it shall be the obligation of the Lessor, after written
notice from Lessee, to promptly, at Lessor's sole cost and expense, rectify any
such violation.
(b) Except as provided in paragraph 6.2(a) Lessee shall, at Lessee's
expense, promptly comply with all applicable statutes, ordinances, rules,
regulations, orders, covenants and restrictions of record, and requirements of
any fire insurance underwriters or rating bureaus, now in effect or which may
hereafter come into effect, whether or not they reflect a change in policy from
that now existing, during the term or any part of the term hereof, relating in
any manner to the Premises and the occupation and use by Lessee of the Premises.
Lessee shall conduct its business in a lawful manner and shall not use or permit
the use of the Premises or the Common Areas in any manner that will tend to
create waste or a nuisance or shall tend to disturb other occupants of the
Office Building Project.
6.3 CONDITIONS OF PREMISES.
(a) Lessor shall deliver the Premises to Lessee in a clean condition
on the Lease Commencement Date (unless Lessee is already in possession) and
Lessor warrants to Lessee that the plumbing, lighting, air conditioning, and
heating system in the Premises shall be in good operating condition. In the
event that it is determined that this warranty has been violated, then it shall
be the obligation of Lessor, after receipt of written notice from Lessee setting
forth with specificity the nature of the violation, to promptly, at Lessor's
sole cost, rectify such violation.
(b) Except as otherwise provided in this Lease, Lessee hereby
accepts the Premises and the Office Building Project in their condition existing
as of the Lease Commencement Date or the date that Lessee takes possession of
the Premises, whichever is earlier, subject to all applicable zoning, municipal,
county and state laws, ordinances and regulations governing and regulating the
use of the Premises, and any easements, covenants or restrictions of record, and
accepts this Lease subject thereto and to all matters disclosed thereby and by
any exhibits attached hereto. Lessee acknowledges that it has satisfied itself
by its own independent investigation that the Premises are suitable for its
intended use, and that neither Lessor nor Lessor's agent or agents has made any
representation or warranty as to the present or future suitability of the
Premises, Common Areas, or Office Building Project for the conduct of Lessee's
business.
7. MAINTENANCE, REPAIRS, ALTERATIONS AND COMMON AREA SERVICES.
7.1 LESSOR'S OBLIGATIONS. Lessor shall keep the Office Building Project,
including the Premises, interior and exterior walls, roof, and common areas, and
the equipment whether used exclusively for the Premises or in common with other
premises, in good condition and repair; provided, however, Lessor shall not be
obligated to paint, repair or replace wall coverings, or to repair or replace
any improvements that are not ordinarily a part of the Building or are above
then Building standards. Except as provided in paragraph 9.5, there shall be no
abatement of rent or liability of Lessee on account of any injury or
interference with Lessee's business with respect to any improvements,
alterations or repairs by Lessor to the Office Building Project or any part
thereof. Lessee expressly waives the benefits of any statute now or hereafter in
effect which would otherwise afford Lessee the right to make repairs at Lessor's
expense or to terminate this Lease because of Lessor's failure to keep the
Premises in good order, condition and repair.
7.2 LESSEE'S OBLIGATIONS.
(a) Notwithstanding Lessor's obligation to keep the Premises in good
condition and repair, Lessee shall be responsible for payment of the cost
thereof to Lessor as additional rent for that portion of the cost of any
maintenance and repair of the Premises, or any equipment (wherever located) that
serves only Lessee or the Premises, to the extent such cost is attributable to
causes beyond normal wear and tear. Lessee shall be responsible for the cost of
painting, repairing or replacing wall coverings, and to repair or replace any
Premises improvements that are not ordinarily a part of the Building or that are
above then Building standards. Lessor may, at its option, upon reasonable
notice, elect to have Lessee perform any particular such maintenance or repairs
the cost of which is otherwise Lessee's responsibility hereunder.
(b) On the last day of the term hereof, or on any sooner
termination, Lessee shall surrender the Premises to Lessor in the same condition
as received, ordinary wear and tear excepted, clean and free of debris. 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
Lessee. Lessee shall repair any damage to the Premise occasioned by the
installation or removal of Lessee's trade fixtures, alterations, furnishings and
equipment. Except as otherwise stated in this Lease, Lessee shall leave the air
lines, power panels, electrical distribution systems, lighting fixtures, air
conditioning, window coverings, carpets, wall paneling, ceilings and plumbing on
the Premises and in good operating condition.
7.3 ALTERATIONS AND ADDITIONS.
(a) Lessee shall not, without Lessor's prior written consent make
any alterations, improvements, additions, Utility Installations or repairs in,
on or about the Premises, or the Office Building Project. As used in this
paragraph 7.3 the term "Utility Installation" shall mean carpeting, window and
wall coverings, power panels, electrical distribution systems, lighting
fixtures, air conditioning, plumbing, and telephone and telecommunication wiring
and equipment. At the expiration of the term, Lessor may require the removal of
any or all of said alterations, improvements, additions or Utility
Installations, and the restoration of the Premises and the Office Building
Project to their prior condition, at Lessee's expense. Should Lessor permit
Lessee to make its own alterations, improvements, additions or Utility
Installations, Lessee shall use only such contractor as has been expressly
approved by Lessor, and Lessor may require Lessee to provide Lessor, at Lessee's
sole cost and expense, a lien and completion bond in an amount equal to one and
one-half times the estimated cost of such improvements, to insure Lessor against
any liability for mechanic's and materialmen's liens and to insure completion of
the work. Should Lessee make any alterations, improvements, additions or Utility
Installations without the prior approval of Lessor, or use a contractor not
expressly approved by Lessor, Lessor may, at any time during the term of this
Lease, require that Lessee remove any part or all of the same.
(b) Any alterations, improvements, additions or Utility
Installations in or about the Premises or the Office Building Project that
Lessee shall desire to make shall be presented to Lessor in written form, with
proposed detailed plans. If Lessor shall give its consent to Lessee's making
such alteration, improvement, addition or Utility Installation, the consent
shall be deemed conditioned upon Lessee acquiring a permit to do so from the
applicable governmental agencies, furnishing a copy thereof to Lessor prior to
the commencement of the work, and compliance by Lessee with all conditions of
said permit in a prompt and expeditious manner.
(c) Lessee shall pay, when due, all claims for labor or materials
furnished or alleged to have been furnished to or for Lessee at or for use in
the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises, the Building of the Office Building
Project, or any interest therein.
(d) Lessee shall give Lessor not less than ten (10) days' notice
prior to the commencement of any work in the Premises by Lessee, and Lessor
shall have the right to post notices of non-responsibility in or on the Premises
or the Building as provided by law. If Lessee shall, in good faith, contest the
validity of any such lien, claim or demand, then Lessee shall, at its sole
expense defend itself and Lessor against the same and shall pay and satisfy
Initials: ____
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<PAGE> 4
any such adverse judgment that may be rendered thereon before the enforcement
thereof against the Lessor or the Premises, the Building or the Office Building
Project, upon the condition that if Lessor shall require, Lessee shall furnish
to Lessor a surety bond satisfactory to Lessor in an amount equal to such
contested lien claim or demand indemnifying Lessor against liability for the
same and holding the Premises, the Building and the Office Building Project free
from the effect of such lien or claim. In addition, Lessor may require Lessee to
pay Lessor's reasonable attorneys' fees and costs in participating in such
action if Lessor shall decide it is to Lessor's best interest to do so.
(e) All alterations, improvements, additions and Utility
Installations (whether or not such Utility Installations constitute trade
fixtures of Lessee), which may be made to the Premises by Lessee, including but
not limited to, floor coverings, panelings, doors, drapes, built-ins, moldings,
sound attenuation, and lighting and telephone or communication systems, conduit,
wiring and outlets, shall be made and done in a good and workmanlike manner and
of good and sufficient quality and materials and shall be the property of Lessor
and remain upon and be surrendered with the Premises at the expiration of the
Lease term, unless Lessor requires their removal pursuant to paragraph 7.3(a).
Provided Lessee is not in default, notwithstanding the provisions in this
paragraph 7.3(e), Lessee's personal property and equipment, other than that
which is affixed to the Premises so that it cannot be removed without material
damage to the Premises or the Building, and other than Utility Installations,
shall remain the property of Lessee and may be removed by Lessee subject to the
provisions of paragraph 7.2.
(f) Lessee shall provide Lessor with as-built plans and
specifications for any alterations, improvements, additions or Utility
Installations.
7.4 UTILITY ADDITIONS. Lessee reserves the right to install new or
additional utility facilities throughout the Office Building Project for the
benefit of Lessor or Lessee, or any other lessee of the Office Building Project,
including, but not by way of limitation, such utilities as plumbing, electrical
systems, communication systems, and fire protection and detection systems, so
long as such installments do not unreasonably interfere with Lessee's use of the
Premises.
8. INSURANCE; INDEMNITY.
8.1 LIABILITY INSURANCE - LESSEE. Lessee shall, at Lessee's expense,
obtain and keep in force during the term of this Lease a policy of Comprehensive
General Liability insurance utilizing an Insurance Services Office standard form
with Broad Form General Liability Endorsement (GL0404), or equivalent, in an
amount of not less than $1,000,000 per occurrence of bodily injury and property
damage combined or in a greater amount as reasonably determined by Lessor and
shall insure Lessee with Lessor as an additional insured against liability
arising out of the use, occupancy or maintenance of the Premises. Compliance
with the above requirement shall not, however, limit the liability of Lessee
hereunder.
8.2 LIABILITY INSURANCE - LESSOR. Lessor shall obtain and keep in force
during the term of this Lease a policy of Combined Single Limit Bodily Injury
and Broad Form Property Damage Insurance, plus coverage against such other risks
Lessor deems advisable from time to time, insuring Lessor, but not Lessee,
against liability arising out of the ownership, use, occupancy or maintenance of
the Office Building Project in an amount not less than $5,000,000.00 per
occurrence.
8.3 PROPERTY INSURANCE - LESSEE. Lessee shall, at Lessee's expense,
obtain and keep in force during the term of this Lease for the benefit of
Lessee, replacement cost fire and extended coverage insurance, with vandalism
and malicious mischief, sprinkler leakage and earthquake sprinkler leakage
endorsements, in an amount sufficient to cover not less than 100% of the full
replacement cost, as the same may exist from time to time, of all of Lessee's
personal property, fixtures, equipment and tenant improvements.
8.4 PROPERTY INSURANCE - LESSOR. Lessor shall obtain and keep in force
during the term of this Lease a policy or policies of insurance covering loss or
damage to the Office Building Project improvements, but not Lessee's personal
property, fixtures, equipment or tenant improvements, in the amount of the full
replacement cost thereof, as the same may exist from time to time, utilizing
Insurance Services Office standard form, or equivalent, providing protection
against all perils included within the classification of fire, extended
coverage, vandalism, malicious mischief, plate glass, and such other perils as
Lessor deems advisable or may be required by a lender having a lien on the
Office Building Project. In addition, Lessor shall obtain and keep in force,
during the term of this Lease, a policy of rental value insurance covering a
period of one year, with loss payable to Lessor, which insurance shall also
cover all Operating Expenses for said period. Lessee will not be named in any
such policies carried by Lessor and shall have no right to any proceeds
therefrom. The policies required by these paragraphs 8.2 and 8.4 shall contain
such deductibles as Lessor or the aforesaid lender may determine. In the event
that the Premises shall suffer an insured loss as defined in paragraph 9.1(f)
hereof, the deductible amounts under the applicable insurance policies shall be
deemed an Operating Expense. Lessee shall not do or permit to be done anything
which shall invalidate the insurance policies carried by Lessor. Lessee shall
pay the entirety of any increase in the property insurance premium for the
Office Building Project over what it was immediately prior to the commencement
of the term of this Lease if the increase is specified by Lessor's insurance
carrier as being caused by the nature of Lessee's occupancy or any act or
omission of Lessee.
8.5 INSURANCE POLICIES. Lessee shall deliver to Lessor copies of
liability insurance policies required under paragraph 8.1 or certificates
evidencing the existence and amounts of such insurance within seven (7) days
after the Commencement Date of this Lease. No such policy shall be cancellable
or subject to reduction of coverage or other modification except after thirty
(30) days prior written notice to Lessor. Lessee shall, at least thirty (30)
days prior to the expiration of such policies, furnish Lessor with renewals
thereof.
8.6 WAIVER OF SUBROGATION. Lessee and Lessor each hereby release and
relieve the other, and waive their entire right of recovery against the other,
for direct or consequential loss or damage arising out of or incident to the
perils covered by property insurance carried by such party, whether due to the
negligence of Lessor or Lessee or their agents, employees, contractors and/or
invitees. If necessary all property insurance policies required under this Lease
shall be endorsed to so provide.
8.7 INDEMNITY. Lessee shall indemnify and hold harmless Lessor and its
agents, Lessor's master or ground lessor, partners and lenders, from and against
any and all claims for damage to the person or property of anyone or any entity
arising from Lessee's use of the Office Building Project, or from the conduct of
Lessee's business or from any activity, work or things done, permitted or
suffered by Lessee in or about the Premises or elsewhere and shall further
indemnify and hold harmless Lessor from and against any and all claims, costs
and expenses arising from any breach or default in the performance of any
obligation on Lessee's part to be performed under the terms of this Lease, or
arising from any act or omission of Lessee, or any of Lessee's agents,
contractors, employees, or invitees, and from and against all costs, attorney's
fees, expenses and liabilities incurred by Lessor as the result of any such use,
conduct, activity, work, things done, permitted or suffered, breach, default or
negligence, and in dealing reasonably therewith, including but not limited to
the defense or pursuit of any claim or any action or proceeding involved
therein; and in case any action or proceeding be brought against Lessor by
reason of any such matter, Lessee upon notice from Lessor shall defend the same
at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor
shall cooperate with Lessee in such defense. Lessor need not have first paid any
such claim in order to be so indemnified. Lessee, as a material part of the
consideration to Lessor, hereby assumes all risk of damage to property of Lessee
or injury to persons, in, upon or about the Office Building Project arising from
any cause and Lessee hereby waives all claims in respect thereof against Lessor.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessee hereby agrees that Lessor
shall not be liable for injury to Lessee's business or any loss of income
therefrom or for loss of or damage to the goods, wares, merchandise or other
property of Lessee, Lessee's employees, invitees, customers, or any other person
in or about the Premises or the Office Building Project, nor shall Lessor be
liable for injury to the person of Lessee, Lessee's employees, agents or
contractors, whether such damage or injury is caused by or results from theft,
fire, steam, electricity, gas, water or rain, or from the breakage, leakage,
obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing,
air conditioning or lighting fixtures, or from any other cause, whether said
damage or injury results from conditions arising upon the Premises or upon other
portions of the Office Building Project, or from other sources or places, or
from new construction or the repair, alteration or improvement of any part of
the Office Building Project, or of the equipment, fixtures or appurtenances
applicable thereto, and regardless of whether the cause of such damage or injury
or the means of repairing the same is inaccessible, Lessor shall not be liable
for any damages arising from any act or neglect of any other lessee, occupant or
user of the Office Building Project, nor from the failure of Lessor to enforce
the provisions of any other lease of any other lessee of the Office Building
Project.
8.9 NO REPRESENTATION OF ADEQUATE COVERAGE. Lessor makes no
representation that limits or forms of coverage of insurance specified in this
paragraph 8 are adequate to cover Lessee's property or obligations under this
Lease.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "Premises Damage" shall mean if the Premises are damaged or
destroyed to any extent.
(b) "Premises Building Partial Damage" shall mean if the Building of
which the Premises are a part is damaged or destroyed to the extent that the
cost to repair is less than fifty percent (50%) of the then Replacement Cost of
the building.
(c) "Premises Building Total Destruction" shall mean the Building of
which the Premises are a part is damaged or destroyed to the extent that the
cost to repair is fifty percent (50%) or more of the then Replacement Cost of
the Building.
(d) "Office Building Project Buildings" shall mean all of the
buildings on the Office Building Project site.
(e) "Office Building Project Buildings Total Destruction" shall mean
if the Office Building Project Buildings are damaged or destroyed to the extent
that the cost of repair is fifty percent (50%) or more of the then Replacement
Cost of the Office Building Project Buildings.
(f) "Insured Loss" shall mean damage or destruction which was caused
by an event required to be covered by the insurance described in paragraph 8.
The fact that an Insured Loss has a deductible amount shall not make the loss an
uninsured loss.
(g) "Replacement Cost" shall mean the amount of money necessary to
be spent in order to repair or rebuild the damaged area to the condition that
existed immediately prior to the damage occurring, excluding all improvements
made by lessees, other than those installed by Lessor at Lessee's expense.
Initials: ____
____
FULL SERVICE-GROSS
PAGE 4 of 10 PAGES
<PAGE> 5
9.2 PREMISES DAMAGE; PREMISES BUILDING PARTIAL DAMAGE.
(a) Insured Loss: Subject to the provisions of paragraphs 9.4 and
9.5, if at any time during the term of this Lease there is damage which is an
Insured Loss and which falls into the classification of either Premises Damage
or Premises Building Partial Damage, then Lessor shall, as soon as reasonably
possible and to the extent the required materials and labor are readily
available through usual commercial channels, at Lessor's expense, repair such
damage (but not Lessee's fixtures, equipment or tenant improvements originally
paid for by Lessee) to its condition existing at the time of the damage, and
this Lease shall continue in full force and effect.
(b) Uninsured Loss: Subject to the provisions of paragraphs 9.4 and
9.5, if at any time during the term of this Lease there is damage which is not
an Insured Loss and which falls within the classification of Premises Damage or
Premises Building Partial Damage, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense), which
damage prevents Lessee from making any substantial use of the Premises, Lessor
may at Lessor's option either (i) repair such damage as soon as reasonably
possible at Lessor's expense, in which event this Lease shall continue in full
force and effect, or (ii) give written notice to Lessee within thirty (30) days
after the date of occurrence of such damage of Lessor's intention to cancel and
terminate this Lease, in which case this Lease shall terminate as of the date of
the occurrence of such damage.
9.3 PREMISES BUILDING TOTAL DESTRUCTION; OFFICE BUILDING PROJECT TOTAL
DESTRUCTION. Subject to the provisions of paragraphs 9.4 and 9.5, if at any time
during the term of this Lease there is damage, whether or not it is an Insured
Loss, which falls into the classifications of either (i) Premises Building Total
Destruction, or (ii) Office Building Project Total Destruction, then Lessor may
at Lessor's option either (i) repair such damage or destruction as soon as
reasonably possible at Lessor's expense (to the extent the required materials
are readily available through usual commercial channels) to its condition
existing at the time of the damage, but not Lessee's fixtures, equipment or
tenant improvements, and this Lease shall continue in full force and effect, or
(ii) give written notice to Lessee within thirty (30) days after the date of
occurrence of such damage of Lessor's intention to cancel and terminate this
Lease, in which case this Lease shall terminate as of the date of the occurrence
of such damage.
9.4 DAMAGE NEAR END OF TERM.
(a) Subject to paragraph 9.4(b), if at any time during the last
twelve (12) months of the term of this Lease there is substantial damage to the
Premises, Lessor may at Lessor's option cancel and terminate this Lease as of
the date of occurrence of such damage by giving written notice to Lessee of
Lessor's election to do so within 30 days after the date of occurrence of such
damage.
(b) Notwithstanding paragraph 9.4(a), in the event that Lessee has
an option to extend or renew this Lease, and the time within which said option
may be exercised has not yet expired, Lessee shall exercise such option, if it
is to be exercised at all, no later than twenty (20) days after the occurrence
of an Insured Loss falling within the classification of Premises Damage during
the last twelve (12) months of the term of this Lease. If Lessee duly exercises
such option during said twenty (20) day period, Lessor shall, at Lessor's
expense, repair such damage, but not Lessee's fixtures, equipment or tenant
improvements, as soon as reasonably possible and this Lease shall continue in
full force and effect. If Lessee fails to exercise such option during said
twenty (20) day period, then Lessor may at Lessor's option terminate and cancel
this Lease as of the expiration of said twenty (20) day period by giving written
notice to Lessee of Lessor's election to do so within ten (10) days after the
expiration of said twenty (20) day period, notwithstanding any term or provision
in the grant of option to the contrary.
9.5 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) In the event Lessor repairs or restores the Building or Premises
pursuant to the provisions of this paragraph 9, and any part of the Premises are
not usable (including loss of use due to loss of access or essential services),
the rent payable hereunder (including Lessee's Share of Operating Expense
Increase) for the period during which such damage, repair or restoration
continues shall be abated, provided (1) the damage was not the result of the
negligence of Lessee, and (2) such abatement shall only be to the extent the
operation and profitability of Lessee's business as operated from the Premises
is adversely affected. Except for said abatement of rent, if any, Lessee shall
have no claim against Lessor for any damage suffered by reason of any such
damage, destruction, repair or restoration.
(b) If Lessor shall be obligated to repair or restore the Premises
or the Building under the provisions of this Paragraph 9 and shall not commence
such repair or restoration within ninety (90) days after such occurrence, or if
Lessor shall not complete the restoration and repair within six (6) months after
such occurrence, Lessee may at Lessee's option cancel and terminate this Lease
by giving Lessor written notice of Lessee's election to do so at any time prior
to the commencement or completion, respectively, of such repair or restoration.
In such event this Lease shall terminate as of the date of such notice.
(c) Lessee agrees to cooperate with Lessor in connection with any
such restoration and repair, including but not limited but not limited to the
approval and/or execution of plans and specifications required.
9.6 TERMINATION - ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this paragraph 9, an equitable adjustment shall be made concerning
advance rent and any advance payments made by Lessee to Lessor. Lessor shall, in
addition, return to Lessee so much of Lessee's security deposit as has not
theretofore been applied by Lessor.
9.7 WAIVER. Lessor and Lessee waive the provisions of any statute which
relate to termination of leases when leased property is destroyed and agree that
such event shall be governed by the terms of this Lease.
10. REAL PROPERTY TAXES.
10.1 PAYMENT OF TAXES. Lessor shall pay the real property tax, as
defined in paragraph 10.3, applicable to the Office Building Project subject to
reimbursement by Lessee of Lessee's Share of such taxes in accordance with the
provisions of paragraph 4.2, except as otherwise provided in paragraph 10.2.
10.2 ADDITIONAL IMPROVEMENTS. Lessee shall not be responsible for paying
any increase in real property tax specified in the tax assessor's records and
work sheets as being caused by additional improvements placed upon the Office
Building Project by other lessees or by Lessor for the exclusive enjoyment of
any other lessee. Lessee shall, however, pay to Lessor at the time that
Operating Expenses are payable under paragraph 4.2(c) the entirety of any
increase in real property tax if assessed solely by reason of additional
improvements placed upon the Premises by Lessee or at Lessee's request.
