10-K
Digimarc CORP (DMRC)
Nt
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
| ☒ | Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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For the fiscal year ended December 31, 2021
OR
| ☐ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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For the transition period from to
Commission File Number 001-34108
DIGIMARC CORPORATION
(Exact name of registrant as specified in its charter)
| Oregon | 26-2828185 |
|---|---|
| (State or other jurisdiction of<br><br><br>incorporation or organization) | (I.R.S. Employer<br><br><br>Identification No.) |
9405 SW Gemini Drive, Beaverton, Oregon 97008
(Address of principal executive offices) (Zip Code)
(503) 469-4800
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered |
|---|---|---|
| Common Stock, $0.001 Par Value Per Share | DMRC | The NASDAQ Stock Market LLC |
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
|---|---|---|---|
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of common stock, par value $0.001 per share, held by non-affiliates of the registrant, based on the closing price of our common stock on the Nasdaq Global Market on the last business day of the registrant’s most recently completed fiscal second quarter (June 30, 2021), was approximately $431 million. Shares of common stock beneficially held by each officer and director have been excluded from this computation because these persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for any other purposes.
As of February 25, 2022, 17,687,331 shares of the registrant’s common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s proxy statement pursuant to Regulation 14A (the “Proxy Statement”) for its 2022 annual meeting of shareholders are incorporated by reference into Items 10, 11, 12, 13 and 14 of Part III of this Annual Report on Form 10-K. The registrant intends to file the Proxy Statement not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
Auditor Name: KPMG, LLPAuditor Location: Portland, OregonAuditor Firm ID: 185
Table of Contents
| PART I | ||
|---|---|---|
| Item 1. | Business | 1 |
| Item 1A. | Risk Factors | 7 |
| Item 1B. | Unresolved Staff Comments | 17 |
| Item 2. | Properties | 17 |
| Item 3. | Legal Proceedings | 18 |
| Item 4. | Mine Safety Disclosures | 18 |
| PART II | ||
| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 19 |
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 20 |
| Item 8. | Financial Statements and Supplementary Data | 32 |
| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 32 |
| Item 9A. | Controls and Procedures | 33 |
| Item 9B. | Other Information | 33 |
| Item 9C. | Disclosure Regarding Foreign Jurisdictions That Prevent Inspections……………………………………….. | 33 |
| PART III | ||
| Item 10. | Directors, Executive Officers and Corporate Governance | 34 |
| Item 11. | Executive Compensation | 34 |
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 34 |
| Item 13. | Certain Relationships and Related Transactions, and Director Independence | 34 |
| Item 14. | Principal Accountant Fees and Services | 34 |
| Item 15. | Exhibits and Financial Statement Schedules | 35 |
| SIGNATURES | 40 |
Unless the context otherwise requires, references in this Annual Report on Form 10-K to “Company,” “Digimarc,” “we,” “our” and “us” refer to Digimarc Corporation.
All dollar amounts are in thousands except per share amounts or unless otherwise noted. The percentages within the tables may not sum to 100% due to rounding.
Digimarc, Digimarc Barcode, The Barcode of Everything, Barcode of Everything, and the circle-d logo are registered trademarks of Digimarc Corporation.
| ITEM 1: | BUSINESS |
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The following discussion of Digimarc’s business contains forward-looking statements relating to future events or the future financial performance of Digimarc. Our actual results could differ materially from those anticipated in these forward-looking statements. Please see the discussion regarding forward-looking statements included in this Annual Report on Form 10-K in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, under the caption “Forward-Looking Statements.”
The following discussion of our business should be read in conjunction with our consolidated financial statements and the related notes and other financial information appearing elsewhere in this Annual Report on Form 10-K.
Overview
Digimarc Corporation is a pioneer of digital watermarking solutions, which enable a more efficient, reliable and economical means of automatic identification. Our technology can be used to apply a unique digital identity to virtually all media objects, including product packaging, commercial print, audio and video. These digital identities can be automatically identified by an enabled ecosystem of industrial scanners, smartphones and other interfaces. The technology features:
| • | Digimarc watermarks: a data carrier that can provide a unique digital identity to media objects and is generally visibly imperceptible to people and therefore can be repeated many times over the surface of media objects. |
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| • | Digimarc Discover: a software program for computing devices and network interfaces that recognizes and decodes digital identities applied to media objects. These digital identities can be applied to media objects using Digimarc watermarks, quick response codes and universal product codes, among other types of codes. |
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| • | Digimarc Verify: a suite of software tools used to inspect and verify that the digital identity applied via Digimarc watermarks to media objects is accurate and effective. |
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Together, these core capabilities enable organizations, application developers, and other solution providers to build new and improve existing automatic identification solutions.
Digimarc’s technologies enable customers to create digital identities for physical and digital media objects and provide many benefits for these objects, including:
| • | Product Authentication & Anti-Counterfeiting: The Digimarc watermark can contain unique information to help protect products from counterfeiting and empower suppliers, retailers, authorities or consumers to use mobile devices to analyze packaging that may appear authentic and confirm the legitimacy of products. |
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| • | Recycling Accuracy: The digital identity can contain information specific to packaging content as an aid to broader and more efficient recycling. For example, a microscopic pattern embossed in plastic packaging can identify the materials used and their composition to aid sorting and recapture. |
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| • | Supply Chain Traceability: The digital identity can carry serial numbers for easier tracking of individual items or entire lots. This provides brands more visibility into their supply chains to track their physical products. |
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| • | Online Piracy Protection: The digital identity provides a unique identifier, whether in a digital image, video or audio file, for the detection of use or distribution of the related digital media object. |
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| • | Document Security: The digital identity enables fraud deterrence, most notably in deterring the counterfeiting of banknotes. |
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| • | Retail Operations: The digital identity can be applied to product packaging, allowing for faster and more accurate inventory scanning and faster and easier front-of-store checkout. |
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Our technologies provide a powerful security element (the ability to apply a unique code in any media object), which gave rise to our long-term relationship with a consortium of central banks (the “Central Banks”). That relationship, centered on the counterfeit deterrence of banknotes, was the first commercially successful large-scale use of our technologies.
In March 2021, Digimarc and Multi-Color Corporation (“MCC”), a global leader in label solutions, announced a partnership to serialize product packaging and labels with Digimarc watermarks in support of food safety and traceability initiatives. MCC and its client Orkla, a leading supplier of branded consumer goods in Europe and India, are working together to improve the sortation of plastic and promote a circular economy.
In April 2021, Digimarc entered into an agreement with Practical Methods, Inc. (“Practical Methods”) to license its edgecode™ offering, which provides serialized Digimarc watermarks on packaging for anti-counterfeiting, supply chain visibility and consumer engagement initiatives. Practical Methods specializes in segments within the cosmetics, pharmaceutical, healthcare, consumer packaged goods, sports, apparel and food industries.
In May 2021, Digimarc announced that Esko, a leading prepress software developer and hardware manufacturer, had integrated Digimarc watermark detection and data validation into its industry leading AVT Print Inspection Solutions. The integration simplifies the inspection process and gives consumer goods manufacturers and their packaging suppliers a seamless way to ensure quality control of packaging enabled with Digimarc watermarks through the printing process.
In September 2021, Digimarc announced it had entered phase 2 semi-industrial trials, the next stage of development for intelligent waste sorting as part of the Digital Watermarks Initiative HolyGrail 2.0, driven by AIM, the European Brands Association, and powered by the Alliance to End Plastic Waste. As the selected digital watermarks technology provider, Digimarc is working with the initiative’s two sortation equipment manufacturers, Pellenc ST and Tomra, which together represent an estimated 80% of global market share, to develop add-on modules for their detection sorting units. This milestone marks the second year of the HolyGrail 2.0 project, which has grown to include over 160 companies and organizations across the complete packaging value chain.
In November 2021, Digimarc announced its plan to acquire the product cloud company EVRYTHNG Limited (“EVRYTHNG”) to support greater product digitalization and intelligence. Combining Digimarc’s unique means of identification with the EVRYTHNG Product Cloud® platform makes it possible to gather and apply traceability data from across the product lifecycle, providing end-to-end visibility and authenticity through item-level, real-time intelligence and analytics.
On January 3, 2022, Digimarc acquired all of EVRYTHNG’s outstanding share capital and EVRYTHNG became a wholly owned subsidiary of Digimarc. EVRYTHNG’s market-leading Product Cloud offering opens new markets for Digimarc, further expanding our ability to sell robust, fully integrated solutions that no one else now offers, and provides future cross-selling opportunities into our dual platforms. The acquisition adds 65 employees and expands the geographic footprint for the company, including EVRYTHNG’s main office in London, England.
Integrated Environmental, Social and Governance Strategy
Digimarc is committed to becoming a leader in the Environmental, Social and Governance space (“ESG”). ESG is an integral element of Digimarc's strategy, covering the three key areas of our organization’s impacts on the world around us (impacts on the economy, environment and people), as well as environmental, social, and governance risks or opportunities that have an impact on Digimarc (enterprise value creation). This supports our ability to create value sustainably.
We proactively manage our ESG impacts across People, Product, and Planet, the three pillars of Digimarc’s ESG Framework. In addition, our responsible management of Governance topics forms the foundation for this Framework.
In 2021, Digimarc started investing in ESG as an integrated element of its strategy and operations. We added a Vice President, ESG Engagement & Corporate Communications position to our executive management team. The newly formed ESG & Corporate Communications team began building on our history of commitment to sustainability and social responsibility by conducting a structured ESG materiality assessment. This assessment identified Digimarc’s material ESG impacts, based on a stakeholder mapping and the globally recognized standards published by the Sustainability Accounting Standards Board (“SASB”).
Some of the most prominent ESG impacts we identified are the following:
| People | Product | Planet |
|---|---|---|
| Human Capital Management, including employee engagement and diversity, equity, and inclusion (“DEI”). | Product design for sustainability applications, such as Digimarc watermarks’ ability to improve the accuracy of plastics sortation for recycling. | Climate change management, including our carbon footprint and our strategic response to climate risks and opportunities. |
Management of material ESG impacts across People, Product, and Planet is integrated throughout our organization. Accountability and responsibility for impacts lies with functional leads and relevant subject-matter experts, who act as Impact Owners and Impact Managers, respectively. This approach allows effective incorporation of ESG considerations into our strategic decisions, policies, and processes. The ESG & Corporate Communications team plays a coordinating role, supporting Impact Owners and Impact Managers and reporting on progress to stakeholders.
In 2022, Digimarc’s Impact Owners, Impact Managers, and the ESG & Corporate Communications team will work together to set concrete goals for our impact across People, Product, and Planet. Furthermore, Digimarc plans to publish its inaugural annual ESG Impact Report in the first half of 2022, communicating our progress over 2021 and our goals to all stakeholders. The report will align with industry standards, such as those published by SASB.
More information on our commitment to ESG can be found at http://www.digimarc.com/about/company/our-commitment. The content on any website referred to in this annual report is not incorporated by reference in this annual report unless expressly noted.
Customers and Business Partners
We generate revenue through commercial and government applications of our technology. We service two primary markets: Government and Commercial. Government includes the Central Banks and other government customers. Commercial includes retailers, brands, their suppliers and related solution providers, as well as media, entertainment, education, and other customers.
We derive our revenue primarily from software development services, subscriptions for products and related professional services, and licensing or sale of our patents. During 2021, we generated the majority of our revenue from software development services under a long-term contract with the Central Banks, with whom we have been developing, deploying, supporting and enhancing a system to deter digital counterfeiting of currency using personal computers and digital reprographics for over 20 years, and from subscriptions for our products.
In 2021, revenue from government contracts accounted for 54% of our total revenue. The Central Banks accounted for a majority of all revenue generated under our government contracts. Our contract with the Central Banks runs through December 2024, with a 5-year extension option.
Technology and Intellectual Property
We seek patent protection for our inventions to differentiate our products and technologies, mitigate infringement risks, and develop opportunities for licensing. Our broad patent portfolio covers a wide range of methods, applications, system architectures and processes.
Our intellectual property contains many innovations in digital watermarking, content and object recognition, digital rights management and related fields. To protect our inventions, we have implemented an extensive intellectual property protection program that relies on a combination of patent, copyright, trademark and trade secret laws, and nondisclosure agreements and other contracts. As a result, we believe we have one of the world’s most
extensive patent portfolios in digital watermarking and related fields, with approximately 1,000 U.S. and foreign patents granted and applications pending as of December 31, 2021. The patents in our portfolio each have a life of approximately 20 years from the patent’s effective filing date.
Our current patent licensees include, among others, AlpVision SA, Intellectual Ventures, Kantar SAS, NexGuard Labs B.V., Nielsen, OverDrive, Inc., Signum Technologies, Teletrax B.V., U-NICA Systems AG and Verance Corporation.
For a discussion of activities and costs related to our research and development in the last two years, see “Research, development and engineering” under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Markets
Our patented technologies are used in various automatic identification products and solutions supporting a variety of media objects, from consumer package goods to movies and music, digital images, and banknotes. Each media object enabled by our technology creates the potential for several applications, such as:
| • | product authentication of physical products; |
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| • | sorting of consumer packaged goods in recycling streams; |
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| • | track and trace of products within the supply chain; |
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| • | quality control in manufacturing processes; |
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| • | inventory management and planogram compliance; |
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| • | retail point of sale transaction processing; |
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| • | piracy deterrence of digital media objects; |
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| • | content identification and media management; and |
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| • | enhanced services in support of mobile commerce. |
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We believe that existing products and solutions represent only a small portion of the potential market for our technology.
Competition
No single competitor or small number of competitors dominate our market. Our competitors vary depending on the application of our products and services. We generally compete with non-digital watermarking technologies for the security or marketing budgets of the producers and distributors of media objects, documents, products and advertising. These alternatives include, among other things, encryption-based security systems and technologies and solutions based on fingerprinting, pattern recognition, and traditional barcodes. Our competitive position in digital watermarking applications is strong because of our large, high-quality, sophisticated patent portfolio and our substantial and growing amount of intellectual property in related innovations for the automatic identification of media objects that span basic technologies, applications, system designs and business processes. Our intellectual property portfolio allows us to use proprietary technologies that are well-regarded by our customers and partners, and not available to our competitors without a license. We compete based on the variety of features we offer and a traditional cost/benefit analysis against alternative technologies and solutions. We anticipate that our competitive position within some markets may be affected by factors such as reluctance to adopt new technologies and by changes in government regulations.
Backlog
Based on projected commitments we have for the periods under contract with our respective customers, we anticipate our current contracts as of December 31, 2021, will generate a minimum of $29 million in revenue, compared to $31 million as of December 31, 2020. The decrease is largely related to the structure of our contract with the Central Banks. We expect approximately $16 million of the $29 million to be recognized as revenue during 2022.
Some factors that lead to increased backlog include:
| • | contracts with new customers; |
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| • | renewals with current customers; |
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| • | add-on orders with customers; and |
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| • | contracts with longer contractual periods replacing contracts with shorter contractual periods. |
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Some factors that lead to decreased backlog include:
| • | recognition of revenue associated with existing backlog; |
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| • | contracts with shorter contractual periods replacing contracts with longer contractual periods; |
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| • | modifications to existing contracts; |
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| • | contract minimum payments ending; and |
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| • | expiration of contracts with existing customers. |
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The mix of these factors, among others, dictates whether our backlog increases or decreases for any given period. Our backlog may not result in actual revenue in any particular period, because the orders, awards and contracts included in our backlog may be subject to modification, cancellation or suspension. We may not realize revenue on certain contracts, orders or awards included in our backlog, or the timing of any realization may change.
Human Capital Resources and Management
Employees and Labor Relations
At December 31, 2021, we had 228 full-time employees, including 78 in sales, marketing, product, operations and customer support; 98 in research, development and engineering; and 52 in finance, administration, information technology, intellectual property and legal.
Our employees are not covered by any collective bargaining agreement, and we have never experienced a work stoppage. We believe that our relations with our employees are good. Voluntary employee turnover was 9% and 3% for the years ended December 31, 2021, and 2020, respectively. The increase in voluntary employee turnover was largely driven by a more competitive labor market.
Values
Culture is critically important to Digimarc’s success. We incorporate our core values in daily interactions with colleagues, customers, vendors and other stakeholders. Our core values are embodied in the words Collaborative, Curious and Courageous.
| Digimarc Values | |||
|---|---|---|---|
| Collaborative | Curious | Courageous | |
| We: | Ask for help<br><br><br>Prioritize mentoring<br><br><br>Build trust and transparency | Support innovative thinking<br><br><br>Continuously seek clarity<br><br><br>Listen to our stakeholders | Challenge our own biases<br><br><br>Cultivate collective experiences<br><br><br>Seek out and support ideas |
| We Do Not: | Avoid difficult conversations | Lose sight of our purpose | Assume we have all the answers |
We continue to aid and support our employees during the coronavirus 2019 (“COVID-19”) pandemic with our work-from-home initiative for the majority of our staff. Essential on-site staff benefited from enhanced safety procedures, and the number of employees on-site at any given time was regulated. We provided assistance to help employees who work from home to improve their workspaces, and we increased flexibility in our paid leave programs to support employees caring for children and others. An increasing number of our employees work remotely full-time.
Diversity, Equity and Inclusion
We strive to create an environment where innovative ideas can flourish by demonstrating respect for each other and valuing the diverse opinions, backgrounds and viewpoints of our employees. As a company committed to innovation and representing diversity in a myriad of ways, including race, ethnicity, nationality, sex, gender identity, sexual orientation, age, religious beliefs, background, perspectives, tenure, and work style, we believe that diversity is a competitive asset. We believe that diversity in our teams leads to new ideas, helps us solve problems and allows us to better connect with our global customer base.
We have taken specific actions to continue to foster DEI in our culture, including transparency that we believe will lead to greater inclusion and innovation, with the adoption of the Table Group Methodology, all-employee meetings and fireside chats with our Chief Executive Officer. Learning resources have been implemented to support the acquisition of the skills and behaviors expected from our employees.
In 2021, we identified DEI specifically, and human capital management more broadly, as one of our most material ESG impacts under the People pillar of our ESG Framework. To further structure our approach to DEI, we assigned accountability and responsibility for this topic at various levels of our Human Resources organization, in line with our integrated ESG approach. Our Board of Directors also plays an important role in our DEI efforts. The Governance, Nominating, and Sustainability Committee oversees the Company’s human capital management and DEI programs, in coordination with the Audit and Compensation Committees.
Compensation and Benefits
Our compensation guiding principles are to structure compensation that is simple, aligned and balanced. We believe that these principles are strongly aligned with the strategic priorities of our business and our objective to deliver value for our shareholders. We are committed to fair pay and strive to be externally competitive while ensuring internal equity across our organization. We conduct pay equity assessments and compensation reviews periodically, and when necessary, we take action to address areas of concern. Our total compensation package includes market-competitive pay, stock grants, healthcare and retirement benefits, paid time off, family leave, sick leave and flexible work schedules.
We continue to support our communities during the COVID-19 pandemic, including focused outreach and support through our community outreach matching program, which matches donations made by our employees to their charities of choice.
Learning and Development
We invest resources to develop the talent needed to remain at the forefront of innovation. We have a performance management system to support continuous learning and development. Through frequent surveys and anonymous feedback fora, employees can voice their perceptions of the Company and their work experience, including learning and development opportunities. We have strong participation in our surveys and engage our managers to respond to areas that employees have identified as needing improvement or given low scores.
We support training and development programs for our employees through tuition reimbursement, online training programs such as LinkedIn Learning, conferences, seminars, on-the-job training, and skill certifications. We also encourage and foster onsite training programs and mentoring.
Health, Safety and Wellness
We are committed to a safe and drug-free workplace. We continually invest in programs designed to improve physical, mental, and social well-being. We provide access to a variety of innovative, flexible, and convenient health and wellness programs, which were increasingly critical this year for our essential workers who have worked on-site since the start of the COVID-19 pandemic. Throughout our response to the COVID-19 pandemic, our priority has remained protecting the health and safety of our employees while preserving business continuity.
Governance and Oversight
The executive management team is entrusted with developing and advancing our key human capital strategy, which is reviewed with the Board of Directors. The Chief People Officer is charged with developing and stewarding this strategy on a company-wide basis. This incorporates a broad range of dimensions, including culture, values, labor and employee relations, leadership capabilities, performance management and compensation. DEI are key to successfully achieving business and organizational objectives. Key processes include ongoing performance and development feedback, diversity, equity and inclusion reviews, and periodic engagement surveys that are reviewed
by management and the Board of Directors. All employees have access to resources on topics regarding integrity, our code of conduct, diversity, compliance, and workplace harassment. Employees are encouraged to address any concerns through multiple channels, including anonymously whenever possible, without fear of retaliation or retribution.
Available Information
We make available free of charge through our website at http://www.digimarc.com/about/investors our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to these and other reports filed or furnished by us pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we file these materials with the Securities and Exchange Commission (the “SEC”).
| ITEM 1A: | RISK FACTORS |
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Our business, financial condition, results of operations and cash flows may be affected by a number of factors. The following risk factors identify risks of which we are aware and that we consider to be material to our business. If any of the following risks and uncertainties develops into actual events, our business, financial condition, results of operations or cash flows could be materially adversely affected. In that case, the trading price of our common stock could decline.
RISKS RELATED TO OUR BUSINESS
(1) As a purveyor of disruptive technology, if our partners and potential customers defer or delay adopting and implementing our technology, or if competitors or other market participants successfully engage in campaigns to discredit our technology, our revenues will be negatively affected.
While the Company’s business in the Government market remains relatively strong and predictable, our primary source of revenue growth—the Commercial market—is subject to the market forces and adoption curves common to other disruptive technologies. The Commercial market is in its early stages of development. If widespread adoption of Digimarc technology and the EVRYTHNG Product Cloud in the Commercial market takes longer than anticipated, we will continue to experience operating losses.
We expect companies marketing competing technologies to compete vigorously in the marketplace, and to seek to preserve their market share. To the extent these companies succeed in defending their market position, our ability to achieve profitable operations will be impeded.
With respect to anticipated sales growth and prospects for the Commercial market, our two major avenues for revenue generation are direct sales and partners. Our growing direct sales force is relatively new. Most of our partners are relatively new to our products. Thus, the anticipated sources of revenue growth for the Commercial market are unproven. We are executing strategies intended to make each of these means of revenue generation more effective, but we provide no assurance that we will execute these strategies successfully.
(2) Our future growth will depend to a material extent on the successful advocacy of our technology by our partners to their members and customers, and implementation of our technology in solutions propagated by our partners and provided by third parties.
Our business has long relied on the success of business partners. Our continuing success is largely dependent on a new generation of business partners supporting Digimarc technology in the Commercial market. We have entered into agreements with numerous partners to propagate and support our technology, including brand deployment and pre-media service providers and consumer packaging solutions companies, all of which offer Digimarc digital watermarking services to national and store brand owners and consumer products suppliers. We have also entered into agreements with numerous scanner manufacturers to enable their devices to read Digimarc watermarks. We provide no assurance that these collaborations will successfully generate revenue for our business.
If our partners are not successful in advocating and deploying our technology, we may not be able to achieve and sustain profitable operations. If other business partners who include our technology in their products cease to do so, or we fail to successfully collaborate with third parties or to obtain other partners who will do so, or these partners are unsuccessful in their efforts, expanding deployment of our technology will be adversely affected. Consequently, our ability to increase revenue could be adversely affected, and we may suffer other adverse effects to
our business. In addition, if our technology does not perform according to market expectations, our future sales would suffer as customers employ alternative technologies.
(3) If leading companies in the retail and consumer products industries downplay, minimize or reject the use of our technology, our product deployment may be slowed, and we may be unable to achieve profitable operations.
Our business endeavors in the Commercial market may be impeded or frustrated by larger, more influential companies downplaying, minimizing or rejecting the value or use of our technology. A negative position by such companies could result in obstacles for us that we would be incapable of overcoming and may block or impede the adoption of our technology. Such a development would make the achievement of our business objectives in this market difficult or impossible.
(4) We are subject to risks encountered by companies developing and relying upon new technologies, products, and services to achieve and sustain profitable operations.
Our business and prospects must be considered in light of the risks and uncertainties to which companies with new and rapidly evolving technology, products, and services are exposed. These risks include the following:
| • | we may be unable to develop sources of new revenue or sustainable growth in revenue because our current and anticipated technologies, products, and services may be inadequate or may be unable to attract or retain customers; |
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| • | intense competition from existing and new technologies and providers and rapid technological change could adversely affect the market’s acceptance of our products and services; and |
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| • | we may be unable to develop and maintain new technologies upon which our products and services are dependent, which may cause our products and services to be less sustainable and competitive or which could make it harder for us to expand our revenue and business. |
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(5) A significant portion of our current and potential future revenue is subject to commercial and government contracts and the development of new markets that may involve unpredictable delays and other unexpected changes. Such volatility and uncertainty might limit our actual revenue in any given quarter or year.
We derive a significant portion of our revenue from contracts tied to development schedules or development of new markets, which could shift for months, quarters, or years as the needs of our customers and the markets in which they participate change. Government agencies and commercial customers also face budget pressures that introduce added uncertainty. Any shift in development schedules, the markets in which we or our partners participate, or customer procurement processes, which are outside our control and may not be predictable, could result in delays in bookings/revenues forecasted for any particular period, could affect the predictability of our quarterly and annual results, and might limit our actual revenue recognized in any given quarter or year, resulting in reduced and less predictable revenue, adversely affecting profitability.
We are expanding into new markets, which involve inherent risk and unpredictability. With our acquisition of EVRYTHNG and its Product Cloud offering, we are expanding into applications of the Product Cloud in conjunction with Digimarc watermarks and other data carriers. As we seek to expand outside our areas of historical expertise, we lack the history and insight that benefited us in fields conventionally using digital watermarking. Although we have extensive experience in the commercial application of digital watermarking, we are investing in but may not be as well-positioned in these other opportunities. Accordingly, it may be difficult for us to achieve success in other technologies we might pursue.
(6) A small number of customers account for a substantial portion of our revenue, and the loss of any large contract could materially disrupt our business.
Historically, we have derived a significant portion of our revenue from a limited number of customers. Five customers represented approximately 75% of our revenue for the year ended December 31, 2021.
Most of our revenue comes from our contract with the Central Banks, which expires in 2024 with the possibility of a five-year extension. Other contracts we enter into may contain termination for convenience provisions. If we were to lose any such contract for any reason, or if our relationship with these customers or the Central Banks were materially modified, our financial results would be adversely affected.
We expect to continue to depend upon a small number of customers for a significant portion of our revenue for the foreseeable future. The loss of, or decline in, orders or backlog from one or more major customers could reduce our revenue and have a material adverse effect on our financial results.
(7) Consolidation of consumer product companies and retailers, or other concentration of market share among a few consumer products companies and retailers, may reduce the number of potential customers for our technology and put pressure on our pricing structure.
The consumer products and retailer markets in some geographic regions are dominated by a few large companies. These companies have in the past increased their market share and may continue to do so in the future by expanding through acquisitions. Larger companies have strengthened purchasing power, which could force a decline in our pricing structure and decrease the margins we can realize.
(8) The market for our products is highly competitive, and alternative technologies or larger companies that compete with us may be more successful than us in gaining market share, which would decrease our revenue and profits.
The markets in which we compete for business are intensely competitive and rapidly evolving. We expect competition to continue from both existing competitors and new market entrants. We face competition from other companies and from alternative technologies, including some of our customers, partners, and licensees. We also may face competition from unexpected sources.
Alternative technologies that may directly or indirectly compete with particular applications of our watermarking technologies include:
| • | Traditional anti-counterfeiting technologies—a number of solutions used by many government agencies (that compete for budgetary outlays) designed to deter counterfeiting, including optically sensitive ink, magnetic threads and other materials used in the printing of currencies; |
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| • | Object and image recognition (e.g., trained classifiers employing machine learning)—one or several pre-specified or learned objects or object classes that can be recognized, usually together with their two-dimensional positions in the image or three-dimensional poses in the scene; |
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| • | Radio frequency tags—embedding a chip that emits a signal when in close proximity with a receiver, used in some photo identification credentials, labels and tags; |
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| • | Digital fingerprints and signatures—a metric, or metrics, computed solely from a source image or audio or video track, that can be used to identify an image or track, or authenticate the image or track; |
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| • | Barcodes, dot codes or two-dimensional matrix codes, such as Quick Response codes—data-carrying codes, typically visible in nature (but may be invisible if printed in ultraviolet or infrared-responsive inks) that may be applied by printing or pressing a pattern on a substrate; |
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| • | Internet of Things (IoT) and track-and-trace service providers; and |
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| • | Object sorting technologies such as chemical tracers, taggants, Near Infrared (NIR) sorters, dot or matrix codes, including systems leveraging combinations of these methods and machine learning. |
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In the competitive environments in which we operate, product generation, development and marketing processes relating to technology are uncertain and complex and require accurate prediction of demand as well as successful management of various risks inherent in technology development. In light of these uncertainties, it is possible that our failure to successfully accommodate future changes in technologies related to our technology could have a long-term negative effect on our growth and results of operations.
As we work to achieve market acceptance of our products and services, new developments are expected to continue, and discoveries by others, including current and potential competitors, could render our services and products uncompetitive. Moreover, because of rapid technological changes, we may be required to expend greater amounts of time and money than anticipated to develop new products and services, which in turn may require greater revenue streams from those products and services to cover developmental costs. Many of the companies that compete with us for some of our business, as well as other companies with whom we may compete in the future, are larger and may have stronger brand recognition and greater technical, financial, marketing, and political resources than we do. These attributes could enable these companies to have more success in the market than we have, either by providing better products or better pricing than we can provide. We may be unable to compete successfully against current or future participants in our market or against alternative technologies, and the competitive pressures we face may have a materially adverse effect on our financial position, results of operations or cash flows.
(9) An increase in our operations outside of the U.S. subjects us to risks additional to those to which we are exposed in our domestic operations.
We believe that revenue from sales of products and services to commercial customers outside the U.S. could represent a growing percentage of our total revenue in the future. Digimarc technology and the EVRYTHNG Product Cloud are not bounded geographically, and we believe they will see global deployment. As such, certain contracts may be made and performed, in whole or in part, outside of the United States. International operations are subject to a number of risks that can adversely affect our sales of products and services to customers outside of the U.S., or expose us to additional expense or liabilities, including the following:
| • | difficulties and costs of staffing, developing and managing foreign operations as a result of distance, language, and cultural differences; |
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| • | the effect of laws governing our business, employee, and contractor relationships, and the existence of workers’ councils and labor unions in some jurisdictions; |
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| • | changes in foreign government regulations and security requirements; |
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| • | export license requirements, tariffs, retaliatory trade measures, and domestic or foreign taxes; |
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| • | trade barriers; |
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| • | difficulty in protecting intellectual property; |
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| • | difficulty in collecting accounts receivable; |
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| • | currency fluctuations; and |
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| • | political and economic uncertainty or instability. |
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If we fail to comply with the many international laws and regulations to which we may be subject, we may be subject to significant fines, penalties, or liabilities for noncompliance. These factors may result in greater risk of performance problems or of reduced profitability with respect to our international programs in these markets. In addition, if foreign customers, in particular foreign government authorities, terminate or delay the implementation of our products and services, it may be difficult for us, or we may not be able, to recover our potential losses.
(10) We depend on our key employees for our future success. If we are not able to retain, hire, or integrate these employees, we may not be able to meet our commitments.
Due to the high level of technical expertise that our industry requires, our ability to successfully develop, market, sell, license and support our products, services, and intellectual property depends to a significant degree upon the continued contributions of our key personnel in engineering, sales, marketing, operations, and legal, many of whom would be difficult to replace. We believe our future success will depend in large part upon our ability to retain our current key employees and our ability to attract, integrate, and retain new personnel in the future. It may not be practical for us to match the compensation some of our employees could be offered by other employers. In addition, we may encounter difficulties in hiring and retaining employees because of concerns related to our financial performance. These circumstances may have a negative effect on the market price of our common stock, and employees and prospective employees may factor in the uncertainties relating to our stability and the value of any equity-based incentives in their decisions regarding employment opportunities and decide to leave our employ or decline employment offers. Increasingly, prospective and current employees hold certain expectations of their employer related to diversity, equity, and inclusion, community involvement, and other material environmental, social, and governance (“ESG”) topics. Insufficient or slow progress on emerging ESG considerations may negatively affect our ability to attract, retain, and integrate key employees. Moreover, our business is based in large part on unique and sophisticated technology. New employees require substantial training, involving significant resources and management attention. Competition for experienced personnel in our business can be intense. If we do not succeed in attracting new, qualified personnel or in integrating, retaining, and motivating our current personnel, our growth and ability to deliver products and services that our customers require may be hampered. Although our employees generally have executed agreements containing non-competition clauses, these clauses are becoming increasingly disfavored by policymakers, and we do not assure you that a court would enforce all of the terms of these clauses or the agreements generally. If these clauses were not fully enforced, our employees could join our competitors. Although we generally attempt to control access to and distribution of our proprietary information by our employees, we do not assure you that the confidential nature of our proprietary information will be maintained in the course of such future employment. Any of these events could have a material adverse effect on our financial position, results of operations, or cash flows.
(11) We may acquire or invest in other companies or technologies in the future, which could divert management’s attention, result in additional dilution to our shareholders, increase expenses, disrupt our operations and harm our operating results.
We acquired EVRYTHNG in January 2022, and we may in the future acquire or invest in businesses, products or technologies that we believe could complement or expand our current product and service offerings, enhance our technical capabilities, expand our operations into new markets, or otherwise offer growth opportunities. The pursuit of potential acquisitions or other strategic transactions may divert the attention of management and cause us to incur various expenses related to identifying, investigating, and pursuing suitable acquisitions or strategic transactions, whether or not they are consummated.
There are inherent risks in integrating and managing acquisitions. We may not be able to assimilate or integrate the acquired personnel, operations and technologies successfully or effectively manage the combined business following an acquisition. We also may not achieve the anticipated benefits from an acquired business due to a number of factors, including:
| • | unanticipated costs or liabilities associated with the acquisition; |
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| • | incurrence of acquisition-related costs; |
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| • | inability to generate sufficient revenue to offset acquisition or investment costs; |
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| • | the inability to maintain relationships with customers and partners of the acquired business; |
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| • | the need to implement additional controls, procedures and policies; |
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| • | entry into geographic markets in which we have little or no prior experience, and challenges caused by distance, language, and cultural differences; |
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| • | differences in foreign labor and employment laws, including classification of employees and contractors; |
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| • | disruption of our ongoing business; |
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| • | the potential loss of key employees; and |
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| • | use of substantial portions of our available cash to consummate the acquisition. |
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Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our financial position. In addition, if an acquired business fails to meet our expectations, our operating results and business and financial condition may suffer.
(12) If our revenue models and pricing structures relating to products and services that are under development do not gain market acceptance, the products and services may fail to attract or retain customers and we may not be able to generate new revenue or sustain existing revenue.
Our revenues result from a combination of software subscriptions, cloud services, and software development services. We have not fully developed our revenue models for some applications in the Commercial market. Because some of our products and services are not yet well-established in the marketplace, and because some of these products and services will not directly displace existing solutions, we cannot be certain that the pricing structure for these products and services will gain market acceptance or be sustainable over time, or that the marketing for these products and services will be effective.
(13) An unfavorable assessment of digital watermarking technology by members of the HolyGrail 2.0 initiative could discourage adoption of our technology.
In September 2020, AIM, the European Brands Association, in conjunction with over 85 companies and organizations including many of Europe’s largest consumer brands companies, launched the HolyGrail 2.0 initiative. The purpose of the initiative is to assess whether digital watermarking technology can improve waste sorting and recycling rates for product packaging in the European Union. Digimarc is a technology provider for this ongoing assessment.
An unfavorable assessment of digital watermarking technology generally, or of Digimarc’s digital watermarking technology particularly, could cause its members to consider alternative technologies. This outcome could dissuade HolyGrail 2.0 members and others following its lead from adopting digital watermarking technology for sortation and recycling. This in turn could have a materially adverse effect on our ability to grow adoption of our technology.
(14) The technological viability and economic attractiveness of competing technologies could cause the consumer-packaged goods industry and related industries to adopt a technology other than digital watermarking to support its waste sortation and recycling initiatives.
We have identified two technologies that could be perceived by industry participants to out-perform or be available on more economically favorable terms than Digimarc’s digital watermarking technology for waste sortation and recycling: chemical tracers and artificial intelligence. Industry leaders in a position to influence the industry at large could determine that chemical tracers or artificial intelligence represent a more technologically viable or economically attractive solution, including due to the greater number of potential suppliers, which in turn could increase pricing competition and lower barriers to entry. Such a determination could result in the devaluation of digital watermarking technology’s ability to support the product packaging lifecycle and negatively affect our revenue growth prospects.
(15) COVID-19 Pandemic
The continuation of the coronavirus 2019 (“COVID-19”) pandemic around the world, and particularly in the United States and Europe, presents significant risks to the Company, not all of which we are able to fully evaluate or foresee. Some of the effects that could directly or indirectly result from the COVID-19 pandemic include, without limitation, possible impacts on the health of the Company’s management and employees, impairment of the Company’s administrative, research, and development operations, disruption in supplier and customer relationships, changes in demand for our technology and services, and the collectability of accounts receivable. Some of our projects with retail customers and partners have been delayed as a result of the COVID-19 pandemic, thereby potentially affecting our ability to fund our business through near-term revenue growth. The scope and nature of these impacts, most of which are beyond our control, continue to evolve and the outcomes remain uncertain.
These short-term effects may change over the long-term depending on the duration and severity of the COVID-19 pandemic, the length of time before normal economic and operating conditions resume, the additional governmental actions that may be taken, the extensions of social restrictions that have been imposed to date, and many other factors that can vary materially by geography. Due to the above circumstances, the Company’s results of operations for the year ended December 31, 2021, are not necessarily indicative of the results to be expected for subsequent years.
(16) We face reputational, regulatory, human capital, and business development risks from a perceived or actual failure to effectively manage our material ESG impacts, risks, and opportunities.
We have identified several ESG topics through which we may significantly impact our stakeholders, or which may pose a material risk or opportunity for our business. In light of increasing regulatory, customer, employee, investor, and societal scrutiny of businesses’ management of material ESG topics, we may face a number of related risks, including:
| • | Making insufficient progress on or failing to identify all material ESG topics, resulting in potentially significant negative impacts on our stakeholders and related reputational harm; |
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| • | Being perceived as having a superficial commitment to ESG without meaningfully addressing stakeholder impacts, risks, and opportunities, thereby potentially reducing important stakeholders’ willingness to be associated with, do business with, or be employed by us; |
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| • | An inability to control or avoid stakeholders politicizing our ESG positions, causing potential reputational harm among segments of our important stakeholders; or |
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| • | Failing to comply with rapidly developing regulation on ESG and corporate sustainability in various jurisdictions, which may compromise our credibility, cause reputational harm, or lead to legal proceedings against us. |
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RISKS RELATED TO INFORMATION SECURITY
(17) The security systems used in our business and our product and service offerings may be circumvented or sabotaged by third parties, which could result in the disclosure of sensitive information or private personal information or cause other business interruptions that could damage our reputation and disrupt our business.
Our business relies on computers and other information technologies, both internal and external. The protective measures that we use may not prevent all security breaches, and failure to prevent security breaches may disrupt our business, damage our reputation, and expose us to litigation and liability. A party who circumvents our security measures could misappropriate sensitive or proprietary information or materials or cause interruptions or otherwise damage our products, services, and reputation, and the property of our customers. If unintended parties obtain sensitive data and information or create bugs or viruses or otherwise sabotage the functionality of our systems, we may receive negative publicity, incur liability to our customers, or lose the confidence of our customers, any of which may cause the termination or modification of our contracts. Further, our insurance coverage may be insufficient to cover losses and liabilities that may result from these events.
In addition, we may be required to expend significant capital and other resources to protect ourselves against the threat of security breaches or to alleviate problems caused by these breaches. Any protection or remedial measures may not be available at a reasonable price or at all or may not be entirely effective if commenced.
(18) We may experience outages and disruptions of our infrastructure that may harm our business, prospects, financial condition and results of operations.
We may be subject to outages or disruptions of our infrastructure, including information technology system failures and network disruptions. We use third-party cloud service providers, which are also susceptible to outages and disruptions. System redundancy may be ineffective or inadequate, and our disaster recovery planning may not be sufficient for all eventualities.
(19) Data breaches and cyber-attacks or cyber-fraud could compromise our intellectual property or other sensitive information or result in losses.
We maintain sensitive data on our networks and the networks of our business partners and third-party providers, including proprietary and confidential information relating to our intellectual property, personnel, and business, and that of our customers and third-party providers. Companies have been increasingly subject to a wide variety of security incidents, cyber-attacks, hacking, phishing, and other attempts to gain unauthorized access or engage in fraudulent behavior. Our policies and security measures cannot guarantee security, and our information technology infrastructure, including our networks and systems, may be vulnerable to data breaches, cyber-attacks, or fraud. Third parties may attempt to penetrate or infect our network and systems with malicious software and phishing attacks in an effort to gain access to our network and systems. We may be subject to the risk of third parties falsifying invoices and similar fraud, frequently by obtaining unauthorized access to our vendors’ and business partners’ networks.
In some circumstances, we may partner with third-party providers and provide them with sensitive data. If these third parties fail to adopt or adhere to adequate data security practices, or in the event of a breach of their networks, this sensitive data may be improperly accessed, used, or disclosed. These data breaches and any unauthorized access or disclosure of sensitive data could compromise our intellectual property, expose sensitive business information, and subject us to liability.
The increase in cyber-attacks has resulted in an increased focus on cybersecurity by various government agencies. Cyber-attacks or any investigation or enforcement action related to cybersecurity could cause us to incur significant remediation costs, disrupt key business operations, and divert attention of management and key information technology resources. We may incur losses as a result of cyber-fraud, such as making unauthorized payments, irrespective of robust internal controls. Our reputation and business could be harmed, and we could be subject to third-party claims in the event of such a security breach.
RISKS RELATED TO FINANCIAL REPORTING
(20) Changes to financial accounting standards may affect our results of operations and could cause us to change our business practices.
We prepare our consolidated financial statements to conform to generally accepted accounting principles in the United States (“U.S. GAAP”). These accounting principles are subject to interpretation by the American Institute of Certified Public Accountants, the Securities and Exchange Commission and various bodies formed to interpret
and create accounting rules and regulations. Changes in these rules, or guidance relating to interpretation and adoption of these rules, could have a significant effect on our financial results and could affect portions of our business differently.
In January 2022, we acquired the cloud company EVRYTHNG, which previously reported its financial results under generally accepted accounting principles in the United Kingdom (“U.K. GAAP”). Management will need to convert the accounting principles and policies previously used by EVRYTHNG from U.K. GAAP into U.S. GAAP on a prospective basis. This effort may divert management’s attention, result in additional accounting costs, and lead to increased risk of a misstatement in reported financial results.
(21) We were not profitable in 2021 or 2020 and may not be able to become profitable in the future, particularly if we were to lose large contracts or fail in our new market development initiatives. Sustained lack of profitability could cause us to incur asset impairment charges for long-lived assets or record valuation allowances against our deferred tax assets.
We incurred net losses in 2021 and 2020 largely due to increased levels of investments in our business to support product development and sales growth initiatives.
Becoming profitable in the future will depend upon a variety of factors, including our ability to maintain and obtain more significant partnerships like we have with the Central Banks, and to acquire new commercial customers. Profitability will also depend on our efficiency in executing our business strategy and capitalizing on new opportunities. Various adverse developments, including the loss of large contracts or cost overruns on our existing contracts, could adversely affect our revenue, margins, and profitability.
If we continue to incur operating losses, an impairment to the carrying value of our long-lived assets, including goodwill, acquired intangible assets, patent assets and property and equipment could result. We test for impairment of our long-lived assets when a triggering event occurs that would indicate that the carrying value may not be recoverable. Our methodology for assessing impairment may require management to make judgments and assumptions regarding future cash flows. Our projections of future cash flows are largely based on historical experience, and these projections may not be achieved. Changes to these financial projections used in our impairment analysis could lead to an impairment of all or a portion of our long-lived assets. Any such impairment charge could adversely affect our results of operations and our stock price. We evaluated our long-lived assets for impairment as of December 31, 2021, and 2020 and concluded there was no impairment for either period. We cannot guarantee, however, that our long-lived assets will not become impaired in the future.
We record valuation allowances on our deferred tax assets if, based on available evidence, it is more-likely-than-not that all or some portion of the value of the assets will not be realized. The determination of whether our deferred tax assets are realizable requires management to identify and weigh all available positive and negative evidence. Management considers recent financial performance, projected future taxable income, scheduled reversals of deferred tax liabilities, tax planning strategies and other evidence in assessing the realizability of our deferred tax assets. Adjustments to our deferred tax assets could adversely affect our results of operations and our stock price. In 2014, we recorded a full valuation allowance against our deferred tax assets largely due to the cumulative loss we had incurred over the previous three years, which is considered a significant piece of negative evidence in assessing the realizability of deferred tax assets. As of December 31, 2021, and 2020, we determined a full valuation allowance was still appropriate given continued losses. We will not record tax benefits on any future losses until it is determined that those tax benefits will be realized.
(22) We may be adversely affected by variability of contracted arrangements.
We periodically agree to modify the terms of contractual arrangements with our customers, partners and licensees in response to changes in circumstances underlying the original contractual arrangements, and it is likely that we will do so in the future. As a result of this practice, the terms of our contractual arrangements with our customers, partners, and licensees may vary over time and, depending on the particular modification, could have a material adverse effect on our financial position, results of operations, or cash flows.
RISKS RELATED TO INTELLECTUAL PROPERTY AND LEGAL
(23) (a) We may not be able to adequately secure patent or other protection for our technologies.
Our business depends in part on securing protection for our proprietary technology. To protect our intellectual property portfolio, we rely on a combination of patent, copyright, trademark and trade secret rights, confidentiality procedures, and licensing arrangements. Although we regularly apply for patents to protect our intellectual property,
there is no guarantee that we will secure patent protection for any particular technology we develop.
Changes in the U.S. and foreign patent laws, or in the interpretation of existing laws, may adversely affect our ability to secure or enforce patents. For example, the U.S. Supreme Court issued a decision in 2014 limiting patent eligibility of computer implemented inventions. The Leahy-Smith America Invents Act of 2011 (the “America Invents Act”) also codifies several changes to the U.S. patent laws, including the creation of a post-grant inter partes review process to challenge patents after they have issued. The America Invents Act allows third parties to petition the U.S. Patent and Trademark Office or comparable government authorities in other jurisdictions to review and reconsider the patentability of any of our inventions claimed in our issued patents. Any such proceeding may result in one or more of our patent claims becoming limited or being invalidated altogether. Additionally, certain foreign jurisdictions may not recognize or enforce our patents in those jurisdictions. A limitation or invalidation of our patent claims could adversely affect our financial position and our operating results.
Patents have finite lives, and our ability to continue to rely on our patents as a barrier to entry is limited to the term of the patents. Our earliest patents began expiring in July 2012, and the patents in our portfolio expire at various times between 2022 and 2039. The size and strength of our portfolio depends on the number of patents that have been granted, offset by the number of patents that expire, in any given year.
As part of our confidentiality procedures, we generally enter into non-disclosure agreements with our employees, directors, consultants, and corporate partners, and attempt to control access to and distribution of our technology, solutions, documentation, and other proprietary information. Despite these procedures, third parties could copy or otherwise obtain and make unauthorized use of our technology, solutions or other proprietary information or independently develop similar technologies, solutions, or information. The steps that we have taken to prevent misappropriation of our solutions, technology or other proprietary information may not succeed.
We do not assure you that the protection of our proprietary rights will be adequate or that our competitors will not independently develop similar technologies, duplicate our services, or design around any of our patents.
(b) We may be subject to infringement claims and other litigation, which could adversely affect our business.
As more companies engage in business activities relating to digital watermarking and IoT services, and develop corresponding intellectual property rights, it is increasingly likely that claims may arise which assert that some of our products or services infringe other parties’ intellectual property rights. These claims could subject us to costly litigation and divert management resources. These claims may require us to pay significant damages, cease production of infringing products, terminate our use of infringing technology, or develop non-infringing alternative technologies. In these circumstances, continued use of our technology may require that we acquire licenses to the intellectual property that is the subject of the alleged infringement, and we might not be able to obtain these licenses on commercially reasonable terms or at all. Our use of protected technology may result in liability that threatens our continuing operation.
Some of our contracts include indemnity and similar provisions regarding our non-infringement of third-party intellectual property rights. As deployment of our technology increases, and more companies enter our markets, the likelihood of a third-party lawsuit resulting from these provisions increases. If an infringement arose in a context governed by such a contract, we may have to expend significant sums to defend our customer, refund to our customer amounts already paid to us, pay significant damages, or cease distributing our allegedly infringing products entirely.
(24) We are periodically involved in litigation in the ordinary course of business, and an adverse resolution of such litigation may adversely affect our business, financial condition, results of operations, and cash flows.
From time to time, in our normal course of business, we are a party to various legal claims, actions and complaints. Given the uncertain nature of litigation, we are not able to estimate the amount or range of gain or loss that could result from an outcome of litigation. Litigation can be expensive, lengthy, and disruptive to normal business operations. The results of complex legal proceedings are often uncertain and difficult to predict. We could incur costs in excess of any established accruals and, to the extent available, excess liability insurance. An unfavorable outcome in any legal proceedings could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
(25) The terms and conditions of our contracts could subject us to damages, losses and other expenses if we fail to meet delivery and performance requirements.
Our service contracts typically include provisions imposing:
| • | development and delivery schedules; |
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| • | customer acceptance and testing requirements; and |
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| • | other performance requirements. |
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To the extent these provisions involve performance over extended periods of time, risks of noncompliance may increase. From time to time, we have experienced delays in system implementation, timely acceptance of deliverables, concerns regarding deliverable performance, and other contractual disputes. If we fail to meet contractual performance requirements as promised, or to successfully resolve customer disputes, we could incur liability for damages, as well as increased costs, lower margins, or compensatory obligations in addition to other losses, such as harm to our reputation. Any unexpected increases in costs to meet our contractual obligations or any other requirements necessary to address claims and damages with regard to our customer contracts could have a material adverse effect on our business and financial results.
RISKS RELATED TO OUR CAPITAL STOCK
(26) Our corporate governance documents and Oregon law may delay or prevent an acquisition of us that shareholders may consider favorable, which could decrease the value of your shares.
Our articles of incorporation, bylaws and Oregon law contain provisions that could make it more difficult for a third party to acquire us without the consent of our Board of Directors. These provisions include supermajority voting requirements for shareholders to amend our organizational documents and limitations on actions by our shareholders by written consent. In addition, our Board of Directors has the right to issue preferred stock without shareholder approval, which could be used to dilute the stock ownership of a potential hostile acquirer. Oregon law restricts the ability to vote shares of stock acquired in a transaction that causes the acquiring person to control at least one-fifth, one-third or one-half of the votes entitled to be cast in the election of directors (a “control share acquisition”). Shares acquired in a control share acquisition have no voting rights except as authorized by a vote of the shareholders. Although we believe these provisions protect our shareholders from coercive or otherwise unfair takeover tactics and thereby provide for an opportunity to receive a higher bid by requiring potential acquirers to negotiate with our Board of Directors, these provisions apply even if the offer may be considered beneficial by some shareholders.
GENERAL RISK FACTORS
(27) If we are unable to respond to regulatory or industry standards effectively, or if we are unable to develop and integrate new technologies effectively, our growth and the development of our products and services could be delayed or limited.
Our future success will depend in part on our ability to enhance and improve the responsiveness, functionality, and features of our products and services, and those of our business partners, in accordance with regulatory or industry standards. Our ability to remain competitive will depend in part on our ability to comply with emerging industry and governmental standards in a timely and cost-effective manner. If we are unable to meet these standards effectively, our growth and the development of various products and services could be delayed or limited.
(28) Our common stock price may be volatile, and you could lose all or part of your investment in shares of our common stock.
The price of shares of our common stock may fluctuate as a result of changes in our operating performance or prospects and other factors. Some specific factors that may have a significant effect on the price of shares of our common stock include:
| • | the public’s reaction to our public disclosures; |
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| • | actual or anticipated changes in our operating results or future prospects; |
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| • | potential unfavorable changes from originally reported royalties by customers resulting from an audit performed by us or a third party, or self-corrected by the customer; |
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| • | strategic actions by us or our competitors, such as acquisitions or restructurings; |
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| • | impact of acquisitions on our liquidity and financial performance; |
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| • | new laws or regulations or new interpretations of existing laws or regulations applicable to our business; |
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| • | changes in accounting standards, policies, guidance, interpretations or principles applicable to us; |
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| • | conditions of the industry as a result of changes in financial markets or general economic or political conditions; |
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| • | the failure of securities analysts to cover our common stock in the future, or changes in financial estimates by analysts; |
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| • | changes in analyst recommendations or earnings estimates regarding us, other comparable companies or the industry generally, and our ability to meet those estimates; |
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| • | changes in the amount of dividends paid, if any; |
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| • | changes in our financing strategy or capital structure; |
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| • | future issuances of our common stock or the perception that future sales could occur; and |
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| • | volatility in the equity securities market. |
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(29) We may need to hire additional employees or contract labor in the future in order to take advantage of new business opportunities arising from increased demand, which could increase costs and impede our ability to achieve or sustain profitability in the short term.
We have staffed our company with the intent of accelerating our product development and sales growth initiatives while also focusing on achieving and sustaining profitability. Our current staffing levels could affect our ability to respond to increased demand for our services. In addition, to meet any increased demand and take advantage of new business opportunities in the future, we may need to increase our workforce through additional employees or contract labor. Although we believe that increasing our workforce would potentially support anticipated growth and profitability, it would increase our costs. If we experience such an increase in costs, we may not succeed in achieving or sustaining profitability in the short term.
(30) Products deploying our technology could have unknown defects or errors, which may give rise to claims against us, divert application of our resources from other purposes or increase our project implementation and support costs.
Products and services as complex as ours may contain undetected defects or errors. Furthermore, we often provide complex implementation, integration, customization, consulting, and other technical services in connection with the implementation and ongoing maintenance of our products. Despite testing, defects or errors in our products and services may occur, which could result in delays in the development and implementation of products and systems, inability to meet customer requirements or expectations in a timely manner, loss of revenue or market share, increased implementation and support costs, failure to achieve market acceptance, diversion of development resources, injury to our reputation, increased insurance costs, increased service and warranty costs, and warranty or breach of contract claims. Although we attempt to reduce the risk of losses resulting from warranty or breach of contract claims through warranty disclaimers and liability limitation clauses in our agreements when we can, these contractual provisions are sometimes rejected or limited and may not be enforceable in every instance. If a court refuses to enforce the liability limiting provisions of our contracts for any reason, or if liabilities arise that were not contractually limited or adequately covered by insurance, the expense associated with defending these actions or paying the resultant claims could be significant.
| ITEM 1B: | UNRESOLVED STAFF COMMENTS |
|---|
None.
| ITEM 2: | PROPERTIES |
|---|
We lease our principal corporate office space, which is approximately 47,000 square feet in size and located in Beaverton, Oregon. In July 2015, we entered into an amendment with the landlord of this office space to extend the lease term through March 2024, with rent payments totaling $5.5 million plus operating expenses, payable in monthly installments.
