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PATRIOT SCIENTIFIC CORPORATION
FORM 10-KSB
EXHIBIT NO. 10.3
LEASE AGREEMENT BETWEEN THE COMPANY'S SUBSIDIARY METACOMP, INC. AND
▇▇▇▇-▇-▇▇▇▇ PARTNERSHIP, A CALIFORNIA LIMITED PARTNERSHIP DATED
APRIL 11, 1991 AS AMENDED NOVEMBER 11, 1992 AND NOVEMBER 2, 1995
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STANDARD INDUSTRIAL LEASE- MULTI-TENANT
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
(Pertinent Excerpts)
1. PARTIES. This lease, dated, for reference purposes only April 11, 1991 is
made by and between ▇▇▇▇-▇-▇▇▇▇, Partnership, a California limited
partnership (herein called "Lessor") and Metacomp, Inc., a California
Corporation (herein called ("lessee")
2. PREMISES, PARKING AND COMMON AREAS
2.1. PREMISES. Lessor hereby leases to Lessee and Lessee leases from Lessor
from the term. At the rental, and upon all of the conditions set forth
herein, real property situated in the County of San Diego. State of
California commonly known as 10989 Via Frontera, San Diego and
described as the approximately 5,240 square feet of space herein
referred to as the "premises" as may be outlined on an Exhibit
attached hereto, including rights to the Common Areas as hereinafter
specified but not including any rights to the roof of the Premises or
to any Building in the Industrial Center. The Premises are a portion
of a building, herein referred to as the "Building". The Premises, the
Building, the Common Areas, the land upon which the same are located,
along with all other buildings, and improvements thereon, are herein
collectively referred to as the "Industrial Center".
3. TERM. The term of this Lease shall be for Twenty-four (24) months
commencing on May 1, 1991 and ending on April 30, 1993 unless sooner
terminated pursuant to any provision hereof.
4. RENT.
4.1. BASE RENT. Lessee shall pay to Lessor as Base Rent for the Premises,
without any offset or deduction, except as may be otherwise expressly
provided in this Lease, on the 1st day of each month of the term
hereof, monthly payments in advance of $3,720.40. Lessee shall pay
Lessor upon execution hereof $3,720.40 as Base Rent for May, 1991 Rent
for any period during the term hereof which is for less than one month
shall be a pro rata portion of the Base Rent. 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 or Lessor may
designate in writing.
4.2. OPERATING EXPENSES. Lessee shall pay to Lessor during the term hereof,
in addition to the Base Rent, Lessee's Share, as hereinafter defined,
of all operating Expenses, as hereinafter defined, during each
calendar year of the term of this Lease in accordance with the
following provisions:
a) "Lessee's Share" is defined for purposes of this Lease as 6.63
percent.
b) "Operating Expenses" is defined for purposes of this Lease, as
all costs incurred by Lessor, if any, for:
(i) The operation, repair and maintenance, in neat, clean, good
order and condition, of the following:
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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 and
fences and gates.
bb. Trash Disposal Services
cc. Tenant directories
dd. Fire detection
ee. Security Services
ff. Any other services to be provided by Lessor that is
elsewhere in this Lease stated to be an "Operating
Expenses."
(xxix) The cost of water, gas and electricity to service the
Common Areas
a) The inclusion of the improvements, facilities and services set
forth in paragraph 4.2 (b) (i) of the definition of Operating
expenses 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 of some of them
b) Lessee's Share of 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 Operating Expenses and the
same shall be payable monthly or quarterly, as Lessor shall
designate, during each twelve-month period 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
statement showing Lessee's Share of the actual 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's Share as indicated
on said statement. Lessee shall be entitled to credit the amount
of such over payment against Lessee's Share of Operating expenses
next falling due if Lessee's payments under this paragraph 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 execution hereof
$22,322.40 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 to other charge in default or 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 therefore
deposit cash with Lessor in an amount sufficient to restore said deposit to
the full amount then required of Lessee if the monthly rent shall from time
to time. Increase during the term of this Lease. Lessee shall at the time
of such
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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 separate from its
general accounts. If Lessee performs all of Lessee's obligations hereunder,
said deposit, or so much thereof as has not therefore 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. INSURANCE; INDEMNITY.
6.1. LIABILITY INSURANCE-LESSEE. Lessee shall, at Lessee's expense, obtain
and keep in force during the term of the Lease a policy of combined
Single Limit Bodily Injury and Property Damage insurance insuring
Lessee and Lessor against any liability arising out of the use,
occupancy or maintenance of the Premises and the Industrial Center.
Such insurance shall be an amount not less than $1,000,000.00 per
occurrence. The policy shall insure performance by Lessee of the
indemnity provisions of this paragraph 8. The limits of said insurance
shall not however, limit the liability of Lessee hereunder.
6.2. 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 Property Damage Insurance, insuring Lessor, but not Lessee,
against any liability arising out of the ownership, use, occupancy or
maintenance of the Industrial Center in an amount not less than
$5,000,000.00 per occurrence.
6.3. PROPERTY INSURANCE. 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 Industrial Center improvements, but not Lessee's
personal property, fixtures, equipment or tenant improvements, in an
amount not to exceed the full replacement value thereof, as the same
may exist from time to time, providing protection against all perils
included within the classification of fire, extended coverage,
vandalism, malicious mischief, flood (in the event same is required by
a lender having a lien on the Premises) special extended perils ("all
risk", as such term is used in the insurance industry), plate glass
insurance and such other insurance as Lessor deems advisable. 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.
7. DAMAGE AND DESTRUCTION
7.1. 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.