10.3 DEFINITION OF "REAL PROPERTY TAX." As used herein, the term "real
property tax" shall include any form of real estate tax or assessment, general,
special, ordinary or extraordinary, and any license fee, commercial rental tax,
improvement bond or bonds, levy or tax (other than inheritance, personal income
or estate taxes) imposed on the Office Building Project or any portion thereof
by any authority having the direct or indirect power to tax, including any city,
county, state or federal government, or any school, agricultural, sanitary,
fire, street, drainage or other improvement district thereof, as against any
legal or equitable interest of Lessor in the Office Building Project or in any
portion thereof, as against Lessor's right to rent or other income therefrom,
and as against Lessor's business of leasing the Office Building Project. The
term "real property tax" shall also include any tax, fee, levy, assessment or
charge (i) in substitution of, partially or totally, any tax, fee, levy,
assessment or charge hereinabove included within the definition of "real
property tax," or (ii) the nature of which was hereinbefore included within the
definition of "real property tax," or (iii) which is imposed for a service or
right not charged prior to June 1, 1978, or, if previously charged, has been
increased since June 1, 1978, or (iv) which is imposed as a result of a change
in ownership, as defined by applicable local statutes for property tax purposes,
of the Office Building Project or which is added to a tax or charge hereinbefore
included within the definition of real property tax by reason of such change of
ownership, or (v) which is imposed by reason of this transaction, any
modifications or changes hereto, or any transfers hereof.
10.4 JOINT ASSESSMENT. If the improvements or property, the taxes for
which are to be paid separately by Lessee under paragraph 10.2 or 10.5 are not
separately assessed, Lessee's portion of that tax shall be equitably determined
by Lessor from the respective valuations assigned in the assessor's work sheets
or such other information (which may include the cost of construction) as may be
reasonably available. Lessor's reasonable determination thereof, in good faith,
shall be conclusive.
10.5 PERSONAL PROPERTY TAXES.
(a) Lessee shall pay prior to delinquency all taxes assessed against
and levied upon trade fixtures, furnishings, equipment and all other personal
property of Lessee contained in the Premises or elsewhere.
(b) If any of Lessee's said personal property shall be assessed with
Lessor's real property, Lessee shall pay to Lessor the taxes attributable to
Lessee within ten (10) days after receipt of a written statement setting forth
the taxes applicable to Lessee's property.
11. UTILITIES.
11.1 SERVICES PROVIDED BY LESSOR. Lessor shall provide heating,
ventilation, air conditioning, and janitorial service as reasonably required,
reasonable amounts of electricity for normal lighting and office machines, water
for reasonable and normal drinking and lavatory use, and replacement light bulbs
and/or fluorescent tubes and ballasts for standard overhead fixtures.
11.2 SERVICES EXCLUSIVE TO LESSEE. Lessee shall pay for all water, gas,
heat, light, power, telephone and other utilities and services specially or
exclusively supplied and/or metered exclusively to the Premises or to Lessee,
together with any taxes thereon. If any such services are not separately metered
to the Premises, Lessee shall pay at Lessor's option, either Lessee's Share or a
reasonable proportion to be determined by Lessor of all charges jointly metered
with other premises in the Building.
11.3 HOURS OF SERVICE. Said services and utilities shall be provided
during generally accepted business days and hours or such other days or hours as
may hereafter be set forth. Utilities and services required at other times shall
be subject to advance request and reimbursement by Lessee to Lessor of the cost
thereof.
Initials: ____
____
FULL SERVICE-GROSS
PAGE 5 of 10 PAGES
<PAGE> 6
11.4 EXCESS USAGE BY LESSEE. Lessee shall not make connection to the
utilities except by or through existing outlets and shall not install or use
machinery or equipment in or about the Premises that uses excess water, lighting
or power, or suffer or permit any act that causes extra burden upon the
utilities or services, including but not limited to security services, over
standard office usage for the Office Building Project. Lessor shall require
Lessee to reimburse Lessor for any excess expenses or costs that may arise out
of a breach of this subparagraph by Lessee. Lessor may, in its sole discretion,
install at Lessee's expense supplemental equipment and/or separate metering
applicable to Lessee's excess usage or loading.
11.5 INTERRUPTIONS. There shall be no abatement of rent and Lessor shall
not be liable in any respect whatsoever for the inadequacy, stoppage,
interruption or discontinuance of any utility or service due to riot, strike,
labor dispute, breakdown, accident, repair or other cause beyond Lessor's
reasonable control or in cooperation with governmental request or directions.
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Lessee's interest in the Lease or in the Premises,
without Lessor's prior written consent, which Lessor shall not unreasonably
withhold. Lessor shall respond to Lessee's request for consent hereunder in a
timely manner and any attempted assignment, transfer, mortgage, encumbrance or
subletting without such consent shall be void, and shall constitute a material
default and breach of this Lease without the need for notice to Lessee under
paragraph 13.1. "Transfer" within the meaning of this paragraph 12 shall include
the transfer or transfers aggregating: (a) if Lessee is a corporation, more than
twenty-five percent (25%) of the voting stock of such corporation, or (b) if
Lessee is a partnership, more than twenty-five percent (25%) of the profit and
loss participation in such partnership.
12.2 LESSEE AFFILIATE. Notwithstanding the provisions of paragraph 12.1
hereof, Lessee may assign or sublet the Premises, or any portion thereof,
without Lessor's consent, to any corporation which controls, is controlled by or
is under common control with Lessee, or to any corporation resulting from the
merger or consolidation with Lessee, or to any person or entity which acquires
all the assets of Lessee as a going concern of the business that is being
conducted on the Premises, all of which are referred to as "Lessee Affiliate";
provided that before such assignment shall be effective, (a) said assignee shall
assume, in full, the obligations of Lessee under this Lease and (b) Lessor shall
be given written notice of such assignment and assumption. Any such assignment
shall not, in any way, affect or limit the liability of Lessee under the terms
of this Lease even if after such assignment or subletting the terms of this
Lease are materially changed or altered without the consent of Lessee, the
consent of whom shall not be necessary.
12.3 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.
(a) Regardless of Lessor's consent, no assignment or subletting
shall release Lessee of Lessee's obligations hereunder or alter the primary
liability of Lessee to pay the rent and other sums due Lessor hereunder
including Lessee's Share of Operating Expense Increase, and to perform all other
obligations to be performed by Lessee hereunder.
(b) Lessor may accept rent from any person other than Lessee pending
approval or disapproval of such assignment.
(c) Neither a delay in the approval or disapproval of such
assignment or subletting, nor the acceptance of rent, shall constitute a waiver
or estoppel of Lessor's right to exercise its remedies for the breach of any of
the terms or conditions of this paragraph 12 or this Lease.
(d) If Lessee's obligations under this Lease have been guaranteed by
third parties, then an assignment or sublease, and Lessor's consent thereto,
shall not be effective unless said guarantors give their written consent to such
sublease and the terms thereof.
(e) The consent by Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or to
any subsequent or successive assignment or subletting by the sublessee. However,
Lessor may consent to subsequent sublettings and assignments of the sublease or
any amendments or modifications thereto without notifying Lessee or anyone else
liable on the Lease or sublease and without obtaining their consent and such
action shall not relieve such persons from liability under this Lease or said
sublease; however, such persons shall not be responsible to the extent any such
amendment or modification enlarges or increases the obligations of the Lessee or
sublessee under this Lease or such sublease.
(f) In the event of any default under this Lease, Lessor may proceed
directly against Lessee, any guarantors or any one else responsible for the
performance of this Lease, including the sublessee, without first exhausting
Lessor's remedies against any other person or entity responsible therefor to
Lessor, or any security held by Lessor or Lessee.
(g) Lessor's written consent to any assignment or subletting of the
Premises by Lessee shall not constitute an acknowledgement that no default then
exists under this Lease of the obligations to be performed by Lessee nor shall
such consent be deemed a waiver of any then existing default, except as may be
otherwise stated by Lessor at the time.
(h) The discovery of the fact that any financial statement relied
upon by Lessor in giving its consent to an assignment or subletting was
materially false shall, at Lessor's election, render Lessor's said consent null
and void.
12.4 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING.
Regardless of Lessor's consent, the following terms and conditions shall apply
to any subletting by Lessee of all or any part of the Premises and shall be
deemed included in all subleases under this Lease whether or not expressly
incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease heretofore or
hereafter made by Lessee, and Lessor may collect such rent and income and apply
same toward Lessee's obligations under this Lease; provided, however, that until
a default shall occur in the performance of Lessee's obligations under this
Lease, Lessee may receive, collect and enjoy the rents accruing under such
sublease. Lessor shall not, by reason of this or any other assignment of such
sublease to Lessor nor by reason of the collection of the rents from a
sublessee, be deemed liable to the sublessee for any failure of Lessee to
perform and comply with any of Lessee's obligations to such sublessee under such
sublease. Lessee hereby irrevocably authorizes and directs any such sublessee,
upon receipt of a written notice from Lessor stating that a default exists in
the performance of Lessee's obligations under this Lease, to pay to Lessor the
rents due and to become due under the sublease. Lessee agrees that such
sublessee shall have the right to rely upon any such statement and request from
Lessor, and that such sublessee shall pay such rents to Lessor without any
obligation or right to inquire as to whether such default exists and
notwithstanding any notice from or claim from Lessee to the contrary, Lessee
shall have no right or claim against said sublessee or Lessor for any such rents
so paid by said sublessee to Lessor.
(b) No sublease entered into by Lessee shall be effective unless and
until it has been approved in writing by Lessor. In entering into any sublease,
Lessee shall use only such form of sublessee as is satisfactory to Lessor, and
once approved by Lessor, such sublease shall not be changed or modified without
Lessor's prior written consent. Any sublease shall, by reason of entering into a
sublease under this Lease, be deemed, for the benefit of Lessor, to have assumed
and agreed to conform and comply with each and every obligation herein to be
performed by Lessee other than such obligations as are contrary to or
inconsistent with provisions contained in a sublease to which Lessor has
expressly consented in writing.
(c) In the event Lessee shall default in the performance of its
obligations under this Lease, Lessor at its option and without any obligation to
do so, may require any sublessee to attorn to Lessor, in which event Lessor
shall undertake the obligations of Lessee under such sublease from the time of
the exercise of said option to the termination of such sublease; provided,
however, Lessor shall not be liable for any prepaid rents or security deposit
paid by such sublessee to Lessee or for any other prior defaults of Lessee under
such sublease.
(d) No sublessee shall further assign or sublet all or any part of
the Premises without Lessor's prior written consent.
(e) With respect to any subletting to which lessor has consented,
Lessor agrees to deliver a copy of any notice of default by Lessee to the
sublessee. Such sublessee shall have the right to cure a default of Lessee
within three (3) days after service of said notice of default upon such
sublessee, and the sublessee shall have a right of reimbursement and offset from
and against Lessee for any such defaults cured by the sublessee.
12.5 LESSOR'S EXPENSES. In the event Lessee shall assign or sublet the
Premises or request the consent of Lessor to any assignment or subletting or if
Lessee shall request the consent of Lessor for any act Lessee proposes to do
then Lessee shall pay Lessor's reasonable costs and expenses incurred in
connection therewith, including attorneys', architects', engineers' or other
consultants' fees.
12.6 CONDITIONS TO CONSENT. Lessor reserves the right to condition any
approval to assign or sublet upon Lessor's determination that (a) the proposed
assignee or sublessee shall conduct a business on the Premises of a quality
substantially equal to that of Lessee and consistent with the general character
of the other occupants of the Office Building Project and not in violation of
any exclusives or rights then held by other tenants, and (b) the proposed
assignee or sublessee be at least as financially responsible as Lessee was
expected to be at the time of the execution of this Lease or of such assignment
or subletting, whichever is greater.
13. DEFAULT; REMEDIES.
13.1 DEFAULT. The occurrence of any one or more of the following events
shall constitute a material default of this Lease by Lessee:
(a) The vacation or abandonment of the Premises by Lessee. Vacation
of the Premises shall include the failure to occupy the Premises for a
continuous period of sixty (60) days or more, whether or not the rent is paid.
(b) The breach by Lessee of any of the covenants, conditions or
provisions of paragraphs 7.3(a), (b) or (d) (alterations), 12.1 (assignment or
subletting), 13.1(a) (vacation or abandonment), 13.1(e) (insolvency), 13.1(f)
(false statement), 16(a) (estoppel certificate), 30(b) (subordination), 33
(auctions), or 41.1 (easements), all of which are hereby deemed to be material,
non-curable defaults without the necessity of any notice by Lessor to Lessee
thereof.
(c) The failure by Lessee to make any payment of rent or any other
payment required to be made by Lessee hereunder, as and when due, where such
failure shall continue for a period of three (3) days after written notice
thereof from Lessor to Lessee. In the event that Lessor serves Lessee with a
Notice to Pay Rent or Quit pursuant to applicable Unlawful Detainer statutes
such Notice to Pay Rent or Quit shall also constitute the notice required by
this subparagraph.
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(d) The failure by Lessee to observe or perform any of the
covenants, conditions or provisions of this Lease to be observed or performed by
Lessee other than those referenced in subparagraphs (b) and (c), above, where
such failure shall continue for a period of thirty (30) days after written
notice thereof from Lessor to Lessee; provided, however, that if the nature of
Lessee's noncompliance is such that more than thirty (30) days are reasonably
required for its cure, then Lessee shall not be deemed to be in default if
Lessee commenced such cure within said thirty (30) day period and thereafter
diligently pursues such cure to completion. To the extent permitted by law, such
thirty (30) day notice shall constitute the sole and exclusive notice required
to be given to Lessee under applicable Unlawful Detainer statutes.
(e) (i) The making by Lessee of any general arrangement or general
assignment for the benefit of creditors, (ii) Lessee becoming a "debtor" as
defined in 11 U.S.C. Section 101 or any successor statute thereto (unless, in
the case of a petition filed against Lessee, the same is dismissed within sixty
(60) days, (iii) the appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where possession is not restored to Lessee within thirty
(30) days; or (iv) the attachment, execution or other judicial seizure of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where such seizure is not discharged within thirty (30)
days. In the event that any provision of this paragraph 13.1(e) is contrary to
any applicable law, such provision shall be of no force or effect.
(f) The discovery by Lessor that any financial statement given to
Lessor by Lessee, or its successor in interest or by any guarantor of Lessee's
obligation hereunder, was materially false.
13.2 REMEDIES. In the event of any material default or breach of this
Lease by Lessee, Lessor may at any time thereafter, with or without notice or
demand and without limiting Lessor in the exercise of any right or remedy which
Lessor may have by reason of such default:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Lessee shall immediately surrender possession of the Premises to Lessor. In such
event Lessor shall be entitled to recover from Lessee all damages incurred by
Lessor by reason of Lessee's default including, but not limited to, the cost of
recovering possession of the Premises, expenses of reletting, including
necessary renovation and alteration of the Premises, reasonable attorney's fees,
and any real estate commission actually paid; the worth at the time of award by
the court having jurisdiction thereof of the amount by which the unpaid rent for
the balance of the term after the time of such award exceeds the amount of such
rental loss for the same period that Lessee proves could be reasonably avoided;
that portion of the leasing commission paid by Lessor pursuant to paragraph 15
applicable to the unexpired term of this Lease.
(b) Maintain Lessee's right to possession in which case this Lease
shall continue in effect whether or not Lessee shall have vacated or abandoned
the Premises. In such event Lessor shall be entitled to enforce all of Lessor's
rights and remedies under this Lease, including the right to recover the rent as
it becomes due hereunder.
(c) Pursue any other remedy now or hereafter available to Lessor
under the laws or judicial decisions of the state wherein the Premises are
located. Unpaid installments of rent and other unpaid monetary obligations of
Lessee under the terms of this Lease shall bear interest from the date due at
the maximum rate then allowable by law.
13.3 DEFAULT BY LESSOR. Lessor shall not be in default unless Lessor
fails to perform obligations required of Lessor within a reasonable time, but in
no event later than thirty (30) days after written notice by Lessee to Lessor
and to the holder of any first mortgage or deed of trust covering the Premises
whose name and address shall have theretofore been furnished to Lessee in
writing, specifying wherein Lessor has failed to perform such obligation;
provided, however, that if the nature of Lessor's obligation is such that more
than thirty (30) days are required for performance then Lessor shall not be in
default if Lessor commences performance within such 30-day period and thereafter
diligently pursues the same to completion.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee to Lessor of Base Rent, Lessee's Share of Operating Expense Increase or
other sums due hereunder will cause Lessor to incur costs not contemplated by
this Lease, the exact amount of which will be extremely difficult to ascertain.
Such costs include, but are not limited to, processing and accounting charges,
and late charges which may be imposed on Lessor by the terms of any mortgage or
trust deed covering the Office Building Project. Accordingly, if any installment
of Base Rent, Operating Expense Increase, or any other sum due from Lessee shall
not be received by Lessor or Lessor's designee within ten (10) days after such
amount shall be due, then, without any requirement for notice to Lessee, Lessee
shall pay to Lessor a late charge equal to 6% of such overdue amount. The
parties hereby agree that such late charge represents a fair and reasonable
estimate of the costs Lessor will incur by reason of late payment by Lessee.
Acceptance of such late charge by Lessor shall in no event constitute a waiver
of Lessee's default with respect to such overdue amount, nor prevent Lessor from
exercising any of the other rights and remedies granted hereunder.
14. CONDEMNATION. If the Premises or any portion thereof or the Office
Building Project are taken under the power of eminent domain, or sold under the
threat of the exercise of said power (all of which are herein called
"condemnation"), this Lease shall terminate as to the part so taken as of the
date the condemning authority takes title or possession, whichever first occurs;
provided that if so much of the Premises or the Office Building Project are
taken by such condemnation as would substantially and adversely affect the
operation and profitability of Lessee's business conducted from the Premises,
Lessee shall have the option, to be exercised only in writing within thirty (30)
days after Lessor shall have given Lessee written notice of such taking (or in
the absence of such notice, within thirty (30) days after the condemning
authority shall have taken possession), to terminate this Lease as of the date
the condemning authority takes such possession. If Lessee does not terminate
this Lease in accordance with the foregoing, this Lease shall remain in full
force and effect as to the portion of the Premises remaining, except that the
rent and Lessee's Share of Operating Expense Increase shall be reduced in the
proportion that the floor area of the Premises taken bears to the total floor
area of the Premises. Common Areas taken shall be excluded from the Common Areas
usable by Lessee and no reduction of rent shall occur with respect thereto or by
reason thereof. Lessor shall have the option in its sole discretion to terminate
this Lease as of the taking of possession by the condemning authority, by giving
written notice to Lessee of such election within thirty (30) days after receipt
of notice of a taking by condemnation of any part of the Premises or the Office
Building Project. Any award for the taking of all or any part of the Premises or
the Office Building Project under the power of eminent domain or any payment
made under threat of the exercise of such power shall be the property of Lessor,
whether such award shall be made as compensation for diminution in value of the
leasehold or for the taking of the fee, or as severance damages; provided,
however that Lessee shall be entitled to any separate award for loss of or
damage to Lessee's trade fixtures, removable personal property and unamortized
tenant improvements that have been paid for by Lessee. For that purpose the cost
of such improvements shall be amortized over the original term of this Lease
excluding any options. In the event that this Lease is not terminated by reason
of such condemnation, Lessor shall to the extent of severance damages received
by Lessor in connection with such condemnation, repair any damage to the
Premises caused by such condemnation except to the extent that Lessee has been
reimbursed therefor by the condemning authority. Lessee shall pay any amount in
excess of such severance damages required to complete such repair.
15. BROKER'S FEE.
(a) The brokers involved in this transaction are none as "listing
broker" and none as "cooperating broker" licensed real estate broker(s). A
"cooperating broker" is defined as any broker other than the listing broker
entitled to a share of any commission arising under this Lease. Upon execution
of this Lease by both parties, Lessor shall pay to said brokers jointly, or in
such separate shares as they may mutually designate in writing, a fee as set
forth in a separate agreement between Lessor and said broker(s), or in the event
there is no separate agreement between Lessor and said broker(s), the sum of
$ none , for brokerage services rendered by said broker(s) to Lessor in this
transaction.
(b) Lessor further agrees that (i) if Lessee exercises any Option, as
defined in paragraph 39.1 of this Lease, which is granted to Lessee under this
Lease, or any subsequently granted option which is substantially similar to an
Option granted to Lessee under this Lease, or (ii) if Lessee acquires any rights
to the Premises or other premises described in this Lease which are
substantially similar to what Lessee would have acquired had an Option herein
granted to Lessee been exercised, or (iii) if Lessee remains in possession of
the Premises after the expiration of the term of this Lease after having failed
to exercise an Option, or (iv) if said broker(s) are the procuring cause of any
other lease or sale entered into between the parties pertaining to the Premises
and/or any adjacent property in which Lessor has an interest, or (v) if the Base
Rent is increased, whether by agreement or operation of an escalation clause
contained herein, then as to any of said transactions or rent increases, Lessor
shall pay said broker(s) a fee in accordance with the schedule of said broker(s)
in effect at the time of execution of this Lease. Said fee shall be paid at the
time such increased rental is determined.
(c) Lessor agrees to pay said fee not only on behalf of Lessor but also
on behalf of any person, corporation, association, or other entity having an
ownership interest in said real property of any part thereof, when such fee is
due hereunder. Any transferee of Lessor's interest in this Lease, whether such
transfer is by agreement or by operation of law, shall be deemed to have assumed
Lessor's obligation under this paragraph 15. Each listing and cooperating broker
shall be a third party beneficiary of the provisions of this paragraph 15 to the
extent of their interest in any commission arising under this Lease and may
enforce that right directly against Lessor; provided, however, that all brokers
having a right to any part of such total commission shall be a necessary party
to any suit with respect thereto.
(d) Lessee and Lessor each represent and warrant to the other that
neither has had any dealings with any person, firm, broker or finder (other than
the person(s), if any, whose names are set forth in paragraph 15(a), above) in
connection with the negotiation of this Lease and/or the consummation of the
transaction contemplated hereby, and no other broker or other person, firm or
entity is entitled to any commission or finder's fee in connection with said
transaction and Lessee and Lessor do each hereby indemnify and hold the other
harmless from and against any costs, expenses, attorneys' fees or liability for
compensation or charges which may be claimed by any such unnamed broker, finder
or other similar party by reason of any dealings or actions of the indemnifying
party.