In February 2022, we entered into a sublease agreement and lease extension agreement on a facility in Beaverton, Oregon in order to move our principal corporate offices. The new facility is approximately 65,500 square feet in size. The term of the sublease and lease extension runs through September 2030, with rent payments totaling $8.8 million plus operating expenses, payable in monthly installments. The first 26 months of rent payments and operating expenses are abated to cover the remaining term of our existing corporate office lease.
We believe that our existing facilities are suitable and adequate for our current and foreseeable future needs. The new corporate office space will provide more collaborative working space and additional room for growth. We will market our previous corporate office space for sublease. See Note 9 of our Notes to Consolidated Financial Statements for further lease-related disclosures.
| ITEM 3: | LEGAL PROCEEDINGS |
|---|
We are subject from time to time to legal proceedings and claims arising in the ordinary course of business. At this time, we do not believe that the resolution of any such matters will have a material adverse effect on our financial position, results of operations or cash flows.
| ITEM 4: | MINE SAFETY DISCLOSURES |
|---|
Not applicable.
| ITEM 5: | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
|---|
Our common stock began trading on the Nasdaq Stock Market LLC in October 2008 under the symbol “DMRC.”
At February 25, 2022, we had 356 shareholders of record of our common stock, as shown in the records of our transfer agent. Since many holders hold shares in “street name,” we believe that there is a significantly larger number of beneficial owners of our common stock than the number of record holders.
We withhold (purchase) shares of common stock in connection with stock option exercises and the vesting of restricted shares, including restricted stock units and performance restricted stock units, to satisfy required tax withholding obligations.
The following table sets forth information regarding purchases of our equity securities during the three-month period ended December 31, 2021:
| (d) | ||||||||
|---|---|---|---|---|---|---|---|---|
| (c) | Approximate | |||||||
| Total number | dollar value | |||||||
| of shares | of shares that | |||||||
| (a) | (b) | purchased as | may yet be | |||||
| Total number | Average price | part of publicly | purchased | |||||
| of shares | paid per | announced plans | under the plans | |||||
| Period | purchased (1) | share (1) | or programs | or programs | ||||
| Month 1 | ||||||||
| October 1, 2021 to<br><br><br>October 31, 2021 | 3,192 | $ | 45.32 | — | $ | — | ||
| Month 2 | ||||||||
| November 1, 2021 to<br><br><br>November 30, 2021 | 14,844 | $ | 49.26 | — | $ | — | ||
| Month 3 | ||||||||
| December 1, 2021 to<br><br><br>December 31, 2021 | — | $ | — | — | $ | — | ||
| Total | 18,036 | $ | 48.56 | — | $ | — | ||
| (1) | Stock option shares and fully vested shares of common stock withheld (purchased) by us in satisfaction of required withholding tax liability upon stock option exercise, and vesting of restricted stock, restricted stock units and performance restricted stock units. | |||||||
| --- | --- | |||||||
| ITEM 7: | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | |||||||
| --- | --- |
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements relating to future events or the future financial performance of Digimarc, which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements. Please see the discussion regarding forward-looking statements included at the end of this discussion, under the caption “Forward-Looking Statements,” and Item 1A, “Risk Factors” for a discussion of some of the uncertainties, risks and assumptions associated with these statements.
The following discussion should be read in conjunction with our consolidated financial statements and the related notes and other financial information appearing elsewhere in this Annual Report on Form 10-K.
All dollar amounts are in thousands except per share amounts or unless otherwise noted. The percentages within the tables included in this section may not sum to 100% due to rounding.
Overview
Digimarc Corporation, an Oregon corporation incorporated in 2008, is a pioneer of digital watermarking solutions, which enable a more efficient, reliable and economical means of automatic identification. Our technology can be used to apply a unique digital identity to virtually all media objects, including product packaging, commercial print, audio and video. These digital identities can be automatically identified by an enabled ecosystem of industrial scanners, smartphones and other interfaces. The technology features:
| • | Digimarc watermarks: a data carrier that can provide a unique digital identity to media objects and is generally visibly imperceptible to people and therefore can be repeated many times over the surface of media objects. |
|---|---|
| • | Digimarc Discover: a software program for computing devices and network interfaces that recognizes and decodes digital identities applied to media objects. These digital identities can be applied to media objects using Digimarc watermarks, quick response codes and universal product codes, among other types of codes. |
| --- | --- |
| • | Digimarc Verify: a suite of software tools used to inspect and verify that the digital identity applied via Digimarc watermarks to media objects are accurate and effective. |
| --- | --- |
Together, these core capabilities enable organizations, application developers, and other solution providers to build new and improve existing automatic identification solutions.
Our growth strategy focuses on two markets we serve: Government and Commercial. Government includes the consortium of Central Banks (the “Central Banks”) and other government customers. Commercial includes retailers, brands, their suppliers and related solution providers, as well as media, entertainment, education, and other customers.
We plan to continue investing in research and development and sales and marketing to develop and market our technology and to continue to expand our intellectual property portfolio. To protect our significant efforts in creating our technology, we have implemented an extensive intellectual property protection program that relies on a combination of patent, copyright, trademark and trade secret laws, and nondisclosure agreements and other contracts. As a result, we believe we have one of the world’s most extensive patent portfolios in digital watermarking and related fields, with approximately 1,000 U.S. and foreign patents granted and applications pending as of December 31, 2021. We continue to develop and broaden our portfolio of patented technology in the field of automatic identification and related applications and systems. We devote significant resources to developing and protecting our inventions and continuously seek to identify and evaluate potential licensees for our patents.
COVID-19 Pandemic
The coronavirus 2019 (“COVID-19”) pandemic continues to pose significant risks to our business. The ongoing public health actions attempting to reduce the spread of COVID-19 created and may continue to create significant disruptions to consumer demand, customer and supplier relationships, sales and support processes, and general economic conditions. Accordingly, our management continuously evaluates our business operations, communicates with and monitors the actions of our customers and partners, and reviews our near-term financial performance as we manage the Company through the uncertainty related to the COVID-19 pandemic. Some of our projects with retail customers and partners have been delayed as a result of the COVID-19 pandemic. Delays in these projects have affected the timing of closing new business. To help ensure adequate liquidity during this period and in light of uncertainties posed by the COVID-19 pandemic, we received a loan on April 16, 2020, under the
Paycheck Protection Program (“PPP”). On September 15, 2020, we filed our application for 100% forgiveness of the loan. Our application was reviewed by The Loan Source, Inc. (the “Lender”), and submitted to the Small Business Administration (“SBA”) for approval on December 17, 2020. On September 29, 2021, we received confirmation from the Lender that our PPP loan had been 100% forgiven with respect to both the principal of $5,032 and accrued interest of $62, and that the funds had been received from the SBA to pay off the loan. The SBA reserves the right to audit any PPP loan.
Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”) requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to bad debts, contingencies, goodwill, income taxes, intangible assets, marketable securities, property and equipment and revenue recognition. We base our estimates on historical experience and on other assumptions we believe to be reasonable in the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
Some of our accounting policies require higher degrees of judgment than others in their application. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.
Revenue recognition:
Revenue is recognized in accordance with Accounting Standards Codification (“ASC”) 606 “Revenue from Contracts with Customers” by applying the following steps:
Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligation(s) in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligation(s) in the contract.
Step 5: Recognize when (or as) the entity satisfies the performance obligation(s).
We derive our revenue primarily from software development services and software subscriptions. Applicable revenue recognition criteria are considered separately for each performance obligation as follows:
| • | Service revenue consists primarily of revenue earned from the performance of software development services and, to a lesser extent, professional services. The majority of software development contracts are structured as time and materials consulting agreements. Revenue for services is generally recognized as the services are performed. Billing for services rendered generally occurs within one month after the services are provided. |
|---|---|
| • | Subscription revenue consists primarily of revenue earned from the sale of software products and, to a lesser extent, the licensing or sale of intellectual property. The majority of subscription contracts are recurring, paid in advance and recognized over the term of the subscription, which is typically one to three years. |
| --- | --- |
Customer arrangements may contain multiple performance obligations such as software development services, software products, and maintenance and support fees. We account for individual products and services separately if they are distinct. To determine the transaction price, we consider the terms of the contract and our customary business practices. Some contracts may contain variable consideration. In those cases, we estimate the amount of variable consideration based on the sum of probability-weighted amounts in a range of possible consideration amounts. As part of this assessment, we will evaluate whether any of the variable consideration is constrained and if it is, we will not include it in the transaction price. The consideration is allocated between distinct products and services based on their stand-alone selling prices. For items that are not sold separately, we estimate the standalone selling price based on reasonably available information, including market conditions, specific factors affecting us, and information about the customer. For distinct products and services, we typically recognize the revenue associated with these performance obligations as they are delivered to the customer. Products and services that are not capable of being distinct are combined with other products or services until a distinct performance obligation is identified.
All revenue recognized in the Consolidated Statements of Operations is considered to be revenue from contracts with customers.
Results of Operations—the Years Ended December 31, 2021 and December 31, 2020
The following tables present our consolidated statements of operations data for the periods indicated.
| Year Ended | Year Ended | |||||
|---|---|---|---|---|---|---|
| December 31, | December 31, | |||||
| 2021 | 2020 | |||||
| Revenue: | ||||||
| Service | $ | 15,006 | $ | 13,881 | ||
| Subscription | 11,514 | 10,109 | ||||
| Total revenue | 26,520 | 23,990 | ||||
| Cost of revenue: | ||||||
| Service | 6,299 | 5,827 | ||||
| Subscription | 2,478 | 2,107 | ||||
| Total cost of revenue | 8,777 | 7,934 | ||||
| Gross profit | 17,743 | 16,056 | ||||
| Operating expenses: | ||||||
| Sales and marketing | 20,433 | 18,845 | ||||
| Research, development and engineering | 17,542 | 17,314 | ||||
| General and administrative | 19,634 | 12,710 | ||||
| Total operating expenses | 57,609 | 48,869 | ||||
| Operating loss | (39,866 | ) | (32,813 | ) | ||
| Other income: | ||||||
| Gain on extinguishment of note payable | 5,094 | — | ||||
| Other income (loss) | 29 | 277 | ||||
| Other income, net | 5,123 | 277 | ||||
| Loss before income taxes | (34,743 | ) | (32,536 | ) | ||
| Provision for income taxes | (16 | ) | (1 | ) | ||
| Net loss | $ | (34,759 | ) | $ | (32,537 | ) |
| Year Ended | Year Ended | |||||
| --- | --- | --- | --- | --- | --- | --- |
| December 31, | December 31, | |||||
| 2021 | 2020 | |||||
| Percentages are percent of total revenue | ||||||
| Revenue: | ||||||
| Service | 57 | % | 58 | % | ||
| Subscription | 43 | 42 | ||||
| Total revenue | 100 | 100 | ||||
| Cost of revenue: | ||||||
| Service | 24 | 24 | ||||
| Subscription | 9 | 9 | ||||
| Total cost of revenue | 33 | 33 | ||||
| Gross profit | 67 | 67 | ||||
| Operating expenses: | ||||||
| Sales and marketing | 77 | 79 | ||||
| Research, development and engineering | 66 | 72 | ||||
| General and administrative | 74 | 53 | ||||
| Total operating expenses | 217 | 204 | ||||
| Operating loss | (150 | ) | (137 | ) | ||
| Other income: | ||||||
| Gain on extinguishment of note payable | 19 | — | ||||
| Other income (loss) | — | 1 | ||||
| Other income, net | 19 | 1 | ||||
| Loss before income taxes | (131 | ) | (136 | ) | ||
| Provision for income taxes | (—) | (—) | ||||
| Net loss | (131 | %) | (136 | %) |
Summary
Total revenue increased $2.5 million, or 11%, to $26.5 million, primarily as a result of higher revenue from Commercial subscriptions and services, partially offset by lower revenue from Government subscriptions.
Total operating expenses increased $8.7 million, or 18%, to $57.6 million, primarily as a result of $6.2 million of non-recurring costs incurred under the Separation Agreement and General Release (“Separation Agreement”) we entered into with our former chief executive officer in April 2021 upon his retirement. Excluding this non-recurring cost, operating expenses increased $2.5 million, or 5%, to $51.4 million, reflecting higher consulting, legal and recruiting costs, partially offset by lower compensation costs.
Revenue
| Year Ended | Year Ended | Dollar | Percent | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, | December 31, | Increase | Increase | ||||||||
| 2021 | 2020 | (Decrease) | (Decrease) | ||||||||
| Revenue: | |||||||||||
| Service | $ | 15,006 | $ | 13,881 | $ | 1,125 | 8 | % | |||
| Subscription | 11,514 | 10,109 | 1,405 | 14 | % | ||||||
| Total | $ | 26,520 | $ | 23,990 | $ | 2,530 | 11 | % | |||
| Revenue (as % of total revenue): | |||||||||||
| Service | 57 | % | 58 | % | |||||||
| Subscription | 43 | % | 42 | % | |||||||
| Total | 100 | % | 100 | % |
Service. Service revenue consists primarily of revenue earned from the performance of software development services and, to a lesser extent, professional services. The majority of software development contracts are structured as time and materials agreements. Revenue for services is generally recognized as the services are performed. Billing for services rendered generally occurs within one month after the services are provided. Service contracts can range from days to several years in length. Our contract with the Central Banks, which accounts for the majority of service revenue, has a contract term through December 31, 2024, with the option to extend the term for an additional five years by mutual agreement. The contract is subject to work plans that are reviewed and agreed upon quarterly. The contract provides for predetermined billing rates, which are adjusted annually to account for cost of living variables, and provides for the reimbursement of third party costs incurred to support the work plans.
The increase in service revenue was primarily due to growth in service revenue from Commercial customers, primarily resulting from increased HolyGrail 2.0 activities for the phase 2 semi-industrial trials.
Subscription. Subscription revenue consists primarily of revenue earned from the sale of software products and, to a lesser extent, the licensing or sale of intellectual property. The majority of subscription contracts are recurring, paid in advance and recognized over the term of the subscription, which is typically one to three years.
The increase in subscription revenue was primarily due to growth in subscription revenue from Commercial customers, primarily related to the sale of 10 non-core patents from our patent portfolio, and entering into a contract with a new Commercial customer in March 2021. Most of the minimum contract value for this new contract was recognized as revenue upon delivery of the software, instead of recognized ratably over the two-year term of the contract, because we had no continuing performance obligations after delivery of the software.
Revenue by geography
| Year Ended | Year Ended | Dollar | Percent | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, | December 31, | Increase | Increase | |||||||||
| 2021 | 2020 | (Decrease) | (Decrease) | |||||||||
| Revenue by geography: | ||||||||||||
| Domestic | $ | 6,675 | $ | 7,419 | $ | (744 | ) | (10 | )% | |||
| International | 19,845 | 16,571 | 3,274 | 20 | % | |||||||
| Total | $ | 26,520 | $ | 23,990 | $ | 2,530 | 11 | % | ||||
| Revenue (as % of total revenue): | ||||||||||||
| Domestic | 25 | % | 31 | % | ||||||||
| International | 75 | % | 69 | % | ||||||||
| Total | 100 | % | 100 | % |
Domestic. The decrease in domestic revenue was due to lower subscription revenue from multiple domestic customers, and lower service revenue from domestic customers, primarily related to lower professional services work.
International. The increase in international revenue was due to higher subscription revenue from international customers, primarily related to the sale of 10 non-core patents from our patent portfolio and entering into the contract with the new customer in March 2021 referenced above, and higher service revenue from international customers, primarily related to increased HolyGrail 2.0 activities.
Revenue by market
| Year Ended | Year Ended | Dollar | Percent | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| December 31, | December 31, | Increase | Increase | |||||||
| 2021 | 2020 | (Decrease) | (Decrease) | |||||||
| Government: | ||||||||||
| Service | $ | 13,198 | $ | 13,263 | $ | (65 | ) | (0 | )% | |
| Subscription | 1,200 | 1,400 | (200 | ) | (14 | )% | ||||
| Total Government | $ | 14,398 | $ | 14,663 | $ | (265 | ) | (2 | )% | |
| Commercial: | ||||||||||
| Service | $ | 1,808 | $ | 618 | $ | 1,190 | 193 | % | ||
| Subscription | 10,314 | 8,709 | 1,605 | 18 | % | |||||
| Total Commercial | $ | 12,122 | $ | 9,327 | $ | 2,795 | 30 | % | ||
| Total | $ | 26,520 | $ | 23,990 | $ | 2,530 | 11 | % |
Government. The decrease in Government revenue was primarily due to lower subscription revenue from a Government customer.
Commercial. The increase in Commercial revenue was primarily due to higher subscription revenue from our Commercial customers, primarily related to the sale of 10 non-core patents from our patent portfolio and entering into the contract with the new customer in March 2021 referenced above, and higher service revenue from our Commercial customers, primarily related to increased HolyGrail 2.0 activities.
Cost of revenue
Service. Cost of service revenue primarily includes:
| • | compensation, benefits, incentive compensation in the form of stock-based compensation and related costs of our software developers, quality assurance personnel, professional services team and other personnel where we bill our customers for time and materials costs; |
|---|---|
| • | payments to outside contractors that are billed to customers; |
| --- | --- |
| • | charges for equipment directly used by customers; |
| --- | --- |
| • | depreciation for equipment and software directly used by customers; and |
| --- | --- |
| • | travel costs that are billed to customers. |
| --- | --- |
Subscription. Cost of subscription revenue primarily includes:
| • | cost of outside contractors that provide operational support for our subscription products; |
|---|---|
| • | internet cloud hosting costs and image search data fees to support our subscription products; |
| --- | --- |
| • | license fees paid to technology solution providers when we sell a combined solution; and |
| --- | --- |
| • | amortization of capitalized patent costs and patent maintenance fees. |
| --- | --- |
Gross profit
| Year Ended | Year Ended | Dollar | Percent | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, | December 31, | Increase | Increase | ||||||||
| 2021 | 2020 | (Decrease) | (Decrease) | ||||||||
| Gross Profit: | |||||||||||
| Service | $ | 8,707 | $ | 8,054 | $ | 653 | 8 | % | |||
| Subscription | 9,036 | 8,002 | 1,034 | 13 | % | ||||||
| Total | $ | 17,743 | $ | 16,056 | $ | 1,687 | 11 | % | |||
| Gross Profit Margin: | |||||||||||
| Service | 58 | % | 58 | % | |||||||
| Subscription | 78 | % | 79 | % | |||||||
| Total | 67 | % | 67 | % |
The increase in total gross profit was primarily due to higher subscription and service revenue, partially offset by higher costs.
There was no change in service gross profit margin.
The decrease in subscription gross profit margin was primarily due to higher license fees to a technology solution provider, partially offset by higher subscription revenue.
Operating expenses
Sales and marketing
| Year Ended | Year Ended | Dollar | Percent | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, | December 31, | Increase | Increase | ||||||||
| 2021 | 2020 | (Decrease) | (Decrease) | ||||||||
| Sales and marketing | $ | 20,433 | $ | 18,845 | $ | 1,588 | 8 | % | |||
| Sales and marketing<br><br><br>(as % of total revenue) | 77 | % | 79 | % |
Sales and marketing expenses consist primarily of:
| • | compensation, benefits, incentive compensation in the form of stock-based compensation and related costs of sales, marketing, product, operations and customer support personnel; |
|---|---|
| • | travel and market research costs, and costs associated with marketing programs, such as trade shows, public relations and new product launches; |
| --- | --- |
| • | professional services, consulting and outside contractor costs for sales and marketing and product initiatives; and |
| --- | --- |
| • | charges for infrastructure and centralized costs of facilities and information technology. |
| --- | --- |
The increase in sales and marketing expenses was primarily due to:
| • | severance costs of $1.3 million related to organizational changes we made in June 2021; |
|---|---|
| • | increased consulting costs of $0.7 million related to 2021 sales and product initiatives; and |
| --- | --- |
| • | increased recruiting costs of $0.4 million; partially offset by |
| --- | --- |
| • | decreased compensation costs of $0.7 million reflecting the impact of prior organizational changes; and |
| --- | --- |
| • | severance costs of $0.2 million related to organizational changes we made in July 2020. |
| --- | --- |
Research, development and engineering
| Year Ended | Year Ended | Dollar | Percent | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, | December 31, | Increase | Increase | ||||||||
| 2021 | 2020 | (Decrease) | (Decrease) | ||||||||
| Research, development and<br><br><br>engineering | $ | 17,542 | $ | 17,314 | $ | 228 | 1 | % | |||
| Research, development and<br><br><br>engineering (as % of total revenue) | 66 | % | 72 | % |
Research, development and engineering expenses arise primarily from three areas that support our business model: fundamental research, platform development and product development.
Research, development and engineering expenses consist primarily of:
| • | compensation, benefits, incentive compensation in the form of stock-based compensation and related costs of software and hardware developers and quality assurance personnel; |
|---|---|
| • | payments to outside contractors; |
| --- | --- |
| • | the purchase of materials and services for product development; and |
| --- | --- |
| • | charges for infrastructure and centralized costs of facilities and information technology. |
| --- | --- |
The increase in research, development and engineering expenses was primarily due to:
| • | increased compensation costs of $0.7 million reflecting compensation increases; and |
|---|---|
| • | increased recruiting costs of $0.2 million; partially offset by |
| --- | --- |
| • | severance costs of $0.6 million related to organizational changes we made in July 2020. |
| --- | --- |
General and administrative
| Year Ended | Year Ended | Dollar | Percent | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, | December 31, | Increase | Increase | ||||||||
| 2021 | 2020 | (Decrease) | (Decrease) | ||||||||
| General and administrative | $ | 19,634 | $ | 12,710 | $ | 6,924 | 54 | % | |||
| General and administrative<br><br><br>(as % of total revenue) | 74 | % | 53 | % |
We incur general and administrative costs in the functional areas of finance, legal, human resources, intellectual property, executive and board of directors. Costs for facilities and information technology are also managed as part of the general and administrative processes and are allocated to this area as well as each of the areas in sales and marketing and research, development and engineering.
General and administrative expenses consist primarily of:
| • | compensation, benefits and incentive compensation in the form of stock-based compensation and related costs of general and administrative personnel; |
|---|---|
| • | third party and professional fees associated with legal, accounting and human resources functions; |
| --- | --- |
| • | costs associated with being a public company; |
| --- | --- |
| • | third party costs, including filing and governmental regulatory fees and outside legal fees and translation costs, related to the filing and maintenance of our intellectual property; |
| --- | --- |
| • | charges to write off previously capitalized patent costs for patent assets we abandon; and |
| --- | --- |
| • | charges for infrastructure and centralized costs of facilities and information technology. |
| --- | --- |
The increase in general and administrative expenses was primarily due to:
| • | non-recurring costs of $6.2 million associated with the Separation Agreement we entered into with our former chief executive officer in April 2021 upon his retirement; |
|---|---|
| • | increased legal costs of $1.1 million, primarily related to the EVRYTHNG acquisition and related legal due diligence; |
| --- | --- |
| • | increased consulting costs of $0.6 million for 2021 executive and Board of Director initiatives; and |
| --- | --- |
| • | increased accounting costs of $0.2 million, primarily related to the accounting and tax due diligence associated with the EVRYTHNG acquisition; partially offset by |
| --- | --- |
| • | decreased compensation costs of $1.1 million, reflecting lower compensation for our current chief executive officer, partially offset by increased compensation costs related to higher headcount. |
| --- | --- |
Stock-based compensation
| Year Ended | Year Ended | Dollar | Percent | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| December 31, | December 31, | Increase | Increase | |||||||
| 2021 | 2020 | (Decrease) | (Decrease) | |||||||
| Cost of revenue | $ | 693 | $ | 745 | $ | (52 | ) | (7 | )% | |
| Sales and marketing | 2,691 | 2,152 | 539 | 25 | % | |||||
| Research, development and engineering | 1,590 | 1,890 | (300 | ) | (16 | )% | ||||
| General and administrative | 6,962 | 4,328 | 2,634 | 61 | % | |||||
| Total | $ | 11,936 | $ | 9,115 | $ | 2,821 | 31 | % |
The changes in stock-based compensation expense were primarily due to the expense recognized upon the acceleration of stock awards associated with the Separation Agreement we entered into with our former chief executive officer in April 2021 and organizational changes we made in sales and marketing in June 2021, partially offset by organizational changes we made in research, development and engineering in July 2020.
We anticipate incurring an additional $11,301 in stock-based compensation expense through December 31, 2025 for awards outstanding as of December 31, 2021.
Leases
We lease our principal corporate office space, which is approximately 47,000 square feet in size and located in Beaverton, Oregon. In July 2015, we entered into an amendment with the landlord of this office space to extend the lease term through March 2024, with rent payments totaling $5.5 million plus operating expenses, payable in monthly installments.
In February 2022, we entered into a sublease agreement and lease extension agreement on a facility in Beaverton, Oregon in order to move our principal corporate offices. The new facility is approximately 65,500 square feet in size. The term of the sublease and lease extension runs through September 2030, with rent payments totaling $8.8 million plus operating expenses, payable in monthly installments. The first 26 months of rent payments and operating expenses are abated to cover the remaining term of our existing corporate office lease.
Other income, net
| Year Ended | Year Ended | Dollar | Percent | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, | December 31, | Increase | Increase | ||||||||
| 2021 | 2020 | (Decrease) | (Decrease) | ||||||||
| Other income, net | $ | 5,123 | $ | 277 | $ | 4,846 | 1,749 | % | |||
| Other income, net (as % of total revenue) | 19 | % | 1 | % |
The increase in other income, net was primarily due to the $5,094 gain on the forgiveness of our PPP loan in September 2021, partially offset by lower interest rates earned on investments, net of higher average investment balances.
Provision for income taxes
The provision for income taxes reflects current taxes, deferred taxes and withholding taxes in certain foreign jurisdictions.
For the year ended December 31, 2021, our effective tax rate was 0%, reflecting a full valuation allowance recorded against our deferred tax assets. The valuation allowance against deferred tax assets as of December 31, 2021 was $64,273, an increase of $8,634 from $55,639 as of December 31, 2020. We continually assess the applicability of a valuation allowance against our deferred tax assets. Based upon the positive and negative evidence available as of December 31, 2021, and largely due to the cumulative loss incurred by us over the preceding three years, which is considered a significant piece of negative evidence when assessing the realizability of deferred tax assets, a full valuation allowance is recorded against our deferred tax assets. We will not record tax benefits on any future losses until it is determined that those tax benefits will be realized. All future reversals of the valuation allowance would result in a tax benefit in the period recognized.
For the year ended December 31, 2020, our effective tax rate was 0%, reflecting a full valuation allowance recorded against our deferred tax assets. The valuation allowance against deferred tax assets as of December 31, 2020 was $55,639, an increase of $7,830 from $47,809 as of December 31, 2019.
Liquidity and Capital Resources
| December 31, | December 31, | |||
|---|---|---|---|---|
| 2021 | 2020 | |||
| Working capital | $ | 36,295 | $ | 74,056 |
| Current ratio (1) | 5.7:1 | 8.6:1 | ||
| Cash, cash equivalents and short-term<br><br><br>marketable securities | $ | 33,326 | $ | 77,728 |
| Long-term marketable securities | $ | 8,292 | $ | — |
| Total cash, cash equivalents and<br><br><br>marketable securities | $ | 41,618 | $ | 77,728 |
| (1) | The current (liquidity) ratio is calculated by dividing total current assets by total current liabilities. | |||
| --- | --- |
The $36,110 decrease in cash, cash equivalents and marketable securities at December 31, 2021, from December 31, 2020, resulted primarily from:
| • | cash used in operations, |
|---|---|
| • | purchases of common stock related to tax withholding in connection with the vesting of restricted stock, restricted stock units, performance restricted stock units and exercise of stock options, |
| --- | --- |
| • | loan issued to EVRYTHNG, a related party, prior to closing the acquisition, and |
| --- | --- |
| • | purchases of property and equipment and capitalized patent costs. |
| --- | --- |
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities, and trade accounts receivable. We place our cash and cash equivalents with major banks and financial institutions and at times deposits may exceed insured limits. Marketable securities include commercial paper, corporate notes, federal agency notes and pre-refunded municipals. Our investment policy
requires our portfolio to be invested to ensure that the greater of $3,000 or 7% of the invested funds will be available within 30 days’ notice.
Other than cash used for operating needs, which may include short-term marketable securities, our investment policy limits our credit exposure to any one financial institution or type of financial instrument by limiting the maximum of 5% of our cash and cash equivalents and marketable securities or $1,000, whichever is greater, to be invested in any one issuer except for the U.S. government, U.S. federal agencies and U.S.-backed securities, which have no limits, at the time of purchase. Our investment policy also limits our credit exposure by limiting to a maximum of 40% of our cash and cash equivalents and marketable securities, or $15,000, whichever is greater, to be invested in any one industry category, (e.g., financial or energy industries), at the time of purchase. As a result, we believe our credit risk associated with cash and investments to be minimal. A decline in the market value of any security below cost that is deemed to be other-than-temporary results in a reduction in carrying amount to fair value. To determine whether an impairment is other-than-temporary, we consider whether we have the ability and intent to hold the investment until a market price recovery and evidence indicating that the cost of the investment is recoverable outweighs evidence to the contrary. There have been no other-than-temporary impairments identified or recorded by us in the years ended December 31, 2021 and 2020.
Cash flows from operating activities
| Year Ended | Year Ended | Dollar | Percent | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, | December 31, | Increase | Increase | ||||||||
| 2021 | 2020 | (Decrease) | (Decrease) | ||||||||
| Net loss | $ | (34,759 | ) | $ | (32,537 | ) | $ | 2,222 | 7 | % | |
| Non-cash items | 10,095 | 12,091 | 1,996 | 17 | % | ||||||
| Changes in operating assets and liabilities | (1,452 | ) | 508 | 1,960 | 386 | % | |||||
| Net cash used in operating activities | $ | (26,116 | ) | $ | (19,938 | ) | $ | 6,178 | 31 | % |
Cash flows used in operating activities in 2021 compared to 2020 increased by $6,178, primarily as a result of a higher net loss, lower non-cash items and the impact of changes in operating assets and liabilities. The decrease in non-cash items was primarily due to the $5,032 gain on the forgiveness of the principal on our PPP loan, partially offset by higher stock-based compensation. The change in operating assets and liabilities was due to the timing of receipts from customers and payments to vendors.
Cash flows from investing activities
Cash flows from investing activities in 2021 compared to 2020 increased by $60,245, from $34,264 used to $25,981 provided, primarily as a result of higher net maturities of marketable securities, partially offset by a $2,000 loan issued to EVRYTHNG, a related party, prior to the closing of the acquisition.
Cash flows from financing activities
Cash flows from financing activities in 2021 compared to 2020 decreased by $68,457, from $62,685 provided to $5,772 used, primarily as a result of proceeds from the issuance of common stock and preferred stock related to the Subscription Agreement with TCM Strategic Partners L.P. in September 2020, lower proceeds from stock option exercises, proceeds from our PPP loan issued in April 2020, and higher purchases of common stock in 2021 in satisfaction of required withholding tax lability.
Future cash expectations
Under the rules of ASC Subtopic 205-40 “Presentation of Financial Statements-Going Concern” (“ASC 205-40”), companies are required to evaluate whether conditions and/or events raise substantial doubt about their ability to meet their future financial obligations as they become due within one year after the date that the financial statements are issued. This evaluation takes into account a company’s current available cash and projected cash needs over the one year evaluation period but may not consider things beyond its control, such as increasing revenue or the future exercise of outstanding financial assets. We have incurred operating losses and negative cash flows from operating activities during the last several years, and depending on future results, may continue to incur such losses and negative cash flows in the future. We believe our cash and marketable securities of $41,618 at December 31, 2021, will fund our projected operations for a period of less than 12 months, assuming we are not able to
significantly grow revenues as currently expected, collect proceeds from the exercise of the EVRYTHNG warrants (see EVRYTHNG Acquisition section below for more information), or implement plans to contain operating costs. In this case, additional sources of capital will be needed by us to fund our operations. Under the rules of ASC 205-40, these factors raise substantial doubt about our ability to continue as a going concern.
We plan, as necessary, to secure additional capital in the future through increased revenue, exercise of the EVRYTHNG warrants, partnerships, collaborations, equity or debt financings, or other sources to carry out our planned business activities. If additional capital is not available when required, we may need to take steps to contain costs until such funding is received.
EVRYTHNG Acquisition
On January 3, 2022, we closed our acquisition of EVRYTHNG pursuant to the Share Purchase Agreement (“Purchase Agreement”) entered into on November 15, 2021. Upon closing, EVRYTHNG became a wholly owned subsidiary of Digimarc.
We acquired all outstanding shares of EVRYTHNG’s share capital in exchange for aggregate initial consideration consisting of 772 shares of our common stock and warrants to purchase 231 shares of our common stock. The number of warrants issued was determined based on there being approximately $8,500 of closing costs, which includes EVRYTHNG’s outstanding indebtedness, transaction expenses and certain other liabilities, net of EVRYTHNG’s cash on hand at closing. We paid $6,931 of the estimated closing costs in January 2022. A portion of the initial consideration was held back by us to secure any post-closing adjustments to the initial consideration and the indemnification obligations of the sellers.
The warrants have a per share exercise price of $36.56 and may only be exercised by payment of the exercise price in cash. The number of shares of common stock underlying the warrants and the exercise price of the warrants are subject to adjustment upon the occurrence of certain specified events, including subdivisions and combinations of our common stock. The warrants will expire on March 27, 2022.
Under the terms of the Purchase Agreement, we filed a Registration Statement on Form S-3 with the SEC on January 19, 2022, that became effective on January 28, 2022, covering the resale of the shares of the common stock issued and to be issued as consideration to the sellers.
We granted replacement equity awards to the holders of unvested EVRYTHNG options, pursuant to the terms of the Purchase Agreement. The replacement equity awards have substantially equivalent economic value and vesting terms as the cancelled unvested options.
The Purchase Agreement provides for additional shares of our common stock, subject to certain conditions, to be issued in September 2022. The number of additional common shares, before any downward adjustments, is equivalent to $50,000 of our common stock. The number of additional common shares will be adjusted downward if EVRYTHNG fails to meet its Product Annual Recurring Revenue (“Product ARR”) target of $10,000 by February 28, 2022, and/or if our average stock price during the applicable measurement period is higher than our stock price as of the closing of the EVRYTHNG acquisition. The number of additional shares that may be issued is described in more detail in Item 1.01 of the Current Report on Form 8-K that we filed with the SEC on November 15, 2021, describing the Purchase Agreement. Based on estimated Product ARR at February 28, 2022, which is preliminary and subject to audit, we do not anticipate any additional shares of our common stock will be issued in September 2022.
Equity Distribution Agreement
On May 16, 2019, we entered into an Equity Distribution Agreement, whereby we may sell from time to time through Wells Fargo Securities, LLC, as our sales agent, our common stock having an aggregate offering price of up to $30,000. Wells Fargo Securities, LLC will receive from us a commission equal to 2.50% of the gross sales price per share of common stock for shares having an aggregate offering price of up to $10,000, and a commission of 2.25% of the gross sales price per share of common stock thereafter, for shares sold under the Equity Distribution Agreement. As of December 31, 2021, we had sold 498 shares at an average price of $46.36 under this Equity Distribution Agreement, totaling $23,068 of cash proceeds, less $544 of commissions and $646 of stock issuance costs. As of December 31, 2021, $6,932 remains available for future issuance under the Equity Distribution Agreement.
Shelf Registration
On June 5, 2020, we filed a new shelf registration statement on Form S-3 that included $49,265 of unsold securities from our prior shelf registration statement filed on May 26, 2017 that expired in June 2020. Under the new shelf registration statement, we may sell securities in one or more offerings up to $100,000. As of December 31, 2021, $97,892 remains available under the shelf registration. The new shelf registration statement will expire in July 2023.
We may sell shares under the shelf registration and/or use similar or other financing means to raise working capital in the future, if necessary, to support continued investment in our growth initiatives. We may also raise capital in the future to fund acquisitions and/or investments in complementary businesses, technologies or product lines. If it becomes necessary to obtain additional financing, we may not be able to do so, or if these funds are available, they may not be available on satisfactory terms. The COVID-19 pandemic has created substantial uncertainty and volatility in the stock market, particularly in the small-cap sector in which our stock is traded, and negatively impacted our share price. These factors may inhibit our near-term ability to obtain financing.
Forward-Looking Statements
This Annual Report on Form 10-K includes “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933. Words such as “may,” “might,” “plan,” “should,” “could,” “expect,” “anticipate,” “intend,” “believe,” “project,” “forecast,” “estimate,” “continue,” and variations of such terms or similar expressions are intended to identify such forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, or other statements made by us, are made based on our expectations and beliefs concerning future events impacting us, and are subject to uncertainties and factors (including those specified below), which are difficult to predict and, in many instances, are beyond our control. As a result, our actual results could differ materially from those expressed in or implied by any such forward-looking statements, and investors are cautioned not to place undue reliance on such statements. We believe that the following factors, among others (including those described in Item 1A. “Risk Factors”), could affect our future performance and the liquidity and value of our securities and cause our actual results to differ materially from those expressed or implied by forward-looking statements made by us. Forward-looking statements include but are not limited to statements relating to:
| • | our expectations regarding the acquisition of EVRYTHNG and its impact on our business, including our expectations regarding additional shares that may be issued in connection with the acquisition; |
|---|---|
| • | our beliefs regarding the possible effects of the COVID-19 pandemic on general economic conditions, public health, and consumer demand, and the Company’s results of operations, liquidity, capital resources, and general performance in the future; |
| --- | --- |
| • | the possible impact of COVID-19 on our ability to obtain financing through our Equity Distribution Agreement and the availability of any alternative sources of financing; |
| --- | --- |
| • | the possible impact of any audit or review related to our PPP loan; |
| --- | --- |
| • | the potential impact of COVID-19 on projects with our Commercial customers and partners; |
| --- | --- |
| • | the concentration of most of our revenue among few customers and the trends and sources of future revenue; |
| --- | --- |
| • | anticipated successful advocacy of our technology by our partners; |
| --- | --- |
| • | our belief regarding the global deployment of our products; |
| --- | --- |
| • | our beliefs regarding potential outcomes of participating in the HolyGrail 2.0 initiative and the utility of our products in the recycling industry; |
| --- | --- |
| • | our ESG projects and ESG Impact Report; |
| --- | --- |
| • | our future level of investment in our business, including investment in research, development and engineering of products and technology, development of our intellectual property, sales growth initiatives and development of new market opportunities; |
| --- | --- |
| • | anticipated expenses, costs, margins, provision for income taxes and investment activities in the foreseeable future; |
| --- | --- |
| • | our assumptions and expectations related to stock awards; |
| --- | --- |
| • | our belief that we have one of the world’s most extensive patent portfolios in digital watermarking and related fields; |
| --- | --- |
| • | anticipated effect of our adoption of accounting pronouncements; |
| --- | --- |
| • | our beliefs regarding our critical accounting policies; |
| --- | --- |
| • | our expectations regarding the impact of accounting pronouncements issued but not yet adopted; |
| --- | --- |
| • | anticipated revenue to be generated from current contracts, renewals, and as a result of new programs; |
| --- | --- |
| • | our estimates, judgments and assumptions related to impairment testing; |
| --- | --- |
| • | variability of contracted arrangements in response to changes in circumstances underlying the original contractual arrangements; |
| --- | --- |
| • | business opportunities that could require that we seek additional financing and our ability to do so; |
| --- | --- |
| • | the size and growth of our markets and our assumptions and beliefs related to those markets; |
| --- | --- |
| • | the existence of international growth opportunities and our future investment in such opportunities; |
| --- | --- |
| • | our expected short-term and long-term liquidity positions; |
| --- | --- |
| • | our capital expenditure and working capital requirements and our ability to fund our capital expenditure and working capital needs through cash flow from operations or financing; |
| --- | --- |
| • | our expectations regarding our ability to meet future financial obligations as they become due within the coming fiscal year; |
| --- | --- |
| • | the effect of computerized trading on our stock price; |
| --- | --- |
| • | capital market conditions, our expectations regarding credit risk exposure, interest rate volatility and other limitations on the availability of capital, which could have an impact on our cost of capital and our ability to access the capital markets; |
| --- | --- |
| • | our use of cash, cash equivalents and marketable securities in upcoming quarters and the possibility that our deposits of cash and cash equivalents with major banks and financial institutions may exceed insured limits; |
| --- | --- |
| • | the strength of our competitive position and our ability to innovate and enhance our competitive differentiation; |
| --- | --- |
| • | our beliefs related to our existing facilities; |
| --- | --- |
| • | protection, development and monetization of our intellectual property portfolio; |
| --- | --- |
| • | our beliefs related to our relationship with our employees and the effect of increasing diversity within our workforce; |
| --- | --- |
| • | our beliefs regarding cybersecurity incidents; |
| --- | --- |
| • | our beliefs related to certain provisions in our bylaws and articles of incorporation; |
| --- | --- |
| • | our beliefs related to legal proceedings and claims arising in the ordinary course of business; and |
| --- | --- |
| • | other risks detailed in our filings with the Securities and Exchange Commission, including the risk factors set forth in Item 1A. “Risk Factors.” |
| --- | --- |
We believe that the risk factors specified above and the risk factors contained in Item 1A, “Risk Factors,” among others, could affect our future performance and the liquidity and value of our securities and cause our actual results to differ materially from those expressed or implied by forward-looking statements made by us or on our behalf. Investors should understand that it is not possible to predict or identify all risk factors and that there may be other factors that may cause our actual results to differ materially from the forward-looking statements. All forward-looking statements made by us or by persons acting on our behalf apply only as of the date of this Annual Report on Form 10-K. We do not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the date of the filing of this Annual Report on Form 10-K.
| ITEM 8: | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
|---|
Our Consolidated Financial Statements and the accompanying Notes that are filed as part of this Annual Report are listed under Part III, Item 15, Exhibits and Financial Statement Schedules and are set forth beginning on page F-1 immediately following the signature page of this Form 10-K.
| ITEM 9: | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
|---|
None
| ITEM 9A: | CONTROLS AND PROCEDURES |
|---|
Evaluation of Disclosure Controls and Procedures
Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, have carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) as of the end of the period covered by this Form 10-K. These disclosure controls and procedures are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Based on our evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures, as of the end of the period covered by this Form 10-K, were effective.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP.
Because of inherent limitations, any control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Management is committed to continue monitoring our internal controls over financial reporting and will modify or implement additional controls and procedures that may be required to ensure the ongoing integrity of our consolidated financial statements.
With the participation of our Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, (“COSO”). Based on this evaluation, management has concluded that internal control over financial reporting was effective as of the end of the period covered by this Form 10-K based on those criteria.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the quarter ended December 31, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
| ITEM 9B: | OTHER INFORMATION |
|---|
None
| ITEM 9C: | DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS |
|---|
Not applicable
Certain information required by Part III of this Annual Report on Form 10-K is incorporated herein by reference to the Proxy Statement for our 2022 annual meeting of shareholders, which we intend to file no later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
| ITEM 10: | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
|---|
Code of Ethics
We have adopted a Code of Business Conduct that applies to our principal executive officer, principal financial officer and controller, as well as a Code of Ethics for Financial Professionals that applies to our principal financial officer and controller. We have made these codes available in the Corporate Governance section of our website at http://www.digimarc.com/about/company/corporate-governance. If we waive, or implicitly waive, any material provision of the codes, or substantively amend the codes, we will disclose that fact on our website within four business days.
The other information required by this item is incorporated herein by reference to the information in the Proxy Statement, which we intend to file with the SEC no later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K under the captions “Election of Directors,” “Management,” “Report of the Governance, Nominating, and Sustainability Committee of the Board of Directors—Audit Committee,” and “Other Matters—Delinquent Section 16(a) Reports.”
| ITEM 11: | EXECUTIVE COMPENSATION |
|---|
The information required by this item is incorporated herein by reference to the information in the Proxy Statement, which we intend to file with the SEC no later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, under the captions “Director Compensation” and “Executive Compensation.”
| ITEM 12: | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
|---|
The information required by this item is incorporated herein by reference to the information in the Proxy Statement, which we intend to file with the SEC no later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information.”
| ITEM 13: | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
|---|
The information required by this item is incorporated herein by reference to the information in the Proxy Statement, which we intend to file with the SEC no later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K under the captions “Determination of Board Member Independence” and “Related Party Transactions.”
| ITEM 14: | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
|---|
The information required by this item is incorporated herein by reference to the information in the Proxy Statement, which we intend to file with the SEC no later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, under the captions “Audit and Other Fees Paid to KPMG LLP” and “Approval of Audit Fees and Pre-Approval Policy.”
| ITEM 15: | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
|---|
(a)(1) Financial Statements
The following documents are filed as part of this Annual Report on Form 10-K:
| (i) | Report of Independent Registered Public Accounting Firm |
|---|
Consolidated Balance Sheets as of December 31, 2021 and 2020
Consolidated Statements of Operations for the years ended December 31, 2021 and 2020
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2021 and 2020
Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020
| (ii) | Notes to Consolidated Financial Statements |
|---|
(a)(2) Financial Statement Schedules
All schedules have been omitted since they are not required or are not applicable or the required information is shown in the consolidated financial statements or related notes.
(a)(3) Exhibits
EXHIBIT INDEX
The agreements included or incorporated by reference as exhibits to this report may contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other party or parties to the applicable agreement and:
| • | were not intended to be treated as categorical statements of fact, but rather as a means of allocating the risk to one of the parties if those statements prove to be inaccurate; |
|---|---|
| • | were qualified by disclosures that were made to the other party or parties in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement; |
| --- | --- |
| • | may apply standards of “materiality” that are different from “materiality” under the securities laws; and |
| --- | --- |
| • | were made only as of the date of the applicable agreement or other date or dates that may be specified in the agreement. |
| --- | --- |
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about Digimarc may be found elsewhere in this Annual Report on Form 10-K and in Digimarc’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| DIGIMARC CORPORATION | ||
|---|---|---|
| Date: March 4, 2022 | By: | /S/ CHARLES BECK |
| Charles Beck<br><br><br>Title: Chief Financial Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
| Signature | Title | Date |
|---|---|---|
| /S/ RILEY MCCORMACK | President, Chief Executive Officer and Director | March 4, 2022 |
| Riley McCormack | (Principal Executive Officer) | |
| /S/ CHARLES BECK | Chief Financial Officer and Treasurer | March 4, 2022 |
| Charles Beck | (Principal Financial and Accounting Officer) | |
| /S/ ALICIA SYRETT | Chair of the Board of Directors | March 4, 2022 |
| Alicia Syrett | ||
| /S/ SANDEEP DADLANI | Director | March 4, 2022 |
| Sandeep Dadlani | ||
| /S/ JAMES T. RICHARDSON | Director | March 4, 2022 |
| James T. Richardson | ||
| /S/ Ravi KUMAR SINGISETTI | Director | March 4, 2022 |
| Ravi Kumar Singisetti | ||
| /S/ ANDREW WALTER | Director | March 4, 2022 |
| Andrew Walter |
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| Page | |
|---|---|
| Report of Independent Registered Public Accounting Firm | F-2 |
| Consolidated Balance Sheets | F-4 |
| Consolidated Statements of Operations | F-5 |
| Consolidated Statements of Shareholders’ Equity | F-6 |
| Consolidated Statements of Cash Flows | F-7 |
| Notes to Consolidated Financial Statements | F-8 |
F-1
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Digimarc Corporation:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Digimarc Corporation and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has incurred losses from operations and negative cash flows from operating activities over the last several years that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
F-2
Revenue recognition for new contracts
As discussed in Note 2 to the consolidated financial statements, the Company recorded $26.5 million of total revenue for the year ended December 31, 2021, of which $15.0 million was service revenue and $11.5 million was subscription revenue. Customer arrangements may contain multiple performance obligations such as software development services, software products, and maintenance and support fees. The Company accounts for individual products and services separately if they are distinct. The Company derives its revenue primarily from software development services and software subscriptions with a wide range of service and software offerings.
We identified the evaluation of the Company’s revenue recognition related to new contracts entered into during the year as a critical audit matter. Challenging auditor judgment was required to evaluate the potential impact of specific contract terms on revenue recognition due to the unique nature of new revenue contracts within each service and software offering.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design of certain internal controls related to the Company’s revenue recognition process, including a control over the Company’s assessment of the contract terms and applicable revenue recognition requirements for new contracts. For a selection of new contracts, we read the contract and evaluated the Company’s assessment of the contract terms and revenue recognition. For certain contracts, we confirmed the relevant contract terms directly with the Company’s customers and compared them to the terms utilized by the Company to record revenue. We assessed the recorded revenue by selecting a sample of transactions and comparing the revenue recognized for consistency with the terms of the underlying documentation, including contracts with customers. For a selection of revenue contracts entered during the year, we interviewed personnel outside of the accounting function to consider other relevant facts and circumstances and their impact on revenue recognition.
/s/ KPMG LLP
We have served as the Company’s auditor since 2010.
Portland, Oregon
March 4, 2022
F-3
DIGIMARC CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
| December 31, | |||||
|---|---|---|---|---|---|
| 2020 | |||||
| ASSETS | |||||
| Current assets: | |||||
| Cash and cash equivalents | 13,789 | $ | 19,696 | ||
| Marketable securities | 19,537 | 58,032 | |||
| Trade accounts receivable, net | 6,368 | 3,907 | |||
| Loan receivable from related party | 2,001 | — | |||
| Other current assets | 2,316 | 2,197 | |||
| Total current assets | 44,011 | 83,832 | |||
| Marketable securities | 8,292 | — | |||
| Property and equipment, net | 2,875 | 3,272 | |||
| Intangibles, net | 6,611 | 6,612 | |||
| Goodwill | 1,114 | 1,114 | |||
| Other assets | 1,973 | 2,198 | |||
| Total assets | 64,876 | $ | 97,028 | ||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||
| Current liabilities: | |||||
| Accounts payable and other accrued liabilities | 4,727 | $ | 2,827 | ||
| Deferred revenue | 2,989 | 3,002 | |||
| Note payable, current | — | 3,947 | |||
| Total current liabilities | 7,716 | 9,776 | |||
| Lease liability and other long-term liabilities | 1,780 | 2,295 | |||
| Note payable, long-term | — | 1,118 | |||
| Total liabilities | 9,496 | 13,189 | |||
| Commitments and contingencies (Note 15) | |||||
| Shareholders’ equity: | |||||
| Preferred stock (par value 0.001 per share, 2,500 authorized, 10 shares<br>issued and outstanding at December 31, 2021 and 2020) | 50 | 50 | |||
| Common stock (par value 0.001 per share, 50,000 authorized, 16,940 and<br>16,735 shares issued and outstanding at December 31, 2021 and 2020, respectively) | 17 | 17 | |||
| Additional paid-in capital | 261,324 | 255,024 | |||
| Accumulated deficit | (206,011 | ) | (171,252 | ) | |
| Total shareholders’ equity | 55,380 | 83,839 | |||
| Total liabilities and shareholders’ equity | 64,876 | $ | 97,028 |
All values are in US Dollars.