8. REAL PROPERTY TAXES.
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8.1. PAYMENT OF TAX INCREASE. Lessor shall pay the real property tax
applicable to the Industrial Center provided, however, that Lessee
shall pay, in addition to rent, Lessee's Share (as defined in
paragraph 4.2[a]) of the amount, if any, by which real property taxes
applicable to the Premises increase over the fiscal real estate tax
year 1990-1991. Such payment shall be made by Lessee within thirty
(30) days after receipt of Lessor's written statement setting forth
the amount of such increase and the computation thereof. If the term
of this Lessee shall not expire concurrently within the expiration of
the tax fiscal year, Lessee's liability for increased taxes for the
last partial lease year shall be prorated on an annual basis.
9. PERSONAL PROPERTY TAXES
9.1 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.
When possible. Lessee shall cause said trade fixtures, furnishings,
equipment and all other personal property t be assessed and billed
separately from the real property of Lessor.
9.2 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.
10. UTILITIES. Lessee shall pay for all water, gas, heat, light, power,
telephone and other utilities and services supplied to the Premises,
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 of a reasonable proportion to be determined by Lessor of all
charges jointly metered with other premises in the Building.
11. DEFAULT; REMEDIES.
11.1. DEFAULT. The occurrence of any one or more of the following events
shall constitute a material default of this Lease by Lessee:
a) The vacating or abandonment of the Premises by Lessee.
b) 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 statues such Notice to
pay Rent or Quit shall also constitute the notice required by
this subparagraph.
c) Except as otherwise provided in this Lease, 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 described in paragraph (b) 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) day period and thereafter diligently prosecutes such
cure to
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completion. To the extent permitted by law, such thirty (30) day
notices shall constitute the sole and exclusive notice required
to be given to Lessee under applicable unlawful Detainer statues.
d) (i) The making by Lessee of any general arrangement or general
assignment for the benefit of creditors. (ii) Lessee becomes 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 11.1 (d) is contrary to any applicable law, such
provision shall be of no force or effect.
(e) The discovery by Lessor that any financial statement given to
Lessor by Lessee, any assignee of Lessee, any subtenant of
Lessee, any successor in interest of Lessee or any guarantor of
Lessee's obligation hereunder, was materially false.
11.2. REMEDIES. In the event of any such material default 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 relating,
including necessary renovation and alternation 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 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.
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11.3 DEFAULT BY LESSOR. Lessor shall not be in default unless Lessor fails
to perform obligations required of Lessor within a reasonable time and
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 than Lessor shall not be in default if
Lessor commences performance within such thirty (30) day period and
thereafter diligently prosecutes the same to completion.
11.4 LATE CHARGES. Lessee hereby acknowledges that late payment by Lessee
to Lessor of Base Rent. Lessee's Share of Operating Expenses 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 industrial Center
Accordingly, if any installment of Base rent Operating Expense 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 within 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 consecutive installments
of any of the aforesaid monetary obligations of Lessee, then Base Rent
shall automatically become due and payable quarterly in advance,
rather than monthly notwithstanding paragraph 4.1 or any other
provision of this Lease to the contrary.
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.
THIS LEASE HAS BEEN PREPARED FOR SUBMISSION TO YOUR ATTORNEY FOR 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.
LESSOR LESSEE
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▇▇▇▇-▇-▇▇▇▇ PARTNERSHIP METACOMP, INC.
By: /S/ ▇▇▇▇ ▇▇▇▇, G.P. By: /S/ ▇▇▇▇ ▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇, General Partner ▇▇▇▇ ▇▇▇▇▇, President
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ADDENDUM TO LEASE
This addendum to lease is physically attached to, made a part of, and
incorporated into that certain written "STANDARD INDUSTRIAL LEASE" made as of
April 11, 1991, by and between ▇▇▇▇-▇-▇▇▇▇ Partnership and METACOMP, INC.
Monthly Rate for Period:
11/01/95 - 07/31/96...........$3,435
08/01/96 - 07/31/97...........$4,795
08/01/97 - 07/31/98...........$5,205
08/01/98 - 07/31/99...........$5,305
Forty-five month lease plus utilities, includes additional space at 10989 Via
Frontera (adjoining space at 2,300 sq. ft.). Common area is include in the
monthly rent. Allowance for tenant Improvements up to $40,000 with landlord
approval, including a sign similar to Falon's. Tenant has first right to refusal
on remaining adjoining space, with terms to be at .40 cents per sq. ft. plus
Tenant improvements paid by tenant. If space is improved by landlord the rent
will be adjusted upward.
Total leased space is 7,340 sq. ft.
Lessee: Metacomp, Inc. ▇▇▇▇-▇-▇▇▇▇
Partnership
By: /S/ ▇▇▇▇ ▇▇▇▇▇▇ By: /S/ ▇▇▇▇ ▇▇▇▇
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Date: 11/2/95 Date: 11/2/95
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ADDENDUM TO LEASE
This addendum to lease is physically attached to, made a part of, and
incorporated into that certain written "STANDARD INDUSTRIAL LEASE" made as of
April 11, 1991, by and between ▇▇▇▇-▇-▇▇▇▇ Partnership and METACOMP, INC.
Annual Basic 1993 Year One= $44,644.80 (.71 per sq. foot per mo.)
1994 Year Two= $47,160.00 (.73 per sq. foot per mo.)
1995 Year Three= $46,904.10 (.75 per sq. foot per mo.)
Three year lease plus utilities. Common area is included in the monthly rent.
Allowance for tenant improvements up to $21,500 with landlord approval. Tenant
shall supply ceiling tile. Tenant has first right of refusal on adjoining space.
Lessee: Metacomp, Inc. ▇▇▇▇-▇-▇▇▇▇
Partnership
By: /S/ ▇▇▇▇ ▇▇▇▇▇▇ By: /S/ ▇▇▇▇ ▇▇▇▇
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Date: 11/2/95 Date: 11/2/95
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