16. ESTOPPEL CERTIFICATE.
(a) Each party (as "responding party") shall at any time upon not less
than ten (10) days' prior written notice from the other party ("requesting
party") execute, acknowledge and deliver to the requesting party a statement in
writing (i) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and certifying
that this Lease, as so modified, is in full force and effect) and the date
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to which the rent and other charges are paid in advance, if any, and (ii)
acknowledging that there are not, to the responding party's knowledge, any
uncured defaults on the part of the requesting party, or specifying such
defaults if any are claimed. Any such statement may be conclusively relied upon
by any prospective purchaser or encumbrancer of the Office Building Project or
of the business of Lessee.
(b) At the requesting party's option, the failure to deliver such
statement within such time shall be a material default of this Lease by the
party who is to respond, without any further notice to such party, or it shall
be conclusive upon such party that (i) this Lease is in full force and effect,
without modification except as may be represented by the requesting party, (ii)
there are no uncured defaults in the requesting party's performance, and (iii)
if Lessor is the requesting party, not more than one month's rent has been paid
in advance.
(c) If Lessor desires to finance, refinance, or sell the Office Building
Project, or any part thereof, Lessee hereby agrees to deliver to any lender or
purchaser designated by Lessor such financial statements of Lessee as may be
reasonably required by such lender or purchaser. Such statements shall include
the past three (3) years' financial statements of Lessee. All such financial
statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.
17. LESSOR'S LIABILITY. The term "Lessor" as used herein shall mean only the
owner or owners, at the time in question, of the fee title or a lessee's
interest in a ground lease of the Office Building Project, and except as
expressly provided in paragraph 15, in the event of any transfer of such title
or interest, Lessor herein named (and in case of any subsequent transfers then
the grantor) shall be relieved from and after the date of such transfer of all
liability as respects Lessor's obligations thereafter to be performed, provided
that any funds in the hands of Lessor or the then grantor at the time of such
transfer, in which Lessee has an interest, shall be delivered to the grantee.
The obligations contained in this Lease to be performed by Lessor shall, subject
as aforesaid, be binding on Lessor's successors and assigns, only during their
respective periods of ownership.
18. SEVERABILITY. The invalidity of any provision of this Lease as
determined by a court of competent jurisdiction shall in no way affect the
validity of any other provision hereof.
19. INTEREST ON PAST-DUE OBLIGATIONS. Except as expressly herein provided,
any amount due to Lessor not paid when due shall bear interest at the maximum
rate then allowable by law or judgments from the date due. Payment of such
interest shall not excuse or cure any default by Lessee under this Lease;
provided, however, that interest shall not be payable on late charges incurred
by Lessee nor on any amounts upon which late charges are paid by Lessee.
20. TIME OF ESSENCE. Time is of the essence with respect to the obligations\
to be performed under this Lease.
21. ADDITIONAL RENT. All monetary obligations of Lessee to Lessor under the
terms of this Lease, including but not limited to Lessee's Share of Operating
Expense Increase and any other expenses payable by Lessee hereunder shall be
deemed to be rent.
22. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No prior
or contemporaneous agreement or understanding pertaining to any such matter
shall be effective. This Lease may be modified in writing only, signed by the
parties in interest at the time of the modification. Except as otherwise stated
in this Lease, Lessee hereby acknowledges that neither the real estate broker
listed in paragraph 15 hereof nor any cooperating broker on this transaction nor
the Lessor or any employee or agents of any of said persons has made any oral or
written warranties or representations to Lessee relative to the condition or use
by Lessee of the Premises or the Office Building Project and Lessee acknowledges
that Lessee assumes all responsibility regarding the Occupational Safety Health
Act, the legal use and adaptability of the Premises and the compliance thereof
with all applicable laws and regulations in effect during the term of this
Lease.
23. NOTICES. Any notice required or permitted to be given hereunder shall be
in writing and may be given by personal delivery or by certified or registered
mail, and shall be deemed sufficiently given if delivered or addressed to Lessee
or to Lessor at the address noted below or adjacent to the signature of the
respective parties, as the case may be. Mailed notices shall be deemed given
upon actual receipt at the address required, or forty-eight hours following
deposit in the mail, postage prepaid, whichever first occurs. Either party may
by notice to the other specify a different address for notice purposes except
that upon Lessee's taking possession of the Premises, the Premises shall
constitute Lessee's address for notice purposes. A copy of all notices required
or permitted to be given to Lessor hereunder shall be concurrently transmitted
to such party or parties at such addresses as Lessor may from time to time
hereafter designate by notice to Lessee.
24. WAIVERS. No waiver by Lessor of any provision hereof shall be deemed a
waiver of any other provision hereof or of any subsequent breach by Lessee of
the same or any other provision. Lessor's consent to, or approval of, any act
shall not be deemed to render unnecessary the obtaining of Lessor's consent to
or approval of any subsequent act by Lessee. The acceptance of rent hereunder by
Lessor shall not be a waiver of any preceding breach by Lessee of any provision
hereof, other than the failure of Lessee to pay the particular rent so accepted,
regardless of Lessor's knowledge of such preceding breach at the time of
acceptance of such rent.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a "short form" memorandum of this
Lease for recording purposes.
26. HOLDING OVER. If Lessee, with Lessor's consent, remains in possession of
the Premises or any part thereof after the expiration of the term hereof, such
occupancy shall be a tenancy from month to month upon all the provisions of this
Lease pertaining to the obligations of Lessee, except that the rent payable
shall be two hundred percent (200%) of the rent payable immediately preceding
the termination date of this Lease, and all Options, if any, granted under the
terms of this Lease shall be deemed terminated and be of no further effect
during said month to month tenancy.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. COVENANTS AND CONDITIONS. Each provision of this Lease performable by
Lessee shall be deemed both a covenant and a condition.
29. BINDING EFFECT; CHOICE OF LAW. Subject to any provisions hereof
restricting assignment or subletting by Lessee and subject to the provisions of
paragraph 17, this Lease shall bind the parties, their personal representatives,
successors and assigns. This Lease shall be governed by the laws of the State
where the Office Building Project is located and any litigation concerning this
Lease between the parties hereto shall be initiated in the county in which the
Office Building Project is located.
30. SUBORDINATION.
(a) This Lease, and any Option or right of first refusal granted hereby,
at Lessor's option, shall be subordinate to any ground lease, mortgage, deed of
trust, or any other hypothecation or security now or hereafter placed upon the
Office Building Project and to any and all advances made on the security thereof
and to all renewals, modifications, consolidations, replacements and extensions
thereof. Notwithstanding such subordination, Lessee's right to quiet possession
of the Premises shall not be disturbed if Lessee is not in default and so long
as Lessee shall pay the rent and observe and perform all of the provisions of
this Lease, unless this Lease is otherwise terminated pursuant to its terms. If
any mortgagee, trustee or ground lessor shall elect to have this Lease and any
Options granted hereby prior to the lien of its mortgage, deed of trust or
ground lease, and shall give written notice thereof to Lessee, this Lease and
such Options shall be deemed prior to such mortgage, deed of trust or ground
lease, whether this Lease or such Options are dated prior or subsequent to the
date of said mortgage, deed of trust or ground lease or the date of recording
thereof.
(b) Lessee agrees to execute any documents required to effectuate an
attornment, a subordination, or to make this Lease or any Option granted herein
prior to the lien of any mortgage, deed of trust or ground lease, as the case
may be. Lessee's failure to execute such documents within ten (10) days after
written demand shall constitute a material default by Lessee hereunder without
further notice to Lessee or, at Lessor's option, Lessor shall execute such
documents on behalf of Lessee as Lessee's attorney-in-fact. Lessee does hereby
make, constitute and irrevocably appoint Lessor as Lessee's attorney-in-fact and
in Lessee's name, place and stead, to execute such documents in accordance with
this paragraph 30(b).
31. ATTORNEYS' FEES.
31.1 If either party or the broker(s) named herein bring an action to
enforce the terms hereof or declare rights hereunder, the prevailing party in
any such action, trial or appeal thereon, shall be entitled to his reasonable
attorneys' fees to be paid by the losing party as fixed by the court in the same
or a separate suit, and whether or not such action is pursued to decision or
judgment. The provisions of this paragraph shall inure to the benefit of the
broker named herein who seeks to enforce a right hereunder.
31.2 The attorneys' fee award shall not be computed in accordance with
any court fee schedule, but shall be such as to fully reimburse all attorneys'
fees reasonably incurred in good faith.
31.3 Lessor shall be entitled to reasonable attorneys' fees and all
other costs and expenses incurred in the preparation and service of notice of
default and consultations in connection therewith, whether or not a legal
transaction is subsequently commenced in connection with such default.
32. LESSOR'S ACCESS.
32.1 Lessor and Lessor's agent shall have the right to enter the
Premises at reasonable times for the purpose of inspecting the same, performing
any services required of Lessor, showing the same to prospective purchasers,
lenders, or lessees, taking such safety measures, erecting such scaffolding or
other necessary structures, making such alterations, repairs, improvements or
additions to the Premises or to the Office Building Project as Lessor may
reasonably deem necessary or desirable and the erecting, using and maintaining
of utilities, services, pipes and conduits through the Premises and/or other
premises as long as there is no material adverse effect to Lessee's use of the
Premises. Lessor may at any time place on or about the Premises or the Building
any ordinary "For Sale" signs and Lessor may at any time during the last 120
days of the term hereof place on or about the Premises any ordinary "For Lease"
signs.
32.2 All activities of Lessor pursuant to this paragraph shall be
without abatement of rent, nor shall Lessor have any liability to Lessee for the
same.
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32.3 Lessor shall have the right to retain keys to the Premises and to
unlock all doors in or upon the Premises other than to files, vaults and safes,
and in the case of emergency to enter the Premises by any reasonably appropriate
means, and any such entry shall not be deemed a forceable or unlawful entry or
detainer of the Premises or an eviction. Lessee waives any charges for damages
or injuries or interference with Lessee's property or business in connection
therewith.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises or the Common Areas
without first having obtained Lessor's prior written consent. Notwithstanding
anything to the contrary in this Lease, Lessor shall not be obligated to
exercise any standards of reasonableness in determining whether to grant such
consent. The holding of any auction on the Premises or Common Areas in violation
of this paragraph shall constitute a material default of this Lease.
34. SIGNS. Lessee shall not place any sign upon the Premises or the Office
Building Project without Lessor's prior written consent. Under no circumstances
shall Lessee place a sign on any roof of the Office Building Project.
35. MERGER. The voluntary or other surrender of this Lease by Lessee, or a
mutual cancellation thereof, or a termination by Lessor, shall not work a
merger, and shall, at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of Lessor, operate as an assignment to Lessor
of any or all of such subtenancies.
36. CONSENTS. Except for paragraphs 33 (auctions) and 34 (signs) hereof,
wherever in this Lease the consent of one party is required to an act of the
other party such consent shall not be unreasonably withheld or delayed.
37. GUARANTOR. In the event that there is a guarantor of this Lease, said
guarantor shall have the same obligations as Lessee under this Lease.
38. QUIET POSSESSION. Upon Lessee paying the rent for the Premises and
observing and performing all of the covenants, conditions and provisions on
Lessee's part to be observed and performed hereunder, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease. The individuals executing this Lease on behalf of
Lessor represent and warrant to Lessee that they are fully authorized and
legally capable of executing this Lease on behalf of Lessor and that such
execution is binding upon all parties holding an ownership interest in the
Office Building Project.
39. OPTIONS.
39.1 DEFINITION. As used in this paragraph the word "Option" has the
following meaning: (1) the right or option to extend the term of this Lease or
to renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (2) the option of right of first refusal to lease the
Premises or the right of first offer to lease the Premises or the right of first
refusal to lease other space within the Office Building Project or other
property of Lessor or the right of first offer to lease other space within the
Office Building Project or other property of Lessor; (3) the right or option to
purchase the Premises or the Office Building Project, or the right of first
refusal to purchase the Premises or the Office Building Project or the right of
first offer to purchase the Premises or the Office Building Project, or the
right or option to purchase other property of Lessor, or the right of first
refusal to purchase other property of Lessor or the right of first offer to
purchase other property of Lessor.
39.2 OPTIONS PERSONAL. Each Option granted to Lessee in this Lease is
personal to the original Lessee and may be exercised only by the original Lessee
while occupying the Premises who does so without the intent of thereafter
assigning this Lease or subletting the Premises or any portion thereof, and may
not be exercised or be assigned, voluntarily or involuntarily, by or to any
person or entity other than Lessee; provided, however, that an Option may be
exercised by or assigned to any Lessee Affiliate as defined in paragraph 12.2 of
this Lease. The Options, if any, herein granted to Lessee are not assignable
separate and apart from this Lease, nor may any Option be separated from this
Lease in any manner, either by reservation or otherwise.
39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple options
to extend or renew this Lease a later option cannot be exercised unless the
prior option to extend or renew this Lease has been so exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option, notwithstanding
any provision in the grant of Option to the contrary, (i) during the time
commencing from the date Lessor gives to Lessee a notice of default pursuant to
paragraph 13.1(c) or 13.1(d) and continuing until the noncompliance alleged in
said notice of default is cured, or (ii) during the period of time commencing on
the day after a monetary obligation to Lessor is due from Lessee and unpaid
(without any necessity for notice thereof to Lessee) and continuing until the
obligation is paid, or (iii) in the event that Lessor has given to Lessee three
or more notices of default under paragraph 13.1(c), or paragraph 13.1(d),
whether or not the defaults are cured, during the 12 month period of time
immediately prior to the time that Lessee attempts to exercise the subject
Option, (iv) if Lessee has committed any non-curable breach, including without
limitation those described in paragraph 13.1(b), or is otherwise in default of
any of the terms, covenants or conditions of this Lease.
(b) The period of time within which an Option may be exercised shall not
be extended or enlarged by reason of Lessee's inability to exercise an Option
because of the provisions of paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due and
timely exercise of the Option, if, after such exercise and during the term of
this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of Lessee
for a period of thirty (30) days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee), or (ii) Lessee fails to
commence to cure a default specified in paragraph 13.1(d) within thirty (30)
days after the date that Lessor gives notice to Lessee of such default and/or
Lessee fails thereafter to diligently prosecute said cure to completion, or
(iii) Lessor gives to Lessee three or more notices of default under paragraph
13.1(c), or paragraph 13.1(d), whether or not the defaults are cured, or (iv) if
Lessee has committed any non-curable breach, including without limitation those
described in paragraph 13.1(b), or is otherwise in default of any of the terms,
covenants and conditions of this Lease.
40. SECURITY MEASURES - LESSOR'S RESERVATIONS.
40.1 Lessee hereby acknowledges that Lessor shall have no obligation
whatsoever to provide guard service or other security measures for the benefit
of the Premises or the Office Building Project. Lessee assumes all
responsibility for the protection of Lessee, its agents, and invitees and the
property of Lessee and of Lessee's agents and invitees from acts of third
parties. Nothing herein contained shall prevent Lessor, at Lessor's sole option,
from providing security protection for the Office Building Project or any part
thereof, in which event the cost thereof shall be included within the definition
of Operation Expenses, as set forth in paragraph 4.2(b).
40.2 Lessor shall have the following rights:
(a) To change the name, address or title of the Office Building
Project or building in which the Premises are located upon not less than 90 days
prior written notice;
(b) To, at Lessee's expense, provide and install Building standard
graphics on the door of the Premises and such portions of the Common Areas as
Lessor shall reasonably deem appropriate;
(c) To permit any lessee the exclusive right to conduct any business
as long as such exclusive does not conflict with any rights expressly given
herein;
(d) To place such signs, notices or displays as Lessor reasonably
deems necessary or advisable upon the roof, exterior of the buildings or the
Office Building Project or on pole signs in the Common Areas;
40.3 Lessee shall not:
(a) Use a representation (photographic or otherwise) of the Building
or the Office Building Project or their name(s) in connection with Lessee's
business;
(b) Suffer or permit anyone, except in emergency, to go upon the
roof of the Building.
41. EASEMENTS.
41.1 Lessor reserves to itself the right, from time to time, to grant
such easements, rights and dedications that Lessor deems necessary or desirable,
and to cause the recordation of Parcel Maps and restrictions, so long as such
easements, rights, dedications, Maps and restrictions do not unreasonably
interfere with the use of the Premises by Lessee. Lessee shall sign any of the
aforementioned documents upon request of Lessor and failure to do so shall
constitute a material default of this Lease by Lessee without the need for
further notice to Lessee.
41.2 The obstruction of Lessee's view, air, or light by any structure
erected in the vicinity of the Building, whether by Lessor or third parties,
shall in no way affect this Lease or impose any liability upon Lessor.
42. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to
any amount or sum of money to be paid by one party to the other under the
provisions hereof, the party against whom the obligation to pay the money is
asserted shall have the right to make payment "under protest" and such payment
shall not be regarded as a voluntary payment, and there shall survive the right
on the part of said party to institute suit for recovery of such sum. If it
shall be adjudged that there was no legal obligation on the part of said party
to pay such sum or any part thereof, said party shall be entitled to recover
such sum or so much thereof as it was not legally required to pay under the
provisions of this Lease.
Initials: ____
____
FULL SERVICE-GROSS
PAGE 9 of 10 PAGES
<PAGE> 10
43. AUTHORITY. If Lessee is a corporation, trust, or general or limited
partnership, Lessee, and each individual executing this Lease on behalf of such
entity represent and warrant that such individual is duly authorized to execute
and deliver this Lease on behalf of said entity. If Lessee is a corporation,
trust or partnership, Lessee shall, within thirty (30) days after execution of
this Lease, deliver to Lessor evidence of such authority satisfactory to Lessor.
44. CONFLICT. Any conflict between the printed provisions, Exhibits or
Addenda of this Lease and the typewritten or handwritten provisions, if any,
shall be controlled by the typewritten or handwritten provisions.
45. NO OFFER. Preparation of this Lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to Lessee to lease.
This Lease shall become binding upon Lessor and Lessee only when fully executed
by both parties.
46. LENDER MODIFICATION. Lessee agrees to make such reasonable modifications
to this Lease as may be reasonably required by an institutional lender in
connection with the obtaining of normal financing or refinancing of the Office
Building Project.
47. MULTIPLE PARTIES. If more than one person or entity is named as either
Lessor or Lessee herein, except as otherwise expressly provided herein, the
obligations of the Lessor or Lessee herein shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee,
respectively.
48. WORK LETTER. This Lease is supplemented by that certain Work Letter of
even date executed by Lessor and Lessee, attached hereto as Exhibit C, and
incorporated herein by this reference.
49. ATTACHMENTS. Attached hereto are the following documents which
constitute a part of this Lease:
Exhibit A & B.
Lease Addendum consisting of paragraphs 50, 51, 52, 53 & 54.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS
LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN IT HAS BEEN PREPARED FOR SUBMISSION TO
YOUR ATTORNEY FOR HIS APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS
MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL
ESTATE BROKER OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY,
LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION
RELATING THERETO; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR
OWN LEGAL COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.
LESSOR LESSEE
DECATHLON BUILDING, a Partnership LOGICAL SERVICES INCORPORATED,
a California Corporation
By: /s/ Kenneth A. Robinson By: /s/ R. W. Ulrickson
-------------------------------- ----------------------------
Kenneth A. Robinson R.W. Ulrickson
Its: Managing Partner Its: President
By: By:
-------------------------------- ----------------------------
Its: Its:
--------------------------- ------------------------
Executed at San Jose, California Executed at San Jose, California
on August 26, 1996 on August 26, 1996
Address: 3190 S. Bascom Ave. #200 Address: 3190 S. Bascom Ave. #200
FULL SERVICE -- GROSS
PAGE 10 OF 10 PAGES
<PAGE> 11
STANDARD OFFICE LEASE
DECATHLON BUILDING
3235 Kifer Road
Santa Clara, CA
Suite 210
11,492 r.s.f.
FLOOR PLAN
[Schematic Drawing of Floor Plan]
EXHIBIT A
Initials: ______
______
FULL SERVICE -- GROSS
<PAGE> 12
RULES AND REGULATIONS FOR
STANDARD OFFICE LEASE
Dated: August 26, 1996
By and Between DECATHLON BUILDING, a Partnership & LOGICAL SERVICES
INCORPORATED, a California Corporation
GENERAL RULES
1. Lessee shall not suffer or permit the obstruction of any Common
Areas, including driveways, walkways and stairways.
2. Lessor reserves the right to refuse access to any persons Lessor in
good faith judges to be a threat to the safety, reputation, or property of the
Office Building Project and its occupants.
3. Lessee shall not make or permit any noise or odors that annoy or
interfere with other lessees or persons having business within the Office
Building Project.
4. Lessee shall not keep animals or birds within the Office Building
Project, and shall not bring bicycles, motorcycles or other vehicles into areas
not designated as authorized for same.
5. Lessee shall not make, suffer or permit litter except in appropriate
receptacles for that purpose.
6. Lessee shall not alter any lock or install new or additional locks or
bolts.
7. Lessee shall be responsible for the inappropriate use of any toilet
rooms, plumbing or other utilities. No foreign substances of any kind are to be
inserted therein.
8. Lessee shall not deface the walls, partitions or other surfaces of
the premises or Office Building Project.
9. Lessee shall not suffer or permit any thing in or around the Premises
or Building that causes excessive vibration or floor loading in any part of the
Office Building Project.
10. Furniture, significant freight and equipment shall be moved into or
out of the building only with the Lessor's knowledge and consent, and subject to
such reasonable limitations, techniques and timing, as may be designated by
Lessor. Lessee shall be responsible for any damage to the Office Building
Project arising from any such activity.
11. Lessee shall not employ any service or contractor for services or
work to be performed in the Building, except as approved by Lessor.
12. Lessor reserves the right to close and lock the Building on
Saturdays, Sundays and legal holidays, and on other days between the hours of
_____ P.M. and _____ A.M. of the following day. If Lessee uses the Premises
during such periods, Lessee shall be responsible for securely locking any doors
it may have opened for entry.
13. Lessee shall return all keys at the termination of its tenancy and
shall be responsible for the cost of replacing any keys that are lost.
14. No window coverings, shades or awnings shall be installed or used by
Lessee.
15. No Lessee, employee or invitee shall go upon the roof of the
Building.
16. Lessee shall not suffer or permit smoking or carrying of lighted
cigars or cigarettes in areas reasonably designated by Lessor or by applicable
governmental agencies as non-smoking areas.
17. Lessee shall not use any method of heating or air conditioning other
than as provided by Lessor.
18. Lessee shall not install, maintain or operate any vending machines
upon the Premises without Lessor's written consent.
19. The Premises shall not be used for lodging or manufacturing, cooking
or food preparation.
20. Lessee shall comply with all safety, fire protection and evacuation
regulations established by Lessor or any applicable governmental agency.