See Notes to Consolidated Financial Statements
F-4
DIGIMARC CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
| Year Ended | Year Ended | |||||
|---|---|---|---|---|---|---|
| December 31, | December 31, | |||||
| 2021 | 2020 | |||||
| Revenue: | ||||||
| Service | $ | 15,006 | $ | 13,881 | ||
| Subscription | 11,514 | 10,109 | ||||
| Total revenue | 26,520 | 23,990 | ||||
| Cost of revenue: | ||||||
| Service | 6,299 | 5,827 | ||||
| Subscription | 2,478 | 2,107 | ||||
| Total cost of revenue | 8,777 | 7,934 | ||||
| Gross profit | 17,743 | 16,056 | ||||
| Operating expenses: | ||||||
| Sales and marketing | 20,433 | 18,845 | ||||
| Research, development and engineering | 17,542 | 17,314 | ||||
| General and administrative | 19,634 | 12,710 | ||||
| Total operating expenses | 57,609 | 48,869 | ||||
| Operating loss | (39,866 | ) | (32,813 | ) | ||
| Other income: | ||||||
| Gain on extinguishment of note payable | 5,094 | — | ||||
| Other income (loss) | 29 | 277 | ||||
| Other income, net | 5,123 | 277 | ||||
| Loss before income taxes | (34,743 | ) | (32,536 | ) | ||
| Provision for income taxes | (16 | ) | (1 | ) | ||
| Net loss | $ | (34,759 | ) | $ | (32,537 | ) |
| Beneficial conversion feature | — | (11,443 | ) | |||
| Net loss attributable to common shares | $ | (34,759 | ) | $ | (43,980 | ) |
| Earnings (loss) per common share: | ||||||
| Loss per common share — basic | $ | (2.11 | ) | $ | (3.41 | ) |
| Loss per common share — diluted | $ | (2.11 | ) | $ | (3.41 | ) |
| Weighted average common shares outstanding — basic | 16,463 | 12,906 | ||||
| Weighted average common shares outstanding — diluted | 16,463 | 12,906 |
See Notes to Consolidated Financial Statements
F-5
DIGIMARC CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands)
| Additional | Total | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Preferred Stock | Common Stock | Paid-in | Accumulated | Shareholders' | ||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||
| BALANCE AT DECEMBER 31, 2020 | 10 | $ | 50 | 16,735 | $ | 17 | $ | 255,024 | $ | (171,252 | ) | $ | 83,839 | |||||||
| Exercise of stock options | — | — | 220 | — | 6,007 | — | 6,007 | |||||||||||||
| Issuance of restricted common stock | — | — | 255 | — | — | — | — | |||||||||||||
| Vesting of restricted stock units | — | — | 112 | — | — | — | — | |||||||||||||
| Forfeiture of restricted common stock | — | — | (65 | ) | — | — | — | — | ||||||||||||
| Purchase and retirement of common stock | — | — | (317 | ) | — | (11,779 | ) | — | (11,779 | ) | ||||||||||
| Stock-based compensation | — | — | — | — | 12,072 | — | 12,072 | |||||||||||||
| Net loss | — | — | — | — | — | (34,759 | ) | (34,759 | ) | |||||||||||
| BALANCE AT DECEMBER 31, 2021 | 10 | $ | 50 | 16,940 | $ | 17 | $ | 261,324 | $ | (206,011 | ) | $ | 55,380 | |||||||
| BALANCE AT DECEMBER 31, 2019 | 10 | $ | 50 | 12,446 | $ | 12 | $ | 188,103 | $ | (138,715 | ) | $ | 49,450 | |||||||
| Issuance of Series B preferred stock, net of issuance costs | 17 | 17 | — | — | 16,871 | — | 16,888 | |||||||||||||
| Record Series B beneficial conversion feature | — | — | — | — | 11,443 | — | 11,443 | |||||||||||||
| Accrete Series B beneficial conversion feature | — | — | — | — | (11,443 | ) | — | (11,443 | ) | |||||||||||
| Conversion of Series B preferred stock to common stock | (17 | ) | (17 | ) | 1,198 | 1 | 16 | — | — | |||||||||||
| Issuance of common stock, net of issuance costs | — | — | 2,704 | 3 | 38,600 | — | 38,603 | |||||||||||||
| Exercise of stock options | — | — | 358 | 1 | 5,921 | — | 5,922 | |||||||||||||
| Issuance of restricted common stock | — | — | 256 | — | — | — | — | |||||||||||||
| Forfeiture of restricted common stock | — | — | (15 | ) | — | — | — | — | ||||||||||||
| Purchase and retirement of common stock | — | — | (212 | ) | — | (3,760 | ) | — | (3,760 | ) | ||||||||||
| Stock-based compensation | — | — | — | — | 9,273 | — | 9,273 | |||||||||||||
| Net loss | — | — | — | — | — | (32,537 | ) | (32,537 | ) | |||||||||||
| BALANCE AT DECEMBER 31, 2020 | 10 | $ | 50 | 16,735 | $ | 17 | $ | 255,024 | $ | (171,252 | ) | $ | 83,839 |
See Notes to Consolidated Financial Statements
F-6
DIGIMARC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| Year Ended | Year Ended | |||||
|---|---|---|---|---|---|---|
| December 31, | December 31, | |||||
| 2021 | 2020 | |||||
| Cash flows from operating activities: | ||||||
| Net loss | $ | (34,759 | ) | $ | (32,537 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||
| Depreciation, amortization and write-off of property and equipment | 1,370 | 1,531 | ||||
| Amortization and write-off of intangibles | 678 | 771 | ||||
| Amortization of right of use assets under operating leases | 493 | 470 | ||||
| Amortization of net premiums (discounts) on marketable securities | 650 | 204 | ||||
| Gain on extinguishment of note payable | (5,032 | ) | — | |||
| Stock-based compensation | 11,936 | 9,115 | ||||
| Changes in operating assets and liabilities: | ||||||
| Trade accounts receivable | (2,647 | ) | 114 | |||
| Other current assets | (119 | ) | 259 | |||
| Other assets | (83 | ) | (8 | ) | ||
| Accounts payable and other accrued liabilities | 2,078 | 512 | ||||
| Deferred revenue | (10 | ) | (199 | ) | ||
| Lease liability and other long-term liabilities | (671 | ) | (170 | ) | ||
| Net cash used in operating activities | (26,116 | ) | (19,938 | ) | ||
| Cash flows from investing activities: | ||||||
| Loan to related party | (2,000 | ) | — | |||
| Purchase of property and equipment | (966 | ) | (1,020 | ) | ||
| Capitalized patent costs | (606 | ) | (612 | ) | ||
| Maturities of marketable securities | 82,076 | 42,951 | ||||
| Purchases of marketable securities | (52,523 | ) | (75,583 | ) | ||
| Net cash provided by (used in) investing activities | 25,981 | (34,264 | ) | |||
| Cash flows from financing activities: | ||||||
| Issuance of common stock, net of issuance costs | — | 38,603 | ||||
| Issuance of preferred stock, net of issuance costs | — | 16,888 | ||||
| Exercise of stock options | — | 5,922 | ||||
| Proceeds from note payable | — | 5,032 | ||||
| Purchase of common stock | (5,772 | ) | (3,760 | ) | ||
| Net cash provided by (used in) financing activities | (5,772 | ) | 62,685 | |||
| Net increase (decrease) in cash and cash equivalents | (5,907 | ) | 8,483 | |||
| Cash and cash equivalents at beginning of period | 19,696 | 11,213 | ||||
| Cash and cash equivalents at end of period | $ | 13,789 | $ | 19,696 | ||
| Supplemental disclosure of cash flow information: | ||||||
| Cash received (paid) for income taxes, net | $ | (40 | ) | $ | 20 | |
| Supplemental schedule of non-cash investing and financing activities: | ||||||
| Property and equipment and patent costs in accounts payable | $ | (58 | ) | $ | 76 | |
| Stock-based compensation capitalized to software and patent costs | $ | 136 | $ | 158 | ||
| Cashless exercise of stock options | $ | 6,007 | $ | — | ||
| Beneficial conversion feature | $ | — | $ | 11,443 | ||
| Series B preferred stock dividend, converted into common stock | $ | — | $ | 248 |
See Notes to Consolidated Financial Statements
F-7
DIGIMARC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
(1) Description of Business and Summary of Significant Accounting Policies
Description of Business
Digimarc Corporation (“Digimarc” or the “Company”), an Oregon corporation, is a pioneer of digital watermarking solutions, which enable a more efficient, reliable and economical means of automatic identification. Digimarc technology can be used to apply a unique digital identity to virtually all media objects, including product packaging, commercial print, audio and video. These digital identities can be automatically identified by an enabled ecosystem of industrial scanners, smartphones and other interfaces. The technology features:
| • | Digimarc watermarks: a data carrier that can provide a unique digital identity to media objects and is generally visibly imperceptible to people and therefore can be repeated many times over the surface of media objects. |
|---|---|
| • | Digimarc Discover: a software program for computing devices and network interfaces that recognizes and decodes digital identities applied to media objects. These digital identities can be applied to media objects using Digimarc watermarks, quick response codes and universal product codes, among other types of codes. |
| --- | --- |
| • | Digimarc Verify: a suite of software tools used to inspect and verify that the digital identity applied via Digimarc watermarks to media objects are accurate and effective. |
| --- | --- |
Together, these core capabilities enable organizations, application developers, and other solution providers to build new and improve existing automatic identification solutions.
Principles of Consolidation
The consolidated financial statements include the accounts of Digimarc and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated. Digimarc acquired EVRYTHNG Limited (“EVRYTHNG”) on January 3, 2022. The financial results of EVRYTHNG will be consolidated with Digimarc’s financial results prospectively. See Note 16 for information related to the EVRYTHNG acquisition.
Use of Estimates
The preparation of the consolidated financial statements in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”) requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. The Company’s accounting policies for revenue recognition require higher degrees of judgment than others in their application. Management bases its estimates on historical experience and on other assumptions that are believed to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Reclassifications
Certain prior period amounts in the accompanying consolidated financial statements and notes thereto have been reclassified to conform to current period presentation, including the reclassification of revenue by major target market in Note 2. These reclassifications had no material effect on the results of operations or financial position for any period presented.
Cash Equivalents
The Company considers all highly liquid marketable securities with original maturities of 90 days or less at the date of acquisition to be cash equivalents. Cash equivalents include money market securities, commercial paper and pre-refunded municipals totaling $2,478 and $18,568 at December 31, 2021 and 2020, respectively. Cash
F-8
DIGIMARC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)
equivalents are carried at either cost or amortized cost depending on the type of security, which approximates fair value.
Marketable Securities
The Company considers all investments with original maturities over 90 days that mature in less than one-year from the balance sheet date to be short-term marketable securities. Short-term marketable securities primarily include commercial paper, corporate notes, federal agency notes and pre-refunded municipals. The Company’s marketable securities are classified as held-to-maturity and are reported at amortized cost, which approximates market value.
A decline in the market value of any security below amortized cost that is deemed to be other-than-temporary results in a reduction in the carrying amount. The impairment is charged to earnings and a new cost basis for the security is established. To determine whether an impairment is other-than-temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating that the cost of the investment is recoverable outweighs evidence to the contrary. There have been no other-than-temporary impairments identified or recorded by the Company.
Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to yield using a method that approximates the effective interest method. Under this method, dividend and interest income are recognized when earned.
Fair Value of Financial Instruments
Accounting Standards Codification (“ASC”) 820 “Fair Value Measurements and Disclosures” defines fair value, establishes a framework for measuring fair value under U.S. GAAP, and enhances disclosures about fair value measurements. ASC 820 describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value.
The Company’s fair value hierarchy for its cash equivalents and marketable securities as of December 31, 2021 and 2020, respectively, was as follows:
| December 31, 2021 | Level 1 | Level 2 | Level 3 | Total | ||||
|---|---|---|---|---|---|---|---|---|
| Money market securities | $ | 2,478 | $ | — | $ | — | $ | 2,478 |
| Commercial paper | — | 13,382 | — | 13,382 | ||||
| Corporate notes | — | 9,585 | — | 9,585 | ||||
| Federal agency notes | — | 3,799 | — | 3,799 | ||||
| Pre-refunded municipals | — | 1,063 | — | 1,063 | ||||
| Total | $ | 2,478 | $ | 27,829 | $ | — | $ | 30,307 |
| December 31, 2020 | Level 1 | Level 2 | Level 3 | Total | ||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Money market securities | $ | 10,988 | $ | — | $ | — | $ | 10,988 |
| Commercial paper | — | 36,478 | — | 36,478 | ||||
| Pre-refunded municipals | — | 26,697 | — | 26,697 | ||||
| Corporate notes | — | 2,437 | — | 2,437 | ||||
| Total | $ | 10,988 | $ | 65,612 | $ | — | $ | 76,600 |
The fair value maturities of the Company’s cash equivalents and marketable securities as of December 31, 2021 are as follows:
| Maturities by Period | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Total | Less than<br><br><br>1 year | 1-5<br><br><br>years | 5 - 10<br><br><br>years | More than<br><br><br>10 years | ||||||
| Cash equivalents and marketable securities | $ | 30,307 | $ | 22,015 | $ | 8,292 | $ | — | $ | — |
F-9
DIGIMARC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)
The estimated fair values of the Company’s financial instruments, which include accounts receivable, loan receivable from related party, accounts payable and other accrued liabilities, approximate their carrying values due to the short-term nature of these instruments.
Concentrations of Business and Credit Risk
A significant portion of the Company’s business depends on a limited number of large contracts. The loss of any large contract may result in loss of revenue and margin on a prospective basis. Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities, and accounts receivable.
The Company places its cash and cash equivalents with major banks and financial institutions and at times deposits may exceed insured limits. Other than cash used for operating needs, which may include short-term marketable securities with the Company’s principal banks, the Company’s investment policy limits its credit exposure to any one financial institution or type of financial instrument by limiting the maximum of 5% of its cash equivalents and marketable securities or $1,000, whichever is greater, to be invested in any one issuer except for the U.S. government, U.S. federal agencies and U.S. backed securities, which have no limits, at the time of purchase. The Company’s investment policy also limits its credit exposure by limiting the maximum of 40% of its cash equivalents and marketable securities, or $15,000, whichever is greater, to be invested in any one industry category, (e.g., financial or energy industries), at the time of purchase. As a result, the Company’s credit risk associated with cash and cash equivalents and marketable securities is believed to be minimal.
The Company manages credit risk on accounts receivable by evaluating a customer’s credit worthiness before extending any significant amount of credit. There is a significant concentration of accounts receivable at vary times from our two largest customers. Both customers have significant financial means and a history of paying their invoices timely. The Company does not have a history of significant bad debt write-offs. As a result, the Company’s credit risk associated with accounts receivable is believed to be low.
Contingencies
The Company evaluates all pending or threatened contingencies or commitments, if any, that are reasonably likely to have a material adverse effect on the Company’s operations or financial position. The Company assesses the probability of an adverse outcome and determines if it is remote, reasonably possible or probable as defined in accordance with ASC 450 “Contingencies.” If information available prior to the issuance of the financial statements indicates that it is probable that an asset has been impaired or a liability has been incurred at the date of the financial statements, and the amount of the loss, or the range of probable loss can be reasonably estimated, then the loss is accrued and charged to operations. If no accrual is made for a loss contingency because one or both of the conditions pursuant to ASC 450 are not met, but the probability of an adverse outcome is at least reasonably possible, the Company will disclose the nature of the contingency and provide an estimate of the possible loss or range of loss, or state that such an estimate cannot be made.
Goodwill
The Company tests goodwill for impairment annually and whenever events or changes in circumstances indicate that the carrying value may exceed the fair value, in accordance with ASC 350 “Intangibles – Goodwill and Other.” The Company operates as a single reporting unit. The Company estimates the fair value of its single reporting unit using a market approach, which takes into account the Company’s market capitalization plus an estimated control premium. In connection with the Company’s annual impairment test of goodwill as of June 30, 2021 and 2020, it was concluded that there was no impairment to goodwill as the estimated fair value of the Company’s reporting unit exceeded the carrying value.
Impairment of Long-Lived Assets
The Company assesses long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, in accordance with ASC 360 “Property, Plant and Equipment.”
F-10
DIGIMARC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future net undiscounted cash flows expected to be generated by the assets over their remaining useful life. If such assets are considered to be impaired, the impairment would be recognized in operating results at the amount by which the carrying amount of the assets exceeds the fair value of the assets. Fair value is determined based on discounted cash flows or appraised values, depending on the nature of the assets.
Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
Research and Development
Research and development costs are expensed as incurred in accordance with ASC 730 “Research and Development.”
Software Development Costs
Under ASC 985 “Software,” software development costs are to be capitalized beginning when a product’s technological feasibility has been established and ending when a product is made available for general release to customers. To date, the establishment of technological feasibility of the Company’s products has occurred shortly before general release and, therefore, software development costs qualifying for capitalization have been immaterial. Accordingly, the Company has not capitalized any software development costs and has charged all such costs to research and development expense.
Patent Costs
Costs associated with the application and award of patents in the U.S. and various other countries are capitalized and amortized on a straight-line basis over the term of the patents as determined at award date, which varies depending on the pendency period of the application. Capitalized patent costs, also referred to as patent prosecution costs, include internal legal labor, professional legal fees, government filing fees and translation fees related to expanding the Company’s patent portfolio.
Costs associated with the maintenance and annuity fees of patents are accounted for as prepaid assets at the time of payment and amortized over the shorter of the maintenance period or remaining life of the related patent.
Revenue Recognition
See Note 2 for detailed disclosures of the Company’s revenue recognition policy.
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with ASC 718 “Compensation—Stock Compensation,” which requires the measurement and recognition of compensation for all stock-based awards made to employees and directors including stock options, restricted stock and restricted stock units based on estimated fair values. The estimated fair value of stock-based awards is recognized over the vesting period of the award using the straight-line method.
For stock options, the Company uses the Black-Scholes option pricing model as its method of valuation. The Company’s determination of the fair value on the date of grant (measurement date) is affected by its stock price as well as assumptions regarding a number of subjective variables. These variables include, but are not limited to, the expected life of the award, the Company’s expected stock price volatility over the term of the award, the risk-free interest rate and the expected dividend yield.
For restricted stock and restricted stock units that vest upon meeting a service condition, the Company uses the fair market value of the Company’s common stock on the date of the grant (measurement date) as its method of valuation.
For performance restricted stock units that vest upon meeting both a market condition and a service condition, the Company uses the Monte Carlo Simulation model as its method of valuation. The Company’s determination of the fair value on the date of grant (measurement date) is affected by its stock price as well as assumptions regarding
F-11
DIGIMARC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)
a number of subjective variables. These variables include, but are not limited to, the expected stock price volatility over the term of the award and the risk-free interest rate.
Although the fair value of stock-based awards is determined in accordance with ASC 718 and Staff Accounting Bulletin (“SAB”) No. 107 “Shared-Based Payment,” the Black-Scholes option pricing model and the Monte Carlo Simulation model require the input of subjective assumptions, and other reasonable assumptions could provide differing results.
Income Taxes
The Company accounts for income taxes in accordance with ASC 740 “Income Taxes” utilizing the asset and liability method. Under the asset and liability method, deferred income taxes reflect the future tax consequences of differences between the tax basis of assets and liabilities and their financial reporting amounts. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period of enactment.
The Company records valuation allowances on deferred tax assets if, based on available evidence, it is more-likely-than-not that all or some portion of the assets will not be realized.
The Company is subject to income taxes within the U.S. and other countries, and, in the ordinary course of business, there are transactions and calculations where the ultimate tax determination is uncertain. The Company reports a liability (or contra asset) for unrecognized tax benefits resulting from uncertain tax positions taken (or expected to be taken) on a tax return. The Company recognizes interest and penalties, if any, related to the unrecognized tax benefits in income tax expense.
Liquidity
Under the rules of ASC Subtopic 205-40 “Presentation of Financial Statements-Going Concern” (“ASC 205-40”), companies are required to evaluate whether conditions and/or events raise substantial doubt about their ability to meet their future financial obligations as they become due within one year after the date that the financial statements are issued. This evaluation takes into account a company’s current available cash and projected cash needs over the one year evaluation period but may not consider things beyond its control, such as increasing revenue or the future exercise of outstanding financial assets. The Company has incurred operating losses and negative cash flows from operating activities the last several years and depending on future results may continue to incur such losses and negative cash flows in the future. The Company believes its cash and marketable securities of $41,618 at December 31, 2021, will fund the Company’s projected operations for a period of less than 12 months, assuming management is not able to significantly grow revenues as currently expected, collect proceeds from the exercise of the EVRYTHNG warrants (see Note 16 for information related to the EVRYTHNG warrants), or implement plans to contain operating costs. In this case, additional sources of capital will be needed by the Company to fund its operations. Under the rules of ASC 205-40, these factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The Company plans, as necessary, to secure additional capital in the future through increased revenue, exercise of the EVRYTHNG warrants, partnerships, collaborations, equity or debt financings, or other sources to carry out the Company’s planned business activities. If additional capital is not available when required, the Company may need to take steps to contain costs until such funding is received.
Accounting Pronouncements Adopted
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, “Income Taxes (ASC 740) Simplifying the Accounting for Income Taxes,” that removes certain exceptions to the general principles and also improves consistent application of and simplifies U.S. GAAP. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. The Company adopted this new standard on January 1, 2021.
F-12
DIGIMARC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)
The adoption of this standard did not have a material impact on the Company’s financial condition, results of operations and disclosures.
In October 2021, the FASB issued ASU No. 2021-08, “Business Combination (ASC 805): Accounting for Contract Assets and Liabilities from Contracts with Customers,” which improves the accounting for acquired revenue contracts with customers in a business combination. The amendments in this update primarily address the accounting for contract assets and liabilities from revenue contracts with customers in a business combination, and improves comparability for both the recognition and measurement of acquired revenue contracts with customers at the date of and after a business combination. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Early adoption is permitted. The Company adopted this new standard on January 1, 2022. The Company is currently evaluating the impact of adopting this standard on the Company’s financial condition, results of operations and disclosures in relation to the recent acquisition of EVRYTHNG. See Note 16 for information on the EVRYTHNG acquisition.
Accounting Pronouncements Issued But Not Yet Adopted
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (ASC 326): Measurement of Credit Losses on Financial Instruments,” which amends the guidance on the impairment of financial instruments. The amendments in this update remove the thresholds that entities apply to measure credit losses on financial instruments measured at amortized cost, such as loans, trade receivables, reinsurance recoverables, off-balance-sheet credit exposures, and held-to-maturity securities. Under current U.S. GAAP, entities generally recognize credit losses when it is probable that the loss has been incurred. The guidance removes all current recognition thresholds and introduces the new current expected credit loss (“CECL”) model which will require entities to recognize an allowance for credit losses for the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that an entity expects to collect over the instrument’s contractual life. The new CECL model is based upon expected losses rather than incurred losses. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Early adoption is permitted. The Company does not expect the impact of the adoption of this standard to have a material impact on its financial condition, results of operations and disclosures.
(2) Revenue Recognition
The Company derives its revenue primarily from software development services and software subscriptions. Applicable revenue recognition criteria are considered separately for each performance obligation as follows:
| • | Service revenue consists primarily of revenue earned from the performance of software development services and, to a lesser extent, professional services. The majority of software development contracts are structured as time and materials consulting agreements. Revenue for services is generally recognized as the services are performed. Billing for services rendered generally occurs within one month after the services are provided. |
|---|---|
| • | Subscription revenue consists primarily of revenue earned from the sale of software products and, to a lesser extent, the licensing or sale of intellectual property. The majority of subscription contracts are recurring, paid in advance and recognized over the term of the subscription, which is typically one to three years. |
| --- | --- |
F-13
DIGIMARC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)
Customer arrangements may contain multiple performance obligations such as software development services, software products, and maintenance and support fees. The Company accounts for individual products and services separately if they are distinct. To determine the transaction price, the Company considers the terms of the contract and the Company’s customary business practices. Some contracts may contain variable consideration. In those cases, the Company estimates the amount of variable consideration based on the sum of probability-weighted amounts in a range of possible consideration amounts. As part of this assessment, the Company will evaluate whether any of the variable consideration is constrained and if it is the Company will not include it in the transaction price. The consideration is allocated between distinct products and services based on their stand-alone selling prices. For items that are not sold separately, the Company estimates the standalone selling price based on reasonably available information, including market conditions, specific factors affecting the Company, and information about the customer. For distinct products and services, the Company typically recognizes the revenue associated with these performance obligations as they are delivered to the customer. Products and services that are not capable of being distinct are combined with other products or services until a distinct performance obligation is identified.
All revenue recognized in the Consolidated Statements of Operations is considered to be revenue from contracts with customers.
The following table provides information about disaggregated revenue by major target market in the Company’s single reporting segment:
| Year Ended | Year Ended | |||
|---|---|---|---|---|
| December 31, | December 31, | |||
| 2021 | 2020 | |||
| Government | ||||
| Service | $ | 13,198 | $ | 13,263 |
| Subscription | 1,200 | 1,400 | ||
| Total Government | 14,398 | 14,663 | ||
| Commercial | ||||
| Service | $ | 1,808 | $ | 618 |
| Subscription | 10,314 | 8,709 | ||
| Total Commercial | 12,122 | 9,327 | ||
| Total | $ | 26,520 | $ | 23,990 |
The Company has contract assets from contracts with customers that are classified as “trade accounts receivable.” Financial information about trade accounts receivable is included in Note 6.
The Company has contract liabilities from contracts with customers that are classified as “deferred revenue.” Deferred revenue consists of billings in advance for services and subscriptions for which the performance obligation has not been satisfied.
The following table provides information about contract liabilities from contracts with customers:
| December 31, | December 31, | |||
|---|---|---|---|---|
| 2021 | 2020 | |||
| Deferred revenue, current | $ | 2,989 | $ | 3,002 |
| Deferred revenue, long-term | 33 | 30 | ||
| Total | $ | 3,022 | $ | 3,032 |
F-14
DIGIMARC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)
The Company recognized $2,966 of revenue during the year ended December 31, 2021 that was included in the contract liability balance as of December 31, 2020.
The aggregate amount of the transaction prices from contractual obligations that are unsatisfied or partially unsatisfied was $16,870 and $17,921, as of December 31, 2021 and 2020, respectively.
(3) Segment Information
Geographic Information
The Company derives its revenue from a single reporting segment: automatic identification solutions. Revenue is generated in this segment primarily through software development services and software subscriptions. The Company markets its products in the U.S. and in non-U.S. countries through its sales personnel and partners.
Revenue by geographic area, based upon the “bill-to” location, was as follows:
| Year Ended | Year Ended | |||
|---|---|---|---|---|
| December 31, | December 31, | |||
| 2021 | 2020 | |||
| Domestic | $ | 6,675 | $ | 7,419 |
| International (1) | 19,845 | 16,571 | ||
| Total | $ | 26,520 | $ | 23,990 |
| (1) | Revenue from the Central Banks, consisting of a consortium of central banks around the world, is classified as international revenue. Reporting revenue by country for this customer is not practicable. | |||
| --- | --- |
Major Customers
The following customers accounted for 10% or more of revenue:
| Year Ended | Year Ended | |||||
|---|---|---|---|---|---|---|
| December 31, | December 31, | |||||
| 2021 | 2020 | |||||
| Central Banks | 54 | % | 60 | % | ||
| Walmart Inc. | 12 | % | 13 | % |
Long-lived assets by geographical area
The Company’s long-lived assets are all domiciled in the U.S.
(4) Stock-Based Compensation
Stock-based compensation includes expense charges for all stock-based awards to employees and directors. These awards include stock options, restricted stock, restricted stock units, and performance restricted stock units.
Stock-based compensation expense related to internal labor is capitalized to software and patent costs based on direct labor hours charged to capitalized software and patent costs.
Determining Fair Value
Stock Options
The Company estimates the fair value of stock options on the date of grant (measurement date) using the Black-Scholes option pricing model. The Company recognizes the fair value of stock option awards on a straight-line basis over the vesting period of the award.
The following inputs are used in the Black-Scholes option pricing model to estimate the fair value of stock options:
F-15
DIGIMARC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)
Stock Price. The stock price represents the fair market value of the Company’s common stock on the date of the grant.
Expected Life. The expected life of awards granted represents the period of time that they are expected to be outstanding. The Company determines the expected life based on historical experience with similar awards, giving consideration to the contractual terms and vesting schedules of the awards. Stock options granted generally vest over a service period of three years and have a contractual term of ten years.
Expected Volatility. The Company estimates the volatility of its common stock at the date of grant based on the historical volatility of its common stock based on historical prices over the most recent period commensurate with the expected life of the award.
Risk-Free Interest Rate. The Company determines the risk-free interest rate using current U.S. treasury yields for bonds with a maturity commensurate with the expected life of the award.
Expected Dividend Yield. The expected dividend yield is derived by the Company’s expected annual dividend rate over the expected term divided by the fair value of the Company’s common stock at the grant date.
Black Scholes Option Valuation Inputs:
| Year Ended | Year Ended | ||||
|---|---|---|---|---|---|
| December 31, | December 31, | ||||
| 2021 | 2020 | ||||
| Stock price | $ | — | $ | 15.36 | |
| Expected life (years) | — | 3.25 | |||
| Expected volatility | — | 70.91 | % | ||
| Risk-free interest rate | — | 0.25 | % | ||
| Expected dividend yield | — | 0 | % |
There were no stock options granted during the year ended December 31, 2021.
Restricted Stock
The fair value of restricted stock awards is based on the fair market value of the Company’s common stock on the date of the grant (measurement date), and is recognized on a straight-line basis over the vesting period of the award. Restricted stock awards granted generally vest over a service period of three to four years for employee grants and one to three years for director grants.
Restricted Stock Units
The fair value of restricted stock unit (“RSU”) awards, which vest upon meeting a service condition, is based on the fair market value of the Company’s common stock on the date of the grant (measurement date) and is recognized on a straight-line basis over the service period of the award, which is generally 3 years.
There were no RSUs granted during the year ended December 31, 2021.
Performance Restricted Stock Units
The fair value of performance restricted stock unit (“PRSU”) awards, which vest upon meeting a market condition, such as exceeding a target stock price in the future, and a service condition, is determined on the date of grant (measurement date) using the Monte Carlo Simulation model. The Company recognizes the fair value of the award on a straight-line basis over the service period of the award, which is generally 3 years.
The following inputs are used in the Monte Carlo Simulation model to estimate the fair value of PRSUs:
Stock Price. The stock price represents the fair market value of the Company’s common stock on the date of the grant.
F-16
DIGIMARC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)
Expected Volatility. The Company estimates the volatility of its common stock at the date of grant based on the historical volatility of its common stock based on historical prices over the most recent period commensurate with the term of the award.
Risk-Free Interest Rate. The Company determines the risk-free interest rate using current U.S. treasury yields for bonds with a maturity commensurate with the term of the award.
Monte Carlo Simulation Inputs:
| Year Ended | Year Ended | ||||
|---|---|---|---|---|---|
| December 31, | December 31, | ||||
| 2021 | 2020 | ||||
| Stock price | $ | — | $ | 16.49 | |
| Expected volatility | — | 72.50 | % | ||
| Risk-free interest rate | — | 0.14 | % |
There were no PRSUs granted during the year ended December 31, 2021.
Bruce Davis notified the Company of his intention to retire as the Company’s President and Chief Executive Officer and as Chairman and a member of the Board of Directors effective April 12, 2021 (the “Transition Date”). In connection with his retirement, the Company entered into a Separation Agreement and General Release with Mr. Davis (the “Separation Agreement”), dated April 12, 2021. Pursuant to the Separation Agreement, Mr. Davis agreed to release certain claims he may have against the Company and other released parties, and Mr. Davis’s stock options, restricted stock and RSUs that vest solely based on continued service, and PRSUs that were earned and remained subject to time-based vesting, immediately vested with respect to the number of shares that would have vested if Mr. Davis’s employment had continued for an additional twenty-four months from the Transition Date, and his right to exercise vested stock options will expire on the earliest of (i) twenty-eight months from the Transition Date, (ii) the latest date the particular stock option could have expired by its original terms under any circumstances, or (iii) the tenth anniversary of the original date of grant of the particular stock option.
The terms of the Separation Agreement resulted in the acceleration of vesting for 137 stock options, 30 RSUs, and 82 PRSUs and the forfeiture of 35 stock options, 15 RSUs, and 42 PRSUs. The terms of the Separation Agreement also resulted in a modification to all of Mr. Davis’s outstanding stock options, as the expiration date for exercise of the options was extended beyond the original terms of the options, and 21 PRSUs were modified to provide for accelerated vesting. In accordance with ASC 718, the Company calculated the fair value of the modified stock options and PRSUs and calculated the fair value of the original stock options and PRSUs immediately before the modification. The Company recorded additional stock-based compensation expense of $1,926 upon modification of these awards during the second quarter ended June 30, 2021.
The Company incurred a total of $3,990 of stock-based compensation expense, including the impact of the modified awards noted above, during the second quarter ended June 30, 2021, associated with the Separation Agreement.
Stock-based Compensation
| Year Ended | Year Ended | |||
|---|---|---|---|---|
| December 31, | December 31, | |||
| 2021 | 2020 | |||
| Stock-based compensation: | ||||
| Cost of revenue | $ | 693 | $ | 745 |
| Sales and marketing | 2,691 | 2,152 | ||
| Research, development and engineering | 1,590 | 1,890 | ||
| General and administrative | 6,962 | 4,328 | ||
| Stock-based compensation expense | 11,936 | 9,115 | ||
| Capitalized to software and patent costs | 136 | 158 | ||
| Total stock-based compensation | $ | 12,072 | $ | 9,273 |
F-17
DIGIMARC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)
The following table sets forth total unrecognized compensation cost related to non-vested stock-based awards granted under the Company’s equity compensation plans:
| Year Ended | Year Ended | |||
|---|---|---|---|---|
| December 31, | December 31, | |||
| 2021 | 2020 | |||
| Total unrecognized compensation costs | $ | 11,301 | $ | 14,416 |
Total unrecognized compensation costs will be adjusted for any future forfeitures if and when they occur.
The Company expects to recognize the total unrecognized compensation costs as of December 31, 2021 for stock options, restricted stock, RSU, and PRSU awards over weighted average periods through December 31, 2025 as follows:
| Stock | Restricted | ||||||
|---|---|---|---|---|---|---|---|
| Options | Stock | RSUs | PRSUs | ||||
| Weighted average period | — | 1.36 years | — | — |
(5) Earnings Per Common Share
The Company calculates basic and diluted earnings per common share in accordance with ASC 260 “Earnings Per Share,” using the two-class method because the Company’s unvested restricted stock is a participating security since these awards contain non-forfeitable rights to receive dividends. Under the two-class method, earnings are allocated to each class of common stock and participating security as if all of the earnings for the period had been distributed.
Basic earnings per common share excludes dilution and is calculated by dividing earnings to common shares by the weighted-average number of common shares outstanding for the period. Diluted earnings per common share is calculated by dividing earnings to common shares by the weighted-average number of common shares, as adjusted for the potentially dilutive effect of stock options, RSUs and PRSUs. The dilutive effect of stock options, RSUs and PRSUs is determined using the treasury stock method.
The following table reconciles earnings (loss) per common share:
| Year Ended | Year Ended | |||||
|---|---|---|---|---|---|---|
| December 31, | December 31, | |||||
| 2021 | 2020 | |||||
| Basic Earnings (Loss) per Common Share: | ||||||
| Net loss — basic | $ | (34,759 | ) | $ | (32,537 | ) |
| Beneficial conversion feature | — | (11,443 | ) | |||
| Net loss attributable to common shares — basic | $ | (34,759 | ) | $ | (43,980 | ) |
| Weighted average common shares outstanding — basic | 16,463 | 12,906 | ||||
| Basic earnings (loss) per common share | $ | (2.11 | ) | $ | (3.41 | ) |
| Diluted Earnings (Loss) per Common Share: | ||||||
| Net loss attributable to common shares — diluted | $ | (34,759 | ) | $ | (43,980 | ) |
| Weighted average common shares outstanding — diluted | 16,463 | 12,906 | ||||
| Diluted earnings (loss) per common share | $ | (2.11 | ) | $ | (3.41 | ) |
See Note 12 for details on the beneficial conversion feature.
The following table indicates the common stock equivalents related to stock options, RSUs and PRSUs that were anti-dilutive and excluded from diluted earnings per common share calculations:
F-18
DIGIMARC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)
| Year Ended | Year Ended | |||
|---|---|---|---|---|
| December 31, | December 31, | |||
| 2021 | 2020 | |||
| Anti-dilutive shares due to: | ||||
| Exercise prices higher than the average market price | 50 | 200 | ||
| Net loss | 32 | — |
(6) Trade Accounts Receivable and Allowance for Doubtful Accounts
Trade Accounts Receivable
Trade accounts receivable are recorded at the contractual or invoiced amount.
| December 31, | December 31, | |||||
|---|---|---|---|---|---|---|
| 2021 | 2020 | |||||
| Trade accounts receivable, current | $ | 6,393 | $ | 3,932 | ||
| Trade accounts receivable, long-term | 186 | — | ||||
| Allowance for doubtful accounts | (25 | ) | (25 | ) | ||
| Trade accounts receivable, net | $ | 6,554 | $ | 3,907 | ||
| Unpaid deferred revenue included in trade<br><br><br>accounts receivable | $ | 1,891 | $ | 1,711 |
Allowance for doubtful accounts
The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing trade accounts receivable. The Company determines the allowance based on historical write-off experience and current information. The Company reviews its allowance for doubtful accounts each reporting period. Account balances are charged against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
Unpaid deferred revenue
The unpaid deferred revenue that is included in trade accounts receivable is billed in accordance with the provisions of the contracts with the Company’s customers.
Major customers
The following customers accounted for 10% or more of trade accounts receivable, net:
| December 31, | December 31, | |||||
|---|---|---|---|---|---|---|
| 2021 | 2020 | |||||
| Company A | 43 | % | 69 | % | ||
| Company B | 15 | % | 0 | % | ||
| Company C | 11 | % | 0 | % |
(7) Related Party Transaction
On December 10, 2021, the Company entered into a Loan Agreement with EVRYTHNG (the “Loan Agreement”) pursuant to that certain Share Purchase Agreement dated November 15, 2021 relating to the Company’s acquisition of EVRYTHNG. The Loan Agreement provides for a loan facility of $2,000 to EVRYTHNG at an interest rate of 1% per annum. The loan matures on December 9, 2022.
F-19
DIGIMARC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)
The aggregate outstanding balance of the loan, with accrued interest, was $2,001 as of December 31, 2021.
See Note 16 for information related to the acquisition of EVRYTHNG.
(8) Property and Equipment
Property and equipment are stated at cost. Repairs and maintenance are charged to expense when incurred.
Depreciation on property and equipment is calculated using the straight-line method over the estimated useful lives of the assets, generally two to ten years. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful life or the lease term.
| December 31, | December 31, | |||||
|---|---|---|---|---|---|---|
| 2021 | 2020 | |||||
| Office furniture and fixtures | $ | 1,648 | $ | 1,650 | ||
| Software | 5,674 | 5,004 | ||||
| Equipment | 5,250 | 4,967 | ||||
| Leasehold improvements | 1,658 | 1,658 | ||||
| Gross property and equipment | 14,230 | 13,279 | ||||
| Less accumulated depreciation and amortization | (11,355 | ) | (10,007 | ) | ||
| Property and equipment, net | $ | 2,875 | $ | 3,272 |
(9) Leases
The Company accounts for leases in accordance with ASC 842, “Leases.” The Company leases its corporate office in Beaverton, Oregon. The term of the lease runs through March 2024 with remaining rent payments as of December 31, 2021 totaling $1,899 plus operating expenses, payable in monthly installments.
All of the Company’s leases are operating leases. The following table provides additional details of leases presented in the Consolidated Balance Sheets:
| December 31, | December 31, | |||||
|---|---|---|---|---|---|---|
| 2021 | 2020 | |||||
| Right of use assets | $ | 1,300 | $ | 1,793 | ||
| Lease liabilities, current | $ | 745 | $ | 663 | ||
| Lease liabilities, long-term | $ | 1,028 | $ | 1,772 | ||
| Weighted-average remaining life | 2.2 years | 3.2 years | ||||
| Weighted-average discount rate | 8 | % | 8 | % |
The carrying value of the right of use assets is included in “Other assets” and the current and long-term lease liabilities are included in “Accounts payable and other accrued liabilities” and “Lease liability and other long-term liabilities,” respectively, in the Consolidated Balance Sheets.
Operating lease expense is included in operating expenses in the Consolidated Statements of Operations and in cash flows from operating activities in the Consolidated Statements of Cash Flows. The operating leases include variable lease costs which are included in operating lease expense as incurred. Additional details of the Company’s operating leases are presented in the following table:
| Year-Ended | Year-Ended | |||
|---|---|---|---|---|
| December 31, | December 31, | |||
| 2021 | 2020 | |||
| Operating lease expense | $ | 1,020 | $ | 1,030 |
| Cash paid for operating leases | $ | 1,170 | $ | 1,218 |
F-20
DIGIMARC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)
The table below reconciles the cash payment obligations for the first five years and total of the remaining years for the operating lease liability recorded in the Consolidated Balance Sheet as of December 31, 2021:
| Cash | |||
|---|---|---|---|
| Payment | |||
| Year ending December 31: | Obligations | ||
| 2022 | $ | 862 | |
| 2023 | 867 | ||
| 2024 | 218 | ||
| 2025 | — | ||
| 2026 | — | ||
| Thereafter | — | ||
| Total lease payments | 1,947 | ||
| Imputed interest | (174 | ) | |
| Total minimum lease payments | $ | 1,773 |
See Note 16 for information related to the sublease and lease extension the Company entered into in February 2022 for new corporate office space.
(10) Intangibles
Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. No impairment charges were recorded for the years ended December 31, 2021 and 2020.
Patent costs associated with the application and award of patents in the U.S. and various other countries are capitalized and amortized on a straight-line basis over the term of the patents as determined at the award date, which varies depending on the pendency period of the application, generally approximating seventeen years.
Amortization of intangible assets acquired is calculated using the straight-line method over the estimated useful lives of the assets.
| Estimated Life | December 31, | December 31, | |||||
|---|---|---|---|---|---|---|---|
| (years) | 2021 | 2020 | |||||
| Capitalized patent costs | 17-20 | $ | 10,219 | $ | 9,708 | ||
| Intangible assets acquired: | |||||||
| Purchased intellectual property | 3-10 | 250 | 250 | ||||
| Existing technology | 5 | 1,560 | 1,560 | ||||
| Customer relationships | 7 | 290 | 290 | ||||
| Gross intangible assets | 12,319 | 11,808 | |||||
| Accumulated amortization | (5,708 | ) | (5,196 | ) | |||
| Intangibles, net | $ | 6,611 | $ | 6,612 |
Amortization expense on intangible assets was as follows:
| Year Ended | Year Ended | |||
|---|---|---|---|---|
| December 31, | December 31, | |||
| 2021 | 2020 | |||
| Amortization expense | $ | 576 | $ | 559 |
For intangible assets recorded at December 31, 2021, the estimated future aggregate amortization expense for the years ending December 31, 2022 through December 31, 2026 is as follows:
F-21
DIGIMARC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)
| Amortization | ||
|---|---|---|
| Year ending December 31: | Expense | |
| 2022 | $ | 537 |
| 2023 | 526 | |
| 2024 | 514 | |
| 2025 | 494 | |
| 2026 | 462 |
(11) Notes Payable
Promissory Note under the Paycheck Protection Program
On April 16, 2020, the Company entered into a Promissory Note with Stearns Bank, N.A. in an aggregate principal amount of $5,032 (the “Note”), pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).
The Note was to mature two years from the disbursement date and bore interest at a rate of 1.000% per annum, with the first six months of interest deferred. Principal and interest were payable monthly commencing six months after the disbursement date and could have been prepaid by the Company at any time prior to maturity with no prepayment penalties.
Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of loans granted under the PPP. The Note was subject to forgiveness to the extent proceeds were used for payroll costs, including payments required to continue group health care benefits, and certain rent, utility, and mortgage interest expenses (collectively, “Qualifying Expenses”), pursuant to the terms and limitations of the PPP. The Company believes that it used all of the proceeds from the Note for Qualifying Expenses.
On June 29, 2020, the Company was notified by Stearns Bank, N.A. that the Note was transferred to The Loan Source, Inc., (the “Lender”) who became responsible for servicing the Note, including administering loan forgiveness.
On September 15, 2020, the Company filed its application for 100% forgiveness of the Note. The application was reviewed by the Lender and submitted to the Small Business Administration (“SBA”) for approval on December 17, 2020.
On September 29, 2021, the Company received confirmation from the Lender that the Note had been 100% forgiven with respect to both the principal of $5,032 and accrued interest of $62, and that the funds had been received from the SBA to pay off the Note. The SBA reserves the right to audit any PPP loan. The Company recognized a $5,094 gain on extinguishment of the Note within other income in the Consolidated Statements of Operations for the year-ended December 31, 2021.
(12) Shareholders’ Equity
Preferred Stock
In June 2008, the Board of Directors authorized 2,500 shares of preferred stock, par value $0.001 per share. The Board of Directors has the authority to issue the undesignated preferred stock in one or more series and to determine the powers, preferences and rights and the qualifications, limitations or restrictions granted to or imposed upon any wholly unissued series of undesignated preferred stock and to fix the number of shares constituting any series and the designation of such series, without any further vote or action by the shareholders. The issuance of preferred stock may have the effect of delaying, deferring or preventing a change of control of the Company without further action by shareholders and may adversely affect the voting and other rights of the holders of common stock.
The Board of Directors authorized 10 shares of Series A Redeemable Nonvoting Preferred stock (“Series A Preferred”) that were issued to certain executive officers at the time of formation. The Series A Preferred has no
F-22
DIGIMARC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)
voting rights, except as required by law, and may be redeemed at the option of the Company’s Board of Directors at any time.
The Series A Preferred is redeemable based on the stated fair value of $5.00 per share. The Series A Preferred has no dividend rights and no rights to the undistributed earnings of the Company.
On September 29, 2020, the Company entered into a Subscription Agreement with TCM Strategic Partners L.P. to issue and sell 17 shares of its Series B Convertible Preferred Stock, par value $0.001 per share (“Series B Shares”), for $16,970 of cash proceeds and paid $84 in stock issuance costs. The closing of the sale and issuance of the Series B Shares occurred on October 1, 2020. Subject to shareholder approval, the Series B Shares automatically convert into fully paid and non-assessable shares of common stock at a conversion price equal to $14.37 per share.
On December 10, 2020, the Company held a Special Meeting of Shareholders that approved the issuance of the Company’s common stock upon the conversion of the Series B Shares issued to TCM Strategic Partners L.P. in connection with the private placement on October 1, 2020. On December 10, 2020, the Series B Shares automatically converted into 1,198 shares of the Company’s common stock (“the Conversion Shares”). Under the terms of the Subscription Agreement, the Conversion Shares continued to be subject to the restrictions on transfer that expired on October 1, 2021.
The Series B Shares contained a contingent beneficial conversion feature (“BCF”) that was recognized and accreted at its intrinsic value of $11,443 upon shareholder approval on December 10, 2020 and recognized in the Consolidated Statements of Shareholders’ Equity. The BCF is treated as a deduction from net loss to arrive at net loss attributable to common shares for the purposes of calculating earnings per share. See Note 5 for the calculation of basic and diluted earnings per share.
Common Stock
In June 2008, the Board of Directors authorized 50,000 shares of common stock, par value $0.001 per share. The holders of Digimarc common stock are entitled to one vote for each share held of record on all matters submitted to a vote of its shareholders, including the election of directors. Subject to preferences that may be granted to any then outstanding preferred stock, holders of common stock are entitled to receive ratably those dividends as may be declared by the Board of Directors out of funds legally available for such purpose, as well as any distributions to the Company’s shareholders. In the event of the Company’s liquidation, dissolution or winding up, holders of common stock are entitled to share ratably in all of the Company’s assets remaining after payment of liabilities and the liquidation preference of any then outstanding preferred stock. Holders of common stock have no preemptive or other subscription or conversion rights. There are no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of common stock are fully paid and non-assessable.
On September 29, 2020, the Company entered into a Subscription Agreement with TCM Strategic Partners L.P. to issue and sell 2,542 shares of its common stock in a private placement at a price of $14.37 per share. The closing of the sale of common stock occurred the same day. The offering was made without an underwriter or placement agent. The Company received $36,530 of cash proceeds and paid $190 in stock issuance costs.
On December 10, 2020, the Series B Shares automatically converted into 1,198 shares of the Company’s common stock.
In May 2019, the Company entered into an Equity Distribution Agreement, whereby the Company may sell from time to time through Wells Fargo Securities, LLC, as its sales agent, the Company’s common stock having an aggregate offering price of up to $30,000.
There were no shares sold for the year end December 31, 2021.
For the year ended December 31, 2020, the Company sold 162 shares at an average price of $16.80 under this Equity Distribution Agreement totaling $2,718 of cash proceeds, less $61 of commissions and $394 of stock issuance costs, for net cash proceeds of $2,263.
As of December 31, 2021, $6,932 remained available for future issuance under the Equity Distribution Agreement.
F-23
DIGIMARC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)
Stock Incentive Plan
In March 2018, the Company’s Board of Directors approved the 2018 Incentive Plan (“2018 Plan”) which was later approved by the Company’s shareholders at the Company’s 2018 Annual Meeting of Shareholders in April 2018. The 2018 Plan replaced the 2008 Incentive Plan (“2008 Plan”). The 2018 Plan provides for the grant of incentive and non-qualified stock options, stock appreciation rights, stock awards, restricted stock awards, restricted stock units, performance shares, performance units, and other stock or cash-based awards, which may be granted to officers, directors, employees, consultants, agents, advisors and independent contractors who provide services to the Company and its affiliated companies.
The 2018 Plan authorizes the issuance of 1,000 shares of common stock. In addition, up to 770 shares of common stock subject to awards outstanding under the 2008 Plan became available for issuance under 2018 Plan to the extent that those shares cease to be subject to the awards (as a result of, for example, expiration, cancellation or forfeiture of the award). The shares authorized under the 2018 Plan are subject to adjustment in the event of a stock split, stock dividend, recapitalization or similar event. Shares issued under the 2018 Plan will consist of authorized and unissued shares or shares held by the Company as treasury shares. If an award granted under the 2018 Plan lapses, expires, terminates or is forfeited or surrendered without having been fully exercised or without the issuance of all the shares subject to the award, the shares covered by that award will again be available for issuance under the 2018 Plan. Shares that are (i) tendered by a participant or retained by the Company as payment for the purchase price of an award or to satisfy tax withholding obligations or (ii) covered by an award that is settled in cash, or in some manner that some or all of the shares covered by the award are not issued, will again be available for issuance under the 2018 Plan. In addition, awards granted as substitute awards in connection with acquisition transactions will not reduce the number of shares authorized for issuance under the 2018 Plan.
As of December 31, 2021, under all of the Company’s stock-based compensation plans, an additional 1,004 shares remained available for future grants under the 2018 Plan. The Company issues new shares upon exercises of stock options, grants of restricted stock awards and vesting of restricted stock unit awards.
Stock Options
The following table reconciles the outstanding balance of stock option awards:
| Weighted | Weighted | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Average | Average | Aggregate | |||||||
| Exercise | Grant Date | Intrinsic | |||||||
| Options | Price | Fair Value | Value | ||||||
| Options outstanding, December 31, 2019 | 558 | $ | 31.22 | $ | 14.03 | ||||
| Granted | 105 | $ | 15.36 | $ | 7.36 | ||||
| Exercised | (358 | ) | $ | 29.36 | $ | 13.24 | |||
| Forfeited or expired | — | — | — | ||||||
| Options outstanding, December 31, 2020 | 305 | $ | 27.94 | $ | 12.65 | ||||
| Granted | — | $ | — | $ | — | ||||
| Exercised | (220 | ) | $ | 27.31 | $ | 17.36 | |||
| Forfeited or expired | (35 | ) | $ | 15.36 | $ | 7.36 | |||
| Options outstanding, December 31, 2021 | 50 | $ | 39.54 | $ | 22.23 | $ | — | ||
| Options exercisable, December 31, 2021 | 50 | $ | 39.54 | $ | — | ||||
| Options unvested, December 31, 2021 | — | $ | — | $ | — |
The aggregate intrinsic value is based on the closing price of $39.48 per share of Digimarc common stock on December 31, 2021, which would have been received by the optionees had all of the options with exercise prices less than $39.48 per share been exercised on that date.
F-24
DIGIMARC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)
The following table summarizes information about stock option awards outstanding at December 31, 2021:
| Options Exercisable | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Weighted | Weighted | ||||||||||
| Remaining | Average | Remaining | Average | ||||||||
| Contractual | Exercise | Number | Contractual | Exercise | |||||||
| Exercise Price | Life (Years) | Price | Outstanding | Life (Years) | Price | ||||||
| 39.54 | 50 | 1.61 | $ | 39.54 | 50 | 1.61 | $ | 39.54 |
All values are in US Dollars.
Restricted Stock
The following table reconciles the unvested balance of restricted stock awards:
| Weighted | |||||
|---|---|---|---|---|---|
| Average | |||||
| Number of | Grant Date | ||||
| Shares | Fair Value | ||||
| Unvested balance, December 31, 2019 | 435 | $ | 27.05 | ||
| Granted | 256 | $ | 29.95 | ||
| Vested | (260 | ) | $ | 28.25 | |
| Forfeited | (15 | ) | $ | 23.73 | |
| Unvested balance, December 31, 2020 | 416 | $ | 28.20 | ||
| Granted | 255 | $ | 40.53 | ||
| Vested | (246 | ) | $ | 29.76 | |
| Forfeited | (65 | ) | $ | 33.64 | |
| Unvested balance, December 31, 2021 | 360 | $ | 34.90 |
The following table indicates the fair value of all restricted stock awards that vested:
| Year Ended | Year Ended | |||
|---|---|---|---|---|
| December 31, | December 31, | |||
| 2021 | 2020 | |||
| Fair value of restricted stock awards vested | $ | 8,957 | $ | 5,946 |
Restricted Stock Units
The following table reconciles the unvested balance of restricted stock unit awards:
| Weighted | |||||
|---|---|---|---|---|---|
| Average | |||||
| Number of | Grant Date | ||||
| Units | Fair Value | ||||
| Unvested balance, December 31, 2019 | — | $ | — | ||
| Granted | 45 | $ | 15.36 | ||
| Vested | — | $ | — | ||
| Forfeited | — | $ | — | ||
| Unvested balance, December 31, 2020 | 45 | $ | 15.36 | ||
| Granted | — | $ | — | ||
| Vested | (30 | ) | $ | 15.36 | |
| Forfeited | (15 | ) | $ | 15.36 | |
| Unvested balance, December 31, 2021 | — | $ | — |
The fair value of RSUs vested was $1,050 for the year ended December 31, 2021.
F-25
DIGIMARC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)
Performance Restricted Stock Units
The following table reconciles the unvested balance of performance restricted stock unit awards:
| Weighted | |||||
|---|---|---|---|---|---|
| Average | |||||
| Number of | Grant Date | ||||
| Units | Fair Value | ||||
| Unvested balance, December 31, 2019 | — | $ | — | ||
| Granted | 124 | $ | 11.08 | ||
| Vested | — | $ | — | ||
| Forfeited | — | $ | — | ||
| Unvested balance, December 31, 2020 | 124 | $ | 11.08 | ||
| Granted | — | $ | — | ||
| Vested (1) | (82 | ) | $ | 15.54 | |
| Forfeited | (42 | ) | $ | 11.08 | |
| Unvested balance, December 31, 2021 | — | $ | — | ||
| (1) | |||||
| --- |
Includes the impact of the modification of 21 PRSUs which were cancelled and reissued at a grant date fair value of $28.93.
The fair value of PRSUs vested was $2,886 for the year ended December 31, 2021.
(13) Defined Contribution Plan
The Company sponsors an employee retirement savings plan (the “Plan”) which qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. The Plan combines both an employee savings plan and company matching plan into one plan under Section 401(k), including a 401(k) Roth option. Employees become eligible to participate in the Plan at the beginning of the month following the employee’s hire date. Employees may contribute up to 75% of their pay to the Plan, subject to the limitations of the Internal Revenue Service Code. Company matching contributions are mandatory under the Plan.
The Company made matching contributions in the aggregate amount as follows:
| Year Ended | Year Ended | |||
|---|---|---|---|---|
| December 31, | December 31, | |||
| 2021 | 2020 | |||
| Matching contributions | $ | 1,162 | $ | 1,146 |
F-26
DIGIMARC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)
(14) Income Taxes
The benefit (provision) for income taxes reflects current taxes, deferred taxes, and withholding taxes. The effective tax rate for each of the years ended December 31, 2021 and 2020 was 0%. The Company continues to provide for a full valuation allowance to offset its net deferred tax assets until such time it is more likely than not the tax assets or portions thereof will be realized.
Components of tax benefit (provision) allocated to continuing operations include the following:
| Year Ended | Year Ended | |||||
|---|---|---|---|---|---|---|
| December 31, | December 31, | |||||
| 2021 | 2020 | |||||
| Current: | ||||||
| Federal | $ | — | $ | 16 | ||
| State | (7 | ) | (9 | ) | ||
| Foreign | (9 | ) | (8 | ) | ||
| Sub-total | $ | (16 | ) | $ | (1 | ) |
| Deferred: | ||||||
| Federal | $ | — | $ | — | ||
| State | — | — | ||||
| Foreign | — | — | ||||
| Sub-total | $ | — | $ | — | ||
| Total tax benefit (provision) | $ | (16 | ) | $ | (1 | ) |
The reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate is as follows:
| Year Ended | Year Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, | December 31, | |||||||||||
| 2021 | % | 2020 | % | |||||||||
| Income taxes computed at statutory rates | $ | 7,296 | (21 | )% | $ | 6,832 | (21 | )% | ||||
| (Increases) decreases resulting from: | ||||||||||||
| Change in valuation allowance | (8,634 | ) | 24 | % | (7,830 | ) | 24 | % | ||||
| Federal and state research and experimentation credits | 787 | (2 | )% | 947 | (3 | )% | ||||||
| State income taxes, net of federal tax benefit | 414 | (1 | )% | 451 | (1 | )% | ||||||
| Other | 121 | — | % | (401 | ) | 1 | % | |||||
| Total | $ | (16 | ) | — | % | $ | (1 | ) | — | % |
F-27
DIGIMARC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The tax effects of significant items comprising the Company’s deferred tax assets and deferred tax liabilities are as follows:
| Year Ended | Year Ended | |||||
|---|---|---|---|---|---|---|
| December 31, | December 31, | |||||
| 2021 | 2020 | |||||
| Deferred tax assets: | ||||||
| Federal and state net operating losses | $ | 55,481 | $ | 47,442 | ||
| Federal and state research and experimentation credits | 9,789 | 9,152 | ||||
| ASC 842 - lease liabilities | 393 | 524 | ||||
| Stock based compensation | 217 | 158 | ||||
| Deferred social security tax | 116 | 212 | ||||
| Goodwill | 97 | 154 | ||||
| Other | 107 | 128 | ||||
| Total gross deferred tax assets | 66,200 | 57,770 | ||||
| Less valuation allowance | (64,273 | ) | (55,639 | ) | ||
| Net deferred tax assets | $ | 1,927 | $ | 2,131 | ||
| Deferred tax liabilities: | ||||||
| Patent expenditures | $ | (1,475 | ) | $ | (1,433 | ) |
| ASC 842 - right of use assets | (288 | ) | (386 | ) | ||
| Fixed asset differences | (164 | ) | (312 | ) | ||
| Total gross deferred tax liabilities | $ | (1,927 | ) | $ | (2,131 | ) |
| Total net deferred tax assets and liabilities | $ | — | $ | — |
The Company had a valuation allowance of $64,273 and $55,639 on deferred tax assets as of December 31, 2021 and 2020, respectively, an increase of $8,634 during the year ended December 31, 2021.
As of December 31, 2021, the Company has federal and state net operating loss carryforwards of $227,497 and $157,135, respectively, which have a carryforward of 5 years to indefinite depending on the jurisdiction. The gross deferred tax assets for federal and state net operating loss carryforwards acquired in the Attributor Corporation acquisition have been reduced to the amount of losses allowed to be utilized in the post-acquisition period before expiration after considering the applicable limitations of Internal Revenue Code Section 382.
As of December 31, 2021, the Company has federal and state research and experimental tax credits of $10,369 and $428, respectively, which have a carryforward of 5 to 20 years depending on the jurisdiction.
The Company records accrued interest and penalties associated with uncertain tax positions in the provision for income taxes in the Consolidated Statements of Operations. For the years ended December 31, 2021 and 2020, the Company recognized accrued interest and penalties associated with uncertain tax positions of $0 and $0, respectively. The Company does not anticipate any of its unrecognized benefits will significantly increase or decrease within the next 12 months.
F-28
DIGIMARC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)
A summary reconciliation of the Company’s uncertain tax positions is as follows:
| Year Ended | Year Ended | |||
|---|---|---|---|---|
| December 31, | December 31, | |||
| 2021 | 2020 | |||
| Beginning balance | $ | 823 | $ | 676 |
| Addition for current year tax positions | 84 | 92 | ||
| Addition for prior year tax positions | 11 | 55 | ||
| Reduction for prior year positions | — | — | ||
| Reduction for prior year positions resolved during the current year | — | — | ||
| Ending balance | $ | 918 | $ | 823 |
Uncertain tax positions are classified as a long-term liability (or a contra deferred tax asset) in the Consolidated Balance Sheets for uncertain tax positions taken (or expected to be taken) on a tax return.
The Company’s open tax years subject to examination in the U.S. federal jurisdiction are 2018 through 2020 and applicable state jurisdictions for the tax years 2018 through 2020. To the extent allowed by law, the taxing authorities may have the right to examine prior periods where net operating losses or tax credits were generated and carried forward, and make adjustments up to the amount of the net operating loss or tax credit carryforward.
(15) Commitments and Contingencies
Certain of the Company’s product license and services agreements include an indemnification provision for claims from third parties relating to the Company’s intellectual property. Such indemnification provisions are accounted for in accordance with ASC 450 “Contingencies.” To date, there have been no claims made under such indemnification provisions.
The Company is subject from time to time to other legal proceedings and claims arising in the ordinary course of business. At this time, the Company does not believe that the resolution of any such matters will have a material adverse effect on its financial position, results of operations or cash flows.
(16) Subsequent Events
EVRYTHNG Acquisition
On January 3, 2022, the Company closed on its acquisition of EVRYTHNG pursuant to the Share Purchase Agreement (“Purchase Agreement”) entered into on November 15, 2021. Upon closing, EVRYTHNG became a wholly owned subsidiary of the Company.
The Company acquired all outstanding shares of EVRYTHNG’s share capital in exchange for aggregate initial consideration consisting of 772 shares of common stock of the Company and warrants to purchase 231 shares of common stock of the Company. The number of warrants issued was determined based on there being approximately $8,500 of closing costs, which includes EVRYTHNG’s outstanding indebtedness, transaction expenses and certain other liabilities, net of EVRYTHNG’s cash on hand at closing. The Company paid $6,931 of the estimated closing costs in January 2022. A portion of the initial consideration was held back by the Company to secure any post-closing adjustments to the initial consideration and the indemnification obligations of the sellers.
The warrants have a per share exercise price of $36.56 and may only be exercised by payment of the exercise price in cash. The number of shares of common stock underlying the warrants and the exercise price of the warrants are subject to adjustment upon the occurrence of certain specified events, including subdivisions and combinations of the Company’s common stock. The warrants will expire on March 27, 2022.
Under the terms of the Purchase Agreement, the Company filed a Registration Statement on Form S-3 with the SEC on January 19, 2022, that became effective on January 28, 2022, covering the resale of the common shares issued and to be issued as consideration to the sellers.
F-29
DIGIMARC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)
The Company granted replacement equity awards to the holders of unvested EVRYTHNG options, pursuant to the terms of the Purchase Agreement. The replacement equity awards have substantially equivalent economic value and vesting terms as the cancelled unvested options.
The Purchase Agreement provides for additional shares of the Company’s common stock, subject to certain conditions, to be issued in September 2022. The number of additional common shares, before any downward adjustments, is equivalent to $50,000 of the Company’s common stock. The number of additional common shares will be adjusted downward if EVRYTHNG fails to meet its Product Annual Recurring Revenue target of $10,000 by February 28, 2022, and/or if the Company’s average stock price during the applicable measurement period is higher than its stock price as of the closing of the EVRYTHNG acquisition. The number of additional shares that may be issued is described in more detail in Item 1.01 of the Current Report on Form 8-K that the Company filed with the SEC on November 15, 2021 describing the Purchase Agreement.
Sublease and Lease Extension
On February 4, 2022, the Company entered into a sublease agreement and lease extension agreement on a facility in Beaverton, Oregon in order to move the Company’s principal corporate offices. The new facility is approximately 65,500 square feet in size. The term of the sublease and lease extension runs through September 2030, with rent payments totaling $8.8 million plus operating expenses, payable in monthly installments. The first 26 months of rent payments and operating expenses are abated to cover the remaining term of the Company’s existing corporate office lease.
F-30
dmrc-ex1024_368.htm
Exhibit 10.24
SEPARATION AGREEMENT AND GENERAL RELEASE
This SEPARATION AGREEMENT AND GENERAL RELEASE (this “Agreement” or “Separation Agreement”) is entered into between Robert P. Chamness (the “Executive”) and Digimarc Corporation (“Digimarc,” or the “Company”), and is effective as of the Effective Date as defined in Section 22 below. The Company and Executive shall each be referred to in this Agreement as a “Party,” and collectively as the “Parties.”
WHEREAS, Executive has been employed by the Company as Executive Vice President, Sustainability & Governance, Chief Legal Officer, and Secretary;
WHEREAS, Executive has communicated to the Board of Directors of the Company (the “Board”) his intention to resign his employment and the Board has determined to accept such resignation;
WHEREAS, Executive currently holds 15,946 unvested restricted shares granted under the Company’s 2018 Incentive Plan or 2008 Incentive Plan as set forth on Exhibit C (the “Shares”);
WHEREAS, the Company wishes to express its appreciation for Executive’s service and provide certain separation benefits in exchange for Executive’s promises and covenants set forth herein; and
WHEREAS, Executive and the Company wish to resolve all matters related to Executive’s employment with the Company and the cessation thereof, on the terms and conditions expressed in this Agreement;
NOW THEREFORE, in consideration of the mutual promises contained herein, the Parties, intending to be legally bound, agree as follows:
1.Termination of Employment; Interim Position and Duties.
| a) | Executive’s resignation of his employment with the Company shall be effective on June 30, 2022 (the “Resignation Date”). Employee agrees that his employment with the Company will terminate as of the Resignation Date if not terminated earlier by mutual agreement or by the Company for Cause as provided in this Agreement. Executive’s duties through the Resignation Date will consist of assisting with the annual reporting cycle and the transition to a new Chief Legal Officer, fostering community and positive morale at the Company, and such other duties as the Company may reasonably assign to Executive, not to exceed a normal workload for a full-time employee of the Company. The parties anticipate that, as part of the transition to a new CLO, the Company may announce an acting CLO as of March 31, at which point Executive’s duties as CLO may become more advisory in nature and more focused on special projects. |
|---|---|
| b) | As used in this Agreement, the “Separation Date” refers to the effective date of the termination of Executive’s employment with the Company, whether that is on the |
| --- | --- |
1
155302241.2
| Resignation Date or sooner. Effective on the Separation Date, Executive shall be deemed to have resigned from all positions, roles, titles or offices held by Executive. |
|---|
2.Unconditional Obligations. The Company and Executive acknowledge that, regardless of whether he accepts this Agreement, Executive shall be paid his salary through his termination of employment and he shall be entitled to reimbursement of any business expenses through his termination of employment, if any, that shall be submitted and paid in accordance with Digimarc business expense reimbursement policies and shall further be entitled to the benefits of any applicable state, federal or local laws or ordinances which may not be waived or released by an employee. Executive acknowledges that he is not entitled to FTO payout under Digimarc’s applicable policies. Executive further acknowledges that he shall receive notice under separate cover concerning his right to continue his insurance coverage pursuant to COBRA and that he is solely responsible for electing or declining such coverage and paying the applicable premiums to secure such coverage.
3.Consideration.
| a) | The Company agrees to employ Executive, and Executive agrees to continue his employment, through the Resignation Date at Executive’s current salary and with his current benefits unless the Company terminates Executive’s employment for Cause prior to the Resignation Date. For purposes of this Agreement, “Cause” has the meaning set forth in the attached Exhibit B. If Executive’s employment is terminated for Cause prior to the Resignation Date, Executive shall be entitled to no severance or other benefits under this Agreement except for the Unconditional Obligations described in Section 2 above. |
|---|---|
| b) | If Executive’s employment continues through the Resignation Date and, seven days before the Resignation Date, Executive executes the Supplemental Release attached hereto as Exhibit A (the “Supplemental Release”) and Executive does not revoke the Supplemental Release prior to the effective date of the Supplemental Release, the Company will provide Executive with the following payments and benefits: |
| --- | --- |
| (i) | a lump sum payment in the gross amount of Eighty-four Thousand, Nine Hundred and Seventy-Five Dollars ($84,975.00), less required withholdings and deductions, to be paid on the first administratively practicable payroll date following the Effective Date of the Supplemental Release; and |
| --- | --- |
| (ii) | accelerated vesting with respect to Three Thousand, Seven Hundred and Forty-Eight (3,748) of the Shares effective on the Effective Date of the Supplemental Release. |
| --- | --- |
| c) | Executive acknowledges that all payments to him pursuant to this Agreement shall be subject to all applicable taxes and withholdings and reported on a Form W-2 or, if applicable, a Form 1099. With respect to required tax withholding for Shares, the Company may withhold appropriate amounts from Executive’s severance |
| --- | --- |
2
155302241.2
| payments under this Agreement, require Executive to pay to the Company such amounts, or withhold a number of shares with a value equal to the tax withholding amount, which value will, for purposes of Shares, be based on the closing price of the Company’s shares on the Effective Date of the Supplemental Release. |
|---|
4.Affirmation by Employee. Executive affirms that, as of the date of this Agreement, he has been paid and/or has received all leave (paid or unpaid); compensation, wages, bonuses, and/or commissions, including for all hours of work, including any and all overtime hours worked; and/or benefits to which he may be entitled, and that no other leave (paid or unpaid), compensation, wages, bonuses, commissions and/or benefits are due to Executive as of the date of this Agreement. Executive does not hereby waive compensation that is not payable as of the date of this Agreement, such as an annual bonus (if any) or salary that has been earned and will be paid on the Company’s next regular payday. Executive further affirms that he has no known workplace injuries or occupational diseases and has been provided and/or has not been denied any leave to which Executive was entitled under the Family and Medical Leave Act or related state or local laws. Executive further affirms that he has not been retaliated against for reporting any allegations of wrongdoing by the Company or its officers, including any allegations of corporate fraud. Executive further affirms that he has not raised any claim the factual foundation for which involves discrimination.
5.No Initiated Claims. Executive represents that he has not filed any claims or charges against Digimarc with any court or with the Equal Employment Opportunity Commission, the National Labor Relations Board, the Occupational Safety and Health Administration, the Securities and Exchange Commission or any other federal, state or local governmental agency or commission (“Government Agencies”). Executive further represents he has not assigned to any third party the right to bring a claim or charge against Digimarc with any Governmental Agencies or court. Executive waives any right to recover damages from any claims or litigation asserted by any third party. This Agreement does not prohibit Executive from filing for unemployment benefits nor does it interfere with Executive’s rights under Sections 7 and 8 of the National Labor Relations Act. Nothing in this Agreement shall be construed to prohibit Executive from filing a charge with or participating in any investigation or proceeding conducted by any Government Agencies, including providing documents or other information without notice to Digimarc. This Agreement does not limit Executive’s right to receive an award for information provided to any Government Agencies.
6.Waiver and Release of Claims.
| a) | Executive waives any legal rights and releases and forever discharges Digimarc, and all affiliated and/or related entities of Digimarc, including, but not limited to, each of Digimarc’s shareholders, directors, officers, agents, trustees, employees, attorneys, successors, and assigns (“Digimarc Releasees”), from any and all liability, demands, claims, suits, actions, charges, damages, judgments, levies or executions, damages, whether known or unknown, liquidated, fixed, contingent, direct or indirect, which have been, could have been or could be raised or brought by Executive that related to any matter whatsoever at any time before, and including, the execution of this Agreement (“Claims”). This release includes, but is not limited to, any and all Claims arising out of or related to Executive’s employment with, or |
|---|
3
155302241.2
| separation of employment from, Digimarc; all contractual rights and obligations, including, without limitation all Claims arising under any state or federal law, including, without limitation, any Claims pertaining to discrimination in employment, wage and hour, ORS Chapter 659 and 659A, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Post Civil War Civil Rights Acts (42 USC Sections 1981-1988), the Rehabilitation Act of 1973, the Equal Pay Act of 1963, the Fair Labor Standards Act, ORS Chapters 652 and 653, Oregon Family Medical Leave Act, the federal Family Medical Leave Act, the National Labor Relations Act, the Employee Retirement Income Security Act, all as amended, and any regulations under such authorities; and any Claim arising under any tort or other common law theories, including Claims related to Digimarc’s negligence. Notwithstanding anything in this Agreement to the contrary, Executive does not waive any rights Executive may have (i) under COBRA; (ii) to Executive’s own vested accrued employee benefits under the Company’s health, welfare, or retirement benefit plans as of the last date of employment; (iii) to benefits and/or the right to seek benefits under applicable workers’ compensation and/or unemployment compensation statutes; (iv) to pursue claims which by law cannot be waived by signing this Agreement and/or which may arise after the execution of this Agreement; and/or (v) to enforce this Agreement or to enforce his rights related to his stock consistent with this Agreement. In signing this Agreement, Executive acknowledges and intends that it shall be effective as a bar to each and every one of the Claims hereinabove mentioned or implied. Executive expressly consents that this Agreement shall be given full force and effect according to each and all of its express terms and provisions, including those relating to unknown and unsuspected claims (notwithstanding any state or local statute that expressly limits the effectiveness of an agreement of unknown, unsuspected and unanticipated claims), if any, as well as those relating to any other Claims hereinabove mentioned or implied. Executive acknowledges that he may hereafter discover claims or facts in addition to or different than those which he now knows or believes to exist with respect to the subject matter of the release set forth above and which, if known or suspected at the time of entering into this Agreement, may have materially affected this Agreement and his decision to enter into it. Executive acknowledges and agrees that this waiver is an essential and material term of this Agreement and that without such waiver the Company would not have agreed to the terms of this Agreement. | |
|---|---|
| b) | Executive waives any entitlement to benefits in the event of a change of control of the Company, including without limitation, pursuant to that certain Change of Control Retention Agreement previously entered into by Executive and the Company. |
| --- | --- |
7.No Admissions; Continuation of D&O Coverage. This Agreement shall not be construed as an admission by Digimarc or any Digimarc Releasees that they acted wrongfully with respect to Executive or as an admission by Executive of any misconduct or impropriety. It simply reflects the Parties’ desire to end their employment relationship in a business-like fashion. The Company represents and warrants that the Board is not aware of any facts or circumstances that would give rise to any claims against Executive. Digimarc agrees to maintain Directors and Officers insurance
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for Executive, in substantially the same form provided for current directors and officers, for any and all claims that have arisen or may arise out of related in any way to Executive’s employment, termination of employment (including but not limited to this Separation Agreement and the Supplemental Release) or service as an officer or director of Digimarc, and Executive shall be entitled to any right of indemnification as provided in Digimarc’s bylaws or its governing law as those were in effect as of the date of signature on this Agreement.
8.Return of Property. Executive agrees that, within three (3) business days of the Separation Date, he shall return all of the Company’s property in his possession, including, without limitation, electronically-stored information or data, reports, customer lists, files, memoranda, records, credit cards, keys, passwords, computers, software, telecommunication equipment, and other physical or personal property that Executive received, prepared, or helped prepare in connection with Executive’s employment. Executive agrees that, in the event that Executive subsequently discovers any Company property in Executive’s possession, Executive will promptly return such property to the Company (or its designee). Notwithstanding the foregoing, Executive may retain his Company-provided laptop and cell phone if, prior to the Separation Date, he provides them to the Company’s IT personnel so that Company property may be removed from those devices.
9.Cooperation. Executive agrees to make himself reasonably available to, and to cooperate with the Company in, any internal investigation or administrative, regulatory, or judicial inquiry, investigation, proceeding or arbitration. Executive understands and agrees that his reasonable cooperation includes, but is not limited to, making himself available to the Company upon reasonable notice for interviews and factual investigations; appearing at the Company’s request to give testimony without requiring service of a subpoena or other legal process; volunteering to the Company pertinent information; and turning over all relevant documents which are or may come into his possession. The term “cooperation” does not mean that Executive must provide information that is favorable to the Company; it means only that Executive will provide truthful information within his knowledge and possession upon request of the Company. Executive understands that, if the Company asks for his cooperation in accordance with this provision, or he is required to participate in an administrative or legal proceeding or arbitration related to matters within the scope of his employment at the Company, the Company will reimburse him for reasonable travel and other expenses and, for cooperation rendered more than one year after the Separation Date, the reasonable value of his time, provided that Executive submits to the Company appropriate documentation of such expenses within thirty (30) calendar days after such expenses are incurred (provided that such proceeding was not initiated by Executive and does not otherwise concern any claims by Executive against the Company or any Digimarc Releasees).
10.Reaffirmation of Confidentiality Obligations and Restrictive Covenants. Executive reaffirms his obligations of confidentiality to the Company and represents and warrants that he has not breached the same, and understands that such obligations continue after termination of employment and execution of this Agreement. The Parties incorporate such obligations into this Agreement as if fully set forth herein and acknowledge that Executive’s breach of those obligations shall constitute a breach of this Agreement.
11.Intellectual Property. Executive reaffirms his obligations under that certain Proprietary Information Agreement between Executive and the Company, and represents and warrants that he has not breached the same. Consistent with Executive’s commitments thereunder, Executive agrees
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to cooperate with the Company to execute documents or otherwise provide any reasonable assistance requested by the Company to perfect his assignment of any intellectual property rights in favor of the Company.
12.Non-Disparagement. Subject to the exceptions set forth in Section 13 of this Agreement, Executive agrees that he will not make any statement to any third party that is intended to or is reasonably likely to disparage, slander or otherwise damage the business reputation of the Company or any of the Digimarc Releasees. The Company agrees that it shall instruct its directors and officers not to make any statements concerning Executive that are intended to or are reasonably likely to disparage, slander or otherwise damage the business reputation of the Executive, other than statements believed to be truthful to any Government Agencies. Nothing in this section shall prevent any person from testifying truthfully in response to a subpoena, in response to a request from a government agency, or as otherwise required by law.
13.Exceptions. Executive acknowledges and agrees that nothing in this Agreement or in any agreement between him and the Company prohibits or limits him (or his attorney) from initiating communications directly with, responding to any inquiry from, volunteering information to, or providing testimony before the Securities and Exchange Commission (SEC), the Department of Justice, any regulatory or self-regulatory organization, or any other governmental, law enforcement, or regulatory authority, regarding this Agreement and its underlying facts and circumstances, or any reporting of, investigation into, or proceeding regarding suspected violations of law, and that he is not required to advise or seek permission from the Company before engaging in any such activity. Executive further acknowledges that, in connection with any such activity, he must inform such authority of the confidential nature of any confidential information that he provides, and that he is not permitted to disclose any information that is protected by the attorney-client privilege or any other privilege belonging to the Company, as the Company does not waive and intends to preserve such privileges. Executive is hereby notified that, pursuant to federal law (the Defend Trade Secrets Act), an individual, shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is (i) made in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney solely for the purpose of reporting or investigating a suspected violation of law; or (ii) made in a complaint or other document filed in a lawsuit or other proceeding if such filing is made or attempted to be made under seal. Further, nothing in this Agreement shall restrict Executive’s communications with his immediate family members, tax and financial advisors, and/or attorneys.
14.Voluntary Agreement. Executive acknowledges that Executive is signing voluntarily after having read all the contents of this Agreement and has had the opportunity to consult with and be represented by Executive‘s attorney. Executive further acknowledges that Executive understands the terms and conditions of this Agreement.
15.Governing Law. This Agreement is governed in all respects by the internal, substantive laws of the State of Oregon, without regard to choice of law principles.
16.Arbitration/Waiver of Jury Trial. Digimarc and Executive agree that any disputes arising out of or relating to this Agreement shall be resolved solely and exclusively by final, binding and confidential arbitration in Washington County, Oregon, before a single arbitrator pursuant to the rules of the American Arbitration Association and that such claims shall not be brought in court.
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Notwithstanding the foregoing, the following claims shall not be subject to this arbitration agreement: claims for workers’ compensation benefits, claims for unemployment insurance benefits, claims by the Company or Executive for temporary injunctive relief, and any claims that are not arbitrable pursuant to any statute, rule or regulation forbidding pre-dispute arbitration agreements with respect to such claims. The costs of arbitration shall be borne equally by each party to the dispute and each party shall be responsible for their own legal and professional fees and expenses incurred during such dispute. To the extent applicable, each party hereby consents to the jurisdiction of the state courts of, and the federal courts encompassing, Washington County, Oregon, and each party waives the right to a trial by jury for any action, suit or proceeding brought to enforce this agreement or an arbitration award rendered pursuant to this arbitration clause.
17.Section 409A. Digimarc makes no representations or warranties to Executive with respect to any tax, economic or legal consequences of this Agreement or any payments or other benefits provided hereunder, including without limitation under Code Section 409A, and no provision of the Agreement shall be interpreted or construed to transfer any liability for failure to comply with Code Section 409A from Executive or any other individual to Digimarc or any of its affiliates. Executive, by executing this Agreement, shall be deemed to have waived any claim against Digimarc and its affiliates with respect to any such tax, economic or legal consequences. However, the parties intend that this Agreement and the payments and other benefits provided hereunder be exempt from the requirements of Code Section 409A to the maximum extent possible, whether pursuant to the short-term deferral exception described in Treasury Regulation Section 1.409A-1(b)(4), the involuntary separation pay plan exception described in Treasury Regulation Section 1.409A- 1(b)(9)(iii), or otherwise. To the extent Code Section 409A is applicable to this Agreement (and such payments and benefits), the parties intend that this Agreement (and such payments and benefits) comply with the deferral, payout and other limitations and restrictions imposed under Code Section 409A. Notwithstanding any provision of this Agreement to the contrary, this Agreement shall be interpreted, operated and administered in a manner consistent with such intentions. Without limiting the generality of the foregoing, and notwithstanding any provision of this Agreement to the contrary, with respect to any payments and benefits under this Agreement to which Code Section 409A applies, all references in this Agreement to the termination of Executive's employment are intended to mean Executive's "separation from service," within the meaning of Code Section 409A(a)(2)(A)(i). In addition, if Executive is a "specified employee," within the meaning of Code Section 409A(a)(2)(B)(i), at the time of his "separation from service," within the meaning of Code Section 409A(a)(2)(A)(i), then to the extent necessary to avoid subjecting Executive to the imposition of any additional tax under Code Section 409A, amounts that would otherwise be payable under this Agreement during the six-month period immediately following Executive's "separation from service," shall not be paid to Executive during such period, but shall instead be accumulated and paid to Executive (or, in the event of Executive's death, Executive's estate) in a lump sum on the first business day following the date that is six months after Executive's separation from service. Moreover, the parties intend that this Agreement be deemed to be amended to the extent necessary to comply with the requirements of Code Section 409A and to avoid or mitigate the imposition of additional taxes under Code Section 409A, while preserving to the maximum extent possible the essential economics of Executive's rights under the Agreement. For purposes of Section 409A, the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate and distinct payments.
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18.Severability. If any portion of this Agreement is held to be invalid or unenforceable for any reason, the remaining covenants shall remain in full force and effect to the maximum extent permitted by law.
19.Complete Agreement. This Agreement represents and contains the entire understanding between the Parties in connection with its subject matter and supersedes any other agreement or policy relating to such subject matter, including, without limitation, the Digimarc Policy on Disciplinary Actions, Voluntary and Involuntary Terminations, and Departures from the Company. Executive acknowledges that in signing this Agreement, Executive has not relied upon any representation or statement not set forth in this Agreement made by Digimarc or any of its representatives. The Company makes no representations regarding its relationship with or obligations to Executive, or as to the tax consequences of Employee’s entering into this Agreement, and none it may have made in the past survive, except as expressly set forth in this Agreement. Employee expressly agrees that the Company shall have no liability to him for any tax or penalty imposed on him as a result of this Agreement. This Agreement supersedes any prior written or oral agreements or understandings, except that Executive’s post-employment obligations under the Proprietary Information Agreement and any other confidentiality obligations survive and are incorporated herein as described above in this Agreement.
20.Modification. This Agreement may not be modified or discharged, in whole or in part, and no provision hereof may be waived, except in writing. No waiver of any provision on a particular occasion will affect the enforceability of such provision on subsequent occasions, and no waiver of any particular provision will affect the enforceability of any other provision.
21.ADEA/OWBPA. In accordance with the Age Discrimination in Employment Act (the “ADEA”), as amended by the Older Worker’s Benefit Protection Act:
| a) | Executive acknowledges and agrees that this Separation Agreement is written in a manner that is understandable to him and that he has carefully read and fully understands the provisions and terms of this Separation Agreement and agrees to such provisions and terms; |
|---|---|
| b) | Executive hereby is advised that Executive should consult with an attorney prior to executing this Separation Agreement, and Executive has obtained independent legal advice from an attorney of his own choice with respect to this Agreement, or Executive has knowingly and voluntarily chosen not to do so; |
| --- | --- |
| c) | Executive is not, by signing this Agreement, waiving rights or claims that may arise after the date that this Agreement is executed by Executive; |
| --- | --- |
| d) | Executive knowingly and voluntarily waives any and all rights and claims, including, but not limited to rights under the ADEA and those laws listed in Section 6 above; |
| --- | --- |
| e) | As consideration for executing this Agreement, Executive will receive promises and compensation of value to which Executive would not otherwise be entitled; |
| --- | --- |
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| f) | Executive has up to 21 days in which to consider this Agreement (including its Exhibits A and B) before signing the Agreement, though Executive may choose to sign the Agreement before the 21-day consideration period has expired; and |
|---|---|
| g) | No promise or inducement has been offered to Executive, except as expressly set forth in the Agreement, and Executive is not relying upon any such promise or inducement in entering into this Agreement. |
| --- | --- |
22.Effective Date; Revocation Right. After Executive executes this Agreement, Executive shall have a period of seven (7) days from the date immediately following the date of execution of this Agreement in which Executive may revoke this Agreement at Executive’s sole election by notifying Digimarc in writing. Any revocation within this period must state “I do hereby revoke my agreement to the Separation Agreement.” The written revocation must be either personally delivered or postmarked within seven (7) calendar days of Executive’s execution of this Agreement to Human Resources, Digimarc Corporation, 9405 SW Gemini Drive, Beaverton, OR 97008-7192. In the event Executive does not exercise his right to revoke this Agreement, this Agreement shall become effective on the date immediately following the seven-day revocation period described above (the “Effective Date”).
BY SIGNING THIS AGREEMENT, EXECUTIVE REPRESENTS AND AGREES THAT:
| • | EXECUTIVE HAS CAREFULLY READ THIS AGREEMENT; |
|---|---|
| • | EXECUTIVE UNDERSTANDS ALL OF ITS TERMS AND KNOWS THAT HE IS GIVING UP IMPORTANT RIGHTS, INCLUDING BUT NOT LIMITED TO, RIGHTS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, AS AMENDED; THE EQUAL PAY ACT OF 1963, THE AMERICANS WITH DISABILITIES ACT OF 1990; AND THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED; |
| --- | --- |
| • | EXECUTIVE VOLUNTARILY CONSENTS TO EVERYTHING IN THIS AGREEMENT; |
| --- | --- |
| • | EXECUTIVE HAS BEEN ADVISED TO CONSULT WITH AN ATTORNEY BEFORE EXECUTING THIS AGREEMENT AND HAS DONE SO OR, AFTER CAREFUL READING AND CONSIDERATION, HAS CHOSEN NOT TO DO SO OF EXECUTIVE’S OWN VOLITION; |
| --- | --- |
| • | EXECUTIVE HAS HAD AT LEAST 21 DAYS FROM THE DATE OF RECEIPT OF THIS AGREEMENT TO CONSIDER IT; |
| --- | --- |
| • | EXECUTIVE UNDERSTANDS THAT EXECUTIVE HAS SEVEN (7) DAYS AFTER THE EXECUTION OF THIS AGREEMENT TO REVOKE IT AND THAT THIS AGREEMENT SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE REVOCATION PERIOD HAS EXPIRED; |
| --- | --- |
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| • | EXECUTIVE HAS SIGNED THIS AGREEMENT KNOWINGLY AND VOLUNTARILY AND WITH THE ADVICE OF ANY COUNSEL RETAINED TO ADVISE EXECUTIVE ABOUT THE AGREEMENT; AND |
|---|---|
| • | EXECUTIVE AGREES THAT THE PROVISIONS OF THIS AGREEMENT MAY NOT BE AMENDED, WAIVED, CHANGED OR MODIFIED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE COMPANY AND BY EXECUTIVE. |
| --- | --- |
IN WITNESS WHEREOF, the parties have executed this Separation Agreement and General Release on this 28th day of December, 2021.
| DIGIMARC CORPORATION |
|---|
| /s/ Riley McCormack |
| By: Riley McCormack |
| Title: Chief Executive Officer |
| ROBERT P. CHAMNESS |
| /s/ Robert Chamness |
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EXHIBIT A
SUPPLEMENTAL RELEASE
By his signature below, Robert P. Chamness (“Executive”) hereby releases and forever discharges as of the date hereof Digimarc Corporation and the Digimarc Releasees as set forth herein. Capitalized undefined terms used in this Supplemental Release shall have the meaning ascribed to them in the Separation Agreement and General Release between Executive and the Company (the “Separation Agreement”). The Digimarc Releasees are intended to be third-party beneficiaries of this Supplemental Release, and this Supplemental Release may be enforced by each of them in accordance with the terms hereof in respect of the rights granted to such Digimarc Releasees hereunder. Executive agrees as follows:
1.Executive understands that the payments or benefits to be paid or granted to him under the Separation Agreement represent, in part, consideration for signing this Supplemental Release, and are not salary, wages or benefits to which he was already entitled. Executive understands and agrees that he will not be eligible to receive any payments or benefits specified in Section 3(b) of the Separation Agreement unless he executes this Supplemental Release seven calendar days before the Resignation Date and does not revoke this Supplemental Release within the revocation period provided herein.
2.By his signature below, Executive waives any legal rights and releases and forever discharges Digimarc and the Digimarc Releasees, from any and all liability, demands, claims, suits, actions, charges, damages, judgments, levies or executions, damages, whether known or unknown, liquidated, fixed, contingent, direct or indirect, which have been, could have been or could be raised or brought by Executive that related to any matter whatsoever at any time before, and including, the execution of this Supplemental Release (“Claims”). This release includes, but is not limited to, any and all Claims arising out of or related to Executive’s employment with, or separation of employment from, Digimarc; all contractual rights and obligations, including, without limitation, all Claims arising under any state or federal law, including, without limitation, any Claims pertaining to discrimination in employment, wage and hour, ORS Chapter 659 and 659A, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Post Civil War Civil Rights Acts (42 USC Sections 1981-1988), the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, the Rehabilitation Act of 1973, the Equal Pay Act of 1963, the Fair Labor Standards Act, ORS Chapters 652 and 653, Oregon Family Medical Leave Act, the federal Family Medical Leave Act, the National Labor Relations Act, Executive Retirement Income Security Act, all as amended, and any regulations under such authorities; and any Claim arising under any tort or other common law theories, including Claims related to Digimarc’s negligence.
3.Notwithstanding anything in this Supplemental Release to the contrary, Executive does not waive any rights Executive may have (i) under COBRA; (ii) to Executive’s own vested accrued employee benefits under the Company’s health, welfare, or retirement benefit plans as of the last date of employment; (iii) to benefits and/or the right to seek benefits under applicable workers’ compensation and/or unemployment compensation statutes; (iv) to pursue claims which by law cannot be waived by signing this Supplemental Release and/or which may arise after the execution of this Supplemental Release; (v) to enforce the Separation Agreement or to enforce his
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rights related to his stock consistent with the Separation Agreement; and/or (vi) to challenge the validity of this Supplemental Release.
4.In accordance with the Age Discrimination in Employment Act (the “ADEA”), as amended by the Older Worker’s Benefit Protection Act:
| (a) | Executive acknowledges and agrees that the Separation Agreement and this Supplemental Release is written in a manner that is understandable to him and that he has carefully read and fully understands the provisions and terms of the Separation Agreement and this Supplemental Release and agrees to such provisions and terms; |
|---|---|
| (b) | Executive has been advised and hereby is advised in writing that Executive should consult with an attorney prior to executing this Supplemental Release, and Executive has obtained independent legal advice from an attorney of his own choice with respect to this Supplemental Release, or Executive has knowingly and voluntarily chosen not to do so; |
| --- | --- |
| (c) | Executive is not waiving rights or claims that may arise after the date that this Supplemental Release is executed by Executive; |
| --- | --- |
| (d) | Executive knowingly and voluntarily waives any and all rights and claims, including, but not limited to rights under the ADEA and those laws listed in Paragraph 2 above; |
| --- | --- |
| (e) | As consideration for executing this Supplemental Release, Executive will receive compensation of value to which Executive would not otherwise be entitled; and |
| --- | --- |
| (f) | No promise or inducement has been offered to Executive, except as expressly set forth in the Agreement, and Executive is not relying upon any such promise or inducement in entering into this Supplemental Release. |
| --- | --- |
5.In signing this Supplemental Release, Executive acknowledges and intends that it shall be effective as a bar to each and every one of the Claims hereinabove mentioned or implied. Executive expressly consents that this Supplemental Release shall be given full force and effect according to each and all of its express terms and provisions, including those relating to unknown and unsuspected claims (notwithstanding any state or local statute that expressly limits the effectiveness of an agreement of unknown, unsuspected and unanticipated claims), if any, as well as those relating to any other Claims hereinabove mentioned or implied. Executive acknowledges that he may hereafter discover claims or facts in addition to or different than those which he now knows or believes to exist with respect to the subject matter of the release set forth above and which, if known or suspected at the time of entering into this Supplemental Release, may have materially affected this Supplemental Release and his decision to enter into it. Executive acknowledges and agrees that this waiver is an essential and material term of this Supplemental Release and that without such waiver the Company would not have agreed to the terms of the Separation
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Agreement. Nothing in this Supplemental Release waives or releases claims by Executive that arise after the date the Executive signs this Supplemental Release.
6.Executive acknowledges that this Supplemental Release, together with the Separation Agreement, represents the settlement of any and all claims and potential claims that Executive may have against the Digimarc Releasees through the date Executive signs this Supplemental Release. Executive accepts the Separation Agreement and this Supplemental Release as being in full and complete accord, satisfaction, compromise, and settlement of any and all such claims or potential claims and expressly agrees that he is not entitled to and shall not receive any further payment or recovery of any kind from the Company, and that the Company shall have no further monetary or other obligation of any kind to Executive, including any further obligation for any costs, expenses, and attorneys’ fees, except as provided in the Separation Agreement.
7.Revocation Right. After Executive executes this Supplemental Release, Executive shall have a period of seven (7) days from the date immediately following the date of execution of this Supplemental Release in which Executive may revoke this Supplemental Release at Executive’s sole election by notifying Digimarc in writing. Any revocation within this period must state “I do hereby revoke my agreement to the Supplemental Release.” The written revocation must be either personally delivered or postmarked within seven (7) calendar days of Executive’s execution of this Agreement to Human Resources, Digimarc Corporation, 9405 SW Gemini Drive, Beaverton, OR 97008-7192. In the event Executive does not exercise his right to revoke this Supplemental Release, this Supplemental Release shall become effective on the date immediately following the seven-day revocation period described above (the “Effective Date”).
BY SIGNING THIS SUPPLEMENTAL RELEASE, I REPRESENT AND AGREE THAT:
| • | I HAVE READ IT CAREFULLY; |
|---|---|
| • | I UNDERSTAND ALL OF ITS TERMS AND KNOW THAT I AM GIVING UP IMPORTANT RIGHTS, INCLUDING BUT NOT LIMITED TO, RIGHTS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, AS AMENDED; THE EQUAL PAY ACT OF 1963, THE AMERICANS WITH DISABILITIES ACT OF 1990; AND EXECUTIVE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED; |
| --- | --- |
| • | I VOLUNTARILY CONSENT TO EVERYTHING IN IT; |
| --- | --- |
| • | I HAVE BEEN ADVISED TO CONSULT WITH AN ATTORNEY BEFORE EXECUTING IT AND I HAVE DONE SO OR, AFTER CAREFUL READING AND CONSIDERATION, I HAVE CHOSEN NOT TO DO SO OF MY OWN VOLITION; |
| --- | --- |
| • | I HAVE HAD AT LEAST 21 DAYS FROM THE DATE OF MY RECEIPT OF THIS SUPPLEMENTAL RELEASE TO CONSIDER IT; |
| --- | --- |
| • | I UNDERSTAND THAT I HAVE SEVEN (7) DAYS AFTER THE EXECUTION OF THIS SUPPLEMENTAL RELEASE TO REVOKE IT AND THAT THIS |
| --- | --- |
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| SUPPLEMENTAL RELEASE SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE REVOCATION PERIOD HAS EXPIRED; | |
|---|---|
| • | I HAVE SIGNED THIS SUPPLEMENTAL RELEASE KNOWINGLY AND VOLUNTARILY AND WITH THE ADVICE OF ANY COUNSEL RETAINED TO ADVISE ME WITH RESPECT TO IT; AND |
| --- | --- |
| • | I AGREE THAT THE PROVISIONS OF THIS SUPPLEMENTAL RELEASE MAY NOT BE AMENDED, WAIVED, CHANGED OR MODIFIED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE COMPANY AND BY ME. |
| --- | --- |
| SIGNED: | DATE: |
| --- | --- |
| ROBERT P. CHAMNESS |
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EXHIBIT B
DEFINITION OF “CAUSE”
The term “Cause” shall mean:
| (a) | willful misconduct, insubordination or dishonesty in the performance of Executive’s duties or a knowing and material violation of the Company’s or any successor employer’s policies and procedures in effect from time to time which results in a material adverse effect on the Company or a successor employer; |
|---|---|
| (b) | continued material failure of Executive to satisfactorily perform his duties after receipt of written notice that identifies the areas in which Executive’s performance is deficient; |
| --- | --- |
| (c) | willful action in bad faith or intentional failure to act in good faith by Executive with respect to the Company or a successor employer that materially impairs the Company’s or a successor employer’s business, goodwill or reputation; |
| --- | --- |
| (d) | conviction of Executive of a felony or misdemeanor, conduct by Executive that violates any statute, rule or regulation governing the Company, or conduct by Executive that constitutes unethical practices, dishonesty or disloyalty and that results in a material adverse effect on the Company or a successor employer; |
| --- | --- |
| (e) | current use by Executive of illegal substances; |
| --- | --- |
| (f) | material violation by Executive of his obligations of confidentiality to the Company or a successor employer. |
| --- | --- |
EXHIBIT C
RESTRICTED STOCK AWARDS
| Grant Date | Number of<br>Unvested Shares<br>as of 12/31/2021 |
|---|---|
| 2/15/2018 | 640 |
| 2/15/2019 | 4,165 |
| 2/15/2020 | 5,382 |
| 2/15/2021 | 5,759 |
| Total: | 15,946 |
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dmrc-ex1025_102.htm
Exhibit 10.25
SUBLEASE AGREEMENT
This SUBLEASE AGREEMENT (“Sublease”) is made as of February , 2022 (“Effective Date”), between DIGIMARC CORPORATION, an Oregon corporation, having an office located at 9405 SW Gemini Drive, Beaverton, OR 97008 (“Subtenant”), and FISERV SOLUTIONS LLC, a Wisconsin limited liability company (“Sublandlord”).
RECITALS
WHEREAS, PORTLAND 1 LLC, a Delaware limited liability company, successor in interest to PD Office Owner 11, L.P. a Delaware limited partnership (“Landlord”), and Sublandlord, as tenant, are parties to that certain Lease Agreement dated February, 2018 (the “Prime Lease”) for an office building located at 8500 SW Creekside Place, Beaverton, Oregon consisting of approximately 65,496 rentable square feet (the “Building” and the “Premises”) located on a parcel of land owned by Landlord (the “Property”) as depicted on Exhibit A attached hereto.
WHEREAS, under the terms and conditions of this Sublease, Subtenant desires to sublease from Sublandlord the Premises (also referred to herein as the “Subleased Premises”).
WHEREAS, under the terms and conditions of this Sublease, Sublandlord desires to sublease to Subtenant the Subleased Premises.
WHEREAS, any capitalized terms used but not otherwise defined in this Sublease shall have the meanings set forth in the Prime Lease.
AGREEMENT
NOW, THEREFORE, for and in consideration of the foregoing and for other good and valuable consideration, and the mutual agreements contained herein, the receipt and sufficiency of which is hereby acknowledged, Sublandlord and Subtenant agree as follows:
1.Prime Lease Incorporated. Subtenant acknowledges that it has received, read and understands the Prime Lease attached hereto as Exhibit B and made a part hereof and is familiar with the terms and conditions as incorporated herein by the provisions of this Section 1. This Sublease shall at all times be subject and subordinate to the terms, conditions, and covenants of the Prime Lease.
(a)The terms, conditions and covenants of the Prime Lease are incorporated by reference herein, except to the extent they are (i) inapplicable, inconsistent with, in conflict with, or otherwise modified by the terms of this Sublease, or (ii) expressly excluded from incorporation into this Sublease as follows: Sections 1.03, 1.04, 1.08, 1.10, 1.11, 1.12, 1.13, 1.14., 1.15, 1.17, 1.18, 1.19, 3.03, 4.03, 4.05, any reference to “Tenant Work” in Section 5.02,
5.10 (except to the extent Landlord may consent to grant indemnification rights to Subtenant in the Landlord Consent), 7.02, 7.06 (except to the extent Landlord may consent to grant such rights to Subtenant in the Landlord Consent and subject to all obligations of Subtenant contained
therein), 7.07, 7.08 (except to the extent Landlord may consent to grant such rights to Subtenant in the Landlord Consent and subject to all obligations of Subtenant contained therein), 11, the second paragraph of Section 14, any reference to Renewal Notice in section 16.01, any reference to “Guarantor” in Section 18, Section 22, the last two sentences of Section 23.02, Sections 24, 26, 27.02, 28, 30.10, 30.11, 30.12, Exhibit B, Exhibit E and Exhibit G (except to the extent Landlord may consent to grant such rights to Subtenant in the Landlord Consent and subject to all obligations of Subtenant contained therein).
(b)In construing the Sublease and each party’s obligations hereunder, except as expressly provided in this Sublease to the contrary, wherever in the Prime Lease the term “Tenant” or “Lessee” is used, it shall mean Subtenant; wherever the term “Landlord” or “Lessor” is used, it shall mean Sublandlord; wherever the term “Tenant’s Property” is used, it shall mean solely Subtenant’s Property, as defined herein, wherever the term “Commencement Date” is used, it shall mean the Sublease Commencement Date, and wherever the term “Expiration Date” is used, it shall mean the Sublease Expiration Date. Notwithstanding the foregoing, the use of the term “Landlord” or “Lessor” shall mean solely Landlord and shall not be deemed to mean Sublandlord for purposes of Sections 3.02, 5.05, 5.07, first sentence of 6.03, 7.01, 7.03, 9.02, 16.02, 16.03, 16.04, 10.02, 23.02, and Exhibit C, and the use of the term “Tenant” or “Lessee” shall mean solely Sublandlord as the tenant under the Prime Lease and shall not be deemed to mean Subtenant for purposes of Sections 3.02, 5.05, 7.03, 8 (only with respect to any Required Removables located within the Subleased Premises prior to the Sublease Commencement Date), 16.03, and 16.04 of the Prime Lease and Exhibit C.
(c)Notwithstanding anything in this Sublease to the contrary, Subtenant acknowledges and agrees:
(i)Subtenant shall have no right to any abatement of Rent as a result of any damage to the Premises pursuant to Section 16.02 of the Prime Lease, provided, however, in the event Sublandlord’s rent is abated pursuant to Section 16.02 of the Prime Lease during a period when the Subleased Premises, or a portion thereof, are unable to be occupied due to a casualty, Subtenant’s Base Rent hereunder shall also abate in the same proportion and for the same period of time as the abatement of Sublandlord’s rent with respect to the Subleased Premises, provided that all other obligations of Subtenant shall be performed by Subtenant and Subtenant shall have no claim against Landlord or Sublandlord for any damage suffered by reason of any such casualty,
(ii)Subtenant shall have no right to terminate the Sublease pursuant to Sections 16.03 and 16.04 of the Prime Lease, provided that Sublandlord shall use commercially reasonable efforts to enforce the provisions of Sections 16.03 and 16.04 of the Prime Lease for the benefit of Sublandlord and Subtenant (including to request such performance or cure from the Landlord following a request in writing by Subtenant), and
(iii)Subtenant shall have no right to terminate the Sublease pursuant to Section 17 of the Prime Lease, provided that Sublandlord shall use commercially reasonable efforts to enforce the provisions of Section 17 of the Prime Lease for the benefit of Sublandlord and Subtenant (including to request such performance or cure from the Landlord following a request in writing by Subtenant). In the event the Prime Lease is terminated due to a condemnation as provided in Section 17 of the Prime Lease, such
termination shall have the effect of terminating this Sublease and Subtenant shall be entitled only to any compensation, separately awarded to Subtenant for Subtenant’s relocation expenses and/or damages to Subtenant’s trade fixtures installed by Subtenant. Notwithstanding the foregoing, Subtenant shall have the right to file any separate claim available to Subtenant for any taking of Subtenant’s personal property and fixtures owned by Subtenant and removable by Subtenant upon expiration of this Sublease, and for any other costs and expenses incurred by Subtenant with respect to such condemnation and permissible for Subtenant to include in any such claims made by Subtenant, so long as such claims do not diminish the award available to Sublandlord.
Subtenant further acknowledges and agrees that Subtenant has no right or option to exercise the following rights, if any, granted Sublandlord under the Prime Lease: (i) renewal option(s), (ii) expansion option(s), (iii) early termination right(s) and option(s), (iv) right of first refusal(s) or offer(s), (v) reduction option(s), (vi) abatement(s) (except as expressly provided in this Sublease), (vii) tenant allowances and (viii) roof rights (except to the extent Landlord may consent to the right of access to the roof by Subtenant in the Landlord Consent).
(d)Except as expressly provided in this Sublease to the contrary, Subtenant shall comply with all of the provisions and obligations of the Prime Lease that are to be observed or performed by Sublandlord as “Tenant” thereunder to the extent such obligations arise during the Sublease Term. Without limiting the foregoing, in the event Subtenant defaults under any of the terms, provisions, covenants, conditions or agreements herein set forth, Sublandlord shall have the same rights and remedies as Landlord under the Prime Lease in the event of a default by the “Tenant” thereunder, provided, however, that all notice, cure, grace or similar periods set forth in the Prime Lease for the benefit of the “Tenant” thereunder, if any, shall be reduced by three (3) days with respect to the Subtenant hereunder. Notwithstanding the foregoing, if Sublandlord provides Subtenant with notice of Subtenant’s failure to timely pay Sublease Base Rent or Additional Rent and Subtenant’s failure to pay such amounts extends beyond the applicable notice and cure period on two (2) separate occasions during any twelve (12) month period, Subtenant’s subsequent late payment of Sublease Base Rent or Additional Rent beyond the applicable notice and cure period shall, at Sublandlord’s option, be an incurable event of default hereunder for which Sublandlord shall not be required to provide written notice to Subtenant. Subtenant and Sublandlord each covenant not to take any action or do or perform any act or fail to take any action or do or perform any act which would result in the failure or breach of any of the covenants, terms, provisions or conditions of the Prime Lease on the part of the Tenant (as defined in and set forth within the Prime Lease). In addition, so long as Subtenant is not in default hereunder beyond any applicable notice and cure period, Sublandlord covenants that Sublandlord will not, without the prior written consent of Subtenant (not to be unreasonably withheld, conditioned, or delayed), enter into any modification, amendment or termination of the Prime Lease which would (i) increase the obligations or liabilities of Subtenant under this Sublease or (ii) correspondingly effectuate a termination of the rights of Subtenant under this Sublease without the prior written consent of Subtenant, except as may be permitted in the Prime Lease in the event of a casualty or condemnation.
(e)Except as otherwise expressly provided herein, Sublandlord shall have no duty to perform any obligations of Landlord which are, by their nature, the obligation of an owner or
manager of real property or otherwise specifically excluded pursuant to the terms of this Sublease. For example, Sublandlord shall not be required to provide the services or repairs which the Landlord is required to provide under the Prime Lease. Sublandlord shall have no responsibility, nor shall it be liable to Subtenant, for any default, failure or delay on the part of Landlord in the performance or observance by Landlord of any of its obligations under the Prime Lease. In addition, no such default, failure or delay by Landlord shall affect this Sublease or waive or defer the performance of any of Subtenant’s covenants hereunder. With respect to the non-performance, default or breach by Landlord of its obligations under the Prime Lease, Sublandlord shall reasonably cooperate with Subtenant to obtain Landlord’s performance or Landlord’s cure of such breach or default, including, but not limited to, Landlord’s maintenance obligations, if any, set forth in the Prime Lease; provided, however, Sublandlord’s sole obligation with respect thereto shall be to request such performance or cure from the Landlord following a request in writing by Subtenant. This provision shall survive the expiration or earlier termination of this Sublease.
(f)In any case where under the Prime Lease the consent or approval of Landlord is required, the consent or approval of both Landlord and Sublandlord shall be required, which consent or approval by Sublandlord shall not be unreasonably conditioned, withheld or delayed. In determining whether to grant or withhold any consent or approval hereunder, Sublandlord may expressly condition the same upon the consent or approval of Landlord, as applicable. If Subtenant requests the consent of Sublandlord under any provisions of this Sublease for any act that Subtenant proposes to do hereunder, Subtenant shall, as a condition to doing any such act and the receipt of such consent, reimburse Sublandlord for any and all out of pocket costs and expenses reasonably incurred by Sublandlord in connection therewith, including, without limitation, reasonable attorneys’ fees, provided, however, the total amount due by Subtenant in connection with each request shall not exceed the amount payable by Sublandlord to Landlord under the Prime Lease plus Two Thousand and No/100 Dollars ($2,000.00) (the “Reimbursement Cap”) unless Sublandlord notifies Subtenant that the amount to be incurred by Sublandlord in considering Subtenant’s request for consent or approval in a particular instance is anticipated to exceed the Reimbursement Cap, in which case the Reimbursement Cap will not apply.
(g)To the extent the Prime Lease requires (x) Landlord to serve notice upon Sublandlord or (y) perform any act or observe any term, covenant or condition thereunder, the same shall be deemed amended for the purposes of this Sublease to provide for time limits for Sublandlord of three (3) business days more and deadlines that are three (3) business days later than those provided for Landlord in the Prime Lease.
(h)Any representation, warranty or indemnification made by Landlord in the Prime Lease shall be deemed to be made by Landlord only and shall in no way be imputed to Sublandlord.
(i)Any act or omission by Subtenant which would constitute a breach or default by Sublandlord as “Tenant” under the Prime Lease shall constitute a default on the part of Subtenant hereunder except for any provision of the Prime Lease specifically excluded as an obligation of Subtenant in Section 1(a) or 1(b) of this Sublease.
(j)Any act or omission by Sublandlord which would constitute a breach or default by Sublandlord as "Tenant" under the Prime Lease shall constitute a default on the part of Sublandlord hereunder except for any provisions of the Prime Lease specifically excluded as an obligation of Subtenant in Section 1(a) or 1(b) of this Sublease. Sublandlord shall promptly provide to Subtenant a copy of any written notice of default received by Sublandlord from Landlord and shall provide to Subtenant a copy of other correspondence received by Sublandlord from Landlord which materially impacts the Premises or the Sublease.
2.Sublease Demise. On the terms and conditions of this Sublease and subject to receipt by Sublandlord of Landlord’s Consent (hereinafter defined), Sublandlord hereby subleases and demises to Subtenant, and Subtenant hereby takes and subleases from Sublandlord, the Subleased Premises on the terms and conditions and subject to the provisions set forth herein.
So long as Subtenant timely pays all Rent and other amounts due and performs all of Subtenant’s covenants and agreements contained herein, Sublandlord shall not interfere with the quiet use, possession and enjoyment of the Subleased Premises by Subtenant during the Sublease Term; provided that the proper exercise by Sublandlord of its rights under or in connection with this Sublease will not constitute such an interference.
| 3. | Sublease Term. |
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(a)This Sublease shall commence on the later to occur of the Effective Date and Sublandlord’s receipt of Landlord’s Consent (the “Sublease Commencement Date”) and shall expire on July 31, 2028; provided, however, in the event Subtenant and Landlord enter into a Subtenant Direct Lease (as defined below), the term of which commences immediately upon the expiration of the Prime Lease, then the Sublease shall expire on August 30, 2028 (such date being the “Sublease Expiration Date”), unless sooner terminated in accordance with the terms of this Sublease. The period from the Sublease Commencement Date until the Sublease Expiration Date shall be referred to herein as the “Sublease Term”. Subtenant may have early access to the Subleased Premises solely for the purpose of inspections, field verifications and permitting, conditioned on the following: (i) receipt of Landlord’s Consent; (ii) Subtenant giving Sublandlord notice of entry at least one (1) business day before the Subtenant’s initial entry; and
(iii) Subtenant providing the Sublandlord, in advance of any entry by Subtenant or its contractors, certificates of insurance naming Sublandlord and Landlord as additional insureds.
(b)Subtenant hereby represents that it intends to negotiate with Landlord to enter into a new lease for the Subleased Premises (a “Subtenant Direct Lease”) the term of which would commence immediately upon the expiration of the Prime Lease.
(c)Notwithstanding anything herein to the contrary, if the Prime Lease expires or terminates at any time during the Sublease Term, then this Sublease shall also terminate automatically as of the date of the Prime Lease expiration or early termination; provided, however, Sublandlord agrees not to voluntarily cancel or surrender the Prime Lease without the prior written consent of Subtenant (not to be unreasonably withheld, conditioned, or delayed), so long as Subtenant is not in default beyond any applicable notice and cure period, unless Landlord
agrees to recognize the rights of Subtenant in the Subleased Premises through a direct lease; provided further, however, that (i) if the Prime Lease terminates as a result of a default by Subtenant under this Sublease, then Subtenant shall be liable to Sublandlord for all damages as a result of such termination, and (ii) the foregoing shall not restrict Sublandlord’s right to terminate the Prime Lease as a result of any casualty or condemnation, in accordance with the terms of the Prime Lease.