21. Lessor reserves the right to waive any one of these rules or
regulations, and/or as to any particular Lessee, and any such waiver shall not
constitute a waiver of any other rule or regulation or any subsequent
application thereof to such Lessee.
22. Lessee assumes all risks from theft or vandalism and agrees to keep
its Premises locked as may be required.
23. Lessor reserves the right to make such other reasonable rules and
regulations as it may from time to time deem necessary for the appropriate
operation and safety of the Office Building Project and its occupants. Lessee
agrees to abide by these and such rules and regulations.
PARKING RULES
1. Parking areas shall be used only for parking by vehicles no longer
than full size, passenger automobiles herein called "Permitted Size Vehicles."
Vehicles other than Permitted Size Vehicles are herein referred to as "Oversized
Vehicles."
2. Lessee shall not permit or allow any vehicles that belong to or are
controlled by Lessee or Lessee's employees, suppliers, shippers, customers, or
invitees to be loaded, unloaded, or parked in areas other than those designated
by Lessor for such activities.
3. Parking stickers or identification devices shall be the property of
Lessor and be returned to Lessor by the holder thereof upon termination of the
holder's parking privileges. Lessee will pay such replacement charge as is
reasonably established by Lessor for the loss of such devices.
4. Lessor reserves the right to refuse the sale of monthly
identification devices to any person or entity that willfully refuses to comply
with the applicable rules, regulations, laws and/or agreements.
5. Lessor reserves the right to relocate all or a part of parking spaces
from floor to floor, within one floor, and/or to reasonably adjacent offsite
location(s), and to reasonably allocate them between compact and standard size
spaces, as long as the same complies with applicable laws, ordinances and
regulations.
6. Users of the parking areas will obey all posted signs and park only
in the areas designated for vehicle parking.
7. Unless otherwise instructed, every person using the parking area is
required to park and lock his own vehicle. Lessor will not be responsible for
any damage to vehicles, injury to persons or loss of property, all of which
risks are assumed by the party using the parking area.
8. Validation, if established, will be permissible only by such method
or methods as Lessor and/or its licensee may establish at rates generally
applicable to visitor parking.
9. The maintenance, washing, waxing or cleaning of vehicles in the
parking structure or Common Areas is prohibited.
10. Lessee shall be responsible for seeing that all of its employees,
agents and invitees comply with the applicable parking rules, regulations, laws
and agreements.
11. Lessor reserves the right to modify these rules and/or adopt such
other reasonable and non-discriminatory rules and regulations as it may deem
necessary for the proper operation of the parking area.
12. Such parking use as is herein provided is intended merely as a
license only and no bailment is intended or shall be created hereby.
Initials: ____
____
FULL SERVICE -- GROSS
EXHIBIT B
PAGE 1 OF 1 PAGES
<PAGE> 13
LEASE ADDENDUM
This addendum amends and adds to the provision of the Lease dated August
12, 1996 between the DECATHLON BUILDING, a Partnership, as Lessor and LOGICAL
SERVICES INCORPORATED, a California Corporation, as Lessee, for the property
commonly known as 3235 Kifer Road, Suite 210, Santa Clara, California 95051. To
the extent of a conflict between this Addendum and the provisions of the Lease,
the provisions of this Addendum shall control. Except as expressly changed in
this Addendum, the provisions of the Lease shall remain the same.
50. Paragraph 1.7 Base Rent Increase is amended by adding the following:
"Commencing February 1, 1998 the monthly base rent will be
$16,663.40.
Commencing February 1, 1999 the monthly base rent will be
$17,238.00.
Commencing February 1, 2000 the monthly base rent will be
$17,812.60.
Commencing February 1, 2001 the monthly base rent will be
$18,387.20."
51. Paragraph 1.9 Security Deposit is amended by adding the following:
"The Eighteen Thousand, Three Hundred Eighty-Seven Dollars and
Twenty Cents ($18,387.20) security deposit will be paid
simultaneously with Lessee's execution of this Lease by Lessee
paying $2,873.00 to Lessor. Lessee will be credited with its
existing security deposit of $15,514.20 so that when combined with
the $2,873.00 paid herewith, Lessor will then be in possession of
$18,387.20 as Lessee's security deposit."
52. A new paragraph 52. Is added as follows:
"52. Decathlon Club Membership. Until January 18, 2001 (the date
that Lessor's current agreement with the Decathlon Club expires),
Lessor agrees to provide to Lessee two (2) fully paid family
memberships and an amount not to exceed ten (10) individual fitness
1
<PAGE> 14
memberships (for which tenant will pay the monthly dues) to the
Decathlon Club of Santa Clara, California. In the event that
Lessor's current agreement with the Decathlon Club is renewed or
extended until or past the expiration date of this Lease, the
memberships referred to in this paragraph shall continue until the
end of this Lease Term."
53. A new paragraph 53. is added as follows:
"53. Right to Terminate. Provided that Lessee is not then in default
of any provision of this Lease, Lessee shall have three (3) separate
options to terminate ("Lessee's Options to Terminate") the Lease.
Lessee may exercise Lessee's first option to terminate only by
giving Lessor written notice of its exercise of Lessee's first
option to terminate six (6) months prior to the date of such
termination, together with payment of a termination fee to Lessor in
the amount of Thirty Thousand Dollars ($30,000.00) (the "First
Termination Fee"). Lessee's notice of First Option to Terminate
cannot be given prior to February 1, 1999 nor later than April 30,
1999. In the event Lessee (1) fails to timely provide Lessor with a
notice of exercise of Lessee's Option to Terminate or (2) fails to
pay the Lessor the First Termination Fee simultaneously with the
notice, then at Lessor's sole election Lessee's notice shall be
ineffective, Lessee shall forfeit Lessee's First Option to Terminate
and this Lease shall continue in full force and effect.
Lessee shall have a second option to terminate ("Lessee's Second
Option to Terminate") the Lease only by giving Lessor written notice
of its exercise of Lessee's Second Option to Terminate six (6)
months prior to the date of such termination together with payment
of a termination fee to Lessor in the amount of Twenty Thousand
Dollars ($20,000.00) (the "Second Termination Fee"). Lessee's notice
of Second Option to Terminate cannot be given prior to February 1,
2000 nor later than April 30, 2000. In the event Lessee (1) fails to
timely provide Lessor with a notice of exercise of Lessee's Second
Option to Terminate or (2) fails to pay the Lessor the Second
Termination Fee simultaneously with the notice, then at Lessor's
sole election Lessee's notice shall be ineffective, Lessee shall
forfeit Lessee's Second Option to Terminate and this Lease shall
continue in full force and effect.
2
<PAGE> 15
Lessee shall have a third option to terminate ("Lessee's Third
Option to Terminate") only by giving Lessor written notice of its
exercise of Lessee's Third Option to Terminate three (3) months
prior to the date of such termination together with a termination
fee to Lessor in the amount of Ten Thousand ($10,000.00) (the "Third
Termination Fee"). Lessee's notice of Third Option to Terminate
cannot be given prior to February 1, 2001 nor later than April 30,
2001. In the event Lessee (1) fails to timely provide Lessor with a
notice of exercise of Lessee's Third Option to Terminate or (2)
fails to pay the Lessor the Third Termination Fee simultaneously
with the notice, then at Lessor's sole election Lessee's notice
shall be ineffective and this Lease shall continue in full force and
effect.
Once any of Lessee's options to terminate have been exercised and
proper notice has been given, said option/notice cannot be withdrawn
without Lessor's written approval. Said approval shall be at the
sole discretion of Lessor."
54. A new Paragraph 54 is added as follows:
"54. Additional rent from subletting. In the event that Lessee
elects to sublet a portion of the premises (not to exceed 4,500
rentable square feet) and said sublease is for an amount in excess
of the amount of rent per square foot that Lessee is then required
to pay to Lessor, then Lessee shall pay to Lessor Fifty Percent
(50%) of the positive difference, if any, between (1) all rent and
other consideration paid by the sublessee to Lessee less (2) the
rent payable to Lessor by Lessee for the portion of the premises
that are the subject of the sublease. Said consideration should be
payable to Lessor on the same basis, whether periodic or in lump
sum, that such consideration is paid to Lessee by the sublessee".
SIGNATURE PAGE TO FOLLOW
3
<PAGE> 16
Signature page to Lease Addendum Dated August 12, 1996.
LESSOR:
DECATHLON BUILDING, a Partnership
Dated: August 26, 1996 By: /s/ Kenneth A. Robinson
-------------------------------
Kenneth A. Robinson
Managing Partner
LESSEE:
LOGICAL SERVICES INCORPORATED, a
California Corporation
Dated: August 26, 1996 By: /s/ R. W. Ulrickson
-------------------------------
R. W. Ulrickson
President
4
<PAGE> 1
EXHIBIT 10.9
STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE--MODIFIED NET
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. BASIC PROVISIONS ("Basic Provisions").
1.1 PARTIES: This Lease ("Lease"), dated for reference purposes only,
the 14th day of October, 1998, is made by and between Gul & Vanessa Gazipura
("Lessor") and Logical Services, Incorporated ("Lessee"), collectively the
"Parties," or individually a "Party").
1.2(a) PREMISES. That certain portion of the Building, including all
improvements therein or to be provided by Lessor under the terms of this Lease,
commonly known by the street address of 235 Vineyard Court, Suite #100, located
in the City of Morgan Hill, County of Santa Clara, State of California, with zip
code 95037, as outlined on Exhibit A attached hereto ("Premises"). The
"Building" is that certain building containing the Premises and generally
described as: 4,370 square feet, located at the eastern end of the 15,360 square
foot building known as 235 Vineyard Court. In addition to Lessee's rights to use
and occupy the Premises as hereinafter specified, Lessee shall have
non-exclusive rights to the Common Areas (as defined in Paragraph 2.7 below) as
hereinafter specified, but shall not have any rights to the roof, exterior walls
or utility raceways of the Building or to any other buildings in the Industrial
Center. The Premises, the Building, the Common Areas, the land upon which they
are located, along with all other buildings and improvements thereon, are herein
collectively referred to as the "Industrial Center." (Also see Paragraph 2.)
1.2(b) PARKING. Fourteen (14) unreserved vehicle parking spaces
("Unreserved Parking Spaces"); and Zero (0) reserved parking spaces ("Reserved
Parking Spaces"). (Also see Paragraph 2.6.)
1.3 TERM: The term of this Lease shall be for three (3) years ("Original
Term") commencing on the 1st day of January, 1999 ("Commencement Date") and
ending on the 31st day of December, 2001 ("Expiration Date"). (Also see
Paragraph 3).
1.4 EARLY POSSESSION: _____ not applicable _____ ("Early Possession
Date"). (Also see Paragraphs 3.2 and 3.3.)
1.5 BASE RENT: The sum of four thousand three hundred seventy and 00/100
dollars ($4,370.00) per month ("Base Rent"), payable on the 1st day of each
month commencing on the 1st day of January, 1999. (Also see Paragraph 4.)
[X] If this box is checked, this Lease provides for the Base Rent to be
adjusted per Addendum 1, attached hereto.
1.6 (a) BASE RENT PAID UPON EXECUTION: The sum of four thousand three
hundred seventy and 00/100 dollars ($4,370.00) as Base Rent for the 1st day of
January, 1999 through the 31st day of January, 1999.
1.6 (b) LESSEE'S SHARE OF COMMON AREA OPERATING EXPENSES: Twenty Eight
and 00/100 percent (28.00%) ("Lessee's Share") as determined by [X] prorata
square footage of the Premises as compared to the total square footage of the
Building or [X] other criteria as described in Addendum 2.
1.7 SECURITY DEPOSIT: The sum of four thousand eight hundred seven and
00/100 dollars ($4,807.00) ("Security Deposit"). (Also see Paragraph 5.)
1.8 PERMITTED USE: General office use, engineering, design and light
assembly and testing for electronics related business. ("Permitted Use") (Also
see Paragraph 6.)
1.9 INSURING PARTY. Lessor is the "Insuring Party." (Also see Paragraph
8.)
1.10 (a)REAL ESTATE BROKERS. The following real estate broker(s)
(collectively, the "Brokers") and brokerage relationships exist in this
transaction and are consented to by the Parties.
[X] Dwyer Commercial Brokerage represents Lessor exclusively ("Lessor's
Broker);
[X] Mullinix Commercial Real Estate Company represents Lesseer
exclusively ("Lessee's Broker); or
[ ] _____ not applicable _____ represents both Lessor and Lessee
exclusively ("Dual Agency"). (Also see Paragraph 15.)
1.10 (b)PAYMENT TO BROKERS. Upon the execution of the Lease by both
Parties, Lessor shall pay to said Broker(s) jointly, or in such separate shares
as they may mutually designate in writing, for brokerage services rendered by
said broker(s) in connection with this transaction
[X] a fee as set forth in a separate written agreement between Lessor
and said Broker(s) or
[ ] the sum of _____ not applicable _____.
1.11 GUARANTOR. The obligations of the Lessee under this Lease are to be
guaranteed by Logical Services, Inc. ("Guarantor"). (Also see Paragraph 37.)
1.12 ADDENDA AND EXHIBITS. Attached hereto is an Addendum or Addenda
consisting of Paragraphs 1 through 4, and Exhibits A through __, all of which
constitute a part of this Lease.
2. PREMISES, PARKING AND COMMON AREAS.
2.1 LETTING. Lessor hereby leases to Lessee, and Lessee hereby leases
from Lessor, the Premises, for the term at the rental, and upon all of the
terms, covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of square footage set forth in this Lease, or
that may have been used in calculating rental and/or Common Area Operating
Expenses, is an approximation which Lessor and Lessee agree is reasonable and
the rental and Lessee's Share (as defined in Paragraph 1.6(b)) based thereon is
not subject to revision whether or not the actual square footage is more or
less.
2.2 CONDITION. Lessor shall deliver the Premises to Lessee clean and
free of debris on the Commencement Date and warrants to Lessee that the existing
plumbing, electrical systems, fire sprinkler system, lighting, air conditioning
and heating systems and loading doors, if any, in the Premises, other than those
constructed by Lessee, shall be in good operating condition on the Commencement
Date. If a non-compliance with said warranty exists as of the Commencement Date,
Lessor shall, except as otherwise provided in this Lease, promptly after receipt
of written notice from Lessee setting forth with specificity the nature and
extent of such non-compliance, rectify same at Lessor's expense. If Lessee does
not give Lessor written notice of a non-compliance with this warranty within
thirty (30) days after the Commencement Date, correction of that non-compliance
shall be the obligation of Lessee at Lessee's sole cost and expense.
2.3 COMPLIANCE WITH COVENANTS, RESTRICTIONS AND BUILDING CODE. Lessor
warrants that any improvements (other than those constructed by Lessee or at
Lessee's direction) on or in the Premises which have been constructed or
installed by Lessor or with Lessor's consent or at Lessor's direction shall
comply with all applicable covenants or restrictions of record and applicable
building codes, regulations and ordinances in effect on the Commencement Date.
Lessor further warrants to Lessee that Lessor has no knowledge of any claim
having been made by any governmental agency that a violation or violations of
applicable building codes, regulations, or ordinances exist with regard to the
Premises as of the Commencement Date. Said warranties shall not apply to any
Alterations or Utility Installations (defined in Paragraph 7.3(a)) made or to be
made by Lessee. If the Premises do not comply with said warranties, Lessor
shall, except as otherwise provided in this Lease, promptly after receipt of
written notice from Lessee given within six (6) months following the
Commencement Date and setting forth with specificity the nature and extent of
such non-compliance, take such action, at Lessor's expense, as may be reasonable
or appropriate to rectify the non-compliance. Lessor makes no warranty that the
Permitted Use in Paragraph 1.8 is permitted for the Premises under Applicable
Laws (as defined in Paragraph 2.4).
2.4 ACCEPTANCE OF PREMISES. Lessee hereby acknowledges: (a) that it has
been advised by the Broker(s) to satisfy itself with respect to the condition of
the Premises (including but not limited to the electrical and fire sprinkler
systems, security, environmental aspects, seismic and earthquake requirements,
and compliance with the Americans with Disabilities Act and applicable zoning,
municipal, county, state and federal laws, ordinances and regulations and any
covenants or restrictions of record (collectively, "Applicable Laws")) and the
present and future suitability of the Premises for Lessee's intended use; (b)
that Lessee has made such investigation as it deems necessary with reference to
such matters, is satisfied with reference thereto, and assumes all
responsibility therefore as the same relate to Lessee's occupancy of the
Premises and/or the terms of this Lease; and (c) that neither Lessor, nor any of
Lessor's agents, has made any oral or written representations or warranties with
respect to said matters other than as set forth in this Lease.
2.5 LESSEE AS PRIOR OWNER/OCCUPANT. The warranties made by Lessor in
this Paragraph 2 shall be of no force or effect if immediately prior to the date
set forth in Paragraph 1.1 Lessee was the owner or occupant of the Premises. In
such event, Lessee shall, at Lessee's sole cost and expense, correct any
non-compliance of the Premises with said warranties.
(C) American Industrial Real Estate Association 1993 MULTI-TENANT - MODIFIED NET
<PAGE> 2
2.6 VEHICLE PARKING. Lessee shall be entitled to use the number of
Unreserved Parking Spaces and Reserved Parking Spaces specified in Paragraph
1.2(b) on those portions of the Common Areas designated from time to time by
Lessor for parking. Lessee shall not use more parking spaces than said number.
Said parking spaces shall be used for parking by vehicles no larger than
full-size passenger automobiles or pick-up trucks, herein called "Permitted Size
Vehicles." Vehicles other than Permitted Size Vehicles shall be parked and
loaded or unloaded as directed by Lessor in the Rules and Regulations (as
defined in Paragraph 40) issued by Lessor. (Also see Paragraph 2.9.)
(a) Lessee shall not permit or allow any vehicles that belong to
or are controlled by Lessee or Lessee's employees, suppliers, shippers,
customers, contractors or invitees to be loaded, unloaded, or parked in areas
other than those designated by Lessor for such activities.
(b) If Lessee permits or allows any of the prohibited activities
described in this Paragraph 2.6, then Lessor shall have the right, without
notice, in addition to such other rights and remedies that it may have, to
remove or tow away the vehicle involved and charge the cost to Lessee, which
cost shall be immediately payable upon demand by Lessor.
(c) Lessor shall at the Commencement Date of this Lease, provide
the parking facilities required by Applicable Law.
2.7 COMMON AREAS - DEFINITION. The term "Common Areas" is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the Industrial Center and interior utility raceways within the Premises that
are provided and designated by the Lessor from time to time for the general
non-exclusive use of Lessor, Lessee and other lessees of the Industrial Center
and their respective employees, suppliers, shippers, customers, contractors, and
invitees, including parking areas, loading and unloading areas, trash areas,
roadways, sidewalks, walkways, parkways, driveways and landscaped areas.
2.8 COMMON AREAS - LESSEE'S RIGHTS. Lessor hereby grants to Lessee, for
the benefit of Lessee and its employees, suppliers, shippers, contractors,
customers and invitees, during the term of this Lease, the non-exclusive right
to use, in common with others entitled to such use, the Common Areas as they
exist from time to time, subject to any rights, powers, and privileges reserved
by Lessor under the terms hereof or under the terms of any rules and regulations
or restrictions governing the use of the Industrial Center. Under no
circumstances shall the right herein granted to use the Common Areas be deemed
to include the right to store any property, temporarily or permanently, in the
Common Areas. Any such storage shall be permitted only by the prior written
consent of Lessor or Lessor's designated agent, which consent may be revoked at
any time. In the event that any unauthorized storage shall occur then Lessor
shall have the right, without notice, in addition to such other rights and
remedies that it may have, to remove the property and charge the cost to Lessee,
which cost shall be immediately payable upon demand by Lessor.
2.9 COMMON AREAS - RULES AND REGULATIONS. Lessor or such other person(s)
as Lessor may appoint shall have the exclusive control and management of the
Common Areas and shall have the right, from time to time, to establish, modify,
amend and enforce reasonable Rules and Regulations with respect thereto in
accordance with Paragraph 40. Lessee agrees to abide by and conform to all such
Rules and Regulations, and to cause its employees, suppliers, shippers,
customers, contractors and invitees to so abide and conform. Lessor shall not be
responsible to Lessee for the non-compliance with said rules and regulations by
other lessees of the Industrial Center.
2.10 COMMON AREAS - CHANGES. Lessor shall have the right, in Lessor's
sole discretion, from time to time:
(a) To make changes to the Common Areas, including, without
limitation, changes in the location, size, shape and number of driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, landscaped areas, walkways and utility raceways;
(b) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available;
(c) To designate other land outside the boundaries of the
Industrial Center to be a part of the Common Areas;
(d) To add additional buildings and improvements to the Common
Areas;
(e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Industrial Center, or any portion
thereof; and
(f) To do and perform such other acts and make such other changes
in, to or with respect to the Common Areas and Industrial Center as Lessor may,
in the exercise of sound business judgment, deem to be appropriate.
3. TERM.
3.1 TERM. The Commencement Date, Expiration Date and Original Term of
this Lease are as specified in Paragraph 1.3.
3.2 EARLY POSSESSION. If an Early Possession Date is specified in
Paragraph 1.4 and if Lessee totally or partially occupies the Premises after the
Early Possession Date but prior to the Commencement Date, the obligation to pay
Base Rent shall be abated for the period of such early occupancy. All other
terms of this Lease, however, (including but not limited to the obligations to
pay Lessee's Share of Common Area Operating Expenses and to carry the insurance
required by Paragraph 8) shall be in effect during such period. Any such early
possession shall not affect nor advance the Expiration Date of the Original
Term.
3.3 DELAY IN POSSESSION. If for any reason Lessor cannot deliver
possession of the premises to Lessee by the Early Possession Date, if one is
specified in Paragraph 1.4, or if no Early Possession Date is specified, by the
Commencement Date, Lessor shall not be subject to any liability therefor, nor
shall such failure affect the validity of this Lease, or the obligations or
Lessee hereunder, or extend the term hereof, but in such case, Lessee shall not,
except as otherwise provided herein, be obligated to pay rent or perform any
other obligation of Lessee under the terms of this Lease until Lessor delivers
possession of the Premises to Lessee. If possession of the Premises is not
delivered to Lessee within sixty (60) days after the Commencement Date, Lessee
may, at its option, by notice in writing to Lessor within the (10) days after
the end of said sixty (60) day period, cancel this Lease, in which event the
parties shall be discharged from all obligations hereunder; provided further,
however, that if such written notice of Lessee is not received by Lessor within
said ten (10) day period, Lessee's right to cancel this Lease hereunder shall
terminate and be of no further force or effect. Except as may be otherwise
provided, and regardless of when the Original Term actually commences, if
possession is not tendered to Lessee when required by this Lease and Lessee does
not terminate this Lease, as aforesaid, the period free of the obligation to pay
Base Rent, if any, that Lessee would otherwise have enjoyed shall run from the
date of delivery of possession and continue for a period equal to the period
during which the Lessee would have otherwise enjoyed under the terms hereof, but
minus any days of delay caused by the acts, changes or omissions of Lessee.