4.Measurement. The square footage of 65,496 rentable square feet shall be used for the calculation of Sublease Base Rent and is final and binding by agreement of Sublandlord and Subtenant.
| 5. | Sublease Base Rent, Real Estate Taxes and Utilities. |
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a.Sublease Base Rent. Commencing on April 1, 2024 (the “Sublease Rent Commencement Date”), Subtenant shall pay the Sublease Base Rent (as defined herein) and all taxes applicable thereto, and other amounts due to Sublandlord as provided herein, by the first day of each calendar month without notice or demand by Sublandlord.
The amount of “Sublease Base Rent” shall be paid according to the following schedule:
| Sublease Term by Month(s) | RSF of Subleased Premises | AnnualRate Per RSF | Annual Sublease Base Rent | Monthly Installments of Sublease Base Rent |
|---|---|---|---|---|
| Sublease Commencement Date – 3/31/2024 | 65,496 | abated | abated | abated |
| 4/1/24 – 3/31/25 | 65,496 | $19.55 | $1,280,446.80 | $106,703.90 |
| 4/1/25 - 3/31/26 | 65,496 | $20.14 | $1,318,860.20 | $109,905.02 |
| 4/1/26 - 3/31/27 | 65,496 | $20.74 | $1,358,426.01 | $113,202.17 |
| 4/1/27 - 3/31/28 | 65,496 | $21.36 | $1,399,178.79 | $116,598.23 |
| 4/1/28 – Sublease Expiration Date | 65,496 | $22.00 | $1,441,154.15 | $120,096.18 |
b.Abatement of Sublease Base Rent. Sublandlord and Subtenant acknowledge that Subtenant is currently party to a lease for the building at 9405 SW Gemini, Beaverton, Oregon, (“Subtenant’s Gemini Premises”) a copy of which (with financial information redacted) is attached hereto as Exhibit E (“Subtenant’s Gemini Lease”), which currently has an expiration date of March 31, 2024. The parties agree that Subtenant shall have no obligation to pay Sublease Base Rent or Additional Rent prior to the expiration of Subtenant’s Gemini Lease on March 31, 2024. Commencing no later than thirty (30) days following the Sublease Commencement Date, Subtenant shall use diligent efforts (including retaining Jones Lang LaSalle Brokerage, Inc. or other high quality real estate brokerage firm) to market Subtenant’s Gemini Premises for the purpose of identifying a replacement tenant or subtenant for Subtenant’s Gemini Premises and to eliminate or reduce Subtenant’s financial obligations with respect to Subtenant’s Gemini Lease. Subtenant shall provide regular, detailed updates to
Sublandlord of Subtenant’s efforts with respect to the foregoing (no less frequently than once per quarter). In the event Subtenant subleases all or any portion of Subtenant’s Gemini Premises, assigns any of its right, title or interest in Subtenant’s Gemini Lease, terminates all or any obligations of Subtenant pursuant to Subtenant’s Gemini Lease or otherwise eliminates or reduces Subtenant’s financial obligations with respect to Subtenant’s Gemini Lease or Subtenant’s Gemini Premises (including, without limitation, rent, operating expenses, utility charges and fees, common area maintenance charges, insurance, repair and maintenance costs, and all other amounts typically incurred by Subtenant in connection with Subtenant’s Gemini Premises) (the “Gemini Premises Financial Obligations”), then Subtenant shall pay to Sublandlord fifty percent (50%) of all savings or reduction in any Gemini Premises Financial Obligations (including any amounts paid to Subtenant in connection with any sublease or assignment), net of any out of pocket costs reasonably incurred by Subtenant following the Sublease Commencement Date in connection with the sublease, assignment or termination of Subtenant’s Gemini Lease or Subtenant’s Gemini Premises (such total savings and/or reduction being the “Gemini Premises Savings”). Within thirty (30) days following the date on which Subtenant executes an agreement by which any Gemini Savings will result, Subtenant shall deliver to Sublandlord for review a detailed calculation of the Gemini Savings. Upon approval of such calculation by Sublandlord, Subtenant shall remit to Sublandlord fifty percent (50%) of any Gemini Savings already obtained by Subtenant in equal monthly payments over the length of the term of the Subtenant’s Gemini Lease (which expires March 31, 2024) (the “Gemini Lease Term”) and shall thereafter remit any additional Gemini Savings that Subtenant obtains during the Sublease Term in equal monthly payments over the remaining length of the Gemini Lease Term. Notwithstanding the foregoing, in no way is the effectiveness of this Sublease conditioned upon Subtenant’s ability to sublease Subtenant’s Gemini Premises or to eliminate or reduce any of Subtenant’s Gemini Premises Financial Obligations and this Sublease shall remain in full force and effect notwithstanding any failure or inability of Subtenant to sublease the Subtenant’s Gemini Premises or reduce any Gemini Premises Financial Obligations.
c.Operating Expenses. From and after the Sublease Rent Commencement Date, Tenant will pay as Additional Rent 100% of all Operating Expenses (including, without limitation, all Real Property Taxes, Utility and Service Costs, and Insurance Premiums) charged by Landlord to Sublandlord pursuant to the Prime Lease. Estimated payments shall be made monthly on or before the first day of each calendar month each in the amount of Landlord’s then current estimate. Sublandlord shall deliver to Subtenant a copy of any Landlord’s determination of estimated and actual annual Operating Expenses (as referenced in Sections 1.06(a) and (b) of Exhibit C to the Prime Lease) received by Sublandlord (“Landlord’s Operating Expenses Statement”) within thirty (30) days after Sublandlord’s receipt thereof. If Subtenant has a reasonable basis to believe that the Landlord’s determination of actual Operating Expenses is incorrect in any material respect, then on not more than one (1) occasion per calendar year during the Sublease Term, Subtenant may, within no more than ten (10) business days following Sublandlord’s delivery of Landlord’s Operating Expense Statement, deliver a written notice to Sublandlord specifying in reasonable detail the item(s) that Subtenant has a reasonable basis to believe is incorrect and stating that Subtenant desires to review Landlord’s records of the Operating Expenses for the calendar year to which the Landlord’s Operating Expense Statement applies (“Subtenant’s Review Notice”). Within ten (10) business days following Sublandlord’s receipt of Subtenant’s Review Notice, Sublandlord shall deliver to Landlord a Review Notice as
such term defined in Section 3 of Exhibit C to the Prime Lease. Sublandlord shall thereafter, at Subtenant’s sole cost and expense, and except where such disclosure would violate the terms of a nondisclosure agreement or confidentiality obligations between Sublandlord and Landlord, make available to Subtenant any records of Landlord made available to Sublandlord for inspection in response to the Review Notice as provided in Section 3 of Exhibit C to the Prime Lease and Subtenant shall be bound by all obligations of Sublandlord under such Section 3. Within sixty
(60) days after the records are made available to Subtenant, Subtenant may deliver to Sublandlord a written notice stating in reasonable detail any objection to Landlord’s Operating Expense Statement for the applicable year (a “Subtenant Objection Notice”) and Sublandlord shall deliver such Subtenant Objection Notice to Landlord. Subtenant shall provide Sublandlord with copies of all written communication between Landlord and Subtenant relating to any issues raised in Subtenant’s Objection Notice; provided, however, Sublandlord shall have no obligation to advocate on Subtenant’s behalf or any liability to Subtenant in connection with Landlord’s failure or refusal to modify Landlord’s Operating Expense Statement. If such process results in any credit received by Sublandlord under the Prime Lease, Sublandlord shall remit such credit as a credit against the next installment of Sublease Base Rent and Additional Rent due hereunder. Subtenant shall indemnify, defend and hold Sublandlord harmless from and against any increase in Operating Expenses, damages, liabilities, costs or expenses (including reasonable attorneys’ fees) arising in connection with Subtenant’s exercise of any rights under this Section 5(c).
d.Utilities. From and after the Sublease Rent Commencement Date, Subtenant shall obtain and pay for electrical energy for the use of Subtenant in the Subleased Premises by direct application to and arrangement with the public utility serving the Property, as provided in Section 6 of the Prime Lease. Commencing on the Sublease Rent Commencement Date, Subtenant shall be responsible for paying for all utilities and other services provided to the Premises, including without limitation, all charges under Section 6 of the Prime Lease. Sublandlord shall not be liable for any interruption, failure, defect, change in the supply, character and/or quality of any utilities or other services provided to the Premises for any reason except if directly and solely attributable to the gross negligence or willful misconduct of Sublandlord.
e.Payment of Sublease Base Rent. Subtenant agrees to pay Sublease Base Rent without counterclaim, setoff, abatement, or deduction of any amount for any reason except as expressly provided in this Sublease. All Sublease Base Rent payments shall be sent to the address designated by Sublandlord in writing, which Sublandlord may change from time-to-time with prior written notice to Subtenant. Any partial month of Sublease Base Rent shall be pro- rated. Subtenant shall be solely liable for (and shall indemnify, defend, and hold Sublandlord harmless with regard to) the cost of any third party services or special services from Landlord requested by Subtenant. If Subtenant fails to pay any Sublease Rent or Additional Rent or other charges due under this Sublease within five (5) business days after such payment is due, and such failure to pay occurs more than one (1) time in any twelve (12) month period, Subtenant shall pay Sublandlord a late charge equal to five percent (5%) of the amount so payable. This provision shall survive the expiration or earlier termination of this Sublease.
6.Security Deposit. To secure the faithful performance by Subtenant of all the covenants, conditions and agreements in this Sublease, Subtenant shall deliver to Sublandlord a
security deposit in the amount of $120,096.18 (“Security Deposit”) upon the execution of this Sublease. If Subtenant defaults (beyond any applicable notice and cure period) with respect to any provision of this Sublease, including without limitation the payment of any Sublease Base Rent or Additional Rent, then Sublandlord may use, apply, draw upon or retain all or any part of the Security Deposit to the extent necessary for the payment of any rent, or to compensate Sublandlord for any other loss, cost or damage that Sublandlord may suffer by reason of Subtenant’s default. If any portion of the Security Deposit is so used, applied, or drawn upon, then Subtenant shall, within thirty (30) days after notice thereof, deposit cash with Sublandlord in an amount sufficient to restore the Security Deposit to its original amount. Subtenant’s failure to do so shall be an automatic Event of Default under this Sublease without any additional notice. Sublandlord shall not, unless otherwise required by law, be required to keep the Security Deposit separate from its general funds. Sublandlord shall not be required to pay interest to Subtenant with respect to the Security Deposit. The Security Deposit or any balance thereof (if any) less any amount retained by Sublandlord to cure any defaults pursuant to the terms of this Sublease shall be returned to Subtenant (or to the last transferee of Subtenant’s interest hereunder) within thirty (30) days after the expiration of the Sublease Term (or sooner termination of this Sublease), provided that Subtenant vacates the Subleased Premises in accordance with this Sublease and Subtenant surrenders possession thereof to Sublandlord in the condition required under this Sublease.
| 7. | Condition of Subleased Premises. |
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a.As-Is. Subtenant agrees Sublandlord shall deliver the Subleased Premises and Subtenant shall accept the Subleased Premises “AS IS”, with “ALL FAULTS” and “WITHOUT ANY REPRESENTATION OR WARRANTIES”. Subtenant hereby waives and disclaims any objection or cause of action based upon, or claim that its obligations hereunder should be reduced or limited because of, the physical condition of the Subleased Premises or the suitability of same for Subtenant’s purposes. Subtenant acknowledges that Sublandlord, Sublandlord’s agent or employees, and Landlord have not made any representations or warranties with respect to the physical condition of the Subleased Premises or with respect to the suitability of the same for Subtenant’s purposes, except as specifically provided in Section 9(b) below. Subtenant expressly represents and warrants that Subtenant has relied solely on its own investigation and inspection of the Subleased Premises in its decision to enter into the Sublease and let the Subleased Premises. Any alterations or work performed in the Subleased Premises shall be done at Subtenant’s sole cost and expense, without any tenant improvement allowance from Sublandlord, and shall be performed in accordance with the Prime Lease, in a good and workmanlike manner, and in compliance with all applicable laws, building codes, and regulations.
b.Existing Furniture. Upon the Sublease Commencement Date, Subtenant shall purchase all existing furniture in the Subleased Premises (as further described in Exhibit C attached, and referred to herein as “Existing Furniture”), “AS IS”, “WHERE IS” with “ALL FAULTS” and “WITHOUT ANY REPRESENTATION OR WARRANTIES” for $1.00. Nothing contained herein shall be deemed a representation, warranty or guaranty by or from Sublandlord as to the condition, value, utility or merchantability of or to the Existing Furniture, or any portion thereof, and Sublandlord expressly disclaims any and all warranties in connection
with the Existing Furniture, including, without limitation, warranties of merchantability, condition, and fitness, and in no event shall Sublandlord have any liability or responsibility of any type whatsoever with respect thereto. Subject to the foregoing, Sublandlord shall execute a Bill of Sale in the form attached hereto as Exhibit D conveying the Existing Furniture to Subtenant. Subtenant shall remove all Existing Furniture at the end of the Sublease Term and repair any damage caused by such removal.
8.Use. Subtenant will use and occupy the Subleased Premises only for general office and other legal related uses, and in accordance with the applicable provisions of this Sublease and the Prime Lease. Subtenant covenants not to use the Subleased Premises for any other purpose whatsoever without first obtaining Sublandlord’s and Landlord’s prior written consent (which Sublandlord will not unreasonably withhold, provided that Sublandlord may require Subtenant to deposit an additional Security Deposit with Sublandlord in the event Sublandlord, in its discretion, determines such is warranted as a result of the other purpose for which Subtenant desires to use the Subleased Premise, provided that the Security Deposit (including any additional Security Deposit) shall not be more than Two Hundred percent (200%) of the original Security Deposit hereunder), and not to use or occupy (or suffer or permit the use or occupancy of) the Subleased Premises or any part thereof in any manner which might be contrary to the terms and conditions of this Sublease or the Prime Lease. Subtenant shall comply with all laws relating to the use, condition, access to, and occupancy of the Subleased Premises, including without limitation obtaining all required licenses and permits for Subtenant to conduct business at the Subleased Premises.
| 9. | Representations and Warranties. |
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a.By Subtenant. Subtenant represents and warrants to Sublandlord that : (a) Subtenant is a corporation duly organized, validly existing and in good standing under the laws of Oregon, the jurisdiction in which it is organized and has full power and authority to carry out its obligations under this Sublease; and (b) the execution and delivery of this Sublease by Subtenant has been duly and validly authorized by all necessary action of Subtenant, has been duly executed and validly delivered by Subtenant, and is the legal, valid and binding obligation of Subtenant, enforceable in accordance with its terms.
| b. | By Sublandlord. Sublandlord represents and warrants to Subtenant that : |
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(a) Exhibit B to this Sublease is a true and complete copy of the Prime Lease and is in full force and effect and has not been amended or modified; (b) to Sublandlord’s knowledge, Sublandlord has received no notice of default under the Prime Lease which has not been cured or satisfied;
(c)Sublandlord is the holder of the interest of the Tenant under the Prime Lease and, to Sublandlord’s knowledge, Sublandlord’s interest as Tenant under the Prime Lease is not the subject of any lien, assignment, conflicting sublease, or other hypothecation or pledge;
(d)Sublandlord has given no notice of default to the Landlord under the Prime Lease which has not been cured or satisfied; (e) Sublandlord is a company duly organized, validly existing and in good standing under the laws of Oregon and has full power and authority to carry out its obligations under this Sublease and the Prime Lease; (f) the execution and delivery of this Sublease by Sublandlord has been duly and validly authorized by all necessary action of Sublandlord, has been duly executed and validly delivered by Sublandlord, and is the legal, valid
and binding obligation of Sublandlord, enforceable in accordance with its terms; (g) to Sublandlord’s knowledge, Sublandlord has not, prior to the Sublease Commencement Date, caused or permitted any Hazardous Materials (as defined in the Prime Lease) to be brought upon, kept, stored, discharged, released, or used in, under, or about any portion of the Subleased Premises in violation of applicable Laws without the prior written consent of Landlord, provided, however such representation does not apply to small amounts of Hazardous Materials permitted under Section 5.06 of the Prime Lease; and (h) to Sublandlord’s knowledge, Sublandlord has not received any written notice from a governmental agency of any violations of any Laws (as defined in the Prime Lease) relating to the storage, discharge, release or use of Hazardous Materials affecting the Subleased Premises.
10.Insurance. Subtenant shall, at its sole cost and expense, obtain the insurance policies required of Tenant under the first paragraph of Section 14 of the Prime Lease. Each such policy shall name Sublandlord and Landlord as additional insureds.
11.Inspection Rights. Upon one (1) day’s prior notice, which may be given to Subtenant without following the Notice requirements in Section 17 so long as such notice is provided to Sue Taylor at: telephone: (503) 469-4659 (work) and (503) 560-0834 (mobile) or email: Sue.Taylor@digimarc.com (or such other individual that Subtenant designates in writing (including such individual’s name, phone number and email address) from time to time) both verbally by phone and in writing by email (or no notice in the event of a bona fide emergency meaning an imminent threat of property damage or bodily injury), and from time to time, Sublandlord shall have the right to inspect the Subleased Premises. Sublandlord agrees to use commercially reasonable means to minimize any interruption to Subtenant’s business in the Sublease Premises as a result of such inspection. Sublandlord and Landlord shall have all access rights granted to Landlord under the terms and conditions of Section 10.01 and otherwise under the Prime Lease.
12.Assignment/Subletting. Subtenant shall not assign, transfer, or sublet the Subleased Premises, in whole or any part, or any right or obligation hereunder, without Sublandlord and Landlord’s prior written consent, which Sublandlord agrees to not unreasonably withhold, condition or delay. Any sub-sublease or assignment by Subtenant shall be subject to the terms of the Prime Lease and this Sublease, and Subtenant shall remain primarily liable hereunder.
13.Alterations and Improvements. Notwithstanding anything to the contrary set out herein or in the Prime Lease, Subtenant shall not make any Alterations (including without limitation, any Cosmetic Alterations), additions or improvements to, or install any fixtures in, the Subleased Premises without first obtaining the written consent of Sublandlord (not to be unreasonably withheld, conditioned or delayed) and Landlord, provided, however, if any Alterations do not require the consent of Landlord under the Prime Lease, then such Alterations shall be subject only to the consent of Sublandlord. Subject to Landlord’s approval, Sublandlord hereby consents to Subtenant’s construction and installation of the improvements described in Exhibit F attached hereto (“Subtenant’s Initial Alterations”) following the Sublease Commencement Date, pursuant to the requirements of Section 9.04 of the Prime Lease.
14.Repair and Maintenance. Sublandlord shall have no obligation to repair or maintain any portion of the Subleased Premises or the Property, provide any services with respect to, or make any alterations or improvements to the Subleased Premises for the benefit of Subtenant or otherwise, it being acknowledged and agreed that all obligations with respect thereto, if the responsibility of Landlord under the Prime Lease, remain solely the obligations of Landlord thereunder. Subtenant shall be responsible, at Subtenant’s sole cost and expense, for all repairs and maintenance to the Subleased Premises during the Sublease Term which are not expressly the obligation of Landlord under the Prime Lease, as provided in Section 9.02 of the Prime Lease. With respect to the non-performance, default or breach by Landlord of its obligations under the Prime Lease, Sublandlord shall timely and reasonably cooperate with Subtenant to obtain Landlord’s performance or Landlord’s cure of such breach or default, including, but not limited to, Landlord’s maintenance obligations, if any, set forth in the Prime Lease; provided, however, Sublandlord’s sole obligation with respect thereto shall be to request such performance or cure from the Landlord following a request in writing by Subtenant. This provision shall survive the expiration or earlier termination of this Sublease.
15.Right to Cure Subtenant’s Defaults and Damages. If Subtenant shall at any time fail to make any payment or perform any other obligation of Subtenant hereunder within the applicable cure period, if any, set out in this Sublease, then Sublandlord, without prejudice to its other rights (including, but not limited to, terminating this Sublease immediately upon written notice to Subtenant, in addition to all of the remedies available to Landlord under the Prime Lease in the event of a like default or failure on the part of Sublandlord, as tenant thereunder), shall have the right, but not the obligation, without waiving or releasing Subtenant from any obligations of Subtenant hereunder, to make such payment or perform such other obligation of Subtenant in such manner to such extent as Sublandlord shall deem necessary, and in exercising any such right, to pay any incidental costs and expenses and incur and pay reasonable attorneys’ fees. Subtenant shall pay to Sublandlord upon demand all sums so paid by Sublandlord and all incidental costs and expenses of Sublandlord in connection therewith, together with interest thereof at the lower of eight percent (8%) or the then maximum rate of interest which may lawfully be collected from Subtenant, from the date of Sublandlord making such expenditures. Such remedies shall be in addition to all other remedies available to Sublandlord under this Sublease, at law and in equity.
16.Surrender on Termination. Subtenant shall, at its sole cost and expense, surrender and vacate the Subleased Premises and deliver unencumbered and vacant possession of the Subleased Premises to Sublandlord on the Sublease Expiration Date, or any earlier termination of this Sublease, and shall, at its sole cost and expense, on or prior to such date, remove therefrom any and all of its personal property, furniture (including the Existing Furniture), and furnishings located therein (including but not limited to any cabling installed by Subtenant, its vendors, contractors or agents, as well as Subtenant’s secured access or other security system) (“Subtenant’s Property”) and repair and restore all damage to the Subleased Premises caused by Subtenant’s use and occupancy of the Subleased Premises (ordinary wear and tear excepted), including without limitation, the removal of Subtenant’s Property as required herein. In addition, Subtenant shall perform all obligations of Sublandlord pursuant to Section 5 of Exhibit G of the Prime Lease with respect to any Items installed on the roof by Sublandlord, which Items are listed on Exhibit G of this Sublease, attached hereto and incorporated herein. Subtenant shall
pay to Sublandlord, upon demand, all sums so paid by Sublandlord and all incidental costs and expenses of Sublandlord in connection therewith, together with interest at the then maximum rate of interest which may be lawfully collected from Subtenant, from the date of Sublandlord making such expenditures. Notwithstanding anything to the contrary in the Prime Lease, Subtenant shall pay Sublandlord a sum for each day that Subtenant retains possession of the Subleased Premises or any part thereof after expiration or earlier termination of this Sublease, by lapse of time or otherwise, an amount equal to one hundred fifty percent (150%) of the rent and any other amounts Sublandlord is required to pay Landlord under the Prime Lease for the Subleased Premises and Subtenant shall also pay to Sublandlord damages, consequential as well as direct, sustained by Sublandlord by reason of such retention, including, without limitation, reasonable attorneys’ fees. Subtenant acknowledges that the Prime Lease is scheduled to expire on August 31, 2028; therefore, time is of the essence with respect to Subtenant’s obligation to surrender the Subleased Premises in accordance with the terms of this Sublease and the Prime Lease. Nothing in this Section, however, shall be construed or operate as a waiver of Sublandlord’s right of reentry or any other right of Sublandlord under this Sublease or of Landlord under the Prime Lease. Notwithstanding the foregoing, if Subtenant enters into a Subtenant Direct Lease with Landlord and delivers to Sublandlord a written agreement executed by Landlord in a form satisfactory to Sublandlord (i) agreeing that Subtenant may remain in possession of the Subleased Premises following the expiration or earlier termination of this Sublease, and (ii) releasing Sublandlord from any and all liability with respect to the condition of the Subleased Premises and Section 27.01 of the Prime Lease, then Subtenant shall have no obligation to surrender and vacate the Subleased Premises as provided in this Section 16; provided that Subtenant shall release Sublandlord from and indemnify, defend and hold Sublandlord harmless from and against any and all claims relating to the condition of the Premises as of the Sublease Expiration Date and any obligations of Sublandlord to surrender and vacate the Premises set out in Section 27.01 and otherwise in the Prime Lease. This provision shall survive the expiration or earlier termination of this Sublease.
17.Notices. Any notice, statement, demand or other communication (“Notice”) by one party to the other shall be given in writing and shall be effective upon receipt or refusal if (i) delivered by hand or (ii) sent via overnight mail by a nationally recognized express delivery service, when addressed to Subtenant or Sublandlord as follows:
Notice to Sublandlord:
Fiserv, Inc.
Attn: General Counsel’s Office
4000 NW 120th Avenue, MS/CON – REAL
Coral Springs, FL 33065 Notice to Subtenant:
Digimarc Corporation Attn: Sue Taylor
8500 SW Creekside Place Beaverton, Oregon 97008
Either party may change its notice address from time-to-time by providing prior written notice of the same to the other party.
18.Entire Agreement; Modification; Waiver. This Sublease contains the entire agreement between Subtenant and Sublandlord with respect to the Subleased Premises and supersedes all other agreements or other understandings of the parties with respect to the Subleased Premises. This Sublease shall not be modified except by a writing executed by the parties. No waiver shall be deemed to have been made unless expressed in writing and signed by an authorized representative of the waiving party.
19.No One Party Deemed Drafter. Each party to this Sublease acknowledges that such party has been represented by legal counsel in preparation of this Sublease. If this Sublease or any provision hereof is interpreted by a court of law, no provision hereof shall be construed more harshly against any party as drafter.
20.Counterparts. This Sublease may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall together constitute one and the same instrument. Facsimile or electronic (PDF) signatures shall be treated as if they are original signatures.
| 21. | Indemnity. |
|---|
a.Subtenant shall indemnify, defend and hold harmless Sublandlord and its officers, directors, members, employees, agents, affiliates, successors and assigns from and against all losses, costs, damages, expenses and liabilities, including, without limitation, reasonable attorneys’ fees, incurred by Sublandlord to the extent arising out of (a) any accidents, damages or injuries to persons or property occurring in or on the Subleased Premises during the Sublease Term; (b) any breach of this Sublease by Subtenant; (c) any work done in or to the Subleased Premises by or on behalf of Subtenant; (d) any act, omission or negligence on the part of Subtenant and/or its officers, employees, agents, customers and/or invitees, or any person claiming through or under Subtenant; (e) any claims made by the Landlord under the Prime Lease to the extent arising out of Subtenant’s acts or omissions or its use and occupancy of the Subleased Premises during the Sublease Term; or (f) any claims made by Landlord pursuant to Section 5.09 of the Prime Lease arising out of or caused in whole or in part, by or in connection with Subtenant’s use or possession of the Subleased Premises or otherwise arising on or after the Sublease Commencement Date (a “Subtenant Claim”). Notwithstanding the foregoing, Subtenant shall not be required to indemnify Sublandlord or hold Sublandlord harmless to the extent that the gross negligence or intentional misconduct on the part of Sublandlord or Sublandlord’s breach of its obligations under this Sublease or the Prime Lease resulted in a Subtenant Claim.
b.Sublandlord shall indemnify, defend and hold harmless Subtenant and its officers, directors, members, employees, agents, affiliates, successors and assigns from and against all losses, costs, damages, expenses and liabilities, including, without limitation,
reasonable attorneys’ fees, incurred by Subtenant to the extent arising out of (a) any breach of this Sublease by Sublandlord; (b) any work done in or to the Subleased Premises by or on behalf of Sublandlord prior to the Sublease Commencement Date; or (c) any claims against the Subtenant made by the Landlord under the Prime Lease to the extent arising out of Sublandlord’s acts or omissions or its use and occupancy of the Subleased Premises prior to the Sublease Commencement Date (a “Sublandlord Claim”). Notwithstanding the foregoing, Sublandlord shall not be required to indemnify Subtenant or hold Subtenant harmless to the extent that the negligence or intentional misconduct on the part of Subtenant or Subtenant’s breach of its obligations under this Sublease resulted in a Sublandlord Claim.
c.Under no circumstances shall the parties by liable to each other under any theory of tort, contract, strict liability or other legal or equitable theory for any punitive, special, incidental, indirect or consequential damages each of which is excluded by agreement of the parties regardless of whether or not any party has been advised of the possibility of such damages. The foregoing sentence shall not in any way diminish the parties’ indemnification obligations under this Section 21 or excuse Subtenant’s failure to pay the express payments and obligations under this Sublease as and when due. This provision shall survive the expiration or earlier termination of this Sublease.
22.Default by Landlord. Sublandlord shall not be responsible or liable for any violation or default by Landlord under the Prime Lease and shall not be obligated to bring any action or proceeding or to take any steps to enforce Sublandlord’s rights against Prime Landlord other than, upon the written request of Subtenant, making a demand upon Prime Landlord to perform its obligations under the Prime Lease with respect to the Sublease Premises, including, without limitation, the obligation to provide the number of parking spaces set out in Section 7.03 of the Prime Lease. This provision shall survive the expiration or earlier termination of this Sublease.
23.Brokers. The Parties acknowledge and agree that neither Sublandlord nor Subtenant utilized a broker in connection with this transaction except Deron Jones and Justin Haber of Jones Lang LaSalle Brokerage, Inc. (“Sublandlord’s Broker”) who represents the Sublandlord and Eric Turner and Craig Reinhart of Jones Lang LaSalle Brokerage, Inc. (“Subtenant’s Broker”) who represents the Subtenant. Each party agrees to indemnify and hold the other party harmless of and from all claims, liabilities, costs, expenses and damages arising as a result of a breach of the representation and warranty set forth in the preceding sentence. The fee for the Subtenant’s Broker shall be paid under a separate agreement with Sublandlord’s Broker and Sublandlord shall be solely responsible for any fee owed to Sublandlord’s Broker. This provision shall survive the expiration or earlier termination of this Sublease.
24.Signage. Subtenant may, at Subtenant’s sole cost and expense, and subject to the prior written consent of Landlord and Sublandlord and subject to all applicable Laws, install exterior signage that substantially conforms to the existing exterior Building and Project signage and as depicted in Exhibit F of the Prime Lease, except that Sublandlord’s name shall be replaced by Subtenant’s name. All other exterior signage to be installed by Subtenant (“Subtenant’s Amended Signage”) shall be subject to the following terms and conditions: (a) following approval thereof by Landlord and Sublandlord (which approval by Sublandlord shall
not be unreasonably withheld, conditioned, or delayed), Subtenant shall submit plans and drawings for Subtenant’s Amended Signage to any and all public authorities having jurisdiction and shall obtain written approval from each such jurisdiction prior to installation, and shall fully comply with all applicable Laws and all covenants, conditions and restrictions affecting the Property; and (b) Subtenant shall, at Subtenant's sole cost and expense, design, construct and install the Subtenant’s Amended Signage in accordance with all applicable Laws. Subtenant shall maintain all of Subtenant’s exterior signage located on the Building and in the Project in good condition and repair, and all cost of maintenance and repair shall be borne by Subtenant. Upon the expiration or earlier termination of this Sublease, if Subtenant fails to remove any of Subtenant’s exterior signage and repair the Building or Project, as applicable, in accordance with the terms of the Prime Lease, Sublandlord may cause such signage to be removed from the Building or Project and the Building or Project to be repaired and restored to the condition which existed prior to the installation of such signage (including, if necessary, the replacement of any precast concrete panels), all at the sole cost and expense of Subtenant and otherwise in accordance with this Sublease without further notice from Sublandlord notwithstanding anything to the contrary contained in this Sublease. Notwithstanding the foregoing, if Subtenant enters into a Subtenant Direct Lease and Landlord delivers to Sublandlord a written agreement executed by Landlord in a form satisfactory to Sublandlord (i) agreeing that such signage may remain in place following the expiration or earlier termination of this Sublease, and (ii) releasing Sublandlord from any and all liability with respect to such signage and Sections 7.06 and 7.07 of the Prime Lease, then Subtenant shall have no obligation to remove the signage as provided in this Section 24.
25.Parking. Subtenant shall be entitled to utilize the parking spaces provided to Sublandlord under the Prime Lease, provided that Subtenant shall be required to comply with the provisions of the Prime Lease that relate to parking: Subtenant shall be responsible for any replacement fee charged due to the loss of any magnetic parking card or parking sticker issued by Landlord, the parking facility operator, or any of their agents. Any additional parking shall be secured by the Subtenant directly from the Landlord, provided such additional parking is at no additional cost or liability to Sublandlord.
26.Building Access. Subtenant shall have access to the Premises pursuant to the terms in the Prime Lease. Notwithstanding anything herein or in the Prime Lease to the contrary, in the event Subtenant desires its own secured access system to the Subleased Premises, Subtenant shall be responsible for the installation thereof, in accordance with any applicable provisions of the Prime Lease.
27.No Jury Trial. IN THE EVENT OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR IN CONNECTION WITH THIS SUBLEASE EACH OF THE SUBLANDLORD AND THE SUBTENANT HEREBY WAIVES ITS RIGHTS TO A TRIAL BY JURY.
28.Landlord’s Consent. The effectiveness of this Sublease is expressly conditioned upon the Landlord providing its written consent hereto (“Landlord’s Consent”). Subtenant shall deliver (in any reasonably prompt manner not to exceed three (3) business days) to Sublandlord any information reasonably requested by Landlord in connection with Landlord’s approval of
this Sublease, including without limitation with respect to the nature and operation of Subtenant’s business and/or the financial condition of Subtenant. In connection with requesting Landlord’s Consent, Sublandlord shall (i) have no liability to Subtenant in the event that Landlord does not give Landlord’s Consent and (ii) not be required to pay any consideration to Landlord in order to obtain Landlord’s Consent or to commence a legal proceeding against Landlord, with Subtenant being obligated to pay any consideration required by Landlord in connection with evaluating whether or not it will grant Landlord’s Consent to this Sublease. Notwithstanding anything contained in this Sublease to the contrary, if Landlord’s Consent is not obtained within sixty (60) days of the Effective Date, Subtenant and Sublandlord shall each have the right to terminate this Sublease by written notice to the other party (“Termination Notice”). Upon receipt of the Termination Notice by Sublandlord or Subtenant, this Sublease shall automatically be deemed null and void and of no further force or effect, and any Security Deposit paid by Subtenant to Sublandlord shall promptly be returned to Subtenant. In the event of any conflict between Section 16 or Section 21(a) of this Sublease and the terms of the Landlord’s Consent, as between Sublandlord and Subtenant, the terms of this Sublease shall control.
29.Anti-terrorism Statute Compliance. Subtenant and Sublandlord hereby each represents and warrants to the other that it is not: (1) in violation of any Anti-Terrorism Law; (2) conducting any business or engaging in any transaction or dealing with any Prohibited Person, including the making or receiving or any contribution of funds, goods or services to or for the benefit of any Prohibited Person; (3) dealing in, or otherwise engaging in any transaction relating to, any property or interest in property blocked pursuant to Executive Order No. 13224; (4) engaging in or conspiring to engage in any transaction that evades or avoids, or had the purpose of evading or avoiding, or attempts to violate any of the prohibitions set forth in any Anti- Terrorism Law; or (5) a Prohibited Person, nor are any of its partners, members, managers, officers or directors a Prohibited Person. As used herein, “Antiterrorism Law” is defined as any law relating to terrorism, anti-terrorism, money laundering or anti-money laundering activities, including Executive Order No. 13224 and Title 3 of the USA Patriot Act. As used herein “Executive Order No. 13224” is defined as Executive Order No. 13224 on Terrorist Financing effective September 24, 2001, and relating to “Blocking Property and Prohibiting Transactions With Persons Who Commit, or Support Terrorism.” “Prohibited Person” is defined as (1) a person or entity that is listed in the Annex to Executive Order 13224; (ii) a person or entity with whom Subtenant or Sublandlord is prohibited from dealing or otherwise engaging in any transaction by any Antiterrorism Law, or (iii) a person or entity that is named as a “specially designated national and blocked person” on the most current list published by the U.S. Treasury Department Office Of Foreign Assets Control as its official website, http://www.treas.gov/ofac/tllsdn.pdf or at any replacement website or other official publication of such list. “USA Patriot Act” is defined as the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56). Each party hereby agrees to defend, indemnify, and hold harmless the other from and against any and all claims, damages, losses, risks, liabilities, and expenses (including reasonable attorneys’ fees and costs) arising from or related to any breach of the foregoing representations and warranties. This section shall survive the expiration or earlier termination of this Sublease.
30.Relocation Allowance. Sublandlord shall reimburse Subtenant for out of pocket costs incurred by Subtenant (not to exceed $3.00 per rentable square foot in the Subleased
Premises) (the “Relocation Allowance”) for relocation from the Subtenant’s Gemini Premises, set up of the Subleased Premises, and acquisition of Subtenant’s furniture, fixtures and equipment (including any security equipment or fire suppression equipment) in connection with Subtenant’s relocation to the Subleased Premises (such costs being the “Relocation Costs”). The Relocation Allowance shall be paid by Sublandlord within thirty (30) days following receipt by Sublandlord of paid invoices detailing all such Relocation Costs, which shall be delivered to Sublandlord no later than ninety (90) days following the Sublease Commencement Date.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto have executed this Sublease as of the day and year written above.
Sublandlord:Subtenant:
FISERV SOLUTIONS LLCDIGIMARC CORPORATION
By:/s/ Stephen CooganBy: /s/ Charles Beck
Name:Name:
Title: Title:
EXHIBIT A
Subleased Premises
The "Building" and the "Project" in which the Subleased Premises is located are depicted below
19
155462073.4
HB: 4860-1276-1863.7
EXHIBIT B
Prime Lease [See attached]
21
155462073.4
HB: 4860-1276-1863.7
EXECUTION COPY
LEASE AGREEMENT
BETWEEN
PD OFFICE OWNER 11, L.P., a Delaware limited partnership,
as Landlord
AND
FISERV SOLUTIONS, LLC, a Wisconsin limited liability company, as Tenant
8500 SW CREEKSIDE PLACE BEAVERTON,OREGON
f0002176S S I
TABLE OF CONTENTS
Page
| I. |  Basic Lea-se lnfonnationI |
|---|
3,.Condition of Premises; Work Letter3
5.CompllanCie with Laws; Use..............................,5
6.Electrichy......................................,6
7.BuHding Services: Exterior Signoge; Roof Spllu............................................••••-•7
8.Leasefiold fmprovemcnts......................................................................,9
9.Repairs and AIterations. ..........•..........................................•.0
I0.LandJord's Accessl l
11.Assignment and Sublettin,gl2
| 13. | Indemnity arn:I Waiver of Claims13 |
|---|---|
| 14. | Insurancel4 |
| --- | --- |
t5.Subrogation..........................................................................,.............•15
16.Casualty Damage..............................................,..................................,15
l7.Condemnation.16
18.Eve,nts of Default17
19..Remedies17
20.Limitation of Liability18
21,Intentionally Omitted18
| 22. | Holding Overl 8 |
|---|---|
| 23. | Subordination to Mortgages; Estoppel Certificate19 |
| --- | --- |
100021765 s I
| 24. | Termination Right of Tenant.20 |
|---|---|
| 25. | Intentionally Omitted20 |
| --- | --- |
26.Notice........................,,20
27.Sutrender of Premises; Tenant's Protected Information20
28.Option to Rene•w..........................................................................................................,21
| 29. | Confidentiality23 |
|---|---|
| 30. | Miscellaneous23 |
| --- | --- |
EXHJBJTA EXHJ'BIT B EXHIBITC EXHIBIT D EXIDBITE EXHIBITF
EXfflBITG
EXIOBlTH
PREM1S£S, BUILDING AND PROJECT PLAN
WORK LETTER
OPERATING EXPENSES AND REAL PROPERTY TAXES
RULES AND REGULATIONS
GUARANTY EXTERIOR SIGNACE ROOF LICENSE PARKJNG
10002176S 5 I
ii
LEASE AGREEMENT
THIS LEASE AGREEMENT (the "Lease") is made and entered into as of February, 2018, by and between PD OFFICE OWNER 11, L.P., a Delaware limited partnership ("Landlord") and FISERV SOLUTIONS, LLC. a Wisconsin limited liability company ("Tenant").
| 1. | Bask Lease Information. |
|---|
1.0I "Building" shall mean the entire building located at 8500 SW Creekside, Beaverton, Oregon and commonly known as the 8500 Building. The Landlord and Tenant agree that the "Rentable Square Footage of the Building" is deemed to be 65,496 rentable square feet. "Property" shall mean the Building and the parcel of land owned by Landlord on which the Building, the parking facilities and other improvements, if any, serving the Building arc located. The Property is part of the "Project" commonly referred to as Creekside Corporate Park. The Building and the Project are depicted on Exhibit A attached hereto.
| 1.02 | "Premises" shall mean the Building. |
|---|---|
| 1.03 | "Commencement Date" shall mean August 20, 2018. |
| --- | --- |
| 1.04 | "Rent Commencement Date" shall mean January 20, 2019. |
| --- | --- |
| 1.05 | ''Expiration Date" shall mean August 31, 2028. |
| --- | --- |
| 1.06 | "Term" shall mean the period commencing on the Access Date and ending on the Expiration Date, unless tenninated early in accordance with this Lease. |
| --- | --- |
| 1.07 | "Permitted Use" shall mean general office use such as for marketing, sales and administration, and other ancillary uses related thereto allowable by Laws. |
| --- | --- |
"Base Rent":
Base Rent PeriodBase Rent PRSFMonthlyAnnually
8/20/20188/31/2019
9/01/20198/31/2020
9/01/20208/31/2021
9/01/20218/31/2022
9/01/20228/31/2023
9/01/20238/31/2024
9/01/20248/31/2025
9/01/20258/31/2026
9/01/20268/31/2027
9/01/20278/31/2028
100021765.J I
1.10
"Tenant's Proportionate Share of Building" shall be computed by dividing the Rentable Square Footage of the Premises by the Rentable Square Footage of the Building and, as of the date of this Lease, shall be 100%. "Tenant's Proportionate Share of Project" shall be computed by dividing the Rentable Square Footage of the Premises by the Rentable Square Footage of the Project and, as of the dateof this Lease, shall be 12.4%.
| "Estimated Initial M | Operating Expenses": The estimated monthly Operating Expenses in 2017 is SIIIIII per rentable square foot (exclusive of electricity for the Premises). This infonnation is not a representation or warranty of Landlord concerning such expenses during the Tenn of this Lease. |
|---|---|
| 1.11 | ••Access Date" shall mean April I, 2018. |
| --- | --- |
| 1.12 | "Landlord Allowance": $.....which sum shall include a so-called "Test Fit Allowance" of$  |
| --- | --- |
I.I 3 "Security Deposit": None.
| 1.14 | "Guarantor": Fiserv, (nc., a Wisconsin corporation. |
|---|---|
| 1.15 | "Broker": Jones Lang LaSalle. |
| --- | --- |
| 1.16 | Intentionally Omitted. |
| --- | --- |
| 1.17 | Tenant's Billing Address: Fiserv, 2900 Westside Parkway, Alpharetta, GA 30004, Attention: Bill Panzer, Global Real Estate-Workplace Solutions, Manager, Real Estate Transactions. |
| --- | --- |
| 1.18 | Landlord's Remittance Address: PD Office Owner 11, L.P., MS 111, P.O. Box 4300, Portland, Oregon 97208-4300. |
| --- | --- |
| 1.19 | Addresses for Notices: |
| --- | --- |
If lo Landlord:
lfto Tenant:
100021765 j j2
PD OFFICE OWNER 11, L.P.
c/o Starwood Capital Group 100 Pine Street, Suite 3000
San Francisco, California 94111 Attention: Andrew Wong
with a copy to:
PD OFFICE OWNER 11, L.P.
c/o Starwood Capital Group 591 West Putnam Avenue Greenwich, Connecticut 06830 Attention: General Counsel
Fiserv Solutions, LLC 2900 Westside Parkway
Alpharetta, GA 30004
Attention: VP Global Real Estate and Workplace Solutions With a copy to:
FISERV, INC.
255 Fiserv Drive
Brookfield, WI 53045 Attention: General Counsel
All capitalized terms used without definition in the text of this Lease are as defined in this Article I (Basic Lease Information).
| 2. | Lease Grant. |
|---|
Landlord hereby leases the Premises to Tenant, and Tenant hereby leases the Premises from Landlord, on and subject to the terms and conditions of this Lease.
| 3. | Condition of Premises; Work Letter. |
|---|---|
| 3.01 | The Premises are accepted by Tenant in "AS IS" condition and configuration without any representations or warranties by Landlord, except as otherwise provided herein. |
| --- | --- |
| 3.02 | Landlord represents to Tenant that, as of the Commencement Date, (a) the mechanical, HYAC, plumbing and electrical systems serving the Premises and the structural elements of the Building will be in working order, (b) to the actual knowledge of Landlord, the HYAC system for the Premises is of sufficient size and capacity to provide the Premises with acceptable heating, ventilation and air conditioning services given the Pennitted Use hereunder, (c) the roof of the Building will be free of leaks and, to the actual knowledge of Landlord, other defects, and (d) to the actual knowledge of Landlord, the Building is in compliance with all Laws (as defined in Section 5.01 below), including, without limitation, the Americans with Disabilities Act and regulations promulgated thereunder (the "ADA"). As used in this Lease, "to the actual knowledge of Landlord" and words of similar import shall mean the actual knowledge of Andrew Wong, without any obligation of due inquiry, as of the Commencement Date. Tenant shall have the right, prior to the Commencement Date, to perform any and all tests and other inspections relating to the roof, mechanical, electrical and plumbing systems (including HYAC) and other structural components of the Building. If any of such tests or inspections indicate that there is a defect with such Building systems and/or structural components, Tenant shall give Landlord written notice of such defects, and Landlord shall be required to promptly cure the defect, at its sole costs and expenses, to Tenant's reasonably satisfaction. In addition, Landlord, at its sole cost and expense, on or before August 31, 2018, shall be required to repair and repaint that portion of the exterior of the Building that is currently bubbling and peeling, and shall be required to repair the tilt wall panel joint caulk and backer rod. Landlord hereby warrants to Tenant that, for a period of twelve (12) months following the Commencement Date, the roof and the mechanical systems (including the HVAC) of the Building will be free of defects and repairs obligations. |
| --- | --- |
(0002116s s I3
| 3.03 | Tenant agrees to construct Tenant Work (as defined in Exhibit B). and Landlord agrees to provide Tenant with a Landlord Allowance, in accordance with Exhibit B attached hereto. Tenant shall have access to the Premises commencing on the Access Date for purposes of constructing Tenant Work and otherwise preparing the Premises for Tenant's business operations. Notwithstanding anything to the contrary contained in this Lease, Tenant shall not be obligated to pay Base Rent and Tenant's Proportionate Shar-e of Operating Expenses (as defined in Exhibit C) for the period from the Access Date through and including August I9, 2018. |
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4,Rent.
| 4.01 | Tenant shall pay Landlord, without any setoff or deduction, unless expressly set forth in this Lease, aJI Base Rent and Additional Rent due for the Term (collectively referred to as "Rent"). "Additional Rent" means all sums (exclusive of Base Rent) that Tenant is required to pay Landlord under this Lease. Tenant shall pay and be liable for all rental, sales and use tax.es (but excluding income taxes), if any, imposed upon or measured by Rent. Recurring monthly charges of Additional Rent shall be due and payable in advance on the first day of each calendar month without notice or demand. All other items of Rent shall be due and payable by Tenant on or before 30 days after billing by Landlord. Rent shall be made payable to the entity, and sent to the address, Landlord designates and shall be made by good and sufficient check or by wire transfer pursuant to an account designated by Landlord upon request or by other means acceptable to Landlord. Rent for any partial month during the Tenn shall be prorated. Tenant's covenant to pay Rent is independent of every other covenant in this Lease. |
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| 4.02 | Tenant shall pay Landlord an administration fee equal to 5% of alJ past due Rent, provided that Tenant shall be entitled to a grace period of 5 days for the first late payment of Rent in a calendar year. In addition, past due Rent shall accrue interest at 12% per annum but not more than the maximum amount permitted by applicable Law. Landlord's acceptance of less than the correct amount of Rent shall be considered a payment on account of the earliest Rent due. No endorsement or statement on a check or letter accompanying payment shall be considered an accord and satisfactfon. |
| --- | --- |
| 4.03 | Upon execution and delivery of this Lease, Tenant shall pay to Landlord the installment of Base Rent in the amount of $...representing Base Rent for period from January 20, 20I 9 through January 31, 20I9. Notwithstanding anything to the contrary contained in this Lease, so long as Tenant is not then in Default under this Lease beyond any applicable cure period, Tenant shall not be obligated to pay Base Rent only for the five (5) month period from the Commencement Date through (but not including) the Rent Commencement Date. |
| --- | --- |
| 4.04 | Tenant shall pay Tenant's Proportionate Share of Operating Expenses in accordance with |
| --- | --- |
Exhibit C of this Lease.
| 4.05 | Upon the execution and delivery of this Lease, Tenant shall cause Guarantor to deliver to Landlord the original, fully-executed Guaranty in the fonn annexed hereto as Exhibit E. |
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(0002176S S }4
S.Compliance with Laws; Use.
| 5.01 | The Premises shall be used for the Pennitted Use and for no other use whatsoever. Tenant shall comply with all Laws (including, without limitation, the ADA) regarding the operation of Tenant's business and the use, condition, configuration and occupancy of the Premises. Tenant shall promptly provide Landlord with copies of any notices it receives regarding an alleged violation of Law. For purposes of this Lease, "Law" or "Laws" means all applicable federal, state and local laws, codes, ordinances, statutes, rules, regulations, and other legal requirements (including covenants and restrictions of record). |
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| 5.02 | Tenant shall, at its sole cost and expense, promptly comply with any Laws, including without limitation the ADA, that relate to the Premises, Tenant Work and Alterations. |
| --- | --- |
| 5.03 | Tenant shall comply with the Rules and Regulations attached as Exhibit D and such other reasonable rules and regulations adopted by Landlord from time to time, including rules and regulations for the performance of Alterations. Landlord shall not enforce such rules and regulations in a manner that discriminates against Tenant. |
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| 5.04 | "Hazardous Materials" will mean any substance commonly referred to, or defined in any Law(s), as in effect or as implemented or modified from time to time, as a hazardous, dangerous, toxic, or radioactive material or hazardous substance (or other similar term), including but not be limited to, chemicals, solvents, pollutants, contaminants, petroleum products, flammable or radioactive materials, explosives, asbestos, urea formaldehyde, PCB's, chlorofluorocarbons, freon or radioactive materials. |
| --- | --- |
| 5.05 | Landlord represents to Tenant that, to Landlord's actual knowledge (which shall mean the actual knowledge of Andrew Wong, without any obligation of due inquiry), the Premises do not contain any Hazardous Materials in violation of Laws (as such terms are defined in this Lease) as of the date of this Lease. |
| --- | --- |
| 5.06 | Tenant will not cause or permit any Hazardous Materials to be brought upon, kept, stored, discharged, released or used in, under or about any portion of the Property by Tenant or its agents in violation of applicable Law without the prior written consent of Landlord, which consent may be withheld or conditioned in Landlord's sole discretion; provided, Tenant may bring into the Premises small amounts of Hazardous Materials (such as cleaning products and copy toner) which are readily available to Tenant by unregulated retail purchase if the same are necessary in Tenant's normal business operations. If Tenant or any Tenant's Related Parties brings any Hazardous Materials to the Premises or Property, with or without the prior written consent of Landlord (without waiver of the requirement of prior written consent), Tenant will, at its sole cost and expense, cause all such Hazardous Materials to be removed from the Property and/or remediated in compliance with any and all applicable Laws. Further, Tenant shall: (i) use such Hazardous Material only as is reasonably necessary to Tenant's business, in small, properly labeled quantities; (ii) handle, use, keep, store, and dispose of such Hazardous Material using accepted industry standards and in compliance with all applicable Laws; and (jji) maintain at all times a copy of the |
| --- | --- |
most current MSDS sheet for each such Hazardous Material, and permit Landlord to
review the same at any reasonable time upon request.Upon expiration or earlier
(00021765 s J
tennination of this Lease, Tenant will, at Tenant's sole cost and expense, cause all Hazardous Materials brought to the Premises or the Property by Tenant or any Tenant's Related Parties, to be removed from the Property in compliance with any and all applicable Laws.
| 5.07 | If either Landlord or Tenant violates the provisions of this Article, then such party will promptly, at its expense, take all investigatory and/or remedial action (collectively called "Remediation"), as directed or required by any governmental authority that is necessary to fully clean up, remove and dispose of such Hazardous Materials and any contamination so caused and shall do so in compliance with any applicable Laws. Landlord has the right to perform Remediation that is the Tenant's obligation, at Tenant's sole cost and expense. Tenant shall not have any obligation to conduct any Remediation for any Hazardous Materials that existed at the Property prior to the Commencement Date, and all Remediation of such Hazardous Materials existing as of the Commencement Date shall be the responsibility of Landlord as required by Laws. |
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| 5.08 | Each party shall immediately provide to the other written notice of any investigation or claim arising out of the use by such party of Hazardous Materials at the Property or the violation of any provision of this Article, or alleged violation of any applicable Law and shall keep the other party fully advised regarding the same. Tenant shall provide to Landlord all reports required to be filed with any governmental authority regarding the use of Hazardous Materials by Tenant or any Tenant's Related Parties at the Property and any incidents regarding the same. Landlord retains the right to participate at Tenant's expense |
| --- | --- |
in any Remediation and/or legal actions affecting the Property involving Hazardous Materials arising from Tenant's actual or alleged violation of any provision of this Article or Law.
| 5.09 | Tenant will indemnify, protect, defend and hold Landlord and the Landlord Related Parties harmless from any and all damages, causes of action, fines, losses, liabilities, judgments, penalties, claims, and other costs incurred or imposed directly by reason of (a) any governmental order, action, proceeding, or required Remediation and/or (b) any third party claims, suits, proceedings, or legal actions as specified in this Article, in each case to the extent caused by, based upon, or arising out of any breach or failure of Tenant or Tenant's Related Parties to observe any covenants in Sections 5.01 and 5.06 of this Article. |
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5.10 Landlord will indemnify, protect, defend and hold Tenant and Tenant Related Parties harmless from any and all damages, causes of action, fines, losses, liabilities, judgments, penalties, claims, and other costs incurred or imposed directly by reason of (a) any governmental order, action, proceeding, or required Remediation and/or (b) any third party claims, suits, proceedings, or legal actions as specified in this Article, in each case to the extent caused by, based upon, or arising out of any breach or failure of Landlord to observe any covenants in this Article.
| 6. | Electricity. |
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| 6.01 | Tenant shall obtain and pay for electrical energy for the use of Tenant in the Premises by direct application to, and arrangement with, the public utility serving the Property. If either the quantity or character of electrical service is changed by the public utility or other |
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100021165 s I
company supplying electrical service to the Property or is no longer available or suitable for Tenant's requirements (collectively, an "Electrical Service Event"), such Electrical Service Event shall not (a) constitute an actual or constructive eviction, in whole or in part, or entitle Tenant to any abatement or diminution of Base Rent, or (b) relieve Tenant from any of its obligations under this Lease, or (c) impose any liability upon Landlord or its agents by reason of inconvenience or annoyance to Tenant, injury to or interruption of Tenant's business or otherwise, unless such Electrical Service Event is caused by Landlord's gross negligence or willful misconduct. .
| 6.02 | Landlord shall have the option of installing sub-meters at Landlord's expense to measure Tenant's consumption of electrical energy. If Landlord exercises such option, Tenant shall pay to Landlord, as additional rent, on demand, from time to time, but no more frequently than monthly, for its consumption of electrical energy at the then applicable rate charged by the utility company, with no markup or administrative fee by Landlord, for sub-metered electrical energy. For the purpose of this Section, the rate to be paid by Tenant in the event of sub-metering shall include any t.ruces or other charges in connection therewith. If any tax shall be imposed upon Landlord's receipts from the sale or resale of electrical energy to Tenant, the pro rata share allocable to the electrical energy service received by Tenant shall be passed on to, included in the bill of, and paid by Tenant if and to the extent pennitted by law. |
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| 6.03 | Tenant's use of electrical service shall not exceed the capacity serving the Premises as of the Commencement Date, and Landlord represents and covenants to Tenant that the electrical capacity of the Premises shall not be less than 6 watts per rentable square foot of connected load, exclusive of lighting, throughout the Term. Other than as may be expressly set forth in this Lease, 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 Property with electricity or for any other reason not directly attributable to Landlord, provided, however, that in such instance, Landlord shall use commercially reasonable efforts to cause the electricity to be restored as soon as practicable thereafter. |
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| 7. | Building Services; Exterior Signage; Roof Space. |
| --- | --- |
| 7.01 | Landlord shall furnish Tenant with the following services: (a) water for use in the lavatories and pantries (b) customary heat and air conditioning in season; (c) passenger and freight elevator service; (d) maintenance of the exterior common areas of the Property; and the Project (such as the parking areas), including landscaping and snow/ice removal and (e) access to the Building and Premises for Tenant and its employees 24 hours per day/7 days per week, subject to the tenns of this Lease and such protective services or monitoring systems, if any, as Landlord may reasonably impose, including, without limitation, sign-in procedures and/or presentation of identification cards. Tenant shall contract for janitorial services with a contractor reasonably approved by Landlord and pay all fees and charges for janitorial service. Landlord shall enter into, and maintain during the Tenn of this Lease, service contracts for the repair and maintenance of the elevators and HVAC system serving the Building and pay all fees and charges for such service contracts which amounts shall be Operating Expenses subject to the provisions of Exhibit C. Tenant will have 24-hour/7-day a week control of the HVAC. |
| --- | --- |
(000217655 I7
| 7.02 | So long as Landlord or an Affiliate of Landlord owns those portions of the Project known as Creekside V and Creekside VI, Tenant shall have the right, at no additional charge, to use the existing conference facilities located on the third (3^rd^) floor of Creekside V and the ground floor of Creekside VI on a non-exclusive first come, first serve basis. Tenant's use of the conference facilities shall be further subject to, and compliance with, the following terms and conditions: (a) Tenant shall reserve the conference facilities with Landlord prior to its use of same; (b) Tenant shall utilize the conference facilities solely for meetings, conferences and other transactions necessary for and incidental to Tenant's business and |
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(c) Tenant shall promptly clean the conference facilities after its use.
| 7.03 | Landlord shall provide Tenant, at no additional charge and in compliance with applicable zoning laws, with not less than 3.4 unreserved parking spaces per 1,000 rentable square feet of the Building at the Property in the area depicted in Exhibit H attached hereto. All parking will comply with the tenns and conditions of this Lease and applicable Rules and Regulations. The parking privileges granted to Tenant are personal to Tenant; Tenant shall not assign or sublet parking privileges other than in connection with an approved or permitted assignment of this Lease or sublease. |
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| 7.04 | Landlord agrees that Tenant shall be entitled to install a proprietary security system at the entrances to the Premises as part of Tenant Work, at Tenant's sole cost and expense (but payable from the Landlord Allowance), subject to Landlord's reasonable approval thereof and compliance with the provisions of this Lease and Laws and provided that Landlord and Tenant devise a plan that permits Landlord and its security contractors access to the Premises in the event on an emergency. |
| --- | --- |
| 7.05 | Landlord shall have access to all air-cooling, fan, ventilating and machine rooms and electrical closets and all other mechanical installations (collectively, the "Mechanical Areas") and Landlord agrees to provide not less than one (I) day notice prior to entry (except in the case of an emergency). Tenant shall not construct partitions or other obstructions which may unreasonably interfere with Landlord's access thereto or the moving of Landlord's equipment to and from the Mechanical Areas. Tenant shall not enter the Mechanical Areas or tamper with, adjust, or otherwise affect the Mechanical Areas or install any supplementary or auxiliary HVAC equipment to serve the Premises without Landlord's prior consent in each instance, which consent shall not be unreasonably withheld or delayed. Landlord shall not be responsible if the normal operation of the Building System providing HVAC to the Premises (the "HVAC System") shall fail to provide cooled or heated air, as the case may be, in accordance with this Lease by reason of (a) any machinery or equipment installed by or on behalf of Tenant, which shall have an electrical load in excess of the average electrical load set forth in this Lease, or (b) any rearrangement of partitioning or other Alterations made or performed by or on behalf of Tenant affecting the HVAC System. Tenant at all times shall cooperate fully with Landlord and shall abide by the Building Rules and Regulations that Landlord may reasonably prescribe for the proper functioning and protection of the HVAC System. |
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| 7.06 | Landlord shall provide the initial directory signage in the Building at Landlord's cost; provided that any changes requested by Tenant thereafter shall be subject to reimbursement of Landlord's costs to make the requested change. In addition, so long as Tenant has not sublet portions of the Premises so that it occupies less than 50% of the |
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(0002176S S I 8
rentable area of the Premises for the conduct of its business, Tenant shall have the right, at Tenant's sole cost and expense, to place an exterior identification sign ("Exterior Signage"), subject to the terms and conditions of this Lease. Such right to the Exterior Signage is personal to Tenant and is subject to the following terms and conditions: (a) Tenant shall submit plans and drawings for the Exterior Signage to any and all public authorities having jurisdiction and shall obtain written approval from each such jurisdiction prior to installation, and shall fully comply with all applicable Laws and all
covenants, conditions and restrictions affecting the Property; (b) Tenant shall, at Tenant's sole cost and expense, design, construct and install the Exterior Signage; (iii) the Exterior Signage and location thereof shall be subject to Landlord's prior written approval, which Landlord shall have the right to withhold in its reasonable discretion; and (iv) Tenant shall maintain the Exterior Signage in good condition and repair, and all cost of maintenance and repair shall be borne by Tenant. Landlord hereby approves the Exterior Signage set forth on Exhibit F attached hereto, subject to compliance by Tenant with the terms of this Section 7.06. At Landlord's option, Tenant's right to the Exterior Signage may be revoked and terminated upon occurrence of any of the following events: (a} Tenant assigns any of its interest in this Lease, other than in connection with a Business Transfer, or sublets more than 50% of the rent.able area of the Premises; or (b) this Lease shall terminate or otherwise no longer be in effect.
| 7.07 | Upon the expiration or earlier tennination of this Lease or at such other time that Tenant's signage rights are terminated pursuant to the terms hereof, if Tenant fails to remove the Exterior Signage and repair the Building./Project in accordance with the terms of this Lease, Landlord shall cause the Exterior Signage to be removed from the Building/Project and the Building/Project to be repaired and restored to the condition which existed prior to the installation of the Exterior Signage (including, if necessary, the replacement of any precast concrete panels), all at the sole cost and expense of Tenant and otherwise in accordance with this Lease without further notice from Landlord notwithstanding anything to the contrary contained in this Lease. |
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| 7.08 | Landlord hereby grants Tenant a license to use a portion of the space on the roof of the Building in accordance with Exhibjt G. |
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| 8. | Leasehold Improvements. |
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All improvements in and to the Premises, including any Alterations (collectively, "Leasehold Improvements") shall remain upon the Premises at the end of the Term without compensation to Tenant, provided that Tenant, at its expense, in compliance with all applicable Laws, shall close up any slab penetrations in the Premises. In addition, Landlord, by written notice to Tenant given at the time Landlord provides its approval of the plans for such Leasehold Improvements, may require Tenant, at its expense, to remove any Alterations that, in Landlord's reasonable judgment, are of a nature that would require removal and repair costs that are materially in excess of the removal and repair costs associated with standard office improvements (such other items collectively are referred to as "Required Removables"). Required Removables shall include, without limitation,
internal stairways, raised floors, personal baths and showers, supplemental HYAC units and equipment, vaults, rolling tile systems and structural alterations and modifications. The Required Removables shall be removed by Tenant before the Expiration Date.