4. RENT.
4.1 BASE RENT. Lessee shall pay Base Rent and other rent or charges, as
the same may be adjusted from time to time, to Lessor in lawful money of the
United States, without offset or deduction, on or before the day on which it is
due under the terms of this Lease. Base Rent and all other rent and charges for
any period during the term hereof which is for less than one full month shall be
prorated based upon the actual number of days of the month involved. Payment of
Base Rent and other charges shall be made to Lessor at its address stated herein
or to such other persons or at such other addresses as Lessor may from time to
time designate in writing to Lessee.
4.2 COMMON AREA OPERATING EXPENSE. Lessee shall pay to Lessor during the
term hereof, in addition to the Base Rent, Lessee's Share (as specified in
Paragraph 1.6(b)) of all Common Area Operating Expenses, as hereinafter defined,
during each calendar year of the term of this Lease, in accordance with the
following provisions:
(a) "COMMON AREA OPERATING EXPENSES" are defined, for purposes of
this Lease, as all costs incurred by Lessor relating to the ownership and
operation of the Industrial Center, including, but not limited to, the
following:
(i) The operation, repair and maintenance, in neat, clean,
good order and condition, of the following:
(aa) The Common Areas, including parking areas,
loading and unloading areas, trash areas, roadways, sidewalks, walkways,
parkways, driveways, landscaped areas, striping, bumpers, irrigation systems,
Common Area lighting facilities, fences and gates, elevators and roof.
(bb) Exterior signs and any tenant directories.
(cc) Fire detection and sprinkler systems.
(ii) The cost of water, gas, electricity and telephone to
serve the Common Areas.
(iii) Trash disposal, property management and security
services and the costs of any environmental inspections.
(iv) Reserves set aside for maintenance and repair of
Common Areas.
(v) Real Property Taxes (as defined in Paragraph 10.2) to
be paid by Lessor for the Building and the Common Areas under Paragraph 10
hereof.
(vi) The cost of the premiums for the insurance policies
maintained by Lessor under Paragraph 8 hereof.
(vii) Any deductible portion of an insured loss concerning
the Building or the Common Areas.
(viii) Any other services to be provided by Lessor that
are stated elsewhere in this Lease to be a Common Area Operating Expense.
(b) Any Common Area Operating Expenses and Real Property Taxes
that are specifically attributable to the Building or to any other building in
the Industrial Center or to the operation, repair and maintenance thereof, shall
be allocated entirely to the Building or to such other building. However, any
Common Area Operating Expenses and Real Property Taxes that are not specifically
attributable to the Building or to any other building or to the operation,
repair and maintenance thereof, shall be equitably allocated by Lessor to all
buildings in the Industrial Center.
(c) The inclusion of the improvements, facilities and services
set forth in Subparagraph 4.2(a) shall not be deemed to impose an obligation
upon Lessor to either have said improvements or facilities or to provide those
services unless the Industrial Center already has the same, Lessor already
provides the services, or Lessor has agreed elsewhere in this Lease to provide
the same or some of them.
(d) Lessee's Share of Common Area Operating Expenses shall be
payable by Lessee within ten (10) days after a reasonably detailed statement of
actual expenses is presented to Lessee by Lessor. At Lessor's option, however,
an amount may be estimated by Lessor from time to time of Lessee's Share of
annual Common Area Operating Expenses and the same shall be payable monthly or
quarterly, as Lessor shall designate, during each 12-month period of the Lease
term, on the same day as the Base Rent is due hereunder. Lessor shall deliver to
Lessee within sixty (60) days after the expiration of each calendar year a
reasonably detailed statement showing Lessee's Share of the actual Common Area
Operating Expenses incurred during the preceding year. If Lessee's payments
under this Paragraph 4.2(d) during said preceding year exceed Lessee's Share as
indicated on said statement, Lessee shall be credited the amount of such over-
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payment against Lessee's Share of Common Area Operating Expenses next becoming
due. If Lessee's payments under this Paragraph 4.2(d) during said preceding year
were less than Lessee's Share as indicated on said statement, Lessee shall pay
to Lessor the amount of the deficiency within ten (10) days after delivery by
Lessor to Lessee of said statement.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon Lessee's execution
hereof the Security Deposit set forth in Paragraph 1.7 as security for Lessee's
faithful performance of Lessee's obligations under this Lease. If Lessee fails
to pay Base Rent or other rent or charges due hereunder, or otherwise Defaults
under this Lease (as defined in Paragraph 13.1), Lessor may use, apply or retain
all or any portion of said Security Deposit for the payment of any amount due
Lessor or to reimburse or compensate Lessor for any liability, cost, expense,
loss or damage (including attorney's fees) which Lessor may suffer or incur by
reason thereof. If Lessor uses or applies all or any portion of said Security
Deposit, Lessee shall within ten (10) days after written request therefore
deposit monies with Lessor sufficient to restore said Security Deposit to the
full amount required by this Lease. Any time the Base Rent increases during the
term of this Lease, Lessee shall, upon written request from Lessor, deposit
additional monies with Lessor as an addition to the Security Deposit so that the
total amount of the Security Deposit shall at all times bear the same proportion
to the then current Base Rent as the Initial Security Deposit bears to the
Initial Base Rent set forth in Paragraph 1.5. Lessor shall not be required to
keep all or any part of the Security Deposit separate from its general accounts.
Lessor shall, at the expiration or earlier termination of the term hereof and
after Lessee has vacated the Premises, return to Lessee (or, at Lessor's option,
to the last assignee, if any, of Lessee's interest herein), that portion of the
Security Deposit not used or applied by Lessor. Unless otherwise expressly
agreed in writing by Lessor, no part of the Security Deposit shall be considered
to be held in trust, to bear interest or other increment for its use, or to be
prepayment for any monies to be paid by Lessee under this Lease.
6. USE.
6.1 PERMITTED USE.
(a) Lessee shall use and occupy the Premises only for the
Permitted Use set forth in Paragraph 1.8, or any other legal use which is
reasonably comparable thereto, and for no other purpose. Lessee shall not use or
permit the use of the Premises in a manner that is unlawful, creates waste or a
nuisance, or that disturbs owners and/or occupants of, or causes damage to the
Premises or neighboring premises or properties.
(b) Lessor hereby agrees to not unreasonably withhold or delay
its consent to any written request by Lessee. Lessee's assignees or subtenants,
and by prospective assignees and subtenants of Lessee, its assignees and
subtenants, for a modification of said Permitted Use, so long as the same will
not impair the structural integrity of the improvements on the Premises or in
the Building or the mechanical or electrical systems therein, does not conflict
with uses by other lessees, is not significantly more burdensome to the Premises
or the Building and the improvements thereon, and is otherwise permissible
pursuant to his Paragraph 6. If Lessor elects to withhold such consent, Lessor
shall within five (5) business days after such request give a written
notification of same, which notice shall include an explanation of Lessor's
reasonable objections to the change in use.
6.2 HAZARDOUS SUBSTANCES.
(a) REPORTABLE USES REQUIRE CONSENT. The term "Hazardous
Substance" as used in this Lease shall mean any product, substance, chemical,
material or waste whose presence, nature, quantity and/or intensity of
existence, use, manufacture, disposal, transportation, spill, release or effect,
either by itself or in combination with other materials expected to be on the
Premises, is either: (i) potentially injurious to the public health, safety or
welfare, the environment, or the Premises; (ii) regulated or monitored by any
governmental authority; or (iii) a basis for potential liability of Lessor to
any governmental agency or third party under any applicable statute or common
law theory. Hazardous Substance shall include, but not be limited to,
hydrocarbons, petroleum, gasoline, crude oil or any products or by-products
thereof. Lessee shall not engage in any activity in or about the Premises which
constitutes a Reportable Use (as hereinafter defined) of Hazardous Substances
without the express prior written consent of Lessor and compliance in a timely
manner (at Lessee's sole cost and expense) with all Applicable Requirements (as
defined in Paragraph 6.3). "Reportable Use" shall mean (i) the installation or
use of any above or below ground storage tank, (ii) the generation, possession,
storage, use, transportation, or disposal of a Hazardous Substance that requires
a permit from, or with respect to which a report, notice, registration or
business plan is required to be filed with, any governmental authority, and
(iii) the presence in, on or about the Premises of a Hazardous Substance with
respect to which any Applicable Laws require that a notice be given to persons
entering or occupying the Premises or neighboring properties. Notwithstanding
the foregoing, Lessee may, without Lessor's prior consent, but upon notice to
Lessor and in compliance with all Applicable Requirements, use any ordinary and
customary materials reasonably required to be used by Lessee in the normal
course of the Permitted Use, so long as such use is not a Reportable Use and
does not expose the Premises or neighboring properties to any meaningful risk of
contamination or damage or expose Lessor to any liability therefor. In addition,
Lessor may (but without any obligation to do so) condition its consent to any
Reportable Use of any Hazardous Substance by Lessee upon Lessee's giving Lessor
such additional assurances as Lessor, in its reasonable discretion, deems
necessary to protect itself, the public, the Premises and the environment
against damage, contamination or injury and/or liability therefor, including but
not limited to the installation (and, at Lessor's option, removal on or before
Lease expiration or earlier termination) of reasonably necessary protective
modifications to the Premises (such as concrete encasements) and/or the deposit
of an additional Security Deposit under Paragraph 5 hereof.
(b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable
cause to believe, that a Hazardous Substance has come to be located in, on,
under or about the Premises or the Building, other than as previously consented
to by Lessor, Lessee shall immediately give Lessor written notice thereof,
together with a copy of any statement, report, notice, registration,
application, permit, business plan, license, claim, action, or proceeding given
to, or received from, any governmental authority or private party concerning the
presence, spill, release, discharge of, or exposure to, such Hazardous Substance
including but not limited to all such documents as may be involved in any
Reportable Use involving the Premises. Lessee shall not cause or permit any
Hazardous Substance to be spilled or released in, on, under or about the
Premises (including, without limitation, through the plumbing or sanitary sewer
system).
(c) INDEMNIFICATION. Lessee shall indemnify, protect, defend and
hold Lessor, its agents, employees, lenders and ground lessor, if any, and the
Premises, harmless from and against any and all damages, liabilities, judgments,
costs, claims liens, expenses, penalties, loss of permits and attorneys' and
consultants' fees arising out of or involving any Hazardous Substance brought
onto the Premises by or for Lessee or by anyone under Lessee's control. Lessee's
obligations under this Paragraph 6.2(c) shall include, but not be limited to,
the effects of any contamination or injury to person, property or the
environment created or suffered by Lessee, and the cost of investigation
(including consultants' and attorneys' fees and testing), removal, remediation,
restoration and/or abatement thereof, or of any contamination therein involved,
and shall survive the expiration or earlier termination of this Lease. No
termination, cancellation or release agreement entered into by Lessor and Lessee
shall release Lessee from its obligations under this Lease with respect to
Hazardous Substances, unless specifically so agreed by Lessor in writing at the
time of such agreement.
6.3 LESSEE'S COMPLIANCE WITH REQUIREMENTS. Lessee shall, at Lessee's
sole cost and expense, fully, diligently and in a timely manner, comply with all
"Applicable Requirements," which term is used in this Lease to mean all laws,
rules, regulations, ordinances, directives, covenants, easements and
restrictions of record, permits, the requirements of any applicable fire
insurance underwriter or rating bureau, and the recommendations of Lessor's
engineers and/or consultants, relating in any manner to the Premises (including
but not limited to matters pertaining to (i) industrial hygiene, (ii)
environmental conditions on, in, under or about the Premises, including soil and
groundwater conditions, and (iii) the use, generation, manufacture, production,
installation, maintenance, removal, transportation, storage, spill, or release
of any Hazardous Substance), now in effect or which may hereafter come into
effect. Lessee shall, within five (5) days after receipt of Lessor's written
request, provide Lessor with copies of all documents and information, including
but not limited to permits, registrations, manifests, applications, reports and
certificates, evidencing Lessee's compliance with any Applicable Requirements
specified by Lessor, and shall immediately upon receipt, notify Lessor in
writing (with copies of any documents involved) of any threatened or actual
claim, notice, citation, warning, complaint or report pertaining to or involving
failure by Lessee or the Premises to comply with any Applicable Requirements.
6.4 INSPECTION; COMPLIANCE WITH LAW. Lessor, Lessor's agents, employees,
contractors and designated representatives, and the holders of any mortgages,
deeds of trust or ground leases on the Premises ("Lenders") shall have the right
to enter the Premises at any time in the case of an emergency, and otherwise at
reasonable times, for the purpose of inspecting the condition of the Premises
and for verifying compliance by Lessee with this Lease and all Applicable
Requirements (as defined in Paragraph 6.3), and Lessor shall be entitled to
employ experts and/or consultants in connection therewith to advise Lessor with
respect to Lessee's activities, including but not limited to Lessee's
installation, operation, use, monitoring, maintenance, or removal of any
Hazardous Substance on or from the Premises. The costs and expenses of any such
inspections shall be paid by the party requesting same, unless a Default or
Breach of this Lease by Lessee or a violation of Applicable Requirements or a
contamination, caused or materially contributed to by Lessee, is found to exist
or to be imminent, or unless the inspection is requested or ordered by a
governmental authority as the result of any such existing or imminent violation
or contamination. In such case, Lessee shall upon request reimburse Lessor or
Lessor's Lender, as the case may be, for the costs and expenses of such
inspections.
7. MAINTENANCE, REPAIRS, UTILITY INSTALLATIONS, TRADE FIXTURES AND ALTERATIONS.
7.1 LESSEE'S OBLIGATIONS.
(a) Subject to the provisions of Paragraphs 2.2 (Condition), 2.3
(Compliance with Covenants, Restrictions and Building Code), 7.2 (Lessor's
Obligations), 9 (Damage or Destruction), and 14 (Condemnation), Lessee shall, at
Lessee's sole cost and expense and at all times, keep the Premises and every
part thereof in good order, condition and repair (whether or not such portion of
the Premises requiring repair, or the means of repairing the same, are
reasonably or readily accessible to Lessee, and whether or not the need for such
repairs occurs as a result of Lessee's use, any prior use, the elements or the
age of such portion of the Premises), including, without limiting the generality
of the foregoing, all equipment or facilities specifically serving the Premises,
such as plumbing, heating, air conditioning, ventilating, electrical, lighting
facilities, boilers, fired or unfired pressure vessels, fire hose connections if
within the Premises, fixtures, interior walls, interior surfaces of exterior
walls, ceilings, floors, windows, doors, plate glass, and skylights, but
excluding any items which are the responsibility of Lessor pursuant to Paragraph
7.2 below. Lessee, in keeping the Premises in good order, condition and repair,
shall exercise and perform good maintenance practices. Lessee's obligations
shall include restorations, replacements or renewals when necessary to keep the
Premises and all improvements thereon or a part thereof in good order, condition
and state of repair.
(b) Lessee shall, at Lessee's sole cost and expense, procure and
maintain a contract, with copies to Lessor, in customary form and substance for
and with a contractor specializing and experienced in the inspection,
maintenance and service of the heating, air conditioning and ventilation system
for the Premises. However, Lessor reserves the right, upon notice to Lessee, to
procure and maintain the contract for the heating, air conditioning and
ventilating systems, and if Lessor so elects, Lessee shall reimburse Lessor,
upon demand, for the cost thereof.
(c) If Lessee fails to perform Lessee's obligations under this
Paragraph 7.1, Lessor may enter upon the Premises after ten (10) days' prior
written notice to Lessee (except in the case of an emergency, in which case no
notice shall be required), perform such obligations on Lessee's behalf, and put
the Premises in good order, condition and repair, in accordance with Paragraph
13.2 below.
7.2 LESSOR'S OBLIGATIONS. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance with Covenants, Restrictions and Building Code),
4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee's Obligations), 9
(Damage or Destruction) and 14 (Condemnation), Lessor, subject to reimbursement
pursuant to Paragraph 4.2, shall keep in good order, condition and repair the
foundations, exterior walls, structural condition of interior bearing walls,
exterior roof, fire sprinkler and/or standpipe and hose (if located in the
Common Areas) or other automatic fire extinguishing system including fire alarm
and/or smoke
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detection systems and equipment, fire hydrants, parking lots, walkways,
parkways, driveways, landscaping, fences, signs and utility systems serving the
Common Areas and all parts thereof, as well as providing the services for which
there is a Common Area Operating Expense pursuant to Paragraph 4.2. Lessor shall
not be obligated to paint the exterior or interior surfaces of exterior walls
nor shall Lessor be obligated to maintain, repair or replace windows, doors or
plate glass of the Premises. Lessee expressly waives the benefit of any statute
now or hereafter in effect which would otherwise afford Lessee the right to make
repairs at Lessor's expense or to terminate this Lease because of Lessor's
failure to keep the Building, Industrial Center or Common areas in good order,
condition and repair.
7.3 UTILITY INSTALLATIONS, TRADE FIXTURES, ALTERATIONS.
(a) DEFINITIONS; CONSENT REQUIRED. The term "UTILITY
INSTALLATIONS" is used in this Lease to refer to all air lines, power panels,
electrical distribution, security, fire protection systems, communications
systems, lighting fixtures, heating, ventilating and air conditions equipment,
plumbing, and fencing in, on or about the Premises. The term "TRADE FIXTURES"
shall mean Lessee's machinery and equipment which can be removed without doing
material damage to the Premises. The term "ALTERATIONS" shall mean any
modification of the improvements on the Premises which are provided by Lessor
under the terms of this Lease, other than Utility Installations or Trade
Fixtures. "LESSEE-OWNED ALTERATIONS AND/OR UTILITY INSTALLATIONS" are defined as
Alterations and/or Utility Installations made by Lessee that are not yet owned
by Lessor pursuant to Paragraph 7.4(a). Lessee shall not make nor cause to be
made any Alterations or Utility Installations in, on, under or about the
Premises without Lessor's prior written consent. Lessee may, however, make
non-structural Utility Installations to the interior of the Premises (excluding
the roof) without Lessor's consent but upon notice to Lessor, so long as they
are not visible from the outside of the Premises, do not involve puncturing,
relocating or removing the roof or any existing walls, or changing or
interfering with the fire sprinkler or fire detection systems and the cumulative
cost thereof during the term of this Lease as extended does not exceed
$2,500.00.
(b) CONSENT. Any Alterations or Utility Installations that Lessee
shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with detailed plans. All consents given by
Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific consent,
shall be deemed conditioned upon: (i) Lessee's acquiring all applicable permits
required by governmental authorities; (ii) the furnishing of copies of such
permits together with a copy of the plans and specifications for the Alteration
or Utility Installation to Lessor prior to commencement of the work thereon; and
(iii) the compliance by Lessee with all conditions of said permits in a prompt
and expeditious manner. Any Alterations or Utility Installations by Lessee
during the term of this Lease shall be done in a good and workmanlike manner,
with good and sufficient materials, and be in compliance with all Applicable
Requirements. Lessee shall promptly upon completion thereof furnish Lessor with
as-built plans and specifications therefor. Lessor may, (but without obligation
to do so) condition its consent to any requested Alteration or Utility
Installation that costs $2,500.00 or more upon Lessee's providing Lessor with a
lien and completion bond in an amount equal to one and one-half times the
estimated cost of such Alteration or Utility Installation.
(c) LIEN PROTECTION. Lessee shall pay when due all claims for
labor or materials furnished or alleged to have been furnished to or for Lessee
at or for use on the Premises, which claims are or may be secured by any
mechanic's or materialmen's lien against the Premises or any interest therein.
Lessee shall give Lessor not less than ten (10) days' notice prior to the
commencement of any work in, or, or about the Premises, and Lessor shall have
the right to post notices of non-responsibility in or on the Premises as
provided by law. If Lessee shall, in good faith, contest the validity of any
such lien, claim or demand, then Lessee shall, at its sole expense, defend and
protect itself, Lessor and the Premises against the same and shall pay and
satisfy any such adverse judgment that may be rendered thereon before the
enforcement thereof against the Lessor or the Premises. If Lessor shall require,
Lessee shall furnish to Lessor a surety bond satisfactory to Lessor in an amount
equal to one and one-half times the amount of such contested lien claim or
demand, indemnifying Lessor against liability for the same, as required by law
for the holding of the Premises free from the effect of such lien or claim. In
addition, Lessor may require Lessee to pay Lessor's attorneys' fees and costs in
participating in such action if Lessor shall decide it is to its best interest
to do so.
7.4 OWNERSHIP, REMOVAL, SURRENDER, AND RESTORATION.
(a) OWNERSHIP. Subject to Lessor's right to require their removal
and to cause Lessee to become the owner thereof as hereinafter provided in this
Paragraph 7.4, all Alterations and Utility Installations made to the Premises by
Lessee shall be the property of and owned by Lessee, but considered a part of
the Premises. Lessor may, at any time and at its option, elect in writing to
Lessee to be the owner of all or any specified part of the Lessee-Owned
Alterations and Utility Installations. Unless otherwise instructed per
Subparagraph 7.4(b) hereof, all Lessee-Owned Alterations and Utility
Installations shall, at the expiration or earlier termination of this Lease,
become the property of Lessor and remain upon the Premises and be surrendered
with the Premises by Lessee.
(b) REMOVAL. Unless otherwise agreed in writing, Lessor may
require that any or all Lessee-Owned Alterations or Utility Installations be
removed by the expiration or earlier termination of this Lease, notwithstanding
that their installation may have been consented to by Lessor. Lessor may require
the removal at any time of all or any part of any Alterations or Utility
Installations made without the required consent of Lessor.
(c) SURRENDER/RESTORATION. Lessee shall surrender the Premises by
the end of the last day of the Lease term or any earlier termination date, clean
and free of debris and in good operating order, condition and state of repair,
ordinary wear and tear excepted. Ordinary wear and tear shall not include any
damage or deterioration that would have been prevented by good maintenance
practice or by Lessee performing all of its obligations under this Lease. Except
as otherwise agreed or specified herein, the Premises, as surrendered, shall
include the Alterations and Utility Installations. The obligation of Lessee
shall include the repair of any damage occasioned by the installation,
maintenance or removal of Lessee's Trade Fixtures, furnishings, equipment, and
Lessee-Owned Alterations and Utility Installations, as well as the removal of
any storage tank installed by or for Lessee, and the removal, replacement, or
remediation of any soil, material or ground water contaminated by Lessee, all as
may then be required by Applicable Requirements and/or good practice. Lessee's
Trade Fixtures shall remain the property of Lessee and shall be removed by
Lessee subject to its obligation to repair and restore the Premises per this
Lease.