(00021765 s I 9
Tenant shall repair damage caused by the installation or removal of any Cable or Required Removables. If Tenant fails to perform its obligations in a timely manner, Landlord may perform such work at Tenant's expense. Notwithstanding the foregoing, Landlord agrees to identify Required Removables in connection with its review and approval of plans and specifications for Tenant Work and indicate in such approval whether Landlord requires their removal as of the end of the Tenn (as defined in Exhibit B).
| 9. | Repairs and Alterations. |
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| 9.01 | Tenant shall periodically inspect the Premises to identify any conditions that are dangerous or in need of maintenance or repair and shall promptly provide Landlord with notice of any such conditions that Tenant is aware of. Tenant shall, at its sole cost and expense, perform all maintenance and repairs to the Premises that are not Landlord's express responsibility under this Lease, and keep the Premises in good condition and repair, reasonable wear and tear excepted. Tenant's repair and maintenance obligations include, without limitation, repairs to: (a) floor coverings; (b) interior partitions; (c) doors; (d) the interior side of demising walls; (e) electronic, fiber, phone and data cabling and related equipment that is installed by or for the exclusive benefit of Tenant (collectively, "Cable"); (f) supplemental air conditioning units, kitchens, including hot water heaters, plumbing, and similar facilities exclusively serving Tenant; and (g) Alterations. Subject to the tenns of Article 15 below, to the extent Landlord is not reimbursed by insurance proceeds, Tenant shall reimburse Landlord for the cost of repairing damage to the Building caused by the acts of Tenant, Tenant Related Parties and their respective contractors and vendors. If Tenant fails to commence and diligently proceed with any repairs to the Premises for more than 30 days after notice from Landlord (although notice shall not be required in an emergency), Landlord may make the repairs, and Tenant shall pay the reasonable cost of the repairs, together with an administrative charge in an amount equal to I0% of the cost of the repairs. |
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| 9.02 | Landlord shall keep and maintain in good repair and working order and perform maintenance upon the: (a) structural elements of the Building (including, without limitation, floors and exterior walls); (b) foundation of the Building; (c) roof of the Building; and (d) all plumbing, mechanical and electrical systems located on the Property and Project outside of the Building (collectively, the "Base Building"). Landlord, at its cost and expense, shall comply with applicable Laws with respect to the Base Building, including without limitation the ADA. In addition, Landlord shall keep and maintain in good repair and working order and perform maintenance upon the: (a) sprinkler system; |
| --- | --- |
(b) all plumbing, mechanical and electrical systems exclusively serving the Building (including, without limitation, the HVAC System); and (c) all exterior portions of the Project and Property, including, but not limited to, snow removal, landscaping, the parking lot, sidewalks and driveways. Costs incurred by Landlord in connection with the performance of its obligations under this Section 9.02 or otherwise under this Lease shall be Operating Expenses to the extent provided in Exhibit C.
| 9.03 | Tenant shall not make alterations, repairs, additions or improvements or install any Cable (collectively referred to as "Alterations") without first obtaining the written consent of |
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Landlord in each instance, which consent shall not be unreasonably withheld or delayed. However, Landlord's consent shall not be required for any Alteration that satisfies all of
100021165 s lI0
the following criteria (a "Cosmetic Alteration"), although prior written notice to Landlord shall be required: (a) is of a cosmetic nature; (b) is not visible from the exterior of the Premises or Building; {c) will not affect the Base Building; (d) does not require work to be performed inside the walls or above the ceiling of the Premises; and (e) the costs thereof do not exceed -in the aggregate, within any 12 month period.
| 9.04 | Except for Cosmetic Alterations, prior to starting any Alterations, Tenant shall furnish to Landlord (a) plans and specifications, (b) names of contractors reasonably acceptable to Landlord (provided that Landlord may designate specific contractors with respect to Base Building), {c) required permits and approvals, and (d) evidence of contractors and subcontractors insurance in amounts reasonably required by Landlord and naming Landlord as an additional insured. |
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Alterations shall be constructed in a good and workmanlike manner using materials of a quality reasonably approved by Landlord (except for Cosmetic Alterations which shall not require Landlord's approval). In addition, Tenant shall pay Landlord a fee for Landlord's oversight and coordination of any Alterations (except for Cosmetic Alterations or any initial Alterations by Tenant to prepare the Premises for Tenant's occupancy) equal to 1% of the cost of the Alterations. Upon completion, except for any Cosmetic Alterations, Tenant shall furnish to Landlord "as-built" plans for all Alterations, completion affidavits and full and final waivers of lien, and certificates of final approval for such Alterations required by any governmental authority.
| 10. | Landlord's Access. |
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| 10.01 | Landlord may enter the Premises to (a) inspect the Premises, (b) show the Premises to prospective lenders, investors, purchasers and, in the last year of the Tenn, to prospective tenants or (c) pelfonn or facilitate the perfonnance of repairs, alterations or additions to the Premises or any portion of the Building. Except in emergencies or to provide Building services, Landlord shall provide Tenant with reasonable prior verbal notice of entry and shall use reasonable efforts to minimize any interference with Tenant's use of the Premises. If reasonably necessary, Landlord may temporarily close all or a portion of the Premises to perfonn repairs and alterations. However, except in emergencies, Landlord will not close the Premises if the work can reasonably be completed on weekends and after Building Service Hours. Entry by Landlord shall not constitute a constructive eviction or entitle Tenant to an abatement or reduction of Rent. Tenant may have a representative of Tenant accompany Landlord during any access of Landlord onto the Premises. |
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t 0.02 Landlord has the right at any time to change the name, number or designation by which the Building is commonly known. Without limiting the generality of the foregoing, Landlord shall have the right to erect and maintain temporary sidewalk bridges and/or temporary scaffolding on or about those portions of the Property outside of the Building. Landlord shall use reasonable efforts to minimize interference with Tenant's use and occupancy of the Premises during the making of such changes or alterations, provided that Landlord shall have no obligation to employ contractors or labor at overtime or other premium pay rates or to incur any other overtime costs or additional expenses whatsoever.
C0002176H l
| 11. | Assignment and Subletting. |
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11.0I Except in connection with a Business Transfer. Tenant shall not assign, sublease, transfer, mortgage, pledge, encumber or othetwise transfer any interest in this Lease or allow any third party to use any portion of the Premises (collectively or individually, a "Tnnsfer") without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed. Any Transfer in violation of this Section shall, at Landlord's option, be deemed a Default by Tenant as described in Section 18, and shall be voidable by Landlord. fn no event shall any Transfer, including a Business Transfer, release or relieve Tenant from any obligation under this Lease, and Tenant shall remain primarily liable for the perfonnance of the tenant's obligations under this Lease, as amended from time to time.
| 11.02 | Tenant shall provide Landlord with financial statements for the proposed transferee, a fully executed copy of the proposed assignment, sublease or other Transfer documentation and such other infonnation as Landlord may reasonably request. Within 20 days after receipt of the required infonnation and documentation, Landlord shall either (a) consent to the Transfer by execution of a consent agreement in a form reasonably designated by Landlord; or (b) reasonably refuse to consent to the Transfer in writing and provide written reasons for such refusal. Tenant shall pay for all of Landlord's actual legal costs incurred in connection with Landlord's review of any requested Transfer (not to exceed |
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| $ | per request), provided that such costs shall not be payable in connection with a Business Transfer. |
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| 11.03 | Tenant shall pay Landlord 50% of (a) all rent and other consideration which Tenant receives as a result of a Transfer less (b) the Rent payable to Landlord for the portion of the Premises and Tenn covered by the Transfer (including, but not limited to, sums paid for the sale or rental of Tenant's Property). Tenant shall pay Landlord for Landlord's share of the excess within 30 days after Tenant's receipt of the excess on a monthly basis. Tenant may deduct from the excess, amortized monthly on a straight-line basis over the remaining term of the Lease, all reasonable and customary expenses directly incurred by Tenant attributable to the Transfer. If and for so long as Tenant is in Default, Landlord may require that all sublease payments be made directly to Landlord, in which case Tenant shall receive a credit against Rent in the amount of Tenant's share of payments received by Landlord. |
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| 11.04 | Tenant may, without obtaining Landlord's consent, (a) assign this Lease to a successor to Tenant by merger, consolidation, reorganization or the purchase of all or substantially all of Tenant's assets or equity of Tenant, or (b) assign this Lease or sublet all or a portion of the Premises to an Affiliate, without the consent of Landlord, provided that all of the following conditions are satisfied (each a "Business Transfer"): (a) Tenant must not be in Default; (b) Tenant must give Landlord written notice at least 15 days before such Business Transfer; (c) such Business Transfer was made for a legitimate independent business purpose and not for the purpose of transferring this Lease and (d) Tenant shall deliver to Landlord a confinnation of the Guaranty of this Lease executed and delivered by Guarantor. Tenant's notice to Landlord shall include infonnation and documentation |
| --- | --- |
evidencing the Business Transfer and showing that each of the above conditions has been satisfied. If requested by Landlord, Tenant's successor shall sign a commercially
C000ll76SS I12
reasonable fonn of assumption agreement "Affiliate" shall mean an entity controlled by, controlling or under common control with Tenant.
| 12. | Liens. |
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Tenant shall not pennit mechanics' or other liens to be placed upon the Property, Premises or Tenant's leasehold interest in connection with any work or service done or purportedly done by or for the benefit of Tenant or its transferees. Tenant shall give Landlord notice at least 15 days prior to the commencement of any work in the Premises to afford Landlord the opportunity, where applicable, to post and record notices of non responsibility provided that any request for consent to the Alteration in respect of such work shall constitute such notice. Tenant, within 30 days of notice from Landlord, shall fully discharge any lien by settlement, by bonding or by insuring over the lien in the manner prescribed by the applicable Law and shall provide evidence satisfactory to Landlord that such lien has been removed or bonded within such 30-day period. Tenant's failure to cure same shall be deemed a Default under this Lease and, in addition to any other remedies available to Landlord as a result of such Default by Tenant, Landlord, at its option, may bond, insure over or otherwise discharge the lien. Tenant shall reimburse Landlord for any amount paid by Landlord, including, without limitation, reasonable attorneys' fees.
| 13. | Indemnity and Waiver of Claims. |
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Except to the extent caused by the negligence or willful misconduct of Landlord or any Landlord Related Parties, Tenant shall indemnify, defend and hold Landlord and Landlord Related Parties hannless against and from all liabilities, obligations, damages, penalties, claims, actions, costs, charges and expenses, including, without limitation, reasonable attorneys' fees and other professional fees (if and to the extent pennitted by Law) (collectively referred to as "Losses"), which may be imposed upon, incurred by or asserted against Landlord or any of the Landlord Related Parties by any third party and arising out of or in connection with any damage or injury occurring in the Premises or any negligence or wrongful acts or omissions (including violations of Law) of Tenant, the Tenant Related Parties or any of Tenant's transferees, contractors or licensees. Except to the extent caused by the negligence or willful misconduct of Tenant or any Tenant Related Parties. Landlord shall indemnify, defend and hold Tenant, its trustees, members, principals, beneficiaries, partners, officers, directors, employees and agents ("Tenant Related Parties") hannless against and from all Losses which may be imposed upon, incurred by or asserted against Tenant or any of the Tenant Related Parties by any third party and arising out of or in connection with the negligence or wrongful acts or omissions (including violations of Law) of Landlord or the Landlord Related Parties. Tenant hereby waives all claims against and releases Landlord and its trustees, members, principals, beneficiaries, partners, officers, shareholders, directors, employees, contractors, licensees, invitees, servants, agents, representatives and Mortgagees (the "Landlord Related Parties") from all claims for any injury to or death of persons, damage to property or business loss in any manner related to (a) Force Majeure, {b) acts of third parties, (c) the burstfog or leaking of any tank, water closet, drain or other pipe, unknown fire, explosion, falling plaster, steam, gas, electricity, electrical or electronic emanations or disturbance, water, rain, snow or leaks from any part of the Building or from the pipes or caused by dampness, vandalism,
(00021765 s I13
malicious mischief, (d) the inadequacy or failure of any security or protective services, personnel or equipment, or (e) any matter not within the reasonable control of Landlord, unless caused by the gross negligence or willful misconduct of Landlord or Landlord Related Parties.
| 14. | Insurance. |
|---|
Tenant shall maintain the following insurance ("Tenant's Insurance"): (a) Commercial General Liability Insurance applicable to the Premises and its appurtenances providing, on an occurrence basis, a minimum combined single limit of$and 
general aggregate; (b) Commercial Umbrella Liability Insurance with per occurrence and aggregate limits of -with the liability insurance required under clauses (a) above scheduled as underlying; and (c) Property/Business lntenuption Insurance written on an All Risk or Special Cause of Loss Form, including sprinkler leakage, at replacement cost value and with a replacement cost endorsement covering all of Tenant's business and trade fixtures, equipment, movable partitions, furniture, merchandise and other personal property within the Premises or the Property, including, without limitation, on the Roof Space ("Tenant's Property") and any Leasehold Improvements performed by or for the benefit of Tenant; (c) Workers' Compensation Insurance in amounts required by Law; and
(d) Employers Liability Coverage of at least Sper occurrence. Any company writing Tenant's Insurance shall have an A.M. Best rating of not less than A-Vlll. All Commercial General Liability Insurance policies shall name as additional insureds Landlord (or its successors and assignees), the managing agent for the Building (or any successor) and their respective members, principals, beneficiaries, partners, officers, directors, employees, and agents, and other designees of Landlord and its successors as the interest of such designees shall appear and shall be primary and noncontributory to any insurance which may be carried by Landlord. In addition, Landlord shall be named as a loss payee with respect to Property Insurance on the Leasehold Improvements. All policies of Tenant's Insurance shall contain endorsements that the insurer(s) shall give Landlord and its designees at least 30 days' advance written notice of any cancellation, termination, material change or lapse of insurance, unless such policy is promptly replaced by another policy in accordance with the foregoing requirements. Tenant shaJI provide Landlord with a certificate of insurance evidencing Tenant's Insurance prior to the earlier to occur of the Access Date or the date Tenant is provided with possession of the Premises, and thereafter as necessary to assure that Landlord always has current certificates evidencing Tenant's Insurance and the Additional Insured Endorsement CG 20 11 11 85 or its equivalent is required to be provided as soon as it is available. Landlord shall maintain so called All Risk property insurance on the Building at replacement cost value as reasonably estimated by Landlord and Commercial General Liability Insurance applicable to the Building, together with such other insurance coverage as Landlord, in its reasonable judgment, may elect to maintain.
Notwithstanding the foregoing, Tenant has advised Landlord that, as of the date of this Lease, Tenant is self-insured for its liability exposures. Tenant agrees to provide Landlord with a Certificate of Self Insurance. Any self-insured exposure shall be deemed to be an insured ri.sk under this Lease. The beneficiaries of such insurance shall be afforded no less insurance protection than if such self-insured portion was fully insured by an insurance company of the quality and caliber required hereunder (including, without
(00021765 5 l14
limitation, the protection of a legal defense, by attorneys reasonably acceptable to beneficiaries, and the payment of claims within the same time period that a third party insurance carrier of the quality and caliber otherwise required hereunder would have paid such claims). Waiver of subrogation pursuant hereunder shall be applicable to any self insured exposure. The self-insurance retention can be no greater than one percent (I%) of tangible net worth of Guarantor (as evidenced by the most recent annual financial statements of Guarantor delivered to and reasonably acceptable to Landlord), and the insurance required under this Lease must be maintained in excess of such self-insurance retention.
1S. Subrogation.
Landlord and Tenant hereby waive and shall cause their respective property insurance carriers to waive any and all rights of recovery, claims, actions or causes of action against the other for any loss or damage with respect to Tenant's Property, Leasehold Jmprovements, the Building, the Premises, or any contents thereof, including rights, claims, actions and causes of action based on negligence, which loss or damage is (or would have been, had the insurance required by this Lease been carried) covered by insurance. For the purposes of this waiver, any deductible with respect to a party's insurance shall be deemed covered by and recoverable by such party under valid and collectable policies of insurance.
| 16. | Casualty Damage. |
|---|---|
| 16.01 | Landlord and Tenant shall give prompt notice to the other party if all or any portion of the Premises becomes untenantable by fire or other casualty to the Premises (collectively a "Casualty"). In the event of such Casualty, either party, by written notice to the other within 30 days after the date of such Casualty, shall have the right to terminate this Lease if more than fifty percent (50%) of the Premises have been materially damaged and there is less than one (I) year of the Tenn (including, for purposes of this provision, any Renewal Tenn as to which Tenant has provided a Renewal Notice prior to such date) remaining on the date of the Casualty. If this Lease is so tenninated, (a) the Term shall expire upon the date set forth in such notice, which shall not be less than 30 days after such notice is given, and Tenant shall vacate the Premises and surrender the same to Landlord no later than the date set forth in the notice, (b) Tenant's liability for Rent shall cease as of the date of the damage, (c) any prepaid Rent for any period after the date of the damage and any overpayment of Operating Expenses be refunded by Landlord to Tenant, and (d) Landlord shall be entitled to collect all insurance proceeds of policies held by Landlord or Tenant providing coverage for Alterations and other improvements to the Premises (but not insurance proceeds for damage to Tenant's personal property and equipment). Landlord shall retain such proceeds from Tenant's insurance irrespective of whether Landlord performed or paid for such Alterations and improvements, whether by contribution, offset or otheiwise. |
| --- | --- |
| 16.02 | If this Lease is not terminated, Landlord shall promptly and diligently, subject to reasonable delays for insurance adjustment or other matters beyond Landlord's reasonable control, restore the Premises and Building in a good and workmanlike manner, in compliance with all applicable Laws, and in such manner as to minimize any |
| --- | --- |
10002116s s l IS
disturbance to Tenant's use (if any) of any undamaged portions of the Premises. Such restoration shall be to substantially the same condition that existed prior to the Casualty, eKcept for modifications required by applicable Laws and excluding restoration or replacement of Tenant's Property. In such case, Rent shall abate on a per diem basis during the period of reconstruction and repair.
| 16.03 | In addition to Landlord's rights under Section 16.0I, if the Premises are damaged such that a reputable general contractor selected by Landlord reasonably estimates in writing that the time to restore the Premises is greater than nine (9) months (subject to reasonable delays for insurance adjustment or other matters beyond Landlord's reasonable control) then, either Landlord or Tenant may give the other party a notice terminating this Lease not later than 30 days following the date such written estimate of restoration. If this Lease is so terminated, (a) the Term shall eKpire upon the date set forth in the terminating party's notice, which shall not be less than 30 days after such notice is given, and Tenant shall vacate the Premises and surrender the same to Landlord no later than the date set forth in the notice, (b) Tenant's liability for Rent shall cease as of the date of the damage, |
|---|
(c) any prepaid Rent for any period after the date of the damage and any overpayment of Operating fapenses shall be refunded by Landlord to Tenant, and (d) Landlord shall be entitled to collect all insurance proceeds of policies held by Landlord or Tenant providing coverage for Alterations and other improvements to the Premises (but not insurance proceeds for damage to Tenant's personal property and equipment). Landlord shall retain such proceeds from Tenant's insurance irrespective of whether Landlord perfonned or paid for such Alterations and improvements, whether by contribution, offset or otherwise.
| 16.04 | Notwithstanding anything set forth to the contrary in this Article 16, in the event a Casualty to the Premises and/or Building renders the Premises untenantable during the final 24 months of the Tenn and Tenant's inability to use the Premises is reasonably expected to continue until at least the earlier of the (a) Expiration Date, or (b) the 180th day after the date when such Casualty occurs, then either Landlord or Tenant may terminate this Lease by notice to the other party within 30 days after the occurrence of such Casualty and this Lease shall expire on the 30th day after the date of such notice. |
|---|---|
| 17. | Condemnation. |
| --- | --- |
Either party may terminate this Lease if any material part of the Premises or the Property is taken or condemned for any public or quasi-public use under Law, by eminent domain or private purchase in lieu thereof (a "Taking"). The terminating party shall provide written notice of termination to the other party within 45 days after it first receives notice of the Taking. The termination shall be effective as of the effective date of any order granting possession to, or vesting legal title in, the condemning authority. If this Lease is not terminated, Base Rent and Tenant's Proportionate Share shall be appropriately adjusted to account for any reduction in the square footage of the Premises. All compensation awarded for a Taking shall be the property of Landlord. The rights to receive compensation or proceeds are expressly waived by Tenant, however, Tenant may file a separate claim for Tenant's Property and Tenant's reasonable relocation expenses, provided the filing of the claim does not diminish the amount of Landlord's award. If only a part of the Premises is subject to a Taking and this Lease is not terminated, Landlord,
(00021765 s }16
with reasonable diligence, will restore the remaining portion of the Premises as nearly as practicable to the condition immediately prior to the Taking.
| 18. | Events of Default. |
|---|
In addition to any other default specifically described in this Lease, each of the following occurrences shall be a "Default": (a) Tenant's failure to pay any portion of Rent when due, if the failure continues for 5 days after written notice of default to Tenant ("Monetary Default''); (b) Tenant's failure (other than a Monetary Default) to comply with any term, provision, condition or covenant of this Lease, if the failure is not cured within 30 days after written notice to Tenant provided, however, if Tenant's failure to comply cannot reasonably be cured within 30 days, Tenant shall be allowed additional time as is reasonably necessary to cure the failure so long as Tenant begins the cure within 30 days and diligently pursues the cure to completion; (c) Tenant or any Guarantor becomes insolvent, makes a transfer in fraud of creditors, makes an assignment for the benefit of creditors, admits in writing its inability to pay its debts when due or forfeits or loses its right to conduct business; or (d) Tenant's interest in this Lease shall pass to any third party, whether by operation of Law or otherwise, except as expressly permitted under Article 11. All notices sent under this Section shall be in satisfaction of, and not in addition to, notice required by Law.
| 19. | Remedies. |
|---|
19.0I Upon Default, Landlord shall have the right to pursue any one or more of the following remedies:
| (a) | Landlord may serve a written notice of cancellation of this Lease upon Tenant, and this Lease and the Term shall end and expire as fully and completely, and Tenant shall then quit and surrender the Premises to Landlord, but Tenant shall remain liable for damages as provided in this Article 19. If Tenant fails to surrender the Premises, Landlord, in compliance with applicable Law, may enter upon and take possession of the Premises and remove Tenant, Tenants Property and any party occupying the Premises. Tenant shall pay Landlord, on demand, all past due Rent and other losses and damages Landlord suffers as a result of Tenant's Default, including, without limitation, all Costs of Reletting and any deficiency that may arise from reletting or the failure to relet the Premises. "Costs of Reletting" shall include all reasonable costs and expenses incurred by Landlord in reletting or attempting to relet the Premises, including, without limitation, legal fees, brokerage commissions, and the cost of alterations and the value of other concessions or allowances granted to a new tenant. |
|---|---|
| (b) | Terminate Tenant's right to possession of the Premises and, in compliance with applicable Law, remove Tenant, Tenant's Property and any parties occupying the Premises. Landlord may relet all or any part of the Premises, without notice to Tenant, for such period of time and on such terms and conditions (which may include concessions, free rent and work allowances) as Landlord in its absolute discretion shall determine. Landlord may collect and receive all rents and other income from the reletting. Tenant shall pay Landlord on demand all past due Rent, all Costs of Reletting and any deficiency arising from the |
| --- | --- |
100021765 .s l17
reletting or failure to relet the Premises. The re-entry or taking of possession of the Premises shall not be construed as an election by Landlord to tenninate this Lease.
| 19.02 | In lieu of calculating damages under Section 19.01, Landlord may elect to receive as damages the sum of (a) all Rent accrued through the date of termination of this Lease or Tenant's right to possession, and (b) an amount equal to the total Rent that Tenant would have been required to pay for the remainder of the Term discounted to present value at 3%, minus the then present fair rental value of the Premises for the remainder of the Tenn, similarly discounted, after deducting all anticipated Costs of Reletting. |
|---|---|
| 19.03 | If Tenant is in Default of any of its non-monetary obligations under the Lease, Landlord shall have the right to perform such obligations. Tenant shall reimburse Landlord for the cost of such performance upon demand together with an administrative charge equal to l 0% of the cost of the work performed by Landlord. The repossession or re-entering of alI or any part of the Premises shall not relieve Tenant of its liabilities and obligations under this Lease. No right or remedy of Landlord shall be exclusive of any other right or remedy. Each right and remedy shall be cumulative and in addition to any other right and remedy now or subsequently available to Landlord at Law or in equity. |
| --- | --- |
| 20. | Limitation of Liability. |
| --- | --- |
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS LEASE, THE LIABILITYOF LANDLORD(AND OF ANY SUCCESSOR LANDLORD) SHALL BE LIMITED TO LANDLORD'S (AND ANY SUCCESSOR TO LANDLORD) INTEREST IN THE PROPERTY. TENANT SHA.LL LOOK SOLELY TO LANDLORD'S INTEREST IN THE PROPERTY FOR THE RECOVERY OF ANY JUDGMENT OR AWARD AGAINST LANDLORD OR ANY LANDLORD RELATED PARTY.NEITHER LANDLORD NOR ANY LANDLORD RELATED PARTY SHALL BE PERSONALLY LIABLE FOR ANY JUDGMENT OR DEFICIENCY, AND IN NO EVENT SHALL LANDLORD OR ANY LANDLORD RELATED PARTY BE LIABLE TO TENANT FOR ANY LOST PROFIT, DAMAGE TO OR LOSS OF BUSINESS OR ANY FORM OF SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGE. BEFORE FILING SUIT FOR AN ALLEGED DEFAULT BY LANDLORD, TENANT SHALL GIVE LANDLORD AND THE MORTGAGEE(S) WHOM TENANT HAS BEEN NOTIFIED HOLD MORTGAGES, NOTICE AND REASONABLE TIME (NOT TO EXCEED THIRTY (30) DAYS) TO CURE THE ALLEGED DEFAULT.
| 21. | Intentionally Omitted. |
|---|---|
| 22. | Holding Over. |
| --- | --- |
If Tenant fails to surrender all or any part of the Premises at the termination of this Lease, occupancy of the Premises after tennination shall be that of a tenancy at sufferance. Tenant's occupancy shall be subject to all the terms and provisions of this Lease. Tenant shall pay an amount (on a per month basis without reduction for partial months during the holdover) equal to: (a) for the first three (3) months of the holdover period, the greater of:
| (i) | the fair market rent.al value for the Premises as reasonably detennined by Landlord (but |
|---|
not to exceed 125% of the Rent payable under this Lease as of the termination of this
!00021765 s I18
Lease), or (ii) the Base Rent and Additional Rent payable under this Lease as of the Expiration Date, and (b) commencing with the fourth (4th) month of such holdover, 150% of the Base Rent and Additional Rent payable under this Lease as of the Expiration Date. Tenant shall be liable to Landlord for (i) any payment or rent concession which Landlord may be required to make to any tenant obtained by Landlord for all or any part of the Premises (a "New Tenant") in order to induce such New Tenant not to terminate its lease by reason of the holding-over by Tenant, and (ii) the loss of the benefit of the bargain if any New Tenant shall terminate its lease by reason of the holding over by Tenant; and (c) indemnify Landlord against all claims for damages by any New Tenant. No holdover by Tenant or payment by Tenant after the termination of this Lease shall be construed to extend the Term or prevent Landlord from immediate recovery of possession of the Premises by summary proceedings or otherwise.
| 23. | Subordination to Mortgages; Estoppel Certificate. |
|---|---|
| 23.01 | Tenant accepts this Lease subject and subordinate to any mortgage(s), deed(s} of trust, ground leasc(s} or other lien(s) now or subsequently arising upon the Premises, the Building or the Property, and to renewals, modifications, refinancings and extensions thereof(collectively referred to as a "Mortgage''); provided, however, so long as Tenant is not in Default, Tenant's rights under this Lease shall not be disturbed. The party having the benefit of a Mortgage shall be referred to as a "Mortgagee". This clause shall be self operative, but upon request from a Mortgagee, Tenant shall execute a commercially reasonable subordination agreement in favor of the Mortgagee. As an alternative, a Mortgagee shall have the right at any time to subordinate its Mortgage to this Lease. Upon the request of Landlord or any Mortgagee, Tenant, shall attom to any successor to Landlord's interest in this Lease. |
| --- | --- |
| 23.02 | Landlord agrees to use commercially reasonable efforts to deliver a subordination, non disturbance and attomment agreement ("SNDA") from the holder of any current or future Mortgage encumbering the Premises. Such SNDA shall be on terms acceptable to both Tenant and such Mortgagee, provided, however, that Tenant agrees to execute and deliver a commercially reasonable SNDA approved by such Mortgagee. Landlord shall have no liability, and this Lease shall not be affected in any way, in the event that Tenant and such Mortgagee do not execute a SNDA for any reason whatsoever, unless Landlord shall fail to use commercially reasonable efforts. Notwithstanding anything to the contrary contained in this Lease, the subordination of this Lease to the lien of any future Mortgage shall be conditioned on Tenant receiving (at Landlord's cost and expense except that Tenant shall pay its own legal fees and disbursements in connection therewith), a SNDA from the Mortgagee containing reasonable and customary terms. Until such time as a SNDA has been delivered to Tenant, this Lease shall not be subject or subordinate to the Mortgage. |
| --- | --- |
| 23.03 | Tenant shall within IO days after receipt of a written request from the Landlord, execute and deliver a commercially reasonable estoppel certificate to those parties as are reasonably requested by Landlord, including a Mortgagee or prospective purchaser of the Building and/or Property. Without limitation, such estoppel certificate may include a certification as to the status of this Lease (to the actual knowledge of the executing |
| --- | --- |
!000217655 '19
| 24. | Termination Right of Tenant. |
|---|
$-
Provided that at the time of delivery of the Termination Notice (hereinafter defined) and on the Tennination Date (hereinafter defined), Tenant is not in Default under this Lease, Tenant shall have the right to terminate this Lease effective as of January 31, 2026 (the "Termination Date") upon the following conditions: (a) Tenant shall deliver to Landlord written notice (the "Termination Notice") not later than January 31, 2025 advising Landlord of its election to terminate this Lease effective on the Termination Date; (b)
Tenant shall pay the sum ofto Landlord by wire transfer to an account
designated by Landlord no later than January 31, 202S; and (c) Tenant surrenders vacant possession of the Premises, free of subtenants and the rights of others to occupancy, on or before the Tennination Date in accordance with the tenns of this Lease. Provided Tenant is not then in Default on the Tennination Date and provided the conditions in Section
24.0I hereinabove are complied with, this Lease shall terminate and expire on the
Tennination Date as if the Termination Date were the Expiration Date.
| 25. | Intentionally Omitted. |
|---|---|
| 26. | Notice. |
| --- | --- |
Except as otherwise expressly provided in this Lease, any consents, notices, demands, requests, approvals or other communications given under this Lease shall be in writing and delivered by hand or sent by registered or certified mail with return receipt requested, or sent by overnight or same day courier service at the party's respective addresses set forth in the Basic Lease lofonnation. Each notice shall be deemed to have been received on the earlier to occur of actual delivery or the date on which delivery is refused or, if Tenant has vacated the Premises without providing a new address, 3 days after notice is deposited in the U.S. mail or with a courier service in the manner described above. Either party may, at any time, change its address (other than to a post office box address) by giving the other party written notice of the new address.
| 27. | Surrender of Premises; Tenant's Protected Item.!. |
|---|---|
| 27.01 | At the tennination of this Lease or Tenant's right of possession, Tenant shall remove Tenant's Property from the Premises, and quit and surrender the Premises to Landlord, vacant, broom clean, and in good order, condition and repair, ordinary wear and tear and damage which Landlord is obligated to repair hereunder excepted. If Tenant fails to remove any of Tenant's Property, Landlord may deem all or any part of Tenant's Property to be abandoned and, at Tenant's sole cost and expense, shall be entitled (but not obligated) to remove Tenant's Property. Landlord shall not be responsible for the value, preservation or safekeeping of Tenant's Property, except for Landlord's failure to comply with the terms of Section 27.02 with respect to the Protected Items. Tenant shall pay Landlord, upon demand. the expenses and storage charges incurred. |
| --- | --- |
(000'2l76SS J20
| 27.02 | Tenant hereby advises Landlord that, at the tennination of this Lease or Tenant's right of possession, Landlord shall use reasonable efforts to handle computer servers, desktop stations, laptops or hard copy files which could reasonably be expected to contain infonnation of Tenant's customers (the "Protected Items") in accordance with this Section. Landlord shall use reasonable efforts to: (a) advise Tenant in writing of the Protected Items, (b) store such Protected Items for a period of not less than 90 days from |
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the date of the tennination of this Lease or Tenant's right of possession. If Tenant does not take possession of the Protected Items within such 90-day period, Landlord has the right to dispose of such Protected Items. Landlord shall not be responsible for the value, preservation or safekeeping of the Protected Items, and Tenant shall pay Landlord, upon demand, the expenses and storage charges incurred.
| 28. | Option to Renew. |
|---|---|
| 28.01 | Provided that as of the date of the Renewal Notice and the Expiration Date (as same may be extended by the exercise of the First Renewal Option) (a) this Lease shall be in full force and effect, and (b) there shall not be existin& a Default under this Lease which is continuing after notice by Landlord to Tenant and the expiration of the applicable cure period, then Tenant shall have two (2) consecutive options to extend the Term of this Lease for the entire Premises (the "First Renewal Option" and "Second Renewal Option"; collectively, the "Renewal Options") for a period of two (2) years each (the "First Renewal Term" and the "Second Renewal Term"; collectively, the "Renewal Terms"). The First Renewal Option shall be exercisable by written notice (the "Renewal Notice") to Landlord given not later than August 31, 2027. In the event that Tenant has exercised the First Renewal Option in accordance with this Article, the Second Renewal Option shall be exercisable by Renewal Notice to Landlord given not less than August 3I, 2029. The First Renewal Term and Second Renewal Term shall constitute extensions of the initial Term of this Lease and shall be upon all of the same terms and conditions as the initial Tenn, except that (i) there shall be no further option to renew the Tenn of this Lease and (ii) the Base Rent for the First Renewal Tenn and the Second Renewal Term shall be payable at a rate per annum equal the Market Rate (as defined herein) of the Premises as of the first day of each Renewal Term. The "Market Rate" shall mean the prevailing fair market rental that a tenant would pay upon extending or renewing its existing lease for space similar to the Premises in the Portland, Oregon metropolitan area ("Comparable Space"), based on all available data including comparable transactions for Comparable Space consummated within the prior twelve (12) month period and taking into consideration the size, location, accessibility, quality, condition, and zoning of the Building as compared to Comparable Space, the term of the lease, any appropriate rent inducements or concessions included, and other relevant factors. During the Renewal Terms, all Additional Rent that Tenant is obligated to pay under this Lease during the initial Term hereof for Operating Expenses shall continue without intemiption, it being the intention of the parties hereto that the Renewal Terms shall be deemed a part of and |
| --- | --- |
continuation of the initial Tenn of this Lease.
| 28.02 | Within four (4) months following receipt of Tenant's Renewal Notice, Landlord shall |
|---|
advise Tenant in writing of its detennination of the Market Rate and basis therefor. If Tenant shall dispute Landlord's determination of the Market Rate, Tenant shall give notice to Landlord of such dispute within twenty (20) days of Tenant's receipt of Land.lord's
100021165 s I
notice of Landlord's calculation of the Market Rate, and the parties shall commence negotiations to agree upon the Market Rate. If Landlord and Tenant are unable to reach agreement within thirty (30) days from the date of Tenant's notice of dispute, the Market Rate shall bedetennined as follows:
(a)The Market Rate shall be detennined by a single arbitrator selected by mutual agreement of the parties. The arbitrator shall be an impartial independent real estate broker having not less than then 15 years• experience related to the leasing of commercial office space in office buildings comparable to the Building (a "Qualified Broker"), If the parties cannot agree on an arbitrator, then within a second period of ten ( I 0) days, each party shall select a Qualified Broker and, within ten ( I 0) days thereafter, the two Qualified Brokers shall select a third Qualified Broker and the third Qualified Broker shall be the sole arbitrator. If one party shall fail to select a Qualified Broker within the second ten ( I0) day period, then the Qualified Broker chosen by the other party shall be the sole arbitrator.
(b)Within 15 days following the appointment of the arbitrator. Landlord and Tenant shall attend a hearing before the arbitrator at which each party shall submit a report setting forth its determination of the Market Rate of the Premises as submitted to the other party under paragraph (a) above, together with such evidence as each such party shall deem relevant to support its detennination. If either party fails to submit its determination, then the arbitrator shall select the detennination that was submitted. The arbitrator shall, within 30 days following such hearing and submission of evidence,
render his or her decision by selecting the detennination of fair market rental rate submitted by either Landlord or Tenant which, in the judgment of the arbitrator, most nearly reflects the fair market rental rate of the Premises for the Renewal Tenn, and such determination shall be final and binding. The arbitrator shall have no power or authority to select any fair market rental rate other than a fair market rental rate submitted by Landlord or Tenant, and the decision of the arbitrator shall be final and binding upon Landlord and Tenant. If the fair market rental rate shall not have been determined by the Renewal Tenn Commencement Date, Tenant shall pay Base Rent in the amount equal to the monthly rent due during the last year of the initial Term or prior Renewal Term until the Market Rate shall have been determined by the arbitrator. Upon any such determination, the Base Rent for the Premises shall be retroactively adjusted to the Renewal Term Commencement Date between the parties.
| (c) | The fees of the arbitrator and the expenses of the arbitration proceeding shall be paid by the party whose estimate is not selected. Each party shall pay the fees of its respective counsel and the fees of any witness or expert retained by that party. |
|---|---|
| 28.03 | Upon request by Landlord or Tenant following the commencement date for the Renewal Term, Landlord and Tenant will mutually execute, acknowledge and deliver an amendment to this Lease setting forth the Base Rent for the Renewal Term, the Renewal Term Commencement Date, and the Expiration Date, as extended. The failure of either party to execute and deliver such an amendment shall not affect the rights or the parties under this Lease. If Tenant shall duly and timely exercise Tenant's right to the Renewal Term pursuant to the terms hereof, all of the applicable references in this Lease to the Tenn shall be deemed to include the Renewal Term. |
| --- | --- |
(000!2176SS l 22
| 28.04 | It is an express condition of the Renewal Option granted to Tenant pursuant to the terms of this Article that time shall be of the essence with respect to Tenant's giving of the Renewal Notice within the period above provided. |
|---|---|
| 28.05 | The Renewal Option shall automatically terminate and become null, void and of no force and effect upon the earlier to occur of (a) the expiration or termination of this Lease by Landlord or pursuant to law, (b) the termination or surrender of Tenant's right to possession of the Premises or any portion thereof, or (c) the failure of Tenant to timely and properly exercise the Renewal Option. |
| --- | --- |
| 29. | Confidentiality. |
| --- | --- |
Tenant shall keep the provisions of this Lease confidential, and shall instruct its agents, employees, attorneys and consultants to keep such provisions confidential, but the foregoing shall not restrict Tenant's right to disclose such provisions as reasonably required in connection with the conduct of its business to attorneys, accountants and other professionals or as Tenant may otherwise be compelled by Law to disclose. Tenant agrees that it shaJI not issue any press release with respect to or otherwise publicize this Lease, and Tenant shall require its agents and consultants to similarly refrain from publicizing the terms hereof.
| 30. | Miscellaneous. |
|---|
30.0I This Lease shall be interpreted and enforced in accordance with the Laws of the State of Oregon.
| 30.02 | Landlord and Tenant hereby irrevocably consent to the jurisdiction and proper venue of the State and County where the Property is located. |
|---|---|
| 30.03 | If any term or provision of this Lease shall to any extent be void or unenforceable, the remainder of this Lease shall not be affected. |
| --- | --- |
| 30.04 | If there is more than one Tenant or if Tenant is comprised of more than one party or entity, the obligations imposed upon Tenant shall be joint and several obligations of all the parties and entities, and requests or demands from any one person or entity comprising Tenant shall be deemed to have been made by all such persons or entities. Notices to any one person or entity shall be deemed to have been given to all persons and entities. |
| --- | --- |
| 30.05 | Tenant represents and warrants to Landlord that (a) each individual executing this Lease on behalf of Tenant is authorized to do so on behalf of Tenant and (b) that Tenant is not, and the entities or individuals constituting Tenant or which may own or control Tenant or which may be owned or controlled by Tenant are not, (a) in violation of any laws relating to terrorism or money laundering, or (b) among the individuals or entities identified on any list compiled pursuant to Executive Order 13224 for the purpose of identifying suspected terrorists or on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control at its official website http//www.treas.gov/ofac/tllsdn.pdf or any replacement website or other replacement official publication of such list. Landlord represents and warrants to Tenant that (a) each individual executing this Lease on behalf of Landlord is authorized to do so on behalf of Landlord and (b) that Landlord is |
| --- | --- |
(00021765 s I23
not, and the entities or individuals constituting Landlord or which may own or control Landlord or which may be owned or controlled by Landlord, are not, (a) in violation of any laws relating to terrorism or money laundering, or (b) among the individuals or entities identified on any list compiled pursuant to Executive Order 13224 for the purpose of identifying suspected terrorists or on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control at its official website http//www.treas.gov/ofac/tnsdn.pdf or any replacement website or other replacement official publication of such list.
| 30.06 | If either party institutes a suit against the other for violation of or to enforce any covenant, tenn or condition of this Lease, the prevailing party shall be entitled to reimbursement of all of its costs and expenses, including, without limitation, reasonable attorneys' fees. |
|---|---|
| 30.07 | Landlord and Tenant hereby waive any right to trial by jury in any proceeding based upon a breach of this Lease. No failure by either party to declare a default immediately upon its occurrence, nor any delay by either party in taking action for a default, nor Landlord's acceptance of Rent with knowledge of a default by Tenant, shall constitute a waiver of the default, nor shall it constitute an estoppel. |
| --- | --- |
| 30.08 | Whenever a period of time is prescribed for the taking of an action by Landlord or Tenant (other than the payment of the Rent or any other amount due hereunder), the period of time for the perfonnance of such action shall be extended by the number of days that the performance is actually delayed due to strikes, acts of God, shortages of labor or materials, |
| --- | --- |
war, terrorist acts, civil disturbances and other causes beyond the reasonable control of the performing party other than lack of funds ("Force Majeure").
| 30.09 | Landlord shall have the right to transfer and assign, in whole or in part, all of its rights and obligations under this Lease and in the Building and Property. Upon transfer Landlord shall be released from any further obligations hereunder and Tenant agrees to look solely to the successor in interest of Landlord for the perfonnance of such obligations, provided that, any successor pursuant to a voluntary, third party transfer (but not as part of an involuntary transfer resulting from a foreclosure or deed in lieu thereof) shall have assumed Landlord's obligations under this Lease. |
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| 30.10 | Landlord has delivered a copy of this Lease to Tenant for Tenant's review only and the delivery of it does not constitute an offer to Tenant or an option. |
| --- | --- |
| 30.11 | Landlord and Tenant each acknowledge and agree that Broker represented Landlord and Tenant in connection with this Lease. Tenant represents that it has dealt with, and only with Broker, and no other real estate brokers, in connection with this Lease. Tenant shall indemnify and hold Landlord and the Landlord Related Parties hannless from all claims of any brokers, other than Broker, claiming to have represented Tenant in connection with this Lease. Landlord shall indemnify and hold Tenant and the Tenant Related Parties harmless from all claims of any brokers claiming to have represented Landlord in connection with this Lease. Landlord agrees to pay brokerage commissions to the Broker in accordance with their separate written commission agreement. |
| --- | --- |
(00021765 5 )24
| 30.12 | Tenant may peacefully have, hold and enjoy the Premises, subject to the terms of this Lease, provided Tenant pays the Rent and fully performs all of its covenants and agreements. This covenant shall be binding upon Landlord and its successors only during its or their respective periods of ownership of the Building. |
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| 30.13 | This Lease does not grant any rights to light or air over or about the Building. Landlord excepts and reserves exclusively to itself any and all rights not specifically granted to Tenant under this Lease. |
| --- | --- |
| 30.14 | This Lease constitutes the entire agreement between the parties and supersedes all prior agreements and understandings related to the Premises, including all lease proposals, letters of intent and other documents. Neither party is relying upon any warranty, statement or representation not contained in this Lease. This Lease may be modified only by a written agreement signed by an authorized representative of Landlord and Tenant. |
| --- | --- |
[No Further Text on this Page; Signature Page Follows)
100021765 s I25
Landlord and Tenant have executed this Lease as of the day and year first above written.
LANDLORD:
PD OFFICE OWNER 11, L.P., a Delaware
limited partnership
By: PD Office Owner 11GP, L.L.C., its
General Pa
TENANT:
FISERV SOLUTIONS, LLC, a Wisconsin limited
liability company
By:
Name:
Title: V Global Real Estat•---
Workplace Solutions
100021765 s I
EXHIBIT A
PLAN OF PREMISES/BUILDING AND PROJECT
All areas, dimensions and locations are approximate, and any physical conditions indicated may not exist as shown.
10002116s s l
Walking& running traUs
SW Stratus St
@
Tennis & voll11y
ball courts
Koll Center Wetlands Park
0
ll90.5
(J
9205
North
(j)
870.5
8700
L]
CJ
8770
EXHIBIT B
WORK LETTER
Capitalized terms not otherwise defined in this Exhibit B shall have the meaning given to such tenns in the Lease of which this Exhibit Bis a part.
Provided that Tenant is not then in Default under the Lease, Landlord shall pay Tenant for (a) the design and construction costs and expenses incurred in connection with alterations and improvements made in connection with Tenant's initial occupancy of the Premises ("Tenant Work"), but in no event to exceed the Landlord Allowance. Landlord agrees that Tenant may use any reputable, licensed architect for preparation of the test fit plans and full plans and specifications, including Landlord's architect for the Property, LRS Architects. The Landlord Allowance may be utilized to pay for the hard and soft costs of Tenant Work, Tenant's moving costs, low voltage wiring and telecommunications cabling. but no portion of the Landlord Allowance may be used for business and other equipment, furniture, trade fixtures, signage and/or personal property. Landlord agrees thatof the Landlord Allowance may be utilized by Tenant as a credit against monthly Base Rent and Additional Rent. Any portion of the Landlord Allowance that Tenant fails to requisition or utilize as a rental credit as set forth above within eighteen (18) months from the Access Date shall be forfeited by Tenant.
| (a) | Tenant shall manage the construction of the Tenant Work in the Premises pursuant to plans prepared by Tenant's architect and approved by Landlord, which approval shall not be unreasonably withheld, conditioned or delayed. Tenant shall be solely responsible for the timely preparation and submission to Landlord of the final architectural, electrical and |
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mechanical construction drawings, plans and specifications necessary to construct the Tenant Work.
| (b) | Tenant shall enter into a direct contract for the Tenant Work with a general contractor selected by Tenant and approved by Landlord (which approval shall not be unreasonably withheld, conditioned or delayed) following Tenant's bidding process. Landlord's designated electrical contractor, mechanical/HYAC contractor and life safety contractor shall be permitted to bid on the electrical, mechanical/HY AC and life safety portions of the Tenant Work (respectively). In addition, Landlord shall have the right to approve of any subcontractors used in connection with the Tenant Work (which approval shall not be unreasonably withheld, conditioned or delayed). Landlord's supervision of any work for or on behalf of Tenant shall not be deemed a representation by Landlord that the plans or the revisions thereto comply with applicable insurance requirements or applicable Laws, or that the improvements constructed in accordance with the plans and any revisions thereto will be adequate for |
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Tenant's use, it being agreed that Tenant shall be responsible for all
elements of the design of the Tenant Work and any changes thereto
100021165 s I
(including, without limitation, compliance with applicable Laws, functionality of design, the structural integrity of the design, the configuration of the Premises and the placement of Tenant's furniture, appliances and equipment). Accordingly, notwithstanding Landlord's review and approval of the plans, Landlord shall have no responsibility or liability whatsoever for any errors or omissions contained in the plans, or to verify dimensions or conditions, or for the quality, design or compliance with applicable Laws of any improvements described therein or constructed in Premises, and Tenant hereby waives all claims against Landlord relating to, or arising out of the construction of the Tenant Work, unless caused by the gross negligence or willful misconduct of Landlord.
| (c) | Subject to the Landlord Allowance, Tenant shall be responsible for the cost of the Tenant Work, including the cost of preparing the plans and pennits, plus any applicable state sales or use tax, if any. Tenant agrees that Tenant shall comply with its obligations under the Lease with respect to construction and/or alterations of the Premises. Tenant shall make no changes or modifications to the plans or submit any change orders without the prior written approval of Landlord (which approval shall not be unreasonably withheld, conditioned or delayed) and otherwise in accordance with the Lease. |
|---|---|
| (d) | The Landlord Allowance may be utilized by Tenant in connection with the construction and/or alteration of the Tenant Work, as provided above, to pay for (i) "hard cost expenses" (as hereinafter defined) and (ii) "soft cost expenses" (as hereinafter defined). Tenant shall be entitled to request disbursement of portions of the Landlord Allowance from time to time, but no more often than monthly, in order to pay contractors, vendors and suppliers directly for portions of the Tenant Work completed. Landlord agrees to disburse the applicable portions of the Landlord Allowance within thirty (30) days after receipt and approval of a completed requisition for payment ("Tenant Requisition") in a fonn issued by the American Institute of Architects (A[A) or otheiwise approved by Landlord, certified and sworn to by Tenant and Tenant's architect, together with invoices, waivers of liens and releases from contractors, vendors and suppliers as Landlord reasonably requires. In each instance Tenant shall receive proof of payment. |
| --- | --- |
| (e) | Each Tenant Requisition shall certify (W) the amount being requested allocated as follows: (i) the amount being requested with respect to "soft cost expenses" (which shall be defined herein to mean costs, fees, and charges for pennits and licenses and any architectural, engineering, design and construction management and consulting fees or similar fees paid or incurred in connection with the Tenant Work), (ii) the aggregate amount of soft cost expenses theretofore paid, (iii) the amount being requested |
| --- | --- |
with respect to "hard cost expenses" (which shall be defined herein to
100021765 s I
mean costs and expenses of labor, materials and supplies paid or incurred in connection with the Tenant Work), (iv) the aggregate amount of the hard cost expenses theretofore paid; (X) the approximate percentage of completion attained with respect to each item of the Tenant Work upon Landlord's written request; (Y) the cost incurred with respect to such item; and (Z) that the portion of the Tenant Work theretofore completed has been completed in a good and workmanlike manner, to the satisfaction of Tenant's architect, substantially in accordance with the plans and in compliance with all Laws and permits. So long as Tenant shall not then be in default under the Lease beyond any applicable notice and cure period, payment shall be made for work completed as certified in Tenant's request and the Tenant Requisition, which Tenant Requisition shall reflect a five (5%) percent or greater "holdback" until such contractor's portion of the Tenant Work, including punch list items shall have been finally completed. So long as Tenant shall not then be in default under the Lease, beyond any applicable notice and cure period (if any), within thirty (30) days following the last to occur of: (A) Tenant's request for payment of the final installment of the Landlord Allowance, (B) final completion of the Tenant Work in accordance with the provisions of this Lease, (C) the certification of Tenant's architect that the Tenant Work has been completed in a good and workmanlike manner, to the satisfaction of Tenant's architect, substantially in accordance with the approved plans and in compliance with all Laws and permits, (D) delivery by Tenant to Landlord of waivers of lien and releases from all contractors desiring final payment for all work performed by such contractors and (E) delivery by Tenant to Landlord of"as built" drawings (if available) with respect to the Tenant Work, the balance of the Landlord Allowance shall be disbursed.
| (f) | Landlord shall be entitled to deduct from the Landlord Allowance a construction management fee for Landlord's oversight of the Tenant Work in an amount equal to the actual cost incurred by Landlord for such construction management, but not to exceed 1.0% of the cost of Tenant Work. |
|---|---|
| (g) | Provided Tenant is not in Default under the Lease, Landlord agrees to provide Tenant with the Test Fit Allowance to be applied toward the cost of "test fit" plans for the Premises. The Test Fit Allowance shall be paid to Tenant (or to the architect directly) within thirty (30) days of submission to Landlord of a written request therefor and a detailed invoice. |
| --- | --- |
(000217655 I
EXHIBITC
OPERATING EXPENSES AND REAL PROPERTY TAXES
| 1. | Operating Expenses. Tenant shall pay Tenant's Proportionate Share of the total amount of Operating Expenses (defined below) for each calendar year during the Term. |
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1.01"Operating Expenses" as used in the Lease shall include all costs and expenses related to the ownership. management, operation, maintenance, replacement, improvement and repair of the Premises, Building, Project and/or Property, or any part thereof, incurred by Landlord including but not limited to: (a) costs and expenses of Property supplies, materials, labor, equipment, and tools; (b) Utility and Service Costs (as further described in Section L.03 below), security, janitorial, trash removal, and all applicable service and maintenance agreements; (c) Property related legal, accounting, and consulting fees, costs and expenses, including but not limited to the cost of contests of Real Property Taxes; (as further described in Section 1.02 below); (d) Insurance Premiums for all policies deemed necessary by Landlord and/or its lenders, and all deductible amounts under such policies (as further described in Section 1.04 below); (e) costs and expenses of operating, maintaining, and repairing the Property, including but not limited to all interior areas and also driving, parking, loading, and other paved or unpaved areas (including but not limited to, resurfacing and striping and any snow and ice removal Landlord elects to conduct), landscaped areas (including but not limited to, tree trimming), building exteriors (including but not limited to, painting and roof work), signs and directories, and lighting; (f) costs of capital improvements and replacements (including but not limited to, all financing costs and interest charges) amortized over the useful life of the capital improvement or replacement reasonably determined by Landlord; (g) costs and expenses of compensation (including but not limited to, any payroll taxes, worker's compensation for employees, and customary employee benefits) of all persons, including independent contractors, who perfonn duties, or render services on behalf of, or in connection with the Property, or any part thereof, including but not limited to, Property operations, maintenance, repair, and rehabilitation; (h) Property management fees (not to exceed 2.5% of gross revenues) and the cost of providing space used by the Property manager; and (i) Real Property Taxes.
Notwithstanding the foregoing, Operating Expenses shall not include: (i) depreciation charges;
(ii)interest and principal payments, loan fees, penalties, attorneys' fees and other costs relating to any mortgages or loans relating to the Project; (iii) ground rental payments; (iv) advertising and promotional expenses, real estate brokerage and leasing commission; (v) legal fees for the negotiation or enforcement of leases; (vi) cost of repair from a Casualty or taking; (vii) the cost of any repair, replacement or other expense which is the Landlord's responsibility to pay under this Lease; (viii) cost of altering the space of other tenants or amounts expended by Landlord to perform the delinquent or defaulted obligations of other tenants of the Project; (ix) costs and expenses of any insurance which is not required or permitted to be carried by Landlord pursuant to the provisions of this Lease and is not customarily maintained by landlords of office buildings in the Beaverton market; (x) costs, expenses, fines or penalties due to Landlord's violations of any governmental law or rule; (xi) income, excess profit or corporate capital stock tax; (xii) costs and expenses for which Landlord has been reimbursed by insurance, another service or third party; (xiii) Landlord's general overhead and administrative expenses (including, without
(00021765 5 )
limitation, salaries and expenses of Landlord's executive officers); and (xiv) costs related to
maintaining Landlord's existence as a limited partnership or other entity.
1.02"Real Property Taxes" shall include any fee, license fee, tax, levy, charge, or assessment (hereinafter individually and/or collectively referred to as "Tax") imposed by any authority having the direct or indirect power to tax and where such Tax is imposed against the Property, or any part thereof. or Landlord in connection with its ownership or operation of the Property, including but not limited to: (a) any Tax on rent or Tax against Landlord's business of leasing the Property; (b) any Tax by any authority for services or maintenance provided to the Property, or any part thereof, including but not limited to, fire protection, streets, sidewalks, and utilities; (c) any Tax on real estate or personal property levied with respect to the Property, or any part thereof, and any fixtures and equipment and other property used in connection with the Property; (d) any Tax based upon a reassessment of the Property due to a change in ownership or transfer of all or part of Landlord's interest in the Property; and (e) any Tax replacing, substituting for, or in addition to any Tax previously included in this definition. Real Property Taxes do not include Landlord's federal or state net income taxes or any franchise, capital, stock, transfer, inheritance or income (other than rental income) tax imposed on Landlord. In case of special taxes or assessments which may be payable in installments, only the amount of each installment and interest paid thereon paid during a calendar year shall be included in Real Property Taxes for such year.
Landlord agrees, in the event Landlord does not institute an action to reduce Real Estate Taxes and/or the assessment of the Property for Real Estate Tax purposes ("RET Action"), that Tenant has the right to institute such RET Action, at Tenant's sole cost and expense. Upon written request of Tenant, Landlord agrees to advise Tenant as to whether such RET Action has been commenced or if Landlord intends to commence such RET Action. Such RET Action shall be commenced in the name of Tenant, unless such RET Action can only be commenced in the name of Landlord, in which event Tenant has the right to commence such RET Action on behalf of Landlord. Landlord agrees to execute such documents and instruments necessary to commence and prosecute the RET Action. Tenant agrees to provide Landlord with copies of all documents and instruments at least three (3) business days prior to filing in the RET Action. A RET Action commenced by Tenant, and any settlement of any RET Action, cannot affect (a) the Real Estate Taxes or the assessment of the Property for period before January I, 2018 or after December 31, 2028 (or December 31, 2030 in the event the First Renewal Option is exercised, or December 31, 2032 in the event the Second Renewal Option is exercised).
| 1.03 | "Utility and Service Costs" shall include all Landlord incurred utility and service costs and expenses including but not limited to costs related to water and plumbing, electricity, gas, lighting, steam, sewer, waste disposal, and HVAC, and all costs related to plumbing, mechanical. electrical, elevator, HYAC, and other systems. |
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| 1.04 | "Insurance Premiums" shall include all insurance premiums for all insurance policies maintained by Landlord from time to time related to the Property. |
| --- | --- |
| 1.05 | Throughout the Term, Tenant will pay as Additional Rent its Proportionate Share (of the Project, Property and/or Building, as designated from time to time by Landlord) of Operating Expenses which will be equal to each calendar year's total Operating Expenses multiplied by |
| --- | --- |
(000217655 l
Tenant's Proportionate Share. Estimated payments shall be made monthly on or before the first day of each calendar month each in the amount of Landlord's then current estimate as outlined below. Tenant's Proportionate Share will be prorated for partial months. Landlord agrees that the cost of capital improvements and replacements shall not be included in Tenant's Proportionate Share of Operating Expenses for the period from the Commencement Date through and including August 31, 2019.
| 1.06 | Tenant's Proportionate Share of Operating Expenses shall be determined and paid as follows: |
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(a)Tenant's Operating Expense Estimates: As soon as is practical following the end of each calendar year, but not later than May l, Landlord will provide Tenant with a determination of: (a) Tenant's annual share of estimated Operating Expenses for the then current calendar year; (b) Tenant's monthly Operating Expense estimate for the then current year; and,
(c) Tenant's retroactive estimate correction billing (for the period of January I^st^ through the date immediately prior to the commencement date of Tenant's new monthly Operating Expense estimate) for the difference between Tenant's new and previously billed monthly Operating Expense estimates for the then current year.
(b) Tenant's Proportionate Share of Actual Annual Operating Expenses: Each year, Landlord will provide Tenant with a detennination reflecting the total Operating Expenses for the previous calendar year. If the total of Tenant's Operating Expense estimates billed for the previous calendar year are less than Tenant's Proportionate Share of the actual Operating Expenses, the detennination will indicate the payment amount and date due. If Tenant has paid more than its Proportionate Share of Operating Expenses for the preceding calendar year, Landlord will credit the overpayment toward Tenant's next installment of Base Rent or Operating Expense obligations, or pay the overpayment to Tenant if such overpayment relates to the last year of the Term. Monthly Operating Expense estimates are due on the l'^t^ ofeach month and shall commence in the month specified by Landlord. Tenant's retroactive estimate correction, and actual annual Operating Expense charges, if any, shall be due, in full, on the date(s) specified by Landlord (but not earlier than 30 days after Tenant's receipt of the Operating Expense statement).
2.Tenant shall pay each Operating Expenses in accordance with Tenant's Proportionate Share of the Building or Tenant's Proportionate Share of the Project or the Property, as Operating Expenses are reasonably designated by Landlord.
3.Tenant, within 60 days after receiving Landlord's determination of Operating Expenses, may give Landlord written notice ("Review Notice") that Tenant intends to review Landlord's records of the Operating Expenses (excluding Real Property Tax) for the calendar year to which the statement applies. Within a reasonable time after receipt of the Review Notice, Landlord shall make all pertinent records available for inspection that are reasonably necessary for Tenant to conduct its review. If any records are maintained at a location other than the management office for the Building, Tenant may either inspect the records at such other location or pay for the reasonable cost of copying and shipping the records. If Tenant retains an agent to review Landlord's records, the agent must be with a CPA firm licensed to do business in the state where the Property is located. Tenant shall be solely responsible for all costs, expenses and fees
{0002176SS)
incurred for the audit, unless the audit reveals an overcharge to Tenant of more than five percent (5%), in which case Landlord shall pay or reimburse Tenant's costs incurred for the audit. Within 90 days after the records are made available to Tenant, Tenant shall have the right to give Landlord written notice (an "Objection Notice") stating in reasonable detail any objection to Landlord's statement of Operating Expenses for that year. If Tenant fails to give Landlord an Objection Notice within the 90-day period or fails to provide Landlord with a Review Notice within the 60-day period described above, Tenant shall be deemed to have approved Landlord's detennination of Operating Expenses and shall be barred from raising any claims regarding Operating Expenses for that year. If Tenant provides Landlord with a timely Objection Notice, Landlord and Tenant shall work together in good faith to resolve any issues raised in Tenant's Objection Notice. If Landlord and Tenant determine that Operating Expenses for the calendar year are less than reported, Landlord shall provide Tenant with a credit against the next installment of Base Rent or Tenant's Proportionate Share of Operating Expenses in the amount of the overpayment by Tenant. Likewise, if Landlord and Tenant detennine that Operating Expenses for the calendar year are greater than reported, Tenant shall pay Landlord the amount of any underpayment within 30 days. The records obtained by Tenant shall be treated as confidential. In no event shall Tenant be permitted to examine Landlord's records or to dispute any statement of Operating Expenses unless Tenant has paid and continues to pay all Rent when due.
10002176S s l
EXHIBITD
RULES AND REGULATIONS
Landlord reserves the right to make such other and reasonable rules and regulations as in its judgment may from time to time be needed for safety and security, for care and cleanliness of the Building and the Project and for the preservation of good order therein. Tenant agrees to abide by all such Rules and Regulations herein stated and any additional rules and regulations which are adopted. Tenant shall be responsible for the observance of the Rules and Regulations and the Parking Rules and Regulations set forth below by Tenant's employees, agents, clients, customers, invitees and guests. These Rules and Regulations are in addition to, and shall not be construed to in any way modify, alter or amend, in whole or in part, the terms, covenants, agreements and conditions of any lease of any premises in the Property. Landlord may waive any one or more of these Rules and Regulations for the benefit of any particular tenant or tenants, but no such waiver by Landlord shall be construed as a waiver of such Rules and Regulations in favor of any other tenant or tenants, nor prevent Landlord from thereafter enforcing any such Rules and Regulations against any or all tenants of the Building.
I. Driveways, sidewalks, halls, passages, exits, entrances, elevators, escalators and stairways shall not be obstructed by tenants or used by tenants for any purpose other than for ingress to and egress from their respective premises. The driveways, sidewalks, halls, passages, exits, entrances, elevators and stairways are not for the use of the general public and Landlord shall in all cases retain the right to control and prevent access thereto by all persons whose presence, in the judgment of Landlord, shall be prejudicial to the safety, character, reputation and interests of the Building, the Property and its tenants, provided that nothing herein contained shall be construed to prevent such access to persons with whom any tenant nonnally deals in the ordinary course of such tenant's business unless such persons are engaged in illegal activities. No tenant, and no employees or invitees of any tenant, shall go upon the roof of any Building, except as authorized by Landlord.
2 No signs, advertisements or notices shall be painted or affixed to windows, doors or other parts of the Building, except those of such color, size, style and in such places as are first approved in writing by Landlord. All tenant identification and suite numbers at the entrance to the Premises shall be installed by Landlord, at Tenant's cost and expense, using the standard graphics for the Building. Landlord shall have the right to remove any such sign, placard, banner, picture, name, advertisement, or notice without notice to and at the expense of Tenant, which were installed or displayed in violation of this rule. All approved signs or lettering on doors and walls shall be printed, painted, affixed or inscribed at the expense of Tenant by a person or vendor approved by Landlord and shall be removed by Tenant at the time of vacancy at Tenant's expense. Except in connection with the hanging of lightweight pictures and wall decorations, no nails, hooks or screws shall be inserted into any part of the Premises or Building except by the Building maintenance personnel without Landlord's prior approval.
| 3. | The directory of the Building or Property, if any, will be provided exclusively for the display |
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of the name and location of tenants only,
{00021765 S I
| 4. | No curtains, draperies, blinds, shutters, shades, screens or other coverings, awnings, hangings or decorations shall be attached to, hung or placed in, or used in connection with, any window or door on the Premises without the prior written consent of Landlord. In any event with the prior written consent of Landlord, all such items shall be installed inboard of Landlord's standard window covering and shall in no way be visible from the exterior of the Building. All electrical ceiling fixtures hung in offices or spaces along the perimeter of the Building must be fluorescent or of a quality, type, design, and bulb color approved by Landlord. No articles shall be placed or kept on the window sills so as to be visible from the exterior of the Building. No articles shall be placed against glass partitions or doors which Landlord considers unsightly from outside Tenant's Premises. |
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| 5. | Each tenant shall be responsible for all persons for whom it allows to enter the Building or the Property and shall be liable to Landlord for all acts of such persons. Landlord and its agents shall not be liable for damages for any error concerning the admission to, or exclusion from, the Building or the Property of any person. During the continuance of any invasion, mob, riot, public excitement or other circumstance rendering such action advisable in Landlord's opinion, Landlord reserves the right (but shall not be obligated) to prevent access to the Building and the Property during the continuance of that event by any means it considers appropriate for the safety of tenants and protection of the Building, property in the Building and the Property. |
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| 6. | Tenant shall not alter any lock or access device or install a new or additional lock or access device or bolt on any door of its Premises, without the prior written consent of Landlord. If Landlord shall give its consent, Tenant shall in each case furnish Landlord with a key for any such lock. Tenant, upon the termination of its tenancy, shall deliver to Landlord the keys for all doors which have been furnished to Tenant, and in the event of loss of any keys so furnished, shall pay Landlord therefor. |
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| 7. | The restrooms, toilets, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be thrown into them. The expense of any breakage, stoppage, or damage resulting from violation of this rule shall be borne by the tenant who, or whose employees or invitees, shall have caused the breakage, stoppage, or damage. |
| --- | --- |
| 8. | Tenant shall not use or keep in or on the Premises, the Building or the Property any kerosene, gasoline, or inflammable or combustible fluid or material except in strict accordance with the terms of the Lease. Tenant shall not use, keep or permit to be used or kept in its Premises any foul or noxious gas or substance. Tenant shall not allow the Premises to be occupied or used in a manner offensive or objectionable to Landlord or other occupants of the Building by reason of noise, odors and/or vibrations or interfere in any way with other tenants or those having business therein. No animals, except those assisting handicapped persons, shall be brought onto the Property or kept in or about the Premises. |
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| 9. | Except with the prior written consent of Landlord, Tenant shall not sell, or permit the sale, at retail, of newspapers, magazines, periodicals, theater tickets or any other goods or merchandise in or on the Premises, nor shall Tenant carry on, or permit or allow any |
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(00021765 s I
employee or other person to carry on, the business of stenography, typewriting or any similar business in or from the Premises for the service or accommodation of occupants of any other portion of the Building, or the business of a public barber shop, beauty parlor, nor shall the Premises be used for any illegal, improper, immoral or objectionable purpose, or any business or activity other than that specifically provided for in such Tenant's Lease. Tenant shall not accept hairstyling, barbering, shoeshine, nail, massage or similar services in the Premises or common areas except as authorized by Landlord.
| 10. | If Tenant requires telegraphic, telephonic, telecommunications, data processing, burglar alarm or similar services, it shall first obtain, and comply with, Landlord's instructions in their installation. The cost of purchasing, installation and maintenance of such services shall be borne solely by Tenant Landlord will direct electricians as to where and how telephone, telegraph and electrical wires are to be introduced or installed. No boring or cutting for wires will be allowed without the prior written consent of Landlord. The location of burglar alarms, telephones, call boxes and other office equipment affixed to the Premises shall be subject to the prior written approval of Landlord. |
|---|---|
| 11. | Tenant shall not install any radio or television antenna, satellite dish, loudspeaker or any other device on the exterior walls or the roof of the Building, without Landlord's consent. Tenant shall not interfere with radio or television broadcasting or reception from or in the Building, the Property or elsewhere. |
| --- | --- |
| 12. | Tenant shall not lay linoleum, tile, carpet or any other floor covering so that the same shall be affixed to the floor of its Premises in any manner except as approved in writing by Landlord. Tenant shall not place a load upon any floor of its Premises which exceeds the load per square foot which such floor was designed to carry or which is allowed by law. |
| --- | --- |
| 13. | Tenant shall not operate or pennit to be operated a coin or token operated vending machine or similar device (including, without limitation, telephones, lockers, toilets, scales, amusement devices and machines for sale of beverages, foods, candy, cigarettes and other goods), except for machines for the exclusive use of Tenant's employees and invitees. Bicycles and other vehicles are not permitted inside the Building or on the walkways outside the Building, except in areas designated by Landlord. |
| --- | --- |
| 14. | Business machines and mechanical equipment belonging to Tenant which cause noise or vibration that may be transmitted to the structure of the Building or to any space therein to such a degree as to be objectionable to Landlord or to any tenants in the Building shall be placed and maintained by Tenant, at Tenant's expense, on vibration eliminators or other devices sufficient to eliminate noise or vibration. The persons employed to move such equipment in or out of the Building must be acceptable to Landlord. Tenant shall not install, operate or maintain in the Premises or in any other area of the Building, electrical equipment that would overload the electrical system beyond its capacity for proper, efficient and safe operation as detennined solely by Landlord. Tenant shall not furnish cooling or heating to the Premises, including, without limitation, the use of electric or gas heating devices, without Landlord's prior written consent. Tenant shall not use more than its proportionate share of |
| --- | --- |
telephone lines and other telecommunication facilities available to service the Building.
(00021765 5 )
| 15. | Each tenant shall store all its trash and garbage within the interior of the Premises or as otherwise directed by Landlord from time to time. Tenant shall not place in the trash boxes or receptacles any personal trash or any material that may not or cannot be disposed of in the ordinary and customary manner of removing and disposing of trash and garbage in the city, without violation of any law or ordinance governing such disposal. |
|---|---|
| 16. | Canvassing, soliciting, distribution of handbills or any other written material and peddling in the Building and the Property are prohibited and each tenant shall cooperate to prevent the same. No tenant shall make room-to-room solicitation of business from other tenants in the Building or the Property, without the written consent of Landlord. |
| --- | --- |
| 17. | Landlord shall have the right, exercisable without notice and without liability to any tenant, to change the name and address of the Building and the Property. Without the prior written consent of Landlord, Tenant shall not use the name of the Building, Project or the Property or any photograph or other likeness of the Building, Project or the Property in connection with, or in promoting or advertising, Tenant's business except that Tenant may include the Building's, Project's or Property's name in Tenant's address. |
| --- | --- |
| 18. | Landlord may from time to time adopt systems and procedures for the security and safety of the Building and Property, its occupants, entry, use and contents. Tenant, its agents, employees, contractors, guests and invitees shall comply with Landlord's systems and procedures. Tenant shall comply with all safety, fire protection and evacuation procedures and regulations established by any governmental agency. Tenant assumes any and all responsibility for protecting its Premises from theft, robbery and pilferage, which includes keeping doors locked and other means of entry to the Premises closed. |
| --- | --- |
| 19. | Deleted. |
| --- | --- |
| 20. | Smoking of any kind is strictly prohibited, at all times, at any location on the Property, except in the designated smoking area which is located at the OUTSIDE PERIMETER OF THE BUILDING ONLY. Landlord may relocate the designated smoking area at its sole discretion, at any time during the Term of this Lease. |
| --- | --- |
PARKfNG RULES AND REGULATIONS
| 1. | Cars must be parked entirely within painted stall lines. |
|---|---|
| 2. | All directional signs and arrows must be observed. |
| --- | --- |
| 3. | All posted speed limits for the parking areas shall be observed. ff no speed limit is posted for an area, the speed limit shall be five (5) miles per hour. |
| --- | --- |
| 4. | Parking is prohibited: |
| --- | --- |
| (a) | in areas not striped for parking; |
| --- | --- |
100021165 s I
| (b) | in aisles; |
|---|---|
| (c) | where "no parking" signs are posted; |
| --- | --- |
| (d) | on ramps; |
| --- | --- |
| (e) | in cross hatched areas; and |
| --- | --- |
| (f) | in such other areas as may be designated by Landlord. |
| --- | --- |
5.Handicap and visitor stalls shall be used only by handicapped persons or visitors, as applicable.
6.Parking stickers or any other device or fonn of identification supplied by Landlord from time to time (if any) shall remain the property of Landlord. Such parking identification device must be displayed as requested and may not be mutilated in any manner. The serial number of the parking identification device may not be obliterated. Devices are not transferable and any device may not be obliterated. Devices are not transferable and any device in possession of any unauthorized holder will be void. There will be a replacement charge payable by the parker and such parker's appropriate tenant equal to the amount posted from time to time by Landlord for loss of any magnetic parking card or any parking sticker.
| 7. | Every parker is required to park and lock his or her own car. All responsibility for damage to cars or persons is assumed by the parker. |
|---|
8.Loss or theft of parking identification devices must be reported to Landlord, and a report of such loss or theft must be tiled by the parker at that time. Any parking identification devices reported lost or stolen found on any unauthorized car will be confiscated and the illegal holder will be subject to prosecution. Lost or stolen devices found by the parker must be reported to Landlord immediately to avoid confusion.
9.Parking spaces are for the express purpose of parking one automobile per space. Washing, waxing, cleaning, or servicing of any vehicle by the parker and/or such person's agents is prohibited. The parking areas shall not be used for overnight or other storage for vehicles of any type.
I0. Landlord reserves the right to refuse the issuance of parking identification or access devices to any tenant and/or such tenant's employees, agents, visitors or representatives who willfully refuse to comply with the Parking Rules and Regulations and/or all applicable governmental ordinances, laws, or agreements.
11.Tenant shall acquaint its employees, agents, visitors or representatives with the Parking Rules and Regulations, as they may be in effect from time to time.
12.Any monthly rental for parking shall be paid one month in advance prior to the first day of such month. Failure to do so will automatically cancel parking privileges, and a charge of the prevailing daily rate will be due. No deductions or allowances from the monthly rental for parking will be made for days a parker does not use the parking facilities.
(00021765 5 )
13.A reasonable replacement charge shall be paid to replace a lost parking/building access cards.
14.Vehicles parked in public parking areas will be no larger than full-sized passenger automobiles or standard pick-up trucks. Landlord reserves the right, without notice to Tenant, to tow away at Tenant's sole cost and expense any vehicles parked in any parking area for any continuous period of 24 hours or more, or earlier if Landlord, in its sole discretion, detennines such parking to be a hazard or inconvenience to other tenants or Landlord, or violates any rules or regulations or posted notices related to parking. Landlord shall not be responsible for enforcing Tenant's parking rights against third parties. From time to time, Landlord reserves the right, upon written notice to Tenant, to change the location, the availability and nature of parking spaces, establish reasonable time limits on parking, and, on an equitable basis, to assign specific spaces with or without charge to Tenant as Additional Rent
15.Tenant shall at all times comply with all applicable Laws (as defined in the Lease) respecting the use of the parking facility serving the Building.
16.LANDLORD SHALL NOT BE LIABLE FOR ANY LOSS, INJURY OR DAMAGE TO PERSONS USING THE PARKING FACILITY OR AUTOMOBILES OR OTHER PROPERTY THEREIN, IT BEING AGREED THAT, TO THE FULLEST EXTENT PERMITTED BY LAW, THE USE OF THE SPACES SHALL BE AT THE SOLE RISK OF TENANT AND ITS EMPLOYEES. WITHOUT LIMITING THE FOREGOING, TENANT HEREBY VOLUNTARILY RELEASES, DISCHARGES, WAIVES AND RELINQUISHES ANY AND ALL ACTIONS OR CAUSES OF ACTION FOR PERSONAL INJURY OR PROPERTY DAMAGE OCCURRING TO TENANT ARISING AS A RESULT OF PARKING IN THE PARKING FACILITY, OR ANY ACTIVITIES INCIDENTAL THERETO, WHEREVER OR HOWEVER THE SAME MAY OCCUR, AND FURTHER AGREES THAT TENANT WILL NOT PROSECUTE ANY CLAIM FOR PERSONAL INJURY OR PROPERTY DAMAGE AGAINST LANDLORD OR ANY OF THE LANDLORD RELATED PARTIES FOR ANY SAID CAUSES OF ACTION. IN ALL EVENTS, TENANT AGREES TO LOOK FIRST TO ITS INSURANCE CARRIER AND TO REQUIRE THAT TENANT'S EMPLOYEES LOOK FIRST TO THEIR RESPECTIVE INSURANCE CARRIERS FOR PAYMENT OF ANY LOSSES SUSTAINED IN CONNECTION WITH ANY USE OF THE PARKING FACILITY. TENANT HEREBY WAIVES ON BEHALF OF ITS INSURANCE CARRIERS ALL RIGHTS OF SUBROGATION AGAINST LANDLORD OR LANDLORD RELATED PARTIES.
(00021765 s I
EXIDBITE
GUARANTY
{00021765 s I
GUARANTY OF LEASE
THIS GUARANTY OF LEASE (this "Guaranty") is made this as of the_ day of February, 2018, by FISERV, INC., a Wisconsin corporation ("Guarantor"), in favor of PD OFFICE OWNER II, L.P., a Delaware limited liability company ("Landlord").
RECITALS:
A.Fiserv Solutions, LLC, a Wisconsin limited liability company (''Tenant") desires to enter into that certain Lease Agreement with Landlord (the "Lease"), for premises (the "Premises") consisting of the entire office building located at 8500 SW Creekside Place, Beaverton, Oregon commonly known as the 8500 Building (the "Premises"); and
B.Landlord is unwilling to enter into the Lease of the Premises with Tenant unless Guarantor guarantees the obligations of Tenant under the Lease pursuant to this Guaranty; and
C.Tenant is a wholly-owned subsidiary of Guarantor and Guarantor has a financial interest in causing Landlord to lease the Premises to Tenant and will benefit from the Lease;
NOW, THEREFORE, in consideration of Landlord entering into the Lease and for other good and valuable consideration, the receipt and sufficiency of which arc hereby acknowledged, Guarantor hereby covenants and agrees as follows:
I.Guarantor does hereby guarantee each and every obligation of Tenant under the Lease, including, but not limited to, the obligation of Tenant to pay the rent due thereunder.
2.If Tenant shall default at any time in the payment of any rent or any other sums and charges payable by Tenant under the Lease, whether by acceleration or otherwise, or if Tenant should default in the perfonnance and observance of any of the other covenants, tenns, conditions or agreements contained in the Lease, Guarantor shall promptly pay such rent and other sums and charges, and any arrears thereof, to Landlord and shall promptly perfonn and fulfill all of such other tenns, covenants, conditions and agreements, in accordance with and pursuant to the Lease, and Guarantor shall promptly pay to Landlord all damages, costs and expenses that may arise in consequence of any such default by Tenant under the Lease, including without limitation all reasonable attorneys' fees, and disbursements incurred by Landlord or caused by any such default or by the enforcement of this Guaranty.
3.The obligations of Guarantor hereunder are independent of the obligations of Tenant under the Lease. This Guaranty is an absolute, irrevocable and unconditional guaranty of payment and of perfonnance. It shall be enforceable against Guarantor without the necessity of any suit or proceedings on Landlord's part of any kind or nature whatsoever against Tenant or any other party, or any security Landlord may hold, and without the necessity of any notice of nonpayment, nonperfonnance or nonobservance, or any notice of acceptance of this Guaranty, any notice of any change of Tenant's financial condition, or any other notice of demand to which Guarantor might otherwise be entitled, all of which Guarantor hereby expressly waives; and Guarantor hereby expressly agrees that the validity of this Guaranty and the obligations of Guarantor hereunder shall in no way be affected, diminished, impaired or tenninated by reason
100021766 3 I
)8930100
of the assertion of, or the failure to assert, by Landlord against Tenant, any of the rights or remedies reserved to Landlord pursuant to the provisions of the Lease or by relief of Tenant from any of Tenant's obligations under the Lease or otherwise by (a) the release or discharge ofTenant in any creditors' proceedings, receivership, bankruptcy or other proceedings, (b) the impainnent, limitation or modification of the liability of Tenant or the estate of Tenant in bankruptcy, or of any remedy for the enforcement of Tenant's liability under the Lease, resulting from the operation of any present or future provision of the Bankruptcy Act or other statute or from the decision in any court; or (c) the rejection or disaffinnance of the Lease in any such proceedings. Landlord shall have the right to commence any action or proceeding based upon this Guaranty directly against Guarantor without making Tenant or anyone else a party defendant in such action or proceeding. Any one or more successive and/or concurrent actions may be brought hereon against Guarantor either in the same action, if any, brought against Tenant and/or any other party or in separate actions, as often as Landlord, in its sole discretion, may deem advisable.
4.This Guaranty shall be a continuing guaranty and the liability of Guarantor shall in no way be affected, modified or diminished by reason of, without Landlord's written consent, any assignment, subletting, amendment, expansion, supplement, modification or extension of the Lease, unless Tenant shall be released expressly in writing by Landlord from the performance of its obligations under the Lease in relation to an assignment or subletting of the Lease in which case this Guaranty shall also be released, or by reason of any modification or waiver of or change in any of the terms, or by the covenants, conditions or provisions of the Lease, or by reason of any extension of time that may be granted by Landlord to Tenant or any changed or different use of the Premises consented to in writing by Landlord, or by reason of any dealings or transactions or matters or things occurring between Landlord and Tenant, its successors or assigns, or by release of Tenant from the performance of its obligations under the Lease, or by Landlord's termination of the Lease due to Tenant's default, whether or not notice of any of the foregoing is given to Guarantor, and Guarantor hereby expressly waives any right to receive notices of the foregoing. Without limiting the foregoing, this Guaranty shall be applicable to the obligations of Tenant arising in connection with the termination of the Lease, whether voluntary or otherwise.
5.Neither Landlord's consent to any assignment, subleasing or assignments by Tenant of the Lease, nor any assignment by Landlord of the Lease or the proceeds thereof, made either with or without notice to Guarantor, shall in any manner release Guarantor from any liability as Guarantor hereunder.
6.All of Landlord's rights and remedies under the Lease or under this Guaranty are intended to be distinct, separate and cumulative, and no such right and remedy therein or herein mentioned is intended to be in exclusion of or a waiver of any of the others. The obligations of Guarantor hereunder shall not be released by Landlord's receipt, application or release of security given for the performance and observance of covenants and conditions required to be perfonned and observed by Tenant under the Lease, nor shall Guarantor be released by the maintenance of or execution upon any lien which Landlord may have or assert against Tenant or Tenant's assets.
7,Until all covenants and conditions in the Lease on Tenant's part to be performed and observed are fully performed and observed, Guarantor shall have no right of
(00021766 3 !2
subrogation against Tenant by reason of any payments or acts of performance by Guarantor in compliance with the obligations of Guarantor hereunder.
8.This Guaranty shall be construed in accordance with the laws of the State of Oregon. Guarantor hereby submits itself to the jurisdiction of the courts of the State of Oregon and hereby irrevocably appoints Tenant (or, if Tenant is more than one person then any one of them), the manager, assistant manager and any acting manager of the facility being operated at any time during the term of the Lease at the Premises, and (if Tenant is a corporation, trustee or partnership) all persons of Tenant upon whom service of process may be served, for service upon Tenant as its agents for the service of process in any action against Guarantor arising out of this Guaranty. Pursuant to such service, suit may be brought against Guarantor in any federal, state or local court in the State of Oregon. This provision does not affect any right to serve process upon Guarantor in any other manner permitted by law.
9.If more than one party comprises the Guarantor, then Guarantor acknowledges and agrees that the obligations and liabilities of Guarantor hereunder shall be joint and several as to each of the parties comprising Guarantor, and the release of one of such parties shall not release the other party.
I0. This Guaranty shall be binding upon the successors (including without limitation any and all successors and transferees which may assume Guarantor's obligations as provided in Section 13 hereof), assigns, heirs, executors, administrators and representatives of Guarantor, and shall inure to the benefit of and be enforceable by Landlord and its successors and assigns or by any party to whom Landlord's interest in the Lease or any part thereof, including the rents, may be assigned, whether by way of mortgage or otherwise. Notwithstanding the foregoing, Guarantor's obligations hereunder may not be assigned. Landlord may, without notice, assign this Guaranty in whole or in part.
11.Guarantor hereby waives (a) the right to trial by jury in any action, proceeding or counterclaim brought by any person or entity with respect to any matter whatsoever arising out of or in any way connected with this Guaranty or the Lease; and (b) any right or claim of right to cause a marshalling of Tenant's assets or to cause Landlord to proceed against Tenant and/or any collateral held by Landlord at any time or in any particular order.
| 12. | Guarantor hereby represents and warrants that: |
|---|
{a) Guarantor is a corporation duly organized and validly existing in good standing under the laws of the State of Wisconsin, and has the full power, authority and legal right to enter into and perfonn its obligations under this Guaranty;
| (b) | this Guaranty has been duly authorized, executed and delivered by Guarantor and constitutes the legal, valid and binding obligation of Guarantor, enforceable against Guarantor in accordance with its tenns, subject to principles of equity, bankruptcy, insolvency or other laws of general application relating to the enforcement of creditors' rights; |
|---|
(00021766 J I
389)0100
| (c) | the execution, delivery and perfonnance by Guarantor of this Guaranty do not require any stockholder or other approval or the consent or approval of any of Guarantor's creditors (except such as have already been obtained in writing), do not and will not contravene any applicable law, rule, regulation, judgment or order and do not and will not contravene the provisions of, constitute a breach of or default under, or result in the creation of any security interest, lien or encumbrance on any of the property of Guarantor pursuant to, Guarantor's articles of incorporation, articles of organization, or by-laws or any indenture, mortgage, license or other contract, agreement or instrument to which Guarantor is a party or by which it is bound or subject or to or by which any of its properties is subject or affected; |
|---|---|
| (d) | the execution, delivery and perfonnance by Guarantor of this Guaranty do not require the consent, approval, authorization or order of, the giving of notice to or the registration with, or the taking of any other action with respect to, any governmental authority or agency, foreign or domestic, other than as have been duly obtained, given or taken; |
| --- | --- |
| (e) | the transactions contemplated by this Guaranty are being consummated by Guarantor in furtherance of Guarantor's ordinary business purposes, with no contemplation of insolvency and with no intent to hinder, delay or defraud any of its present or future creditors; |
| --- | --- |
| (f) | neither before nor as a result of the transactions contemplated by this Guaranty will Guarantor be insolvent or have an unreasonably small capital for the conduct of its business and the payment of its anticipated obligations. |
| --- | --- |
| (g) | Guarantor's assets and cash flow enable it to meet its present obligations in the ordinary course of business as they become due, and Guarantor does not believe that it will incur debts beyond its ability to pay; and |
| --- | --- |
| (h) | Guarantor is the sole owner of Tenant. |
| --- | --- |
13.Guarantor agrees that, in connection with any merger or consolidation with any other entity or sale, disposition or other transfer or dispose of all or substantially all of its assets to any person or entity, such successor or transferee shall assume all obligations of Guarantor under this Guaranty, with the same effect as if such successor or transferee had originally been Guarantor hereunder. Guarantor agrees that any merger or consolidation with any other entity or sale, disposition or other transfer or dispose of all or substantially all of its assets to any person or entity shall be a bona fide transaction and not consummated for the
purpose of evading Tenant's obligations under the Lease or Guarantor's obligations under the
{00021766 3 I
4
Guaranty. Irrespective of whether such assumption is in writing, executed and delivered, any such successor or transferee of Guarantor shall for all purposes of this Guaranty and the Lease, be deemed to be the "Guarantor" hereunder, and no such transaction shall have the effect of releasing Guarantor or any successor thereto or transferee thereof from its obligations and liabilities under this Guaranty or Tenant or any successor thereto or assignee thereof from its obligations and liabilities under the Lease.
14.If Landlord shall be obligated by reason of any bankruptcy, insolvency or other legal proceeding to pay or repay to Tenant or to Guarantor or to any trustee, receiver or other representative of either of them, any amounts previously paid by Tenant or Guarantor pursuant to the Lease or this Guaranty, Guarantor shall reimburse Landlord for any such payment or repayment and this Guaranty shall extend to the extent of such payment or repayment made by Landlord, except to the extent, if any, that such payment or repayment is prohibited by law or that such payment or repayment constitutes merely a reimbursement of any overpayment.
15.Guarantor shall, at any time and from time to time, within IO days following request by Landlord execute, acknowledge and deliver to Landlord a statement certifying that this Guaranty is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as modified and stating such modifications).
16.Wherever possible, each provision of this Guaranty shall be construed in such manner as to be valid and enforceable against Guarantor under applicable law, but if any provision hereof shall be deemed invalid or unenforceable to any extent against Guarantor in any jurisdiction, such provision shall be ineffective only to the extent of such invalidity or unenforceability, without invalidating or rendering unenforceable the remainder of such provision or any of the other provisions hereof.
17.Any notice, demand, consent, approval, direction, agreement or other communication required or permitted hereunder or under any other documents in connection herewith shall be in writing and shall be directed as follows:
ifto Guarantor:
with a copy to:
Fiserv, Inc.
2900 Westside Parkway
Alpharetta, GA 30004
Attention: VP Global Real Estate and Workplace Solutions
Fiserv, Inc.
25S Fiserv Drive Brookfield, WI S304S Attention: General Counsel
f00021766 3 I
ifto Landlord:
with a copy to:
PD Office Owner I1, L.P. c/o Starwood Capital Group l00 Pine Street Suite 3000
San Francisco, California 94111 Attention: Andrew Wong
PD Office Owner 11, L.P. c/o Starwood Capital Group 591 West Putnam Avenue Greenwich, CT 06830 Attention: General Counsel
or to such changed address as a party hereto shall designate to the other parties hereto from time to time by notice in the fonn provided herein. Notices shall be (a) personally delivered (including delivery by UPS or other comparable nationwide overnight courier service) to the offices set forth above, in which case they shall be deemed delivered on the date of delivery (or first business day thereafter if delivered other than on a business day or after 5:00 p.m. local time to said offices}; or (b) sent by certified mail, return receipt requested, in which case they shall be deemed delivered on the date shown on the receipt, unless delivery is refused or delayed by the addressee in which event they shall be deemed delivered on the date of deposit in the U.S. Mail.
18.Section headings appearing in this Guaranty are for convenience or reference only and shall not define, limit, amplify or otherwise modify any provision hereof.
19.No provision of this Guaranty may be amended, modified, waived, discharged or terminated except by a writing signed by Landlord and Guarantor expressly referring to the provisions of this Guaranty to which such writing relates. No course of dealing with respect to any of the rights, powers and remedies of Landlord in exercising any such right, power or remedy, shall operate as a waiver thereof or otherwise be prejudicial thereto.
20.All capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Lease.
[Signature on the following page.]
!00021766 3 l6
IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the date first written above.
GUARANTOR:
FISERV, INC.,
a Wisconsin corporation
By:
Name: Kenneth Best
Title: SVP, Chief Accounting Officer
STATE OF WISCONSIN)
) ss.:
COUNTY OF_,
I certify that on ,2018, Kenneth Best, personally came before me and this person acknowledged under oath, to my satisfaction, that: this person signed and delivered the attached document as SVP, Chief Accounting Officer of Fiserv, Inc., a corporation of the State of Wisconsin, named in this document.
Notary Public
My Commission Expires: (SEAL)
100021166 J I7
EXHIBITF EXTERIOR SIGNAGE
(00021765 5 I
Exterior Signagef1serv.
Monuments and Pylons
The corporate standard monument Sign is honzontal and ieatures the logo1n the upper nght comer. with a subtle rep,esentation of the
Proof Points defined at the leh
MONUMENT LAYOUT PRINCIPLES
72•
lBOOtrtr
,,>•
l 32""'d 11••• ••,,. "36"
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hand edge.
There 1s only one size sva111lble as II standard. 4' x 6' 11200 mm x 1800 rrrn). but 11 number of existing monumeni
installations require custom solutions to fit. Allexterior s1gnage must be app,Olled by local gCM3tnance and the respec1111e landlord.
A limited amount of text can be added. following the principles indicated in the diagram
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--- --:255 - - --- -----3½"
!Fiserv Driv..:.:::• "
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Questions?a Return to contentsDl■10
Exterior Signagef1serv.
Building Signs
H
Guild ng Signsw
The Fiserv logo m be used on buildings to identify and brand Fiserv locauons Its use. positioning and size
wiW dependon a number of
factors. These tndude signing rights under the lease. zoning regulauons. d-stance vis1b1hty and architectural conditions
■
The logo is ava lable 1n F1serv Orange 1n bothinternally dlummated (energy etfic1em
..eo ligtiungl and
HE1611T (HI
211•
IS(',C;,nm
WIDTH ( w)
4S-
36"
'30unrn,
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72"
":lDl\ IT,Jn
96"
,.,on mr,
DEPTH (DJ
3"
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3•
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,
3"
I
so•
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:1;,,2o:0J .•--
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non-tUurrunated forms It can also be made available «n white or brushed stainless steel tf color 1s not acceptable or appropriate to the bad:ground.
A range of standard sizes1s availabl . shown m the table to the nght If custom stles are required, they can be made available. but always 1n the same proportions.
Ouest1ons?
itReturn to contents
lilii 13
EXHIBITG
ROOF LICENSE
I. Landlord hereby grants Tenant the non-exclusive right, subject, however, to the rights of any other tenants or parties with interests in or to the roof space, to use the roof ("Roof Space") of the Building located in an area designated by Landlord and only for the purpose of installing telecommunication and related equipment approved by Landlord, which approval shall not be unreasonably withheld or delayed (the "Items"):
| 2. | Tenant shall pay Landlord, as Additional Rent, for all electricity consumed by the Items as reasonably estimated by Landlord's engineer, within thirty (30) days after Landlord bills the same from time to time. |
|---|---|
| 3. | Landlord shall permit Tenant reasonable access to the Roof Space for the purposes permitted hereunder, during normal business hours at the Building upon reasonable advance notice and scheduling through Landlord's management and security personnel. Access after normal business hours may be granted by Landlord in its reasonable discretion, and for such reasonable charges as Landlord shall impose. Landlord reserves the right to enter the Roof Space, without notice, at any time for the purpose of inspecting the same, or making repairs, additions or alterations to the Building, or to exhibit the Roof Space to prospective tenants, purchasers or others, or for any reason not inconsistent with Tenant's rights hereunder. In connection with exercising such rights, Landlord may require Tenant to temporarily disconnect the Items, if feasible. The exercise by Landlord of any of its rights under this Paragraph shall not be deemed an eviction or disturbance of Tenant's use of the Roof Space. Landlord shall work with Tenant to minimize disruption caused by such disconnecting of the Items. |
| --- | --- |
| 4. | Tenant shall not install the Items, or thereafter make any alterations, additions or improvements to the Roof Space or the Items without Landlord's prior written consent, which shall not be unreasonably withheld or delayed. Landlord shall approve or reject the proposed installation of the Items within a reasonable time after Tenant submits (I) plans and specification for the installation of the Items, (2) copies of all required governmental and quasi-governmental permits, licenses, and authorizations which Tenant will obtain at its own expense, and (3) a certificate of insurance evidencing the coverage required herein. The Items shall not, at any time, damage the structural integrity of the Building, interfere with any service provided by Landlord or any other party at the Project, or detract from the appearance of the Building. Landlord may require that any installation or other work be done under the supervision of Landlord's reasonable charges for such supervision. All installation or other work shall be performed in a good and workmanlike manner, in a manner so as to avoid damage to the Building and in accordance with all Laws. |
| --- | --- |
| 5. | Upon tennination of the Lease, by expiration or otherwise, Tenant shall promptly disconnect and remove the Items and fully repair any damage to the Roof Space resulting from such removal. Tenant shall promptly and properly repair (or at Landlord's option. pay Landlord's reasonable charges for repairing) during the Tenn and upon tennination |
| --- | --- |
(0002176SS f
of the Lease or this License, any roof leaks or other damage or injury to the Roof Space, or the Building (or contents thereat) demonstrably caused by Tenant's use of the Roof Space or its installation, use, maintenance or removal of the Items. lf Tenant does not immediately repair any suck leaks, damage or injury, or does not remove the Items when so required. Tenant hereby authorizes Landlord to make such repairs or remove and dispose of the Items and Tenant shall promptly pay Landlord's reasonable charges for doing so. Landlord shall not be liable for any property so disposed or removed by Landlord.
| 6. | Landlord does not represent or warrant that use of the Roof Space hereunder will comply with an applicable Laws, or that the Roof Space will be suitable for Tenant's purposes. Tenant agrees that Tenant has inspected the Roof Space and agrees the same hereunder "as is". Tenant shall at all times comply with any applicable Laws pertaining to Tenant's use of the Roof Space or the Items. |
|---|---|
| 7. | Tenant shall indemnify and hold Landlord harmless from and against any and all loss, cost, claim, damage, liability or expense which Landlord may incur as a direct or indirect result of Tenant's use of the Roof Space or Items, including but not limited to, attorney's fees, whether or not any legal action is instituted. This indemnity obligation shall include Landlord's partners, officers, directors, trustees, beneficiaries, affiliates and agents ("Indemnitees"). |
| --- | --- |
| 8. | Tenant shall not use the Roof Space or the Hems so as to interfere in any way with the ability of Landlord or the tenants and occupants of the Project and neighboring properties to receive radio, television, telephone, microwave, short-wave, long-wave or other signals of any sort that are transmitted through the air or atmosphere, nor so as to interfere with the use of electric, electronic or other facilities, appliances, personal property and fixtures, nor so as to interfere in any way with the use of any antennas, satellite dishes or other electronic or electric equipment or facilities currently or hereafter located on the roof or any floor or area of the Building. Landlord shall attempt to impose and enforce upon other tenants (if any) hereafter installing satellite dishes on the roof or otherwise using the Roof Space for electronic communications requirements similar to those set forth above in this Paragraph 8, but Landlord shall have no liability to Tenant if any electrical interference affecting Tenant shall nevertheless occur. |
| --- | --- |
| 9. | lf the Roof Space, Building or Items are materially damaged by fire or other casualty and Landlord does not restore the Roof Space or the Building, this Agreement shall terminate as of the date of such damage, subject to any provisions hereof which by their terms or reasonable implication shall survive such termination. Landlord shall have no obligation to provide substitute space on the roof or to repair or restore the Roof Space or Building. ln the event of such damage, Tenant shall look solely to its insurers for any claims that Tenant may have in connection with such damage or destruction. |
| --- | --- |
| 10. | This agreement creates a license. Landlord agrees not to revoke this license until the Term (including any options to renew thereunder validly exercised) expire or is sooner terminated, or shall default under this License and fail to cure within IO days after written notice, or shall Default under the terms of the Lease. In any such events, Landlord may |
| --- | --- |
{00011765 s I
also discontinue providing electricity to the Items. Tenant's rights under this License shall not be assignable, nor may Tenant sub-license its rights under this License. Tenant may not let any other party tie into or use the Items or the Roof Space, and Tenant may not transmit or distribute signals through the Items to any parties not affiliated with Tenant. The rights granted herein are personal to Tenant. Any default by Tenant under this license shall also be a default under this Lease.
Landlord shall have the right to terminate this license upon ten (10) days written notice to Tenant in the event of a material interference with Tenant's use of the Items on such Roof Space caused by the use of any equipment by other tenants or parties with interest in or to the Roof Space, unless such interference shall be eliminated, by Tenant within such ten (I 0) day period.
I00021765 5 I
EXfflBIT H
PARKING
!00021765 s I
Proposed landscape and parking lot demo
ID
LANO USE: RC (REGIONAi. CENTER)
ZONE RC-TO(REGIONAi.CENTER • TRANSIT ORIENTED>
TOTAL SITE SF= 201,683 SF (4.63ACRES) REQUIRED 15% MIN.LANDSCAPE• 30,252 SF
CURRENT ESTIMATED LANDSCAPE• 54,5-40 SF (27.04%1 MAXIMUM ALLOWEDREMOVALOF EXISTING LANDSCAPE= 24,288SF
PROPOSED REMOVAL OFEXISTING LANDSCAPE• 6.675SF
PROPOSED ADDEOLANDSCAPE• 301SF
(SEE NEXT PAGE FOR PROPOSEDLOCATIONS)
TOTAL ESTIMATED LANDSCAPE AFTER SITE MODIFICATION:
48,166 SF(23.88%)
LEGEND
REMOVED PARKING SPACE I
CURB
REMOVED LANDSCAPE
CREEKSIDE CORPORATE PARK - 8500 CREEKSIDE PROPOSED PARKING DEMO
SCALE. N.T.S.