8. INSURANCE; INDEMNITY.
8.1 PAYMENT OF PREMIUMS. The cost of the premiums for the insurance
policies maintained by Lessor under this Paragraph 8 shall be a Common Area
Operating Expense pursuant to Paragraph 4.2 hereof. Premiums for policy periods
commencing prior to, or extending beyond, the term of this Lease shall be
pro-rated to coincide with the corresponding Commencement Date or Expiration
Date.
8.2 LIABILITY INSURANCE.
(a) CARRIED BY LESSEE. Lessee shall obtain and keep in force
during the term of this Lease a Commercial General Liability policy of insurance
protecting Lessee, Lessor and any Lender(s) whose names have been provided to
Lessee in writing (as additional insureds) against claims for bodily injury,
personal injury and property damage based upon, involving or arising out of the
ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be on an occurrence basis providing
single limit coverage in an amount not less than $1,000,000 per occurrence with
an "Additional Insured-Managers or Lessors of Premises" endorsement and contain
the "Amendment of the Pollution Exclusion" endorsement for damage caused by
heat, smoke or fumes from a hostile fire. The policy shall not contain any
intra-insured exclusions as between insured persons or organizations, but shall
include coverage for liability assumed under this Lease as an "Insured contract"
for the performance of Lessee's indemnity obligations under this Lease. The
limits of said insurance required by this Lease or as carried by Lessee shall
not, however, limit the liability of Lessee nor relieve Lessee of any obligation
hereunder. All insurance to be carried by Lessee shall be primary to and not
contributory with any similar insurance carried by Lessor, whose insurance shall
be considered excess insurance only.
(b) CARRIED BY LESSOR. Lessor shall also maintain liability
insurance described in Paragraph 8.2(a) above, in addition to and not in lieu
of, the insurance required to be maintained by Lessee. Lessee shall not be named
as an additional insured therein.
8.3 PROPERTY INSURANCE - BUILDING, IMPROVEMENTS AND RENTAL VALUE.
(a) BUILDING AND IMPROVEMENTS. Lessor shall obtain and keep in
force during the term of this Lease a policy or policies in the name of Lessor,
with loss payable to Lessor and to any Lender(s), insuring against loss or
damage to the Premises. Such insurance shall be for full replacement cost, as
the same shall exist from time to time, or the amount required by an Lender(s),
but in no event more than the commercially reasonable and available insurable
value thereof it, by reason of the unique nature or age of the improvements
involved, such latter amount is less than full replacement cost. Lessee-Owned
Alterations and Utility Installations, Trade Fixtures and Lessee's personal
property shall be insured by Lessee pursuant to Paragraph 8.4. If the coverage
is available and commercially appropriate, Lessor's policy or policies shall
insure against all risks of direct physical loss or damage (except the perils of
flood and/or earthquake unless required by a Lender), including coverage for any
additional costs resulting from debris removal and reasonable amounts of
coverage for the enforcement of any ordinance or law regulating the
reconstruction or replacement of any undamaged sections of the Building required
to be demolished or removed by reason of the enforcement of any building,
zoning, safety or land use laws as the result of a covered loss, but not
including plate glass insurance. Said policy or policies shall also contain an
agreed valuation provision in lieu of any co-insurance clause, waiver of
subrogation, and inflation guard protection causing an increase in the annual
property insurance coverage amount by a factor of not less than the adjusted
U.S. Department of Labor Consumer Price Index for All Urban Consumers for the
city nearest to where the Premises are located.
(b) RENTAL VALUE. Lessor shall also obtain and keep in force
during the term of this Lease a policy or policies in the name of Lessor, with
loss payable to Lessor and any Lender(s), insuring the loss of the full rental
and other charges payable by all lessees of the Building to Lessor for one year
(including all Real Property Taxes, insurance costs, all Common Area Operating
Expenses and any scheduled rental increases). Said insurance may provide that in
the event the Lease is terminated by reason of an insured loss, the period of
indemnity for such coverage shall be extended beyond the date of the completion
of repairs or replacement of the Premises, to provide for one full year's loss
of rental revenues from the date of any such loss. Said insurance shall contain
an agreed valuation provision in lieu of any co-insurance clause, and the amount
of coverage shall be adjusted annually to reflect the projected rental income,
Real Property Taxes, insurance premium costs and other expenses, if any,
otherwise payable, for the next 12-month period. Common area Operating Expenses
shall include any deductible amount in the event of such loss.
(c) ADJACENT PREMISES. Lessee shall pay for any increase in the
premiums for the property insurance of the Building and for the Common Areas or
other buildings in the Industrial Center if said increase is caused by Lessee's
acts, omissions, use or occupancy of the Premises.
(d) LESSEE'S IMPROVEMENTS. Since Lessor is the Insuring Party,
Lessor shall not be required to insure Lessee-Owned Alterations and Utility
Installations unless the item in question has become the property of Lessor
under the terms of this Lease.
8.4 LESSEE'S PROPERTY INSURANCE. Subject to the requirements of
Paragraph 8.5, Lessee at its cost shall either by separate policy or, at
Lessor's option, by endorsement to a policy already carried, maintain insurance
coverage on all of Lessee's personal property, Trade Fixtures and Lessee-Owned
Alterations and Utility Installations in, on, or about the Premises similar in
coverage to that carried by Lessor as the Insuring Party under Paragraph 8.3(a).
Such insurance shall be full replacement cost coverage with a deductible not to
exceed $1,000 per occurrence. The proceeds from any such insurance shall be used
by Lessee for the replacement of personal property and the restoration of Trade
Fixtures and Lessee-Owned Alterations and Utility Installations. Upon request
from Lessor, Lessee shall provide Lessor with written evidence that such
insurance is in force.
8.5 INSURANCE POLICIES. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the Premises are
located, and maintaining during the policy term a "General Policyholders Rating"
of at least B+, V, or such other rating as may be required by a Lender, as set
forth in the most current issue of "Best's Insurance Guide." Lessee shall not do
or permit to be done anything which shall invalidate the insurance policies
referred to in
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this Paragraph 8. Lessee shall cause to be delivered to Lessor, within seven (7)
days after the earlier of the Early Possession Date or the Commencement Date,
certified copies of, or certificates evidencing the existence and amounts of,
the insurance required under Paragraph 8.2(a) and 8.4. No such policy shall be
cancelable or subject to modification except after thirty (30) days' prior
written notice to Lessor. Lessee shall at least thirty (30) days prior to the
expiration of such policies, furnish Lessor with evidence of renewals or
"insurance binders" evidencing renewal thereof, or Lessor may order such
insurance and charge the cost thereof to Lessee, which amount shall be payable
by Lessee to Lessor upon demand.
8.6 WAIVER OF SUBROGATION. Without affecting any other rights or
remedies, Lessee and Lessor each hereby release and relieve the other, and waive
their entire right to recover damages (whether in contract or in tort) against
the other, for loss or damage to their property arising out of or incident to
the perils required to be insured against under Paragraph 8. The effect of such
releases and waivers of the right to recover damages shall not be limited by the
amount of insurance carried or required, or by any deductibles applicable
thereto. Lessor and Lessee agree to have their respective insurance companies
issuing property damage insurance waive any right to subrogation that such
companies may have against Lessor or Lessee, as the case may be, so long as the
insurance is not invalidated thereby.
8.7 INDEMNITY. Except for Lessor's negligence and/or breach of express
warranties, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor, partners and
Lenders, from and against any and all claims, loss of rents and/or damages,
costs, liens, judgments, penalties, loss of permits, attorneys' and consultants'
fees, expenses and/or liabilities arising out of, involving, or in connection
with, the occupancy of the Premises by Lessee, the conduct of Lessee's business,
any act, omission or neglect of Lessee, its agents, contractors, employees or
invitees, and out of any Default or Breach by Lessee in the performance in a
timely manner of any obligation on Lessee's part to be performed under this
Lease. The foregoing shall include, but not be limited to, the defense or
pursuit of any claim or any action or proceeding involved therein, and whether
or not (in the case of claims made against Lessor) litigated and/or reduced to
judgment. In case any action or proceeding be brought against Lessor by reason
of any of the foregoing matters, Lessee upon notice from Lessor shall defend the
same at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor
shall cooperate with Lessee in such defense. Lessor need not have first paid any
such claim in order to be so indemnified.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee, Lessee's employees, contractors, invitees, customers, or any other
person in or about the Premises, whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, fire sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building of which the Premises are a
part, from other sources or place, and regardless of whether the cause of such
damage or injury or the means of repairing the same is accessible or not. Lessor
shall not be liable for any damages arising from any act or neglect of any other
lessee of Lessor nor from the failure by Lessor to enforce the provisions of any
other lease in the Industrial Center. Notwithstanding Lessor's negligence or
breach of this Lease, Lessor shall under no circumstances be liable for injury
to Lessee's business or for any loss of income or profit therefrom.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "PREMISES PARTIAL DAMAGE" shall mean damage or destruction to
the Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is less than fifty percent (50%) of
the then Replacement Cost (as defined in Paragraph 9.1(d)) of the Premises
(excluding Lessee-Owned Alterations and Utility Installations and Trade
Fixtures) immediately prior to such damage or destruction.
(b) "PREMISES TOTAL DESTRUCTION" shall mean damage or destruction
to the Premises, other than Lessee-Owned Alterations and Utility Installations,
the repair cost of which damage or destruction is fifty percent (50%) or more of
the then Replacement Cost of the Premises (excluding Lessee-Owned Alterations
and Utility Installations and Trade Fixtures) immediately prior to such damage
or destruction. In addition, damage or destruction to the Building, other than
Lessee-Owned Alterations and Utility Installations and Trade Fixtures of any
lessees of the Building, the cost of which damage or destruction is fifty
percent (50%) or more of the then Replacement Cost (excluding Lessee-Owned
Alterations and Utility Installations and Trade Fixtures of any lessees of the
Building) of the Building shall, at the option of Lessor, be deemed to be
Premises Total Destruction.
(c) "INSURED LOSS" shall mean damage or destruction to the
Premises, other than Lessee-Owned Alterations and Utility Installations and
Trade Fixtures, which was caused by an event required to be covered by the
insurance described in Paragraph 8.3(a) irrespective of any deductible amounts
or coverage limits involved.
(d) "REPLACEMENT COST" shall mean the cost to repair or rebuild
the improvements owned by Lessor at the time of the occurrence to their
condition existing immediately prior thereto, including demolition, debris
removal and upgrading required by the operation of applicable building codes,
ordinances or laws, and without deduction for depreciation.
(e) "HAZARDOUS SUBSTANCE CONDITION" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.
9.2 PREMISES PARTIAL DAMAGE - INSURED LOSS. If Premises Partial Damage
that is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair
such damage (but not Lessee's Trade Fixtures of Lessee-Owned Alteration and
Utility Installations) as soon as reasonably possible and this Lease shall
continue in full force and effect. In the event, however, that there is a
shortage of insurance proceeds and such shortage is due to the fact that, by
reason of the unique nature of the improvements in the Premises, full
replacement cost insurance coverage was not commercially reasonable and
available, Lessor shall have no obligation to pay for the shortage in insurance
proceeds or to fully restore the unique aspects of the Premises unless Lessee
provides Lessor with the funds to cover same, or adequate assurance thereof,
within ten (10) days following receipt of written notice of such shortage and
request therefor. If Lessor receives said funds or adequate assurance thereof
within said ten (10) day period, Lessor shall complete them as soon as
reasonably possible and this Lease shall remain in full force and effect. If
Lessor does not receive such funds or assurance within said period, Lessor may
nevertheless elect by written notice to Lessee within ten (10) days thereafter
to make such restoration and repair as is commercially reasonable with Lessor
paying any shortage in proceeds, in which case this Lease shall remain in full
force and effect. If Lessor does not receive such funds or assurance within such
ten (10) day period, and if Lessor does not so elect to restore and repair, then
this Lease shall terminate sixty (60) days following the occurrence of the
damage or destruction. Unless otherwise agreed, Lessee shall in no event have
any right to reimbursement from Lessor from any funds contributed by Lessee to
repair any such damage or destruction. Premises Partial Damage due to flood or
earthquake shall be subject to Paragraph 9.3 rather than Paragraph 9.2,
notwithstanding that there may be some insurance coverage, but the net proceeds
of any such insurance shall be made available for the repairs if made by either
Party.
9.3 PARTIAL DAMAGE - UNINSURED LOSS. If Premises Partial Damage that is
not an Insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense and
this Lease shall continue in full force and effect), Lessor may at Lessor's
option, either (i) repair such damage as soon as reasonably possible at Lessor's
expense, in which event this Lease shall continue in full force and effect, or
(ii) give written notice to Lessee within thirty (30) days after receipt by
Lessor of knowledge of the occurrence of such damage of Lessor's desire to
terminate this Lease as of the date sixty (60) days following the date of such
notice. In the event Lessor elects to give such notice of Lessor's intention to
terminate this Lease, Lessee shall have the right within ten (10) days after the
receipt of such notice to give written notice to Lessor of Lessee's commitment
to pay for the repair of such damage totally at Lessee's expense and without
reimbursement from Lessor. Lessee shall provide Lessor with the required funds
or satisfactory assurance thereof within thirty (30) days following such
commitment from Lessee. In such event this Lease shall continue in full force
and effect, and Lessor shall proceed to make such repairs as soon as reasonably
possible after the required funds are available. If Lessee does not give such
notice and provide the funds or assurance thereof within the times specified
above, this Lease shall terminate as of the date specified in Lessor's notice of
termination.
9.4 TOTAL DESTRUCTION. Notwithstanding any other provision hereof, if
Premises Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the damage
or destruction is an Insured Loss or was caused by a negligent or willful act of
Lessee. In the event, however, that the damage or destruction was caused by
Lessee, Lessor shall have the right to recover Lessor's damages from lessee
except as released and waived in Paragraph 9.7.
9.5 DAMAGE NEAR END OF TERM. If at any time during the last six (6)
months of the term of this Lease there is damage for which the cost to repair
exceeds one month's Base Rent, whether or not an Insured Loss, Lessor may, at
Lessor's option, terminate this Lease effective sixty (60) days following the
date of occurrence of such damage by giving written notice to Lessee of Lessor's
election to do so within thirty (30) days after the date of occurrence of such
damage. Provided, however, if Lessee at that time has an exercisable option to
extend this Lease or to purchase the Premises, then Lessee may preserve this
Lease by (a) exercising such option, and (b) providing Lessor with any shortage
in insurance proceeds (or adequate assurance thereof) needed to make the repairs
on or before the earlier of (i) the date which is ten (10) days after Lessee's
receipt of Lessor's written notice purporting to terminate this Lease, or (ii)
the day prior to the date upon which such option expires. If Lessee duly
exercises such option during such period and provides Lessor with funds (or
adequate assurance thereof) to cover any shortage in insurance proceeds, Lessor
shall, at Lessor's expense repair such damage as soon as reasonably possible and
this Lease shall continue in full force and effect. If Lessee fails to exercise
such option and provide such funds or assurance during such period, then this
Lease shall terminate as of the date set forth in the first sentence of this
Paragraph 9.5.
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) In the event of (i) Premises Partial Damage or (ii) Hazardous
Substance Condition for which Lessee is not legally responsible, the Base Rent,
Common Area Operating Expenses and other charges, if any, payable by Lessee
hereunder for the period during which such damage or condition, its repair,
remediation or restoration continues, shall be abated in proportion to the
degree to which Lessee's use of the Premises is impaired, but not in excess of
proceeds from insurance required to be carried under Paragraph 8.3(b). Except
for abatement of Base Rent, Common Area Operating Expenses and other charges, if
any, as aforesaid, all other obligations of Lessee hereunder shall be performed
by Lessee, and Lessee shall have no claim against Lessor for any damage suffered
by reason of any such damage, destruction, repair, remediation or restoration.
(b) If Lessor shall be obligated to repair or restore the
Premises under the provisions of this Paragraph 9 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Premises within
ninety (90) days after such obligation shall accrue, Lessee may, at any time
prior to the commencement of such repair or restoration, give written notice to
Lessor and to any Lenders of which Lessee has actual notice of Lessee's election
to terminate this Lease on a date not less than sixty (60) days following the
giving of such notice. If Lessee gives such notice to Lessor and such Lenders
and such repair or restoration is not commenced within thirty (30) days after
receipt of such notice, this Lease shall terminate as of the date specified in
said notice. If Lessor or a lender commences the repair or restoration of the
Premises within thirty (30) days after the receipt of such notice, this Lease
shall continue in full force and effect. "Commence" as used in this Paragraph
9.6 shall mean either the unconditional authorization of the preparation of the
required plans, or the beginning of the actual work on the Premises, whichever
occurs first.
9.7 HAZARDOUS SUBSTANCE CONDITIONS. If a hazardous Substance Condition
occurs, unless Lessee is legally responsible therefor (in which case Lessee
shall make the investigation and remediation thereof required by Applicable
Requirements and this Lease shall continue in full force and effect, but subject
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to Lessor's rights under Paragraph 6.2(c) and Paragraph 13), Lessor may at
Lessor's option either (i) investigate and remediate such Hazardous Substance
Condition, if required, as soon as reasonably possible at Lessor's expense, in
which event this Lease shall continue in full force and effect, or (ii) if the
estimated cost to investigate and remediate such condition exceeds twelve (12)
times the then monthly Base Rent of $100,000 whichever is greater, give written
notice to Lessee within thirty (30) days after receipt by Lessor of knowledge of
the occurrence of such Hazardous Substance Condition of Lessor's desire to
terminate this Lease as of the date sixty (60) days following the date of such
notice. In the event Lessor elects to give such notice of Lessor's intention to
terminate this Lease, Lessee shall have the right within ten (10) days after the
receipt of such notice to give written notice to Lessor of Lessee's commitment
to pay for the excess costs of (a) investigation and remediation of such
Hazardous Substance Condition to the extent required by Applicable Requirements,
over (b) an amount equal to twelve (12) times the then monthly Base Rent or
$100,000, whichever is greater. Lessee shall provide Lessor with the funds
required of Lessee or satisfactory assurance thereof within thirty (30) days
following said commitment by Lessee. In such event this Lease shall continue in
full force and effect, and Lessor shall proceed to make such investigation and
remediation as soon as reasonably possible after the required funds are
available. If Lessee does not give such notice and provide the required funds or
assurance thereof within the time period specified above, this Lease shall
terminate as of the date specified in Lessor's notice of termination.
9.8 TERMINATION - ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this Paragraph 9, Lessor shall return to Lessee any advance payment
made by Lessee to Lessor and so much of Lessee's Security Deposit as has not
been, or is not then required to be, used by Lessor under the terms of this
Lease.
9.9 WAIVER OF STATUTES. Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the Premises
and the Building with respect to the termination of this Lease and hereby waive
the provisions of any present or future statute to the extent it is inconsistent
herewith.
10. REAL PROPERTY TAXES.
10.1 PAYMENT OF TAXES. Lessor shall pay the Real Property Taxes, as
defined in Paragraph 10.2, applicable to the Industrial Center, and except as
otherwise provided in Paragraph 10.3, any such amounts shall be included in the
calculation of Common Area Operating Expenses in accordance with the provisions
of Paragraph 4.2.
10.2 REAL PROPERTY TAX DEFINITION. As used herein, the term "REAL
PROPERTY TAXES" shall include any form of real estate tax or assessment,
general, special, ordinary or extraordinary, an any license fee, commercial
rental tax, improvement bond or bonds, levy or tax (other than inheritance,
personal income or estate taxes) imposed upon the Industrial Center by any
authority having the direct or indirect power to tax, including any city, state
or federal government, or any school, agricultural, sanitary, fire, street,
drainage, or other improvement district thereof, levied against any legal or
equitable interest of Lessor in the Industrial Center or any portion thereof,
Lessor's right to rent or other income therefrom, and/or Lessor's business of
leasing the Premises. The form "REAL PROPERTY TAXES" shall also include any tax,
fee, levy, assessment or charge, or any increase therein, imposed by reason of
events occurring, or changes in Applicable Law taking effect, during the term of
this Lease, including but not limited to a change in the ownership of the
Industrial Center or in the Improvements thereon, the execution of this Lease,
or any modification, amendment or transfer thereof, and whether or not
contemplated by the Parties. In calculating Real Property Taxes for any calendar
year, the Real Property Taxes for any real estate tax year shall be included in
the calculation of Real Property Taxes for such calendar year based upon the
number of days which such calendar year and tax year have in common.
10.3 ADDITIONAL IMPROVEMENTS. Common Area Operating Expenses shall not
include Real Property Taxes specified in the tax assessor's records and work
sheets as being caused by additional improvements placed upon the Industrial
Center by other lessees or by Lessor for the exclusive enjoyment of such other
lessees. Notwithstanding Paragraph 10.1 hereof, Lessee shall, however, pay to
Lessor at the time Common Area Operating Expenses are payable under Paragraph
4.2, the entirety of any increase in Real Property Taxes if assessed solely by
reason of Alterations, Trade Fixtures or Utility Installations placed upon the
Premises by Lessee or at Lessee's request.
10.4 JOINT ASSESSMENT. If the Building is not separately assessed, Real
Property Taxes allocated to the Building shall be an equitable proportion of the
Real Property Taxes for all of the land and improvements included within the tax
parcel assessed, such proportion to be determined by Lessor from the respective
valuations assigned in the assessor's work sheets or such other information as
may be reasonably available. Lessor's reasonable determination thereof, in good
faith, shall be conclusive.
10.5 LESSEE'S PROPERTY TAXES. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or stored within the Industrial Center. When
possible, Lessee shall cause its Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of Lessor.
If any of Lessee's said property shall be assessed with Lessor's real property,
Lessee shall pay Lessor the taxes attributable to Lessee's property within ten
(10) days after receipt of a written statement setting forth the taxes
applicable to Lessee's property.
11. UTILITIES. Lessee shall pay directly for all utilities and services supplied
to the Premises, including but not limited to electricity, telephone, security,
gas and cleaning of the Premises, together with any taxes thereon. If any such
utilities or services are not separately metered to the Premises or separately
billed to the Premises, Lessee shall pay to Lessor a reasonable proportion to be
determined by Lessor of all such charges jointly metered or billed with other
premises in the Building, in the manner and within the time periods set forth in
Paragraph 4.2(d).
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED.