ARCHITECTS
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PROJECT NUMBER
DATEISSUED:
ADDRESS:
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8500 SWCREEKSIDE
217174
05.3117
Proposed additional parking plan
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PROPOSED PARKING MODIFICATION ANALYSIS. EXISTING TOTAL PARKING COUNTr 191
'••,•.,
'••,•.,
EXISTING ADAPARKING= 7 (2 VAN ACCESSIBLE)
MAXIMUMPARKING FOR 'B'OCCUPANCY BUILDING'• 221 REQUIRED ADAPARKING =7 (2VAN ACCESSIBLE)
ACTUAL# OF PARKING SPACESSHOWI = 221 AOAPARKING• 7 (2 VAN ACCESSIBLE)
MINIMUM SHORT•TERM BIKE PARKING .a 8 MINIMUM LONG-TERM BIKE PARKING• 8
•NOTE
PER ZONE A DESCRIBEOINPLANNING COOECHAPTER 60.30.10. MAX.PARKING CALCUtATIONPER TABlE 60.30.10.5.A MIN.BICYCLEPARKING CALCULATION PER TABLE 60.30.10.5.B
LEGEND
NEW CURB I PARKING SPACE NEW LANDSCAPE
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CREEKSIDE CORPORATE PARK•8500 CREEKSfDE PROPOSED PARKING MOD/FICATION
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ADDRESS• PROJECT NUMBER: DATEISSUED:
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8500 SW CREEKSIDE
211174
05.31.17
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PP 01 - PROPOSED PLAN
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EXHIBIT C
Inventory of Existing Furniture
22
155462073.4
HB: 4860-1276-1863.7
Detailed Inventory List For Fiserv
| 2nd Floor Inventory | |||||||
|---|---|---|---|---|---|---|---|
| Item# | Item Description | Qty | Dimensions For Desks & Tables (LXW) | Materials: MDF=M<br><br><br>Wood=W Metal=ML | (Mfr & Model; Freestand, etc.) | Condition | Location (s) |
| 1 | Workstation Chairs | 60 | Steelcase | Exc | 2E005 main office | ||
| 2 | PED(box, file, top) | 74 | 22H, 24D, 15 W | ML | Steelcase | Exc | 2E005main office |
| 3 | Adjustable stool‐orange | 10 | 18" diameter‐adj height | unk | 2E005 main office | ||
| 4 | Trash Cans | 66 | 15x10 | unk | 2E005 main office | ||
| 5 | Slide station(floor dividers) | 8 | 2E005 main office | ||||
| 6 | 3 drawer lateral | 2 | 18Wx40Hx72L | Steelcase | 2E005 main office | ||
| 7 | Locker Cabinet | 1 | 36x19x40 | unk | 2E005 main office | ||
| 8 | 3 drawer laterw/top | 1 | 36Wx40 T x72 L | Steelcase | 2E005 main office | ||
| 9 | Adjustable Up Down | 2 | Veridesk | 2E005 main office | |||
| 10 | File cabinets | 2 | 22"x15"x27" | Steelcase | 2E005 main office | ||
| 11 | Black Leather Ex chair | 1 | unk | 2E005 main office | |||
| 12 | Cubicle Electric workstation | 75 | 6'x6' | Steelcase | 2E005 main office | ||
| w/electric box, file PED&glass divider | 2E005 main office | ||||||
| 13 | Table desk lamps | 73 | unk | 2E005 main office | |||
| 14 | Bull pen workstation | 8 | 60"x24" | Steelcase | 2E005 main office | ||
| 15 | Tall Conf room chairs | 10 | Steelcase | 2E002 side office | |||
| 16 | Audo Conf Tables | 2 | 60"x60" ea | ML | unk | 2E002 side office | |
| 17 | White Board(glass) | 1 | 48"x96" | Glass | Clarus | 2E002 side office | |
| 18 | White Board(glass) | 1 | 48"x60" | Clarus | 2E003 side office | ||
| 19 | Tall Conf room chairs | 6 | Steelcase | 2E003 side office | |||
| 20 | D Conf Table | 1 | 78"x48" | unk | 2E003 side office | ||
| 21 | Cushion Chair Blue Rolling | 3 | unk | 2E006 Huddle Room | |||
| 22 | Small Table | 1 | 36x24x12H | 2E006 Huddle Room | |||
| 23 | white board glass | 1 | 60x48 | Clarus | 2E004 Huddle office | ||
| 24 | cushion chair blue rolling | 2 | unk | 2E004 Huddle office | |||
| 25 | Table | 1 | 36x24x12H | unk | 2E004 Huddle office | ||
| 26 | white table | 1 | 42"x42" | 2E006 side office | |||
| 27 | chairs | 4 | 2E006 side office | ||||
| 28 | Audo Conf Tables | 1 | 96x48x40 | 2E016 Conference Room | |||
| 29 | Tall Conf room chairs | 6 | 2E016 Conference Room | ||||
| Item# | Item Description | Qty | Dimensions For Desks & Tables (LXW) | Materials: MDF=M<br><br><br>Wood=W Metal=ML | (Mfr & Model; Freestand, etc.) | Condition | Location (s) |
| --- | --- | --- | --- | --- | --- | --- | --- |
| 30 | cushion chair blue rolling | 3 | 2E009 Huddle Room | ||||
| 31 | Table | 1 | 36x24x12H | 2E009 Huddle Room | |||
| 32 | Glass board | 1 | 48"x60" | 2E013 flex office | |||
| 33 | Modular desk/overhead/Ped/chair | 1 | 56x24 | 2E013 flex office | |||
| 34 | Credenza | 1 | 64x24 | 2E013 flex office | |||
| 35 | Guest chairs | 2 | 2E013 flex office | ||||
| 36 | Glass board | 1 | 60x24 | 2E0014 fle office | |||
| 37 | Modular desk/overhead/Ped/chair | 1 | 56x24 | 2E0014 fle office | |||
| 38 | Credenza | 1 | 64x24 | 2E0014 fle office | |||
| 39 | Guest chairs | 2 | 2E0014 fle office | ||||
| 40 | Glass board | 1 | 48"x96" | 2C015 Conference Room | |||
| 41 | Audio Tables | 2 | 48x48x29 | 2C015 Conference Room | |||
| 42 | Chairs | 8 | 2C015 Conference Room | ||||
| 43 | Bathroom small tables | 2 | Bathroom | ||||
| 44 | Refrigerator | 1 | Lobby Refreshment area | ||||
| 45 | Bar chairs | 4 | Lobby Refreshment area | ||||
| 46 | Lobby Chairs | 3 | Lobby | ||||
| 47 | Labby table | 1 | 36" diameter | Lobby | |||
| 48 | Lobby Chairs | 4 | Lobby | ||||
| 49 | Lobby table | 2<br><br><br>2 | 60x32x15 | Lobby | |||
| 50 | Lobby bench | 12"x36"x12" | Lobby | ||||
| 51 | Hassock | 2 | 48" diameter | Lobby | |||
| 52 | Hassock | 2 | 18" diameter | Lobby | |||
| 53 | Glass white board | 1 | 96x48 | 2C005 Conference Room | |||
| 54 | Tables tied together | 4 | 60x55x29 | 2C005 Conference Room | |||
| 55 | Chairs | 16 | 2C005 Conference Room | ||||
| 56 | Glass white board | 96x48 | 2C004 Conference Room | ||||
| 57 | Tables tied together | 4 | 60x55x29 | 2C004 Conference Room | |||
| 58 | Chairs | 16 | 2C004 Conference Room | ||||
| 59 | Rolling aisle board | 1 | 72"x48" | 2C004 Conference Room | |||
| 60 | table | 1 | Side lobby | ||||
| 61 | chairs | 2 | Side lobby | ||||
| Item# | Item Description | Qty | Dimensions For Desks & Tables (LXW) | Materials: MDF=M<br><br><br>Wood=W Metal=ML | (Mfr & Model; Freestand, etc.) | Condition | Location (s) |
| --- | --- | --- | --- | --- | --- | --- | --- |
| 62 | Cubicle Electric workstation | 62 | 6'x6' | 2W001 Main Office | |||
| w/electric box, file PED&glass divider | 2W001 Main Office | ||||||
| 63 | Chairs | 32 | 2W001 Main Office | ||||
| 64 | Lamps | 62 | 2W001 Main Office | ||||
| 65 | Mats | 16 | 2W001 Main Office | ||||
| 66 | Bull Pen Stations & Chairs | 8 | 60x24 | 2W001 Main Office | |||
| 67 | Orange Hassocks | 7 | 2W001 Main Office | ||||
| 68 | File Cabinet | 1 | 72x40x18 | 2W001 Main Office | |||
| 69 | File Cabinet | 2 | 48x48x24 | 2W001 Main Office | |||
| 70 | Garbage Cans | 65 | 2W001 Main Office | ||||
| 71 | Garbage Cans | 70 | 2W001 Main Office | ||||
| File Cabinet | 1 | 72x40x18 | 2W001 Main Office | ||||
| 73 | Blue Sofa Couch | 1 | 72Lx48Lx30H | 2W005 Huddle | |||
| 74 | Table | 1 | 48"x48" | 2W004 Huddle | |||
| 75 | Chairs | 2 | Rolling | 2W004 Huddle | |||
| 76 | Sofa Couch | 72Lx48Lx30H | 2W003 Huddle | ||||
| 77 | Table | 1 | 36x24x12 | 2W002 Huddle | |||
| 78 | Blue chairs | 3 | 2W002 Huddle | ||||
| 79 | Table | 1 | (2) 48x48 | 2W016 Conference Room | |||
| 80 | Chairs | 8 | 2W016 Conference Room | ||||
| 81 | Glasd Board | 1 | 96x48 | 2W016 Conference Room | |||
| 82 | Table | 1 | (2) 48x48 | 2W015 Conference Room | |||
| 83 | Chairs | 8 | 2W015 Conference Room | ||||
| 84 | Glasd Board | 1 | 96x48 | 2W015 Conference Room | |||
| 85 | Glass board | 1 | 48"x60" | 2W014 flex office | |||
| 86 | Credenza | 1 | 56x24 | 2W014 flex office | |||
| 87 | Modular desk/overhead/Ped/chair | 1 | 64x24 | 2W014 flex office | |||
| 88 | Guest chairs | 2 | 2W014 flex office | ||||
| 89 | Glass board | 1 | 48"x60" | 2W013 flex office | |||
| 90 | Credenza | 1 | 56x24 | 2W013 flex office | |||
| 91 | Modular desk/overhead/Ped/chair | 1 | 64x24 | 2W013 flex office | |||
| 92 | Guest chairs | 2 | 2W013 flex office | ||||
| --- | --- | --- | --- | --- | --- | --- | --- |
| Item# | Item Description | Qty | Dimensions For Desks & Tables (LXW) | Materials: MDF=M<br><br><br>Wood=W Metal=ML | (Mfr & Model; Freestand, etc.) | Condition | Picture |
| 93 | Table | 1 | 48x48 | unk | 2W019 Huddle | ||
| 94 | Chairs | 4 | unk | 2W019 Huddle | |||
| 95 | Blue chair | 1 | unk | 2W020 Mother's Room | |||
| 96 | Table‐white | 1 | 12x15 | unk | 2W020 Mother's Room | ||
| 97 | Table | 1 | 36x36 | unk | 2W020 Mother's Room | ||
| 98 | Small Refrigerator | 1 | 24x24x24 | unk | 2W020 Mother's Room | ||
| 99 | Racks | 1 | 2W021IDF | ||||
| 100 | Table | 1 | 36x24x12H | unk | 2W023 Huddle | ||
| 101 | Chairs | 3 | unk | 2W023 Huddle | |||
| 1st Floor Inventory | |||||||
| --- | --- | --- | --- | --- | --- | --- | --- |
| Item# | Item Description | Qty | Dimensions For Desks & Tables (LXW) | Materials: MDF=M<br><br><br>Wood=W<br><br><br>Metal=ML | (Mfr & Model; Freestand, etc.) | Condition | Location (s) |
| 102 | Table | 1 | 48x48 | Outer Lobby‐1C002 | |||
| 103 | Chair | 4 | Outer Lobby‐1C002 | ||||
| 104 | Chair‐Gray | 2 | 72x25x25 | Lobby | |||
| 105 | Chair‐Stripe | 2 | 71x48x17 | Lobby | |||
| 106 | Chair‐Light Gray | 1 | 74x24x17 | Lobby | |||
| 107 | Table | 8 | 48x48x29 | 1C012 Conference Room | |||
| 108 | Chairs | 12 | 1C012 Conference Room | ||||
| 109 | Small table | 1 | 12" diameter | 1C012 Conference Room | |||
| 110 | Table | 8 | 48x48x29 | 1C011 Conference Room | |||
| 111 | Chairs | 12 | 1C011 Conference Room | ||||
| 112 | Small table | 1 | 12" diameter | 1C011 Conference Room | |||
| 113 | Table | 8 | 48x48x29 | 1C010 Conference Room | |||
| 114 | Chairs | 12 | 1C010 Conference Room | ||||
| 115 | Small table | 1 | 12" diameter | 1C010 Conference Room | |||
| 116 | Table | 8 | 48x48x29 | 1C009 Conference Room | |||
| 117 | Chairs | 12 | 1C009 Conference Room | ||||
| 118 | Small table | 1 | 12" diameter | 1C009 Conference Room | |||
| --- | --- | --- | --- | --- | --- | --- | --- |
| 119 | Table | 1 | 76x48 | 1E003 Media Huddle | |||
| Item# | Item Description | Qty | Dimensions For Desks & Tables (LXW) | Materials: MDF=M<br><br><br>Wood=W<br><br><br>Metal=ML | (Mfr & Model; Freestand, etc.) | Condition | Location (s) |
| 120 | Tall Chairs | 6 | 1E003 Media Huddle | ||||
| 121 | Glass Board | 1 | 96x48 | 1E003 Media Huddle | |||
| 122 | Table | 1 | 76x48 | 1E002 Media Huddle | |||
| 123 | Tall Chairs | 8 | 1E002 Media Huddle | ||||
| 124 | Glass Board | 1 | 96x48 | 1E002 Media Huddle | |||
| 125 | Table | 1 | 42x42 | 1E001 Media Huddle | |||
| 126 | Chairs | 4 | 1E001 Media Huddle | ||||
| 127 | Glass Board | 1 | 96x48 | 1E001 Media Huddle | |||
| 128 | Table | 1 | 76x48 | 1E006 Media | |||
| 129 | Chairs | 6 | 1E006 Media | ||||
| 130 | Glass Board | 1 | 96x48 | 1E006 Media | |||
| 131 | Glass Board | 1 | 96x48 | IT Help | |||
| 132 | Cubicles | 5 | 60x48 | IT Help | |||
| 133 | Chairs | 5 | IT Help | ||||
| 134 | Workstations | 32 | E007 main office 1 | ||||
| 135 | Bullpen | 16 | E007 main office 1 | ||||
| 136 | Chairs | 31 | E007 main office 1 | ||||
| 137 | Lamps | 32 | E007 main office 1 | ||||
| 138 | Table | 1 | 96x36x36 | Storage | |||
| 139 | Hood | 1 | 48x96x14 | Storage | |||
| 140 | Racks | 4 | 48x18x72 | Storage | |||
| 141 | Racks | 2 | 36x18x86 | Storage | |||
| 142 | Workstations | 32 | main office 1 | ||||
| 143 | Chairs | 32 | main office 1 | ||||
| 144 | Lamps | 32 | main office 1 | ||||
| 145 | Tall chairs | 4 | main office 1 | ||||
| 146 | worktable | 1 | |||||
| 147 | 3 drawer File Cabinets | 4 | 36x36 | main office 1 | |||
| 148 | 4 drawer File Cabinet | 1 | 48x36x12 | main office 1 | |||
| 149 | Orange hassocks | 8 | main office 1 | ||||
| 150 | garbage Cans | 70 | main office 1 | ||||
| 151 | 6 Drawer file cabinets | 6 | 72x18 | main office 1 | |||
| 152 | Computer Racks | 5 | various | Data | |||
| 153 | Refrigerator<br><br><br>Refrigerator | 1 | LG | Café | |||
| --- | --- | --- | --- | --- | --- | --- | --- |
| 153 | 0 | Café | |||||
| Item# | Item Description | Qty | Dimensions For Desks & Tables (LXW) | Materials: MDF=M<br><br><br>Wood=W<br><br><br>Metal=ML | (Mfr & Model; Freestand, etc.) | Condition | Location (s) |
| 154 | Refrigerator | 1 | Cresscor | Café | |||
| 155 | Small refrigerator | 1 | Café | ||||
| 156 | Toaster | 1 | Café | ||||
| 157 | Microwave | 2 | Café | ||||
| 158 | Counter | 2 | 78x46x34 | ||||
| 159 | Stacking chair | 32 | Café | ||||
| 160 | Bookshelf | 1 | 48x65 | Café | |||
| 161 | Stools | 18 | Café | ||||
| 162 | Table | 9 | 42x30x30 | Café | |||
| 163 | Love Seat | 2 | 64x33x40 | Café | |||
| 164 | sofa | 2 | 60x35x32 | Café | |||
| 165 | table | 3 | 84x36x32 | Café | |||
| 166 | Gray Chair | 1 | Café | ||||
| 167 | Workstations | 30 | PSG Room Office | ||||
| 168 | Chairs | 10 | PSG Room Office | ||||
| 169 | lamps | 30 | PSG Room Office | ||||
| 170 | File caboinets | 3 | PSG Room Office | ||||
| 171 | orange hassocks | 2 | PSG Room Office | ||||
| 172 | Pedestal desk | 1 | 1E023 Flex office | ||||
| 173 | Credenza | 1 | 1E023 Flex office | ||||
| 174 | Guest chairs | 2 | 1E023 Flex office | ||||
| 175 | Glass board | 1 | 1E023 Flex office | ||||
| 176 | 1 | 1E022 Flex office | |||||
| 177 | Credenza | 1 | 1E022 Flex office | ||||
| 178 | Guest chairs | 2 | 1E022 Flex office | ||||
| 179 | Glass board | 1 | 1E022 Flex office | ||||
| 180 | Chairs | 22 | Storage | ||||
| 181 | Chair rack | 1 | 36x87x12 | Storage | |||
| 182 | Exam table | 1 | 96x48x40 | Wellness | |||
| 183 | Chairs | 2 | Wellness | ||||
| 184 | Desk | 2 | 76x29x33 | Wellness | |||
| 185 | Chairs | 2 | Wellness | ||||
| 186 | Bookshelf | 1 | 30x15x66 | Mailroom | |||
| 187 | Rack | 36x86 | Mailroom | ||||
| 188 | Bookshelf | 36x15x34 | Mailroom | ||||
| 189 | Desk | 1 | 48x48 | 1C023 Conference Room | |||
| --- | --- | --- | --- | --- | --- | --- | --- |
| 190 | chairs | 4 | 1C023 Conference Room | ||||
| Item# | Item Description | Qty | Dimensions For Desks & Tables (LXW) | Materials: MDF=M<br><br><br>Wood=W<br><br><br>Metal=ML | (Mfr & Model; Freestand, etc.) | Condition | Location (s) |
| 191 | Fitness Room | ||||||
| 192 | 2 drawer File cabinet | Flex Section | |||||
| 193 | Sectional couch | 115x56x30 | Flex Section | ||||
| 194 | Workstations | 48 | Flex Section | ||||
| 195 | Chairs | 16 | Flex Section | ||||
| 196 | lamps | 48 | Flex Section | ||||
| 197 | orange hassocks | 4 | Flex Section | ||||
| 198 | Modular desk/overhead/Ped/chair | 1W031 Office | |||||
| 199 | Credenza | 1W031 Office | |||||
| 200 | Guest chairs | 1W031 Office | |||||
| 201 | Glass Board | 1W031 Office | |||||
| 202 | Modular desk/overhead/Ped/chair | 1W030Office | |||||
| 203 | Guest chairs | 1W030Office | |||||
| 204 | Guest chairs | 1W030Office | |||||
| 205 | Glass Board | 1W030Office | |||||
| 206 | Table | 1W029 Media Huddle | |||||
| 207 | Chairs | 8 | 1W029 Media Huddle | ||||
| 208 | Glass Board | 1 | 1W029 Media Huddle | ||||
| 209 | Couch | 1 | 76x35x34 | Living Room | |||
| 210 | Couch | 1 | 76x35x34 | Living Room | |||
| 211 | Tablke | 1 | 36" diameter | Living Room | |||
| 212 | Chairs | 2 | Living Room | ||||
| 213 | Rolling locker | 76x25x68 | Storage | ||||
| 214 | Garbage Cans | 80 | |||||
| 215 | Workstations | 60 | Commercial Enginmeering | ||||
| 216 | chairs | 31 | Commercial Enginmeering | ||||
| 217 | adjustable desk | 1 | Commercial Enginmeering | ||||
| 218 | Lamps | 50 | Commercial Enginmeering | ||||
| 219 | Orange hassocks | 12 | Commercial Enginmeering | ||||
| 220 | File cabinets | 11 | Commercial Enginmeering | ||||
| 221 | Chairs | 3 | Commercial Enginmeering | ||||
| 222 | Table | 1 | 36x12 | Commercial Enginmeering | |||
| 223 | Bullpens | 16 | Commercial Enginmeering | ||||
| --- | --- | --- | --- | --- | --- | --- | --- |
| 224 | Table | 2 | 48x48 | 1W023 Team Office | |||
| Item# | Item Description | Qty | Dimensions For Desks & Tables (LXW) | Materials: MDF=M<br><br><br>Wood=W<br><br><br>Metal=ML | (Mfr & Model; Freestand, etc.) | Condition | Location (s) |
| 225 | Chairs | 10 | 1W023 Team Office | ||||
| 226 | Glass Board | 1 | 96x48 | 1W023 Team Office | |||
| 227 | Table | 1 | 96x48 | 1W022 Team Office | |||
| 228 | Chairs | 8 | 1W022 Team Office | ||||
| 229 | Glass Board | 1 | 96x48 | 1W022 Team Office | |||
| 230 | Sectional couch | 1 | 50x50 | 1W016 Focus Room | |||
| 231 | Chair & hassack | 1 | 1W015 Focus Room | ||||
| 232 | Table | 1 | 48x48 | 1W014 Huddle | |||
| 233 | Chairs | 3 | 1W014 Huddle | ||||
| 234 | Table | 1 | 48x48 | 1W013 Flex | |||
| 235 | Chairs | 3 | 1W013 Flex | ||||
| 236 | Conf table | 1 | 36: diameter | 1W012 Office | |||
| 237 | Chairs | 3 | 1W012 Office | ||||
| 238 | Pedestal desk | 1 | 1W012 Office | ||||
| 239 | Guest Chairs | 2 | 1W012 Office | ||||
| 240 | Credenza | 1 | 1W012 Office | ||||
| 241 | Glass Board | 1 | 1W012 Office | ||||
| 242 | Table | 1 | 96x48 | 1W011 Office | |||
| 243 | Chairs | 10 | 1W011 Office | ||||
| 244 | Glass Board | 1 | 48x30 | 1W011 Office | |||
| 245 | Table | 1 | 96x48 | 1W010 Office | |||
| 246 | Chairs | 10 | 1W010 Office | ||||
| 247 | Glass Board | 1 | 48x96 | 1W010 Office | |||
| 248 | Sofa sectional | 1 | 48x48 | 1W005 Office | |||
| 249 | Table | 1 | 48x48 | 1W004 Huddle | |||
| 250 | Chairs | 2 | 1W004 Huddle | ||||
| 251 | Hassock | 1 | 1W004 Huddle | ||||
| 252 | Sectional couch | 1 | 84x48 | 1W003 Huddle | |||
| 253 | Table | 1 | 36x24 | 1W002 Huddle | |||
| 254 | Chairs | 3 | 1W002 Huddle | ||||
| --- | --- | --- | --- | --- | --- | --- | --- |
| 255 | Table | 48x48 | 1C006 Phone | ||||
| Item# | Item Description | Qty | Dimensions For Desks & Tables (LXW) | Materials: MDF=M<br><br><br>Wood=W<br><br><br>Metal=ML | (Mfr & Model; Freestand, etc.) | Condition | Location (s) |
| 256 | Chairs | 2 | 1C006 Phone | ||||
| 257 | Table | 48x48 | 1C007 Phone | ||||
| 258 | Chairs | 2 | 1C007 Phone | ||||
| 259 | Glass Board | 36x36 | 1C007 Phone |
EXHIBIT D
Form of Bill of Sale
BILL OF SALE
THIS BILL OF SALE (this “Bill of Sale”) is executed as of, 2021 (the “Effective Date”), by, a(“Assignor”) to and for the benefit of
, a(“Assignee”).
RECITALS
WHEREAS, ASSIGNOR intends to assign and convey unto ASSIGNEE that certain personal property as described herein.
NOW, THEREFORE, in consideration of the foregoing and One and No/100 Dollar ($1.00) and other good and valuable consideration in hand paid by ASSIGNEE to ASSIGNOR, the receipt and sufficiency of which are hereby acknowledged and confessed by ASSIGNOR, ASSIGNOR and ASSIGNEE hereby act and agree as follows:
1.Conveyance. ASSIGNOR does hereby ASSIGN, TRANSFER, CONVEY, SET OVER and DELIVER to ASSIGNEE, its successors and assigns, without recourse, representation or warranties, “as is, where is,” the personal property described on Schedule 1 attached hereto and incorporated herein by reference (the “Personal Property”).
2.AS IS, WHERE IS. ASSIGNEE acknowledges that it: (a) has conducted its own inquiry and investigation into, and based thereon, has formed an independent judgment concerning, the Personal Property; (b) has been furnished with or given access to such information about the Personal Property as it has requested; (c) has inspected the Personal Property; and (d) based on all such information has found the Personal Property to be in acceptable condition for the purpose of consummating the transfer contemplated by this Bill of Sale. ASSIGNEE hereby releases and discharges ASSIGNOR and each of its former, current and future directors, officers, shareholders, predecessors, successors, assigns, affiliates, board members, agents, insurance carriers, attorneys, servants, and employees from each and every claim, cause of action, damages (including consequential damages) and demands, loss and expense, including, but not limited to, attorneys’ fees and costs, that it has or might have, in any way arising out of or in connection with the transfer of the Personal Property or ASSIGNEE’s possession, use, maintenance, transfer or disposal of the Personal Property. ASSIGNOR HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES, WRITTEN OR ORAL, STATUTORY, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY, CONDITION, QUALITY, DURABILITY, DESIGN, OPERATION, FITNESS FOR USE, OR SUITABILITY OF THE PERSONAL PROPERTY IN ANY RESPECT WHATSOEVER, INCLUDING ANY WARRANTY REGARDING THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT—IT BEING UNDERSTOOD AND AGREED THAT THE PERSONAL PROPERTY IS TO BE
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TRANSFERRED “AS IS” AND “WHERE IS” AND IN ITS CONDITION AS OF THE DATE
HEREOF. ASSIGNOR shall in no event be liable for any claim whatsoever by or through ASSIGNEE, or any third party, for any inoperability or failure of the Personal Property to perform as designed or intended, whether such claim is based in any form of warranty, contract, tort (including negligence), strict liability or otherwise and whether for direct, incidental, consequential, exemplary or other damages. ASSIGNOR neither assumes nor authorizes any person to assume for ASSIGNOR any liability in connection with the sale or resale or use or misuse of the Personal Property.
3.Miscellaneous. This Bill of Sale may be executed in any number of counterparts, and each counterpart hereof shall be deemed to be an original instrument, but all such counterparts shall constitute but one instrument. This Bill of Sale shall be construed and enforced in accordance with and governed by the internal laws of the State of Wisconsin. This Bill of Sale shall bind and inure to the benefit of ASSIGNOR and ASSIGNEE and their respective successors and assigns. ASSIGNOR and ASSIGNEE each represents and warrants to the other that (i) it is fully empowered and authorized to execute and deliver this Bill of Sale, and (ii) it has authorized the individual signing this Bill of Sale on its behalf to do so. The parties agree to take all such further actions and execute, acknowledge and deliver all such further documents that are reasonably necessary or useful in carrying out the purposes of this Bill of Sale. Facsimile or electronic (PDF or DocuSign) signatures shall be treated as if they are original signatures when attached hereto.
[SIGNATURE PAGE FOLLOWS IMMEDIATELY]
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HB: 4860-1276-1863.7
IN WITNESS WHEREOF, this Bill of Sale is executed as of the Effective Date.
ASSIGNOR:
, a
By:
Name:
Title:
ASSIGNEE:
, a By:
Name: Title:
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SCHEDULE 1 TO BILL OF SALE
Personal Property
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EXHIBIT E
Subtenant’s Gemini Lease
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FULL SERVICE LEASE
Date: March 22, 2004
Lessor: PS Business Parks, L.P., a California Limited Partnership Lessee: Digimarc Corporation. a Delaware Corporation
| I. | Lease Terms |
|---|---|
| I. | OJThe Premises is the Building whose address |
| --- | --- |
!m- The Premises contains approximately rentabl
The Building contains approximatelyrentable square feet
R
." "A-2". The
Project is depicted on Exhibit "A-3" and contains approximately - .-.•feet. The Property is depicted on Exhibit "A-4" and is commonly referred tote P rk and contains approximately rentable square feet.
1.02Lessee's Notice Address: Lessee's Notice Address i stated in Paragraph 1.01 above.
1.04Lessee's Permitted Use: Lessee shall use the Premises and for no other purpose whatsoever: General office uses.
1.05Lease Term: The Lease Term commences on Sor such other date as is determined by the provisions of this Lease (the "Commencement Date" and ends on the final day of the
M1!! full calendar month thereafter.
| 1.06 | Base Rent: Base Rent shall be paid monthly in the amo nts specified below: | |||
|---|---|---|---|---|
| $ | Beginning | el!tember 112004 | Ending | Februar1: 2812!!!!5 |
| --- | --- | --- | --- | --- |
| Beginning | Marchl,2!!!15 | Ending | Auau§t 31, 2005 | |
| S JJE | Beginning | Sel!tember 11 2!!!5 | Ending | Ayaust JI, 2!!!16 |
| S 6 ,1§2 | Beginning | Sel!tember 11 2006 | Ending | Auaust11 2007 |
| UZJ2!! | Beginning | eptember 11 2!!!17 | Ending | Ayaust ;!112!!!!§ |
| U2sm | Beginning | e11tem r !, 211!!§ | Ending | Auau§t 31, 2!!!!9 |
1..1.lamBeginning el!tember 11 2009Ending Auaust 31, 2010
Beginning Sel!ti:mber 11 2010Ending Auaust 3112!!11
| 1.07 | Security Deposit: S 75~~1~~000.00 |
|---|---|
| 1.08 | Initial Monthly Rent Charges: Base Rent $46,667.00. |
| --- | --- |
1.09Proportionate Share: Lessee's Proportionate Share oft e Property, which represents the approximate Proportionate Share of the Premises to the Property, is • 2%. Lessee's Proportionate Share of the Project, which represents the approximate Proportionate Sh re of the Premises to the Project,
is 39,!)964%1 Lessee's Proportionate Share of the Building within whi h the Premises is located, which represents the approximate Proportionate Share of the Premises to the uilding, is !!!!!.%. Proportionate Share may be adjusted by Lessor during the Lease Term if the size of he Project, Premises or Building
changes.
1.10Expense Base Year: lm-
1.12 Automatic Payments: Unless Lessor otherwise directs in writing, all payments of Base Rent and the monthly estimated payments of Lessee's Proportionate Sh re of Operating Expenses shall be made by electronic payment. Lessee shall execute such necessary a reasonable documents, provide
such necessary and reasonable information, and follow such necessary and reasonable procedures as are requested by Lessor from time to time to facilitate such payments. If, y reason of insufficient funds or other reason, any such payment is not fully made and received, such vent shall be deemed a failure of Lessee to make the required payment. Payment shall be deemed mad by Lessee on the date funds are actually received by Lessor; provided, if Lessee is then in default, Less r shall have the right to return all or a part of any payment received within ten (10) business days of eipt, in which event the returned amount shall be deemed to have not been paid by Lessee or received by Lessor. Receipt of any funds pursuant to this Paragraph shall not constitute a waiver by Lessor of an Default by Lessee whether or not such Default is known to Lessor.
| 2. | Lease of Premises |
|---|
2.01Lessor leases to Lessee, and Lessee leases from Less r, the Premises, upon the terms of this Lease. The Premises are leased "AS IS" except only for the imp vements, if any, which are to be constructed by Lessor pursuant to Exhibit "B." Any such improve ents to be constructed by Lessor pursuant to Exhibit "B" are herein referred to as "Lessor's Work." xcept as provided herein, Lessee acknowledges that neither Lessor nor any agent of Lessor has ma e any representation or warranty regarding the Premises. The square footages set forth in this Lease a approximate and agreed. Use of the terms "rentable" and '.'usable" is for convenience only and repres ts Lessor's interpretation of such terms. Lessor will deliver the Premises to Lessee with existing p umbing, electrical, fire sprinkler, lighting, air conditioning, heating and mechanical systems located in the Premises, if any, in good working condition.
2.02Lessor's Work, if any, shall be installed by Lessor in ompliance with all then applicable codes. Lessee, at its sole expense, agrees to comply with all laws, codes, ordinances and other legal requirements (including covenants and restrictions) applicable to the P mises (herein "Laws''); provided, however, that Lessor, in conjunction with the Lessor's work, shall ect any repairs and improvements required under any Laws as of the Commencement Date. Lessee agr to cause the Premises to comply with all Laws, including by making any changes to the Premises n essitated by any Lessee activity, including but not limited to changes required by (a) any Lessee Impr vements or Lessee Alterations (as defined below), or (b) any use of the Premises or Property by Lessee; provided, Lessor reserves the right to accomplish such changes itself at the expense of Lessee. If any ac• vity of Lessee necessitates changes to the Project other than the Premises, then Lessor shall elect that ssor accomplish the same at the expense of Lessee or that Lessee accomplish the same at its own ex nse. Notwithstanding anything to the contrary herein, Lessee shall not be responsible for making a y structural modifications to the Premises except to the extent Lessee's space plan requires structural ifications.
2.03If for any reason Lessor cannot deliver possession o the Premises three (3) weeks prior to the estimated Commencement Date of the Lease Term, Lessor wi not be subject to any liability nor will the validity of this Lease be affected in any manner. Rather, e Commencement Date shall be delayed until three (3) weeks after delivery of possession to allow see to fixturize the Premises in which event the expiration date of the Lease Term shall be extended to include the same number of full calendar months as set forth in Paragraph 1 above (plus any partial mt month); provided, in the event delivery of possession is delayed by any act, omission or request of Lessee, then the Premises shall be deemed to have been delivered (and the Commencement Date shall cur) on the earlier of the actual date of delivery or the date delivery would have occurred absent the numb r of days of such delay attributable to Lessee and the term shall then be for such number of full cale dar months (plus any partial first month). If for any reason possession of the Premises is not delivere on the scheduled Commencement Date set forth in Paragraph I above, Lessee may a) receive two (2) ays free rent for each day of delay beyond the scheduled commencement date, and b) terminate this. se by written notice given after a forty-five (45) day period beyond the scheduled commencement dat but prior to delivery of possession; provided, such forty-five (45) day period shall be extended by (a) the number of days of delays attributable to Lessee (including but not limited to delays in approv s of plans or cost estimates, delays related to changes in plans requested by Lessee whether or not ap roved by Lessor, delays caused by Lessee installing any "Lessee Improvements," delays caused by oth r early entry or early occupancy by Lessee, and/or other delays attributable to Lessee), plus (b) the n mber of days of delays caused by events beyond the reasonable control of Lessor (including but n limited to fire, earthquake, other casualty, inclement weather, acts of God, shortages of labor or ma erial, lead times on ordered items, strike, acts or omissions of government, and/or delays in government I permits, inspections or approvals). Any such termination shall be without liability of Lessor to Lessee. ny such termination by Lessee shall be Lessee's sole remedy for delay in delivery of possession.
2.04Upon expiration or termination of this Lease, Less agrees to return the Premises to Lessor in the same condition as received by Lessee, normal wear nd tear excepted, with all• removal, repair, and restoration duties of Lessee being fully performed.
2.05Upon request made by Lessor following the Comm ncement Date, Lessee shall execute and deliver an agreement setting forth the Commencement Date, e date upon which the Lease Term
shall expire, and such other matters regarding the commencement of thi Lease as Lessor shall request. If Lessee, with Lessor's prior written consent, occupies the Premises p •or to the Commencement Date, Lessee's occupancy of the Premises shall be subject to all the provision of the Lease. Early occupancy of the Premises shall not advance the expiration date of the Lease.
| 3. | Base Rent |
|---|
On or before the first day of each calendar month of the Leas Term, Lessee will pay to Lessor the Base Rent for such month. Base Rent for any first partial month a d for the first full calendar month of the Lease Term, is due and payable upon due date called for in this ase. Security deposit is due and payable upon Lease execution. Monthly rent for any partial calendar onth will be prorated. All sums payable by Lessee to Lessor hereunder shall be deemed rent. Base Ren and all other amounts required to be paid by Lessee hereunder shall be paid without deduction or offset a d without prior notice or demand. All such amounts shall be paid in lawful money of the United State of America and shall be paid to Lessor at the address stated herein or to such other persons or to uch other places as Lessor may designate in writing from time to time. Amounts payable hereunder s all be deemed paid when actually received by Lessor.
| 4. | Additional Rent |
|---|
4.01Unless otherwise specifically stated in this Lease, an charge payable by Lessee under this Lease other than Base Rent is called "Additional Rent." The term 'rent" whenever used in this Lease means Base Rent, Additional Rent and/or any other monies payable y Lessee under the terms of this Lease.
4.02"Operating Expenses" as used herein shall include all costs and expenses related to the ownership, management, operation, maintenance, replacement, improv ment and repair of the Premises, Building, Project and/or Property, or any part thereof, incurred by Less r including but not limited to: (I) Property supplies, materials, labor, equipment, and tools; (2) Lessor-inc rred Utility and Service Costs (as further described in Paragraph 4.03B below), security, janitorial, trash moval, and all applicable service and maintenance agreements; (3) Property related legal, accounting and consulting fees, costs and expenses, including but not limited to the cost of contests of Re I Property Taxes; (4) Insurance Premiums for all policies deemed reasonably necessary by Lessor an or its lenders, and all deductible amounts under such policies (as further described in Paragraph 4.03C elow); (5) costs and expenses of operating, maintaining, and repairing the Property, including but not Ii ited to all interior areas and also driving, parking, loading, and other paved or unpaved areas (including ut not limited to, resurfacing and striping and any snow and ice removal Lessor elects to conduct), la dscaped areas (including but not limited to, tree trimming), building exteriors (including but not limited to, painting and roof work), signs and directories, and lighting; (6) capital improvements and replacemen s (including but not limited to, all financing costs and interest charges); (7) compensation (including but not limited to, any payroll taxes, worker's compensation for employees, and customary employee b nefits) of all persons, including independent contractors, who perform duties, or render services on b alf of, or in connection with the Property, or any part thereof, including but not limited to, Property op rations, maintenance, repair, and rehabilitation; (8) Property management fees not exceeding 5% of An ual Base Rent.and the reasonable cost of providing space used by the Property manager; and (9) Real Pr perty Taxes (as further described in Paragraph 4.03A, below). All Operating Expenses other than Real perty Taxes, Utility and Service Costs, and Insurance Premiums, are herein referred to as Common Are Expenses (CAM). Any increases in CAM expenses shall be limited to a non-cumulative 5% per year. In addition, in the event Lessor effects any capital improvements or replacements, the cost of the s me shall be amortized over the number of years equal to the useful life of any such capital improvemen s or replacements.
4.03A "Real Property Taxes" shall include any fee, license fe , tax, levy, charge, or assessment (hereinafter individually and/or collectively referred to as "Tax") imp sed by any authority having the direct or indirect power to tax and where such Tax is imposed against e Property, or any part thereof, or Lessor in connection with its ownership or operation of the Property, in luding but not limited to: (l) any Tax on rent or Tax against Lessor's business of leasing the Property; (2) any Tax by any authority for services or maintenance provided to the Property, or any part thereof, including but not limited to, fire protection, streets, sidewalks, and utilities; (3) any Tax on real estate or personal property levied with respect to the Property, or any part thereof, and any fixtures and equi ment and other property used in connection with the Property; (4) any Tax based upon a reassessment f the Property due to a change in ownership or transfer of all or part of Lessor's interest in the Prop rty; and, (5) any Tax replacing, substituting for, or in addition to any Tax previously included in this d finition. Real Property Taxes do not include Lessor's federal or state net income taxes.
4.03B "Utility and Service Costs" shall include all Lessor inc rred utility and service-costs and expenses including but not limited to costs related to water and plumbi g, electricity, gas, lighting, steam, sewer, waste disposal, and HYAC, and all costs related to plumbing mechanical, electrical, elevator, HYAC, and other systems.
4.03C "Insurance Premiums" shall include all insurance premiums for all insurance policies maintained by Lessor from time to time related to the Property.
4.04Throughout the Lease Term following the Base Year, Lessee will pay as Additional Rent its Proportionate Share (of the Project and/or Building, as designated from time to time by Lessor) of the amount by which total Operating Expenses in each calendar year exceed total Operating Expenses for the Base Year, subject to the limitation set forth in Section 4.02 above. Estimated payments shall be made monthly on or before the first day of each calendar month each in the amount of Lessor's then current estimate as outlined below. Lessee's Proportionate Share will be prorated for partial months. All Operating Expenses will be adjusted, at the election of Lessor, to reflect 100% occupancy during any calendar year in which the Project is not fully occupied (in which event Operating Expenses for the Base Year shall also be so adjusted).
4.05Lessee's Proportionate Share of Operating Expenses shall be determined and paid as follows:
4.05A. Lessee's Operating Expense estimates: On or about April l" of each calendar year, Lessor will provide Lessee with a statement of: (I) Lessee's annual share of estimated Operating Expenses in excess of Base Year Operating Expenses for the then current calendar year; (2) Lessee's monthly Operating Expense estimate for the then current year; and, (3) Lessee's retroactive estimate correction billing (for the period of January I" through the date immediately prior to the commencement date of Lessee's new monthly Operating Expense estimate) for the difference between Lessee's new and previously billed monthly Operating Expense estimates for the then current year.
4.05B. Lessee's Proportionate Share of actual annual Operating Expenses: Each year, Lessor will provide Lessee with a statement reflecting the total Operating Expenses for the previous calendar year. If the total of Lessee's Operating Expense estimates billed for the previous calendar year are less than Lessee's Proportionate Share of the actual Operating Expenses in excess of Base Year Operating Expenses, the statement will indicate the payment amount and date due. If Lessee has paid more than its Proportionate Share of excess Operating Expenses for the preceding calendar year, Lessor will credit the overpayment toward Lessee's future Operating Expense obligations. Monthly Operating Expense estimates are due on the I" of each month and shall commence in the month specified by Lessor. Lessee's retroactive estimate correction, and actual annual Operating Expense charges, if any, shall be due, in full, on the date(s) specified by Lessor.
4.06Unless Lessor otherwise elects, Lessee shall pay each Operating Expense in accordance with Lessee's Proportionate Share of the Building or Lessee's Proportionate Share of the Project, whichever is designated by Lessor. Lessor shall have the right to make allocations ("Allocations") to Lessee of any one or more Operating Expenses on a different basis. Lessor shall have the right to make any such Allocations in any manner which Lessor deems reasonable (including use of estimates). For example, if Lessor deems it reasonable to do so, Lessor shall have the right to elect at any time and from time to time (a) to make any Allocation of one or more Operating Expenses based upon Lessee's Proportionate Share of the Building and to make other Allocations on Lessee's Proportionate Share of the Project, (b) to make Allocations of certain Operating Expense items among less than all lessees and/or other than based upon the respective square footages of the lessees, (c) to make different Allocations for different Operating Expenses, and/or (d) to alter an Allocation or the method of determining an Allocation from time to time. In no event shall Lessor be liable to Lessee based upon any incorrect or disputed Allocation nor shall Lessee have any right to terminate this Lease by reason of any such Allocation.
4.07In the event Lessee wishes to audit any Operating Expense charge, such an audit shall be limited to an audit of the annual statement delivered under Paragraph 4.05B abpve. Such audit shall be performed only if, at the time of the audit request and at all times thereafter to and during the course of the audit, Lessee has paid in full all Operating Expenses billed and is not in Default (as defined in Section
20.02 below). Any audit shall be conducted at a time and location designated by Lessor. Lessor and Lessee agree that any Lessee audit must be requested by Lessee by written notice given within six (6) months of the date that Lessor provides the applicable annual statement under Paragraph 4.05B above, and must be completed by Lessee within thirty (30) days of its written notice requesting the audit; if Lessee does not give such written notice within the period of time allowed, or fails to complete the audit within the time allowed, Lessee's right to audit is waived, and the Operating Expenses, as billed, including all calculations used as the basis for Lessor's charges (including any "Allocations" and any applicable Expense Base Year or expense stop calculations), shall be deemed conclusive and final for all purposes under this Lease. All calculations by Lessor of Operating Expenses for the Expense Base Year shall be conclusive and final, and Lessee shall have no right to audit the same, except only Lessee may audit the same as part of an audit of Operating Expenses for the first Expense Comparison Year. Any audit shall be conducted only by Lessee and the CPA then used by Lessee for the preparation -of its tax returns and financial statements; no agent of Lessee employed in connection with the audit shall be employed on any contingent payment basis. Lessee shall maintain as strictly confidential, and shall cause its auditor to execute in favor of Lessor a confidentiality agreement (in form prepared by Lessor)
regarding, all financial information audited, the results of any such audit, and the resolution of any disputed issues arising in connection with such audit. Lessor shall not be bound by the result of any such audit. If the parties do not agree upon the inclusion or amount of any Operating Expense charged by Lessor, the sole remedy of Lessee shall be to conduct an audit within the time specified in this Lease and, if still in disagreement with Lessor, to submit the matter to arbitration pursuant to Section 27.J 7 below within thirty (30) days after completion of the audit to request an adjustment to any disputed Operating Expense item to cause the same to not exceed the amount that Lessor has the right to collect hereunder for such item. In no event will this •Lease be terminable nor shall Lessor be liable for damages based upon any disagreement regarding or adjustment of Operating Expenses.
| 5. | Late Charges |
|---|
If any sum payable by Lessee to Lessor is not received by Lessor within five (5) days after it becomes due, Lessee shall pay a late charge equal to fifty dollars ($50.00) or five (5%) of the then delinquent amount, whichever is greater. A fifty dollar ($50.00) handling fee will be paid to Lessor by Lessee for each bank returned check, and Lessee will be required to make all future payments to Lessor by wire or electronic transfer or by cashier's check. The acceptance of late charges and returned check charges by Lessor will not constitute a waiver of Lessee's Default nor any other rights or remedies of Lessor. Lessee shall not be in default of this Lease the first time in a twelve (12) consecutive month period that Lessee fails to pay rent when due so long as Lessee pays such overdue rent within five (5) days of written notice from Lessor that such overdue amount is due.
| 6. | Security Deposit and Financial Reporting |
|---|
6.0I Upon Lessee's execution of this Lease, Lessee will deposit with Lessor an initial Security Deposit in the amount specified in Paragraph 1 as security for Lessee's full and faithful performance of every provision under this Lease. Lessor will not be required to keep the Security Deposit separate from its general funds and has no obligation or liability for payment of interest thereon (except when required by law). Lessee hereby grants to Lessor a security interest in the Security Deposit. Lessee will not have the right to apply any part of the Security Deposit to any amounts payable under the terms of this Lease nor is it a measure or limitation of Lessor's damages in event of a Default by Lessee. If Lessee fails to pay any rent due herein, or otherwise is in Default of any provision of this Lease, Lessor may, without waiver of the Default or of any other right or remedy, use, apply or retain all or any portion of the Security Deposit for the payment of any amount due Lessor or to compensate Lessor for any loss or damage suffered by Lessee's Default. Within five (5) days after written notification by Lessor, Lessee will restore the Security Deposit to the full amount required under this Lease.
6.02 Within ten (10) days after written request from Lessor but not more often than annually, Lessee shall deliver to Lessor such financial statements as Lessor reasonably requests regarding Lessee or any assignee, subtenant, or guarantor of Lessee. Lessee represents and warrants to Lessor that each financial statement is a true and accurate statement. Lessor shall use such statements only for valid business purposes. Lessor shall have the right to make such financial statements and the other contents of its files available to law enforcement or other governmental agencies upon request
| 7. | Use of Premises |
|---|
7.01The Premises will be used and occupied only for Lessee's Permitted Use. Lessee will, at its sole expense, comply with all conditions and covenants of this Lease, and all Laws. Lessee will not use or permit the use of the Premises, the Property or any part thereof, in a manner that is unlawful, diminishes the appearance or aesthetic quality of any part of the Property, creatc.s waste or a nuisance, or causes damage to the Property. Lessee shall not permit any objectionable or unpleasant odors, smoke, dust, gas, noise or vibrations to emanate from the Premises nor take or permit any other action in the Premises that would endanger, annoy, or interfere with the operations of, Lessor or any other tenant of the Project. Lessee shall obtain, at its sole expense, any permit or other governmental authorization required to operate its business from the Premises. Any animals, excepting guide dogs, on or about the Property or any part thereof are expressly prohibited.
7.02In the event of any excessive trash in or outside the Premises, as determined by Lessor in its sole discretion, Lessor will have the right to remove such excess trash, charge all costs and expenses attributable to its removal to Lessee. Lessee will not cause, maintain or permit any outside storage on or about the Property without prior written consent by Lessor. 1n the event of any unauthorized outside storage by Lessee, Lessor will have the right, without notice, in addition to such other rights and remedies it may have, to remove any such storage at the expense of Lessee.
| 8. | Parking |
|---|
AU parking will comply with the terms and conditions of this Lease and the parking rules and regulations included in Exhibit "D." Lessee will have a non-exclusive privilege to use of one-hundred eighty (180) parking spaces designated by Lessor for public parking and four (4) designated visitor parking spaces at the entry to the Premises. Vehicles parked in public parking areas will be no larger than full-sized passenger automobiles or standard pick-up trucks. Lessor reserves the right, without notice to Lessee, to tow away at Lessee's sole cost and expense any vehicles parked in any parking area for any continuous period of 24 hours or more, or earlier if Lessor, in its sole discretion, determines such parking to be a hazard or inconvenience to other lessees or Lessor, or violates any rules or regulations or posted notices related to parking. Lessor shall not be responsible for enforcing Lessee's parking rights against third parties. From time to time, Lessor reserves the right, upon written notice to Lessee, to change the location, the availability and nature of parking spaces, establish reasonable time limits on parking, and, on an equitable basis, to assign specific spaces with or without charge to Lessee as Additional Rent. The parking privileges granted to Lessee are personal to Lessee; Lessee shalJ not assign or sublet parking privileges.
| 9. | Utilities and Services |
|---|---|
| 9.0 | lSubject to the other provisions of this Lease, the following services are provided. |
| --- | --- |
| A. | Electricity, water, and elevator service (if elevators presently serve the Premises) are provided. |
| --- | --- |
| B. | Heating and air conditioning are provided 7:00 a.m. to 6:00 p.m. Monday through Saturday, except holidays. If Lessee desires such service during other hours, Lessee must prearrange the same with Lessor and pay an additional charge for such service. |
| --- | --- |
| C. | Five days per week janitorial service, periodic window cleaning, supplies for Building operation, and other customary services. |
| --- | --- |
If Lessee uses any utility or service in excess of normal usage levels, as determined by Lessor in its sole discretion, Lessor shall have the right to charge Lessee for such excess use and to charge Lessee the cost to separately meter such use.
9.02Lessor will not be liable or deemed in Lessor Default, nor will there be any abatement of rent or right to terminate this Lease, for (a) any interruption or reduction of utilities, utility services or telecommunication services not caused by Lessor, (b) any telecommunications or other company (whether selected by Lessor or Lessee) failing to provide such utilities or services or providing the same defectively, and/or (c) any utility interruption in the nature of blackouts, brownouts, or rolling interruptions. Lessee agrees to comply with any energy conservation programs required by law or implemented by Lessor. Lessee acknowledges that utility and service costs and availability may fluctuate significantly, due to power shortages or other events and factors, and Lessee accepts the risks of such fluctuations. Lessor reserves the right, in its reasonable discretion, to designate, at any time, the utility and service providers for Lessee's use within the Property; no such designation shall impose liability upon Lessor.
9.03Lessee has satisfied itself as to the adequacy of any Lessor owned utility equipment and the quantity of telephone lines and other service connections to the Building available for Lessee's use.
| 10. | Lessee Improvements; Lessee Alterations and Mechanic's Liens |
|---|
10.01Any improvements to be constructed in the Premises by Lessee prior to Lessee initialJy commencing use of the Premises are referred to throughout this Lease as "Lessee Improvements." All Lessee Improvements will be performed in accordance with the terms and conditions outlined in Exhibit "B" and also in accordance with the provisions set forth in this Paragraph IO regarding Lessee Alterations.
10.02The following provisions apply to "Lessee Alterations" which means and includes (a) any alterations or improvements to the Premises undertaken by Lessee (other than nonstructural installation of equipment or trade fixtures}, (b) any utility instalJations at the Premises undertaken by Lessee, and (c) any repair, restoration, replacement, or maintenance work at the Premises undertaken by Lessee whether or not Lessee is required to undertake such work pursuant to this Lease. Lessee shall not commence any Lessee Alteration without first obtaining the prior written consent of Lessor in each instance which consent may be withheld or conditioned in Lessor's reasonable discretion. Lessee shall submit such information regarding the intended Lessee Alteration as Lessor may reasonably require, and no request for consent shall be deemed complete until such information is delivered. The following provisions apply to alJ Lessee Alterations.
(aJ Lessee shall hire a licensed general contractor who, in tum, shall hire only licensed subcontractors. All work shall be conducted expeditiously and be completed within a reasonable time.
| (b) | Lessee shall obtain all required permits and deliver a copy of the same to Lessor. Lessee shall install all Lessee Alterations in strict compliance with all permits, any plans approved by Lessor, and all conditions to Lessor's approval. |
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| (c) | Unless Lessor elects otherwise in its applicable prior written consent, Lessee shall remove each Lessee Alteration at the end of this Lease or Lessee's right of possession and restore the Premises to its prior condition, all at Lessee's expense. |
| --- | --- |
| (d) | Lessee shall deliver to Lessor, within ten (JO) days following installation of each Lessee Alteration, (w) accurate, reproducible as-built plans, (x) proof of final inspection and approval by all governmental authorities, (y) complete lien waivers for all costs of the Lessee Alteration, and (z) a copy of a recorded notice of completion. |
| --- | --- |
10.03Lessor shall have the right to inspect all Lessee Alterations. Lessee shall pay to Lessor a fee equal to 5% of total project cost up to $50,000 and 2.5% thereafter, to compensate Lessor for review of plans, inspection of work, and other activities regarding any Lessee Alterations. Approval of any plans or inspection of any work is for the sole benefit of Lessor and is not a representation by Lessor that any work is suitable or complies with applicable requirements. Lessor's approval of any Lessee Improvements and Lessee Alterations and/or Lessor's approval or designation of any general contractor, subcontractor, supplier or other project participant will not create any liability whatsoever on the part of Lessor.
I0.04 Lessee shall pay all costs of Lessee Alterations as and when due. Lessee shall not allow any lien to be filed. Lessee shall obtain advance lien waivers and third-party beneficiary agreements from all contractors, subcontractors, suppliers, and others providing equipment, labor, materials, or services, in the form required by Lessor. If any lien is filed, then, without waiver of any other right or remedy, Lessor shall have the right to cause such lien to be removed by any means allowed by law, including bond, deposit, and/or payment of the underlying claim. All sums expended by Lessor in coMection with such lien and/or its removal, including attorney fees, shall be immediately due from Lessee to Lessor, together with interest at the rate of 12%.
10.05All Lessee Improvements and Lessee Alterations are part of the realty and belong to Lessor. Lessee shall be solely responsible to insure all Lessee Alterations and to restore the same following any casualty. As a condition of Lessor consenting to any Lessee Improvements or Lessee Alterations, Lessor reserves the right, at any time to elect to make Lessee the owner of all or any specified part of the Lessee Improvements or Lessee Alterations and/or to require Lessee, upon termination of this Lease, to remove none, all, or part of the same at its sole cost and expense. The provisions of this Paragraph shall survive the termination of this Lease.
10.06Notwithstanding any other provision of this Lease, Lessee shall remove, at or prior to the expiration or termination of this Lease, at its expense, all wiring and