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or otherwise transfer or encumber (collectively, "assign") or
sub-let all or any part of Lessee's interest in this Lease or in the Premises
without Lessor's prior written consent given under and subject to the terms of
Paragraph 36.
(b) A change in the control of Lessee shall constitute an
assignment requiring Lessor's consent. The transfer, on a cumulative basis, of
twenty-five percent (25%) or more of the voting control of Lessee shall
constitute a change in control for this purpose.
(c) The involvement of Lessee or its assets in any transaction,
or series of transactions (by way of merger, sale, acquisition, financing,
refinancing, transfer, leveraged buy-out or otherwise), whether or not a formal
assignment or hypothecation of this Lease or Lessee's assets occurs, which
results or will result in a reduction of the Net Worth of Lessee, as hereinafter
defined, by an amount equal to or greater than twenty-five percent (25%) of such
Net Worth of Lessee as it was represented to Lessor at the time of full
execution and delivery of this Lease or at the time of the most recent
assignment to which Lessor has consented, or as it exists immediately prior to
said transaction or transactions constituting such reduction, at whichever time
said Net Worth of Lessee was or is greater, shall be considered an assignment of
the Lease by Lessee to which Lessor may reasonably withhold its consent. "Net
Worth of Lessee" for purposes of this Lease shall be the net worth of Lessee
(excluding any Guarantors) established under generally accepted accounting
principles consistently applied.
(d) An assignment or subletting of Lessee's interest in this
Lease without Lessor's specific prior written consent shall, at Lessor's option,
be a Default curable after notice per Paragraph 13.1, or a non-curable Breach
without the necessity of any notice and grace period. If Lessor elects to treat
such unconsented to assignment or subletting as a non-curable Breach, Lessor
shall have the right to either: (i) terminate this Lease, or (ii) upon thirty
(30) days written notice ("Lessor's Notice"), increase the monthly Base Rent for
the Premises to the greater of the then fair market rental value of the
Premises, as reasonably determined by Lessor, or one hundred ten percent (110%)
of the Base Rent then in effect. Pending determination of the new fair market
rental value, if disputed by Lessee, Lessee shall pay the amount set forth in
Lessor's Notice, with any overpayment credited against the next installment(s)
of Base Rent coming due, and any underpayment for the period retroactively to
the effective date of the adjustment being due and payable immediately upon the
determination thereof. Further, in the event of such Breach and rental
adjustment, (i) the purchase price of any option to purchase the Premises held
by Lessee shall be subject to similar adjustment to the then fair market value
as reasonably determined by Lessor (without the Lease being considered an
encumbrance or any deduction for depreciation or obsolescence, and considering
the Premises at its highest and best use and in good condition) or one hundred
ten percent (110%) of the price previously in effect, (ii) any index-oriented
rental or price adjustment formulas contained in this Lease shall be adjusted to
require that the base index be determined with reference to the index applicable
to the time of such adjustment, and (iii) any fixed rental adjustments scheduled
during the remainder of the Lease term shall be increased in the same ratio as
the new rental bears to the Base Rent in effect immediately prior to the
adjustment specified in Lessor's Notice.
(e) Lessee's remedy for any breach of this Paragraph 12.1 by
Lessor shall be limited to compensatory damages and/or injunctive relief.
12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.
(a) Regardless of Lessor's consent, any assignment or subletting
shall not (i) be effective without the express written assumption by such
assignee or sublessee of the obligations of Lessee under this Lease, (ii)
release Lessee of any obligations hereunder, nor (iii) alter the primary
liability of Lessee for the payment of Base Rent and other sums due Lessor
hereunder or for the performance of any other obligations to be performed by
Lessee under this Lease.
(b) Lessor may accept any rent or performance of Lessee's
obligations from any person other than Lessee pending approval or disapproval of
an assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of any rent for performance shall constitute a waiver or
estoppel of Lessor's right to exercise its remedies for the Default or Breach by
Lessee of any of the terms, covenants or conditions of this Lease.
(c) The consent of Lessor to any assignment or subletting shall
not constitute a consent to any subsequent assignment or subletting by Lessee or
to any subsequent or successive assignment or subletting by the assignee or
sublessee. However, Lessor may consent to subsequent sublettings and assignments
of the sublease or any amendments or modifications thereto without notifying
Lessee or anyone else liable under this Lease or the sublease and without
obtaining their consent, and such action shall not relieve such persons from
liability under this Lease or the sublease.
(d) In the event of any Default or Breach of Lessee's obligation
under this Lease, Lessor may proceed directly against Lessee, any Guarantors or
anyone else responsible for the performance of the Lessee's obligations under
this Lease, including any sublessee, without first exhausting Lessor's remedies
against any other person or entity responsible therefor to Lessor, or any
security held by Lessor.
(e) Each request for consent to an assignment or subletting shall
be in writing, accompanied by information relevant to Lessor's determination as
to the financial and operational responsibility and appropriateness of the
proposed assignee or sublessee, including but not limited to the intended use
and/or required modification of the Premises, if any, together with a
non-refundable deposit of $1,000 or ten percent (10%) of the monthly Base Rent
applicable to the portion of the Premises which is the subject of the proposed
assignment or sublease, whichever is greater, as reasonable consideration for
Lessor's considering and processing the request for consent. Lessee agrees to
provide Lessor with such other or additional information and/or documentation as
may be reasonably requested by Lessor.
(f) Any assignee of, or sublessee under, this Lease shall, by
reason of accepting such assignment or entering into such sublease, be deemed,
for the benefit of Lessor, to have assumed and agreed to conform and comply with
each and every term, covenant, condition and obligation herein to be observed or
performed by Lessee during the term of said assignment or sublease, other than
such obligations as are contrary to or inconsistent with provisions of an
assignment or sublease to which Lessor has specifically consented in writing.
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(g) The occurrence of a transaction described in Paragraph
12.2(c) shall give Lessor the right (but not the obligation) to require that the
Security Deposit be increased by an amount equal to six (6) times the then
monthly Base Rent, and Lessor may make the actual receipt by Lessor of the
Security Deposit increase a condition to Lessor's consent to such transaction.
(h) Omitted.
12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease of all or a portion
of the Premises heretofore or hereafter made by Lessee, and Lessor may collect
such rent and income and apply same toward Lessee's obligations under this
Lease; provided, however, that until a Breach (as defined in Paragraph 13.1)
shall occur in the performance of Lessee's obligations under this Lease, Lessee
may, except as otherwise provided in this Lease, receive, collect and enjoy the
rents accruing under such sublease. Lessor shall not, by reason of the foregoing
provision or any other assignment of such sublease to Lessor, nor by reason of
the collection of the rents from a sublessee, be deemed liable to the sublessee
for any failure of Lessee to perform and comply with any of Lessee's obligations
to such sublessee under such Sublease. Lessee hereby irrevocably authorizes and
directs any such sublessee, upon receipt of a written notice from Lessor stating
that a Breach exists in the performance of Lessee's obligations under this
Lease, to pay to Lessor the rents and other charges due and to become due under
the sublease. Sublessee shall rely upon any such statement and request from
Lessor and shall pay such rents and other charges to Lessor without any
obligation or right to inquire as to whether such Breach exists and
notwithstanding any notice from or claim from Lessee to the contrary. Lessee
shall have no right or claim against such sublessee, or, until the Breach has
been cured, against Lessor, for any such rents and other charges so paid by said
sublessee to Lessor.
(b) In the event of a Breach by Lessee in the performance of its
obligations under this Lease, Lessor, at its option and without any obligation
to do so, may require any sublessee to attorn to Lessor, in which event Lessor
shall undertake the obligations of the sublessor under such sublease from the
time of the exercise of said option to the expiration of such sublease;
provided, however, Lessor shall not be liable for any prepaid rents or security
deposit paid by such sublessee to such sublessor or for any other prior defaults
or breaches of such sublessor under such sublease.
(c) Any matter or thing requiring the consent of the sublessor
under a sublease shall also require the consent of Lessor herein.
(d) No sublessee under a sublease approved by Lessor shall
further assign or sublet all or any part of the Premises without Lessor's prior
written consent.
(e) Lessor shall deliver a copy of any notice of Default or
Breach by Lessee to the sublessee, who shall have the right to cure the Default
of Lessee within the grace period, if any, specified in such notice. The
sublessee shall have a right of reimbursement and offset from and against Lessee
for any such Defaults cured by the sublessee.
13. DEFAULT; BREACH; REMEDIES.
13.1 DEFAULT; BREACH. Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence
for legal services and costs in the preparation and service of a notice of
Default, and that Lessor may include the cost of such services and costs in said
notice as rent due and payable to cure said default. A "Default" by Lessee is
defined as a failure by Lessee to observe, comply with or perform any of the
terms, covenants, conditions or rules applicable to Lessee under this Lease. A
"Breach" by Lessee is defined as the occurrence of any one or more of the
following Defaults, and, where a grace period for cure after notice is specified
herein, the failure by Lessee to cure such Default prior to the expiration of
the applicable grace period, and shall entitle Lessor to pursue the remedies set
forth in Paragraphs 13.2 and/or 13.3:
(a) The vacating of the Premises without the intention to
reoccupy same, or the abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease, the
failure by Lessee to make any payment of Base Rent, Lessee's Share of Common
Area Operating Expenses, or any other monetary payment required to be made by
Lessee hereunder as and when due, the failure by Lessee to provide Lessor with
reasonable evidence of insurance or surety bond required under this Lease, or
the failure of Lessee to fulfill any obligation under this Lease which endangers
or threatens life or property, where such failure continues for a period of
three (3) days following written notice thereof by or on behalf of Lessor to
Lessee.
(c) Except as expressly otherwise provided in this Lease, the
failure by Lessee to provide Lessor with reasonable written evidence (in duly
executed original form, if applicable) of (i) compliance with Applicable
Requirements per Paragraph 6.3, (ii) the inspection, maintenance and service
contracts required under Paragraph 7.1(b), (iii) the rescission of an
unauthorized assignment or subletting per Paragraph 12.1, (iv) a Tenancy
Statement per Paragraphs 16 or 37, (v) the subordination or non-subordination of
this Lease per Paragraph 30, (vi) the guaranty of the performance of Lessee's
obligations under this Lease if required under Paragraphs 1.11 and 37, (vii) the
execution of any document requested under Paragraph 42 (easements), or (viii)
any other documentation or information which Lessor may reasonably require of
Lessee under the terms of this lease, where any such failure continues for a
period of ten (10) days following written notice by or on behalf of Lessor to
Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40 hereof that
are to be observed, complied with or performed by Lessee, other than those
described in Subparagraphs 13.1(a), (b) or (c), above, where such Default
continues for a period of thirty (30) days after written notice thereof by or on
behalf of Lessor to Lessee; provided, however, that if the nature of Lessee's
Default is such that more than thirty (30) days are reasonably required for its
cure, then it shall not be deemed to be a Breach of this Lease by Lessee if
Lessee commences such cure within said thirty (30) day period and thereafter
diligently prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) the making
by Lessee of any general arrangement or assignment for the benefit of creditors;
(ii) Lessee's becoming a "debtor" as defined in 11 U.S. Code Section 101 or any
successor statute thereto (unless, in the case of a petition filed against
Lessee, the same is dismissed within sixty (60) days); (iii) the appointment of
a trustee or receiver to take possession of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where possession
is not restored to Lessee within thirty (30) days; or (iv) the attachment,
execution or other judicial seizure of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where such
seizure is not discharged within thirty (30) days; provided, however, in the
event that any provision of this Subparagraph 13.1(e) is contrary to any
applicable law, such provision shall be of no force or effect, and shall not
affect the validity of the remaining provisions.
(f) The discovery by Lessor that any financial statement of
Lessee or of any Guarantor, given to Lessor by Lessee or any Guarantor, was
materially false.
(g) If the performance of Lessee's obligations under this Lease
is guaranteed: (i) the death of a Guarantor, (ii) the termination of a
Guarantor's liability with respect to this Lease other than in accordance with
the terms of such guaranty, (iii) a Guarantor's becoming insolvent or the
subject of a bankruptcy filing, (iv) a Guarantor's refusal to honor the
guaranty, or (v) a Guarantor's breach of its guaranty obligation on an
anticipatory breach basis, and Lessee's failure, within sixty (60) days
following written notice by or on behalf of Lessor to Lessee of any such event,
to provide Lessor with written alternative assurances of security, which, when
coupled with the then existing resources of Lessee, equals or exceeds the
combined financial resources of Lessee and the Guarantors that existed at the
time of execution of this Lease.
13.2 REMEDIES. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written notice
to Lessee (or in case of an emergency, without notice), Lessor may at its option
(but without obligation to do so), perform such duty or obligation on Lessee's
behalf, including but not limited to the obtaining of reasonably required bonds,
insurance policies, or governmental licenses, permits or approvals. The costs
and expenses of any such performance by Lessor shall be due and payable by
Lessee to Lessor upon invoice therefor. If any check given to Lessor by Lessee
shall not be honored by the bank upon which it is drawn, Lessor, at its own
option, may require all future payments to be made under this Lease by Lessee to
be made only by cashier's check. In the event of a Breach of this Lease by
Lessee (as defined in Paragraph 13.1), with or without further notice or demand,
and without limiting Lessor in the exercise of any right or remedy which Lessor
may have by reason of such Breach, Lessor may:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Lessee shall immediately surrender possession of the Premises to Lessor. In such
event Lessor shall be entitled to recover from Lessee: (i) the worth at the time
of the award of the unpaid rent which had been earned at the time of
termination; (ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that the Lessee proves could have
been reasonably avoided; (iii) the worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and that
portion of any leasing commission paid by Lessor in connection with this Lease
applicable to the unexpired term of this Lease. The worth at the time of award
of the amount referred to in provision (iii) of the immediately preceding
sentence shall be computed by discounting such amount at the discount rate of
the Federal Reserve Bank of San Francisco or the Federal Reserve Bank District
in which the Premises are located at the time of award plus one percent (1%).
Efforts by Lessor to mitigate damages caused by Lessee's Default or Breach of
this Lease shall not waive Lessor's right to recover damages under this
Paragraph 13.2. If termination of this Lease is obtained through the provisional
remedy of unlawful detainer, Lessor shall have the right to recover in such
proceeding the unpaid rent and damages as are recoverable therein, or Lessor may
reserve the right to recover all or any part thereof in a separate suit for such
rent and/or damages. If a notice and grace period required under Subparagraph
13.1(b), (c) or (d) was not previously given, a notice to pay rent or quit, or
to perform or quit, as the case may be, given to Lessee under any statute
authorizing the forfeiture of leases for unlawful detainer shall also constitute
the applicable notice for grace period purposes required by Subparagraph
13.1(b), (c) or (d). In such case, the applicable grace period under the
unlawful detainer statue shall run concurrently after the one such statutory
notice, and the failure of Lessee to cure the Default within the greater of the
two (2) such grace periods shall constitute both an unlawful detainer and a
Breach of this Lease entitling Lessor to the remedies provided for in this Lease
and/or by said statute.
(b) Continue the Lease and Lessee's right to possession in effect
(in California under California Civil Code Section 1951.4) after Lessee's Breach
and recover the rent as it becomes due, provided Lessee has the right to sublet
or assign, subject only to reasonable limitations. Lessor and Lessee agree that
the limitations on assignment and subletting in this Lease are reasonable. Acts
of maintenance or preservation, efforts to relet the Premises, or the
appointment of a receiver to protect the Lessor's interest under this Lease,
shall not constitute a termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available to Lessor
under the laws or judicial decisions of the state wherein the Premises are
located.
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(d) The expiration or termination of this Lease and/or the
termination of Lessee's right to possession shall not relieve Lessee from
liability under any indemnity provisions of this Lease as to matters occurring
or accruing during the term hereof or by reason of Lessee's occupancy of the
Premises.
13.3 INDUCEMENT RECAPTURE IN EVENT OF BREACH. Any agreement by Lessor
for free or abated rent or other charges applicable to the Premises, or for the
giving or paying by Lessor to or for Lessee of any cash or other bonus,
inducement or consideration for Lessee's entering into this Lease, all of which
concessions are hereinafter referred to as "Inducement Provisions" shall be
deemed conditioned upon Lessee's full and faithful performance of all of the
terms, covenants and conditions of this Lease to be performed or observed by
Lessee during the term hereof as the same may be extended. Upon the occurrence
of a Breach (as defined in Paragraph 13.1) of this Lease by Lessee, any such
Inducement Provision shall automatically be deemed deleted from this Lease and
of no further force or effect, and any rent, other charge, bonus, inducement or
consideration theretofore abated, given or paid by Lessor under such an
Inducement Provision shall be immediately due and payable by Lessee to Lessor,
and recoverable by Lessor, as additional rent due under this Lease,
notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by
Lessor of rent or the cure of the Breach which initiated the operation of this
Paragraph 13.3 shall not be deemed a waiver by Lessor of the provisions of this
Paragraph 13.3 unless specifically so stated in writing by Lessor at the time of
such acceptance.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and other sums due hereunder will cause Lessor to incur
costs not contemplated by this lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed upon
Lessor by the terms of any ground lease, mortgage or deed of trust covering the
Premises. Accordingly, if any installment of rent or other sum due from Lessee
shall not be received by Lessor or Lessor's designee within ten (10) days after
such amount shall be due, then, without any requirement for notice to Lessee,
Lessee shall pay to Lessor a late charge equal to six percent (6%) of such
overdue amount. The parties hereby agree that such late charge represents a fair
and reasonable estimate of the costs Lessor will incur by reason of late payment
by Lessee. Acceptance of such late charge by Lessor shall in no event constitute
a waiver of Lessee's Default or Breach with respect to such overdue amount, nor
prevent Lessor from exercising any of the other rights and remedies granted
hereunder. In the event that a late charge is payable hereunder, whether or not
collected, for three (3) consecutive installments of Base Rent, then
notwithstanding Paragraph 4.1 or any other provision of this Lease to the
contrary, Base Rent shall, at Lessor's option, become due and payable quarterly
in advance.
13.5 BREACH BY LESSOR. Lessor shall not be deemed in breach of this
Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph 13.5, a
reasonable time shall in no event be less than thirty (30) days after receipt by
Lessor, and by any Lender(s) whose name and address shall have been furnished to
Lessee in writing for such purpose, of written notice specifying wherein such
obligation of Lessor has not been performed; provided, however, that if the
nature of Lessor's obligation is such that more than thirty (30) days after such
notice are reasonably required for its performance, then Lessor shall not be in
breach of this Lease if performance is commenced within such thirty (30) day
period and thereafter diligently pursued to completion.
14. CONDEMNATION. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(all of which are herein called "condemnation"), this Lease shall terminate as
to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than ten percent (10%) of the floor
area of the Premises, or more than twenty-five percent (25%) of the portion of
the Common Areas designated for Lessee's parking, is taken by condemnation,
Lessee may, at Lessee's option, to be exercised in writing within ten (10) days
after Lessor shall have given Lessee written notice of such taking (or in the
absence of such notice, within ten (10) days after the condemning authority
shall have taken possession) terminate this Lease as of the date the condemning
authority takes such possession. If Lessee does not terminate this Lease in
accordance with the foregoing, this Lease shall remain in full force and effect
as to the portion of the Premises remaining, except that the Base Rent shall be
reduced in the same proportion as the rentable floor area of the Premises taken
bears to the total rentable floor area of the Premises. No reduction of Base
Rent shall occur if the condemnation does not apply to any portion of the
Premises. Any award for the taking of all or any part of the Premises under the
power of eminent domain or any payment made under threat of the exercise of such
power shall be the property of Lessor, whether such award shall be made as
compensation for diminution of value of the leasehold or for the taking of the
fee, or as severance damages; provided, however, that Lessee shall be entitled
to any compensation, separately awarded to Lessee for Lessee's relocation
expenses and/or loss of Lessee's Trade Fixtures. In the event that this Lease is
not terminated by reason of such condemnation, Lessor shall to the extent of its
net severance damages received, over and above Lessee's Share of the legal and
other expenses incurred by Lessor in the condemnation matter, repair any damage
to the Premises caused by such condemnation authority. Lessee shall be
responsible for the payment of any amount in excess of such net severance
damages required to complete such repair.
15. BROKER'S FEES.
15.1 PROCURING CAUSE. The Broker(s) named in Paragraph 1.10 is/are
procuring cause of this Lease.
15.2 ADDITIONAL TERMS. Unless Lessor and Broker(s) have otherwise agreed
in writing, Lessor agrees that: (a) if Lessee exercises any Option (as defined
in Paragraph 39.1) granted under this Lease or any Option subsequently granted,
or (b) if Lessee acquires any rights to the Premises or other premises in which
Lessor has an interest, or (c) if Lessee remains in possession of the Premises
with the consent of Lessor after the expiration of the term of this Lease after
having failed to exercise an Option, or (d) if said Brokers are the procuring
cause of any other lease or sale entered into between the Parties pertaining to
the Premises and/or any adjacent property in which Lessor has an interest, or
(e) if Base Rent is increased, whether by agreement or operation of an
escalation clause herein, then as to any of said transactions, Lessor shall pay
said Broker(s) a fee in accordance with the schedule of said Broker(s) in effect
at the time of the execution of this Lease.
15.3 ASSUMPTION OF OBLIGATIONS. Any buyer or transferee of Lessor's
interest in this Lease, whether such transfer is by agreement or by operation of
law, shall be deemed to have assumed Lessor's obligation under this Paragraph
15. Each Broker shall be an intended third party beneficiary of the provisions
of Paragraph 1.10 and of this Paragraph 15 to the extent of its interest in any
commission arising from this Lease and may enforce that right directly against
Lessor and its successors.
15.4 REPRESENTATIONS AND WARRANTIES. Lessee and Lessor each represent
and warrant to the other that it has had no dealings with any person, firm,
broker or finder other than as named in Paragraph 1.10(a) in connection with the
negotiation of this Lease and/or the consummation of the transaction
contemplated hereby, and that no broker or other person, firm or entity other
than said named Broker(s) is entitled to any commission or finder's fee in
connection with said transaction. Lessee and Lessor do each hereby agree to
indemnify, protect, defend and hold the other harmless from and against
liability for compensation or charges which may be claimed by any such unnamed
broker, finder or other similar party by reason of any dealings or actions of
the Indemnifying Party, including any costs, expenses, and/or attorneys' fees
reasonably incurred with respect thereto.
16. TENANCY AND FINANCIAL STATEMENTS.
16.1 TENANCY STATEMENT. Each Party (as "Responding Party") shall within
ten (10) days after written notice from the other Party (the "Requesting Party")
execute, acknowledge and deliver to the Requesting Party a statement in writing
in a form similar to the then most current "Tenancy Statement" form published by
the American Industrial Real Estate Association, plus such additional
information, confirmation and/or statements as may be reasonably requested by
the Requesting Party.
16.2 FINANCIAL STATEMENT. If Lessor desires to finance, refinance, or
sell the Premises or the Building, or any part thereof, Lessee and all
Guarantors shall deliver to any potential lender or purchaser designated by
Lessor such financial statements of Lessee and such Guarantors as may be
reasonably required by such lender or purchaser, including but not limited to
Lessee's financial statements for the past three (3) years. All such financial
statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.
17. LESSOR'S LIABILITY. The term "Lessor" as used herein shall mean the owner or
owners at the time in question of the fee title to the Premises. In the event of
a transfer of Lessor's title or interest in the Premises or in this Lease,
Lessor shall deliver to the transferee or assignee (in cash or by credit) any
unused Security Deposit held by Lessor at the time of such transfer or
assignment. Except as provided in Paragraph 15.3, upon such transfer or
assignment and delivery of the Security Deposit, as aforesaid, the prior Lessor
shall be relieved of all liability with respect to the obligations and/or
covenants under this Lease thereafter to be performed by the Lessor. Subject to
the foregoing, the obligations and/or covenants in this Lease to be performed by
the Lessor shall be binding only upon the Lessor as hereinabove defined.
18. SEVERABILITY. The invalidity of any provision of this Lease, as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.
19. INTEREST ON PAST-DUE OBLIGATIONS. Any monetary payment due Lessor hereunder,
other than late charges, not received by Lessor within ten (10) days following
the date on which it was due, shall bear interest from the date due at the prime
rate charged by the largest state chartered bank in the state in which the
Premises are located plus four percent (4%) per annum, but not exceeding the
maximum rate allowed by law, in addition to the potential late charge provided
for in Paragraph 13.4.
20. TIME OF ESSENCE. Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under this Lease.
21. RENT DEFINED. All monetary obligations of Lessee to Lessor under the terms
of this Lease are deemed to be rent.
22. NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.
Lessor and Lessee each represents and warrants to the Brokers that it has made,
and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the other Party to this Lease and as
to the nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party. Each Broker shall be an intended third party beneficiary
of the provisions of this Paragraph 22.
23. NOTICES.
23.1 NOTICE REQUIREMENTS. All notices required or permitted by this
Lease shall be in writing and may be delivered in person (by hand or by
messenger or courier service) or may be sent by regular, certified or registered
mail or U.S. Postal Service Express Mail, with postage prepaid, or by facsimile
transmission during normal business hours, and shall be deemed sufficiently
given if served in a manner specified in this Paragraph 23. The addresses noted
adjacent to a Party's signature on this Lease shall be that Party's address for
delivery or mailing of notice purposes. Either Party may by written notice to
the other specify a different address for notice purposes, except that upon
Lessee's taking possession of the Premises, the Premises shall constitute
Lessee's address for the purpose of mailing or delivering notices to Lessee. A
copy of all notices required or permitted to be given to Lessor hereunder shall
be concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate by written notice to Lessee.
23.2 DATE OF NOTICE. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown on
the receipt card, or if no delivery date is shown, the postmark thereon. If sent
by regular mail, the notice shall be deemed given forty-eight (48) hours after
the same is addressed as required herein and mailed with postage prepaid.
Notices delivered by United States Express Mail or overnight courier that
guarantees next day
MULTI-TENANT - MODIFIED NET
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-8-
<PAGE> 9
delivery shall be deemed given twenty-four (24) hours after delivery of the same
to the United States Postal Service or courier. If any notice is transmitted by
facsimile transmission or similar means, the same shall be deemed served or
delivered upon telephone or facsimile confirmation of receipt of the
transmission thereof, provided a copy is also delivered via delivery or mail. If
notice is received on a Saturday or a Sunday or a legal holiday, it shall be
deemed received on the next business day.
24. WAIVERS. No waiver by Lessor of the Default or Breach of any term, covenant
or condition hereof by Lessee, shall be deemed a waiver of any other term,
covenant or condition hereof, or of any subsequent Default or Breach by Lessee
of the same or any other term, covenant or condition hereof. Lessor's consent
to, or approval of, any such act shall not be deemed to render unnecessary the
obtaining of Lessor's consent to, or approval of, any subsequent or similar act
by Lessee, or be construed as the basis of an estoppel to enforce the provision
or provisions of this Lease requiring such consent. Regardless of Lessor's
knowledge of a Default or Breach at the time of accepting rent, the acceptance
of rent by Lessor shall not be a waiver of any Default or Breach by Lessee of
any provision hereof. Any payment given Lessor by Lessee may be accepted by
Lessor on account of moneys or damages due Lessor, notwithstanding any
qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.
26. NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease. In the event that Lessee holds over in violation of this Paragraph
26 then the Base Rent payable from and after the time of the expiration or
earlier termination of this Lease shall be increased to two hundred percent
(200%) of the Base Rent applicable during the month immediately preceding such
expiration or earlier termination. Nothing contained herein shall be construed
as a consent by Lessor to any holding over by Lessee.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. COVENANTS AND CONDITIONS. All provisions of this Lease to be observed or
performed by Lessee are both covenants and conditions.
29. BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the Parties,
their personal representatives, successors and assigns and be governed by the
laws of the State in which the Premises are located. Any litigation between the
Parties hereto concerning this Lease shall be initiated in the county in which
the Premises are located.
30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.
30.1 SUBORDINATION. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "Security Device"), now or
hereafter placed by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. Lessee
agrees that the Lenders holding any such Security Device shall have no duty,
liability or obligation to perform any of the obligations of Lessor under this
Lease, but that in the event of Lessor's default with respect to any such
obligation, Lessee will give any lender whose name and address have been
furnished Lessee in writing for such purpose notice of Lessor's default pursuant
to Paragraph 13.5. If any Lender shall elect to have this Lease and/or any
Option granted hereby superior to the lien of its Security Device and shall give
written notice thereof to Lessee, this Lease and such Options shall be deemed
prior to such Security Device, notwithstanding the relative dates of the
documentation or recordation thereof.
30.2 ATTORNMENT. Subject to the non-disturbance provisions of Paragraph
30.3., Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new owner shall not: (i) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership, (ii) be subject to any offsets or defenses
which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one month's rent.
30.3 NON-DISTURBANCE. With respect to Security Devices entered into by
Lessor after the execution of this lease, Lessee's subordination of this Lease
shall be subject to receiving assurance (a "non-disturbance agreement") from the
Lender that Lessee's possession and this Lease, including any options to extend
the term hereof, will not be disturbed so long as Lessee is not in Breach hereof
and attorns to the record owner of the Premises.
30.4 SELF-EXECUTING. The agreements contained in this Paragraph 30 shall
be effective without the execution of any further documents; provided, however,
that upon written request from Lessor or a Lender in connection with a sale,
financing or refinancing of Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any such
subordination or non-subordination, attornment and/or non-disturbance agreement
as is provided for herein.
31. ATTORNEYS' FEES. If any Party or Broker brings an action or proceeding to
enforce the terms hereof or declare rights hereunder, the Prevailing Party (as
hereafter defined) in any such proceeding, action, or appeal thereon, shall be
entitled to reasonable attorneys' fees. Such fees may be awarded in the same
suit or recovered in a separate suit, whether or not such action or proceeding
is pursued to decision or judgment. The term "Prevailing Party" shall include,
without limitation, a Party or Broker who substantially obtains or defeats the
relief sought, as the case may be, whether by compromise, settlement, judgment,
or the abandonment by the other Party or Broker of its claim or defense. The
attorneys' fee award shall not be computed in accordance with any court fee
schedule, but shall be such as to fully reimburse all attorneys' fees reasonably
incurred. Lessor shall be entitled to attorneys' fees, costs and expenses
incurred in preparation and service of notices of Default and consultations in
connection therewith, whether or not a legal action is subsequently commenced in
connection with such Default or resulting Breach. Broker(s) shall be intended
third party beneficiaries of this Paragraph 31.
32. LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and Lessor's agents shall
have the right to enter the Premises at any time, in the case of an emergency,
and otherwise at reasonable times for the purpose of showing the same to
prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises or to the Building, as Lessor
may reasonably deem necessary. Lessor may at any time place on or about the
Premises or Building any ordinary "For Sale" signs and Lessor may at any time
during the last one hundred eighty (180) days of the term hereof place on or
about the Premises any ordinary "For Lease" signs. All such activities of Lessor
shall be without abatement of rent or liability to Lessee.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
34. SIGNS. Lessee shall not place any sign upon the exterior of the Premises or
the Building, except that Lessee may, with Lessor's prior written consent,
install (but not on the roof) such signs as are reasonably required to advertise
Lessee's own business so long as such signs are in a location designated by
Lessor and comply with Applicable Requirements and the signage criteria
established for the Industrial Center by Lessor. The installation of any sign on
the Premises by or for Lessee shall be subject to the provisions of Paragraph 7
(Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations).
Unless otherwise expressly agreed herein, Lessor reserves all rights to the use
of the roof of the Building, and the right to install advertising signs on the
Building, including the roof, which do not unreasonably interfere with the
conduct of Lessee's business; Lessor shall be entitled to all revenues from such
advertising signs.
35. TERMINATION; MERGER. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies. Lessor's failure within ten (10) days following any such
event to make a written election to the contrary by written notice to the holder
of any such lesser interest, shall constitute Lessor's election to have such
event constitute the termination of such interest.
36. CONSENTS.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise
provided herein, wherever in this Lease the consent of a Party is required to an
act by or for the other Party, such consent shall not be unreasonably withheld
or delayed. Lessor's actual reasonable costs and expenses (including but not
limited to architects', attorneys', engineers' and other consultants' fees)
incurred in the consideration of, or response to, a request by Lessee for any
Lessor consent pertaining to this Lease or the Premises, including but not
limited to consents to an assignment a subletting or the presence or use of a
Hazardous Substance, shall be paid by Lessee to lessor upon receipt of an
invoice and supporting documentation therefor. In addition to the deposit
described in Paragraph 12.2(e), Lessor may, as a condition to considering any
such request by Lessee, require that Lessee deposit with Lessor an amount of
money (in addition to the Security Deposit held under Paragraph 5) reasonably
calculated by Lessor to represent the cost Lessor will incur in considering and
responding to Lessee's request. Any unused portion of said deposit shall be
refunded to Lessee without interest. Lessor's consent to any act, assignment of
this Lease or subletting of the Premises by Lessee shall not constitute an
acknowledgment that no Default or Breach by Lessee of this Lease exists, nor
shall such consent be deemed a waiver of any then existing Default or Breach,
except as may be otherwise specifically stated in writing by Lessor at the time
of such consent.
(b) All conditions to Lessor's consent authorized by this Lease
are acknowledged by Lessee as being reasonable. The failure to specify herein
any particular condition to Lessor's consent shall not preclude the impositions
by Lessor at the time of consent of such further or other conditions as are then
reasonable with reference to the particular matter for which consent is being
given.
37. GUARANTOR.
37.1 FORM OF GUARANTY. If there are to be any Guarantors of this Lease
per Paragraph 1.11, the form of the guaranty to be executed by each such
Guarantor shall be in the form most recently published by the American
Industrial Real Estate Association, and each such Guarantor shall have the same
obligations as Lessee under this lease, including but not limited to the
obligation to provide the Tenancy Statement and information required in
Paragraph 16.
37.2 ADDITIONAL OBLIGATIONS OF GUARANTOR. It shall constitute a Default
of the Lessee under this Lease if any such Guarantor fails or refuses, upon
reasonable request by Lessor to give: (a) evidence of the due execution of the
guaranty called for by this Lease, including the authority of the Guarantor (and
of the party signing on Guarantor's behalf) to obligate such Guarantor on said
guaranty, and resolution of its board of directors authorizing the making of
such guaranty, together with a certificate of incumbency showing the signatures
of the persons authorized to sign on its behalf, (b) current financial
statements of Guarantor as may from time to time be requested by Lessor, (c) a
Tenancy Statement, or (d) written confirmation that the guaranty is still in
effect.
38. QUIET POSSESSION. Upon payment by Lessee of the rent for the Premises and
the performance of all of the covenants, conditions and provisions on Lessee's
part to be observed and performed under this Lease, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease.
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<PAGE> 10
39. OPTIONS.
39.1 DEFINITION. As used in this Lease, the word "Option" has the
following meaning: (a) the right to extend the term of this Lease or to renew
this Lease or to extend or renew any lease that Lessee has on other property of
Lessor; (b) the right of first refusal to lease the Premises or the right of
first offer to lease the Premises or the right of first refusal to lease other
property of Lessor or the right of first offer to lease other property of
Lessor; (c) the right to purchase the Premises, or the right of first refusal to
purchase the Premises, or the right of first offer to purchase the Premises, or
the right to purchase other property of Lessor, or the right of first refusal to
purchase other property of Lessor, or the right of first offer to purchase other
property of Lessor.
39.2 OPTIONS PERSONAL TO ORIGINAL LESSEE. Each Option granted to Lessee
in this Lease is personal to the original Lessee named in Paragraph 1.1 hereof,
and cannot be voluntarily or involuntarily assigned or exercised by any person
or entity other than said original Lessee while the original Lessee is in full
and actual possession of the Premises and without the intention of thereafter
assigning or subletting. The Options, if any, herein granted to Lessee are not
assignable, either as a part of an assignment of this Lease or separately or
apart therefrom, and no Option may be separated from this Lease in any manner,
by reservation or otherwise.
39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple Options
to extend or renew this Lease, a later option cannot be exercised unless the
prior Options to extend or renew this Lease have been validly exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary: (i) during
the period commencing with the giving of any notice of Default under Paragraph
13.1 and continuing until the noticed Default is cured, or (ii) during the
period of time any monetary obligation due Lessor from Lessee is unpaid (without
regard to whether notice thereof is given Lessee), or (iii) during the time
Lessee is in Breach of this Lease, or (iv) in the event that Lessor has given to
Lessee three (3) or more notices of separate Defaults under Paragraph 13.1
during the twelve (12) month period immediately preceding the exercise of the
Option, whether or not the Defaults are cured.
(b) The period of time within which an Option may be exercised
shall not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due and
timely exercise of the Option, if, after such exercise and during the term of
this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of Lessee
for a period of thirty (30) days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee), or (ii) Lessor gives to
Lessee three (3) or more notices of separate Defaults under Paragraph 13.1
during any twelve (12) month period, whether or not the Defaults are cured, or
(iii) if Lessee commits a Breach of this Lease.
40. RULES AND REGULATIONS. Lessee agrees that it will abide by, and keep and
observe all reasonable rules and regulations ("Rules and Regulations") which
Lessor may make from time to time for the management, safety, care, and
cleanliness of the grounds, the parking and unloading of vehicles and the
preservation of good order, as well as for the convenience of other occupants or
tenants of the Building and the Industrial Center and their invitees.
41. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.
42. RESERVATIONS. Lessor reserves the right, from time to time, to grant,
without the consent or joinder of Lessee, such easements, rights of way, utility
raceways, and dedications that Lessor deems necessary, and to cause the
recordation of parcel maps and restrictions, so long as such easements, rights
of way, utility raceways, dedications, maps and restrictions do not reasonably
interfere with the use of the Premises by Lessee. Lessee agrees to sign any
documents reasonably requested by Lessor to effectuate any such easement rights,
dedication, map or restrictions.
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to institute suit for recovery of such sum. If it shall be adjudged
that there was no legal obligation on the part of said Party to pay such sum or
any part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay under the provisions of this
Lease.
44. AUTHORITY. If either Party hereto is a corporation, trust, or general or
limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.
45. CONFLICT. Any conflict between the printed provisions of this Lease and the
typewritten or handwritten provisions shall be controlled by the typewritten or
handwritten provisions.
46. OFFER. Preparation of this Lease by either Lessor or Lessee or Lessor's
agent or Lessee's agent and submission of same to Lessee or Lessor shall not be
deemed an offer to lease. This Lease is not intended to be binding until
executed and delivered by all Parties hereto.
47. AMENDMENTS. This Lease may be modified only in writing, signed by the
parties in interest at the time of the modification. The Parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional insurance company or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the property
of which the Premises are a part.
48. MULTIPLE PARTIES. Except as otherwise expressly provided herein, if more
than one person or entity is named herein as either Lessor or Lessee, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.
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<PAGE> 11
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR YOUR
ATTORNEY'S REVIEW AND APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED TO
EVALUATE THE CONDITION OF THE PROPERTY FOR THE POSSIBLE PRESENCE OF
ASBESTOS, UNDERGROUND STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO
REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL
ESTATE ASSOCIATION OR BY THE REAL ESTATE BROKER OR THEIR CONTRACTORS,
AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX
CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT RELATES; THE
PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN COUNSEL AS TO THE
LEGAL AND TAX CONSEQUENCES OF THIS LEASE. IF THE SUBJECT PROPERTY IS IN
A STATE OTHER THAN CALIFORNIA, AN ATTORNEY FROM THE STATE WHERE THE
PROPERTY IS LOCATED SHOULD BE CONSULTED.
The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.
Executed at: Morgan Hill, California Executed at: Santa Clara, CA
----------------------- ----------------------------
on: on: 10/23/98
--------------------------------- -------------------------------------
By LESSOR: By LESSEE:
GUL & VANESSA GAZIPURA LOGICAL SERVICES, INCORPORATED
By: /s/Gul Gazipura By: /s/Robert W. Ulrickson
-------------------------------- ------------------------------------
Name Printed: Gul M. Gazipura Name Printed: Robert W. Ulrickson
--------------------- --------------------------
Title: Title: President
------------------------------ ---------------------------------
By: /s/ Vanessa J. Gazipura By:
-------------------------------- --------------------------------------
Name Printed: Vanessa J. Gazipura Name Printed:
--------------------- ---------------------------
Title: Title:
------------------------------ -----------------------------------
Address: 235 Vineyard Court, Address: 3235 Kifer Road, Suite #210
Morgan Hill, Santa Clara,
Cal. 95037 California 95051-0815
--------------------------- --------------------------------
Telephone: (408) 782-5911 Telephone: (408) 739-2600
Facsimile: (408) 782-5912 Facsimile: (408) 739-6364
------------------------- ------------------------------
BROKER: BROKER:
DWYER COMMERCIAL BROKERAGE MULLINIX COMMERCIAL REAL ESTATE COMPANY
Executed at: Morgan Hill, California Executed at: Campbell, California
----------------------- ----------------------------
on: October 14, 1998 on:
-------------------------------- --------------------------------------
By: By:
--------------------------------- --------------------------------------
Name Printed: Robert T. Dwyer Name Printed: Michael G. Mullinix
---------------------- ---------------------------
Title: Broker/Owner Title: Principal
----------------------------- ----------------------------------
Address: Morgan Hill, Address: 1875 So. Bascom Ave.,
California 95037 Suite 116-279
--------------------------- Campbell, California 95008
--------------------------------
Telephone: (408) 779-6062 Telephone: (408) 879-9333
Facsimile: (408) 779-1182 Facsimile: (408) 225-6488
------------------------- ------------------------------
NOTE: These forms are often modified to meet changing requirements of law and
needs of the industry. Always write or call to make sure you are
utilizing the most current form: AMERICAN INDUSTRIAL REAL ESTATE
ASSOCIATION, 345 So. Figueroa St., M-1, Los Angeles, CA 90071, (213)
687-8777.
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<PAGE> 12
ADDENDUM #1
Addendum to the lease dated October 14, 1998 between Gul and Vanessa
Gazipura as Lessor and Logical Services, Incorporated as Lessee for the premises
known as 235 Vineyard Court, #100, Morgan Hill, Cal.
1) BASE RENT INCREASES: The base rent shall increase to $4,588.50 per month,
($1.05 p.s.f.) at the start of the second year, (January 1, 2000) and to
$4,807.00 per month, ($1.10 p.s.f.) at the start of the third year (January 1,
2001).
2) INTERIOR IMPROVEMENTS: Lessor shall construct and pay for the following
interior improvements as shown on Exhibit A: One approx. 15' x 20' conference
room, two approx. 15' x 12' private offices, one approx. 12' x 15' lunch room
with a base cabinet and sink and an upper cabinet. The new offices and
conference room shall be carpeted and the lunch room shall keep the existing
tile floor. All of the new rooms shall have the necessary electrical, mechanical
and fire sprinkler adjustments and additions. The balance of the premises shall
remain in its existing condition.
Any additional improvements not specified above shall be installed at Lessees'
cost after receiving Lessors' approval.
3) OPTION TO RENEW LEASE: Lessee shall have the option to renew this lease for
an additional two years, provided Lessee is not in default of any provisions of
this lease, upon giving Lessor written notice of its intention to exercise this
option, at lease six months prior to the expiration date of this lease. The
monthly base rent shall remain at $4,807.00 for the first year of the option
period and shall increase to $5,025.50 per month, ($1.15 p.s.f.) for the second
year of the option period.
4. RADIO TOWER & SCREEN ROOM: Lessee shall have the right to install a screen
room within the Premises in accordance with paragraph 7. Lessee shall have the
right to install a 40', single mast radio tower at the back of the building or
other location mutually acceptable to Lessor and Lessee. Lessee shall obtain the
Lessors' approval of the design of the tower and in no event shall the tower be
installed on the roof. Lessee shall be responsible for obtaining all necessary
permits and approvals for the
<PAGE> 13
installation of the tower from the City of Morgan Hill and Lessee shall pay for
all of the costs associated with the tower.
LESSOR: /s/Gul Gazipura LESSEE: /s/R.W. Ulrickson
-------------------------- ---------------------------------
DATE: 11/02/98 DATE: 10/23/98
---------------------------- ---------------------------------
<PAGE> 14
EXHIBIT A
[Schematic Drawing of Floor Plan]
<PAGE> 15
ADDENDUM #2
Addendum to the lease dated October 14, 1998 between Gul and Vanessa Gazipura as
Lessor and Logical Services, Incorporated as Lessee for the Premises known as
235 Vineyard Court, Suite #100, Morgan Hill, Cal.
1) Lessee agrees to pay Lessor Common Area Operating Expenses as stated in
paragraph 1.6(b) up to a maximum of $0.25 per square foot.
2) Lessor agrees to install a deadbolt with key on both sides in the door
separating the Lessee space from the Lessor space to limit internal
access between the two areas. The key will be kept with the Lessor.
LESSOR: /s/ Gul Gazipura LESSEE: /s/ R.W. Ulrickson
-------------------------- ---------------------------------
DATE: 11/02/98 DATE: 10/23/98
--------------------------- ----------------------------------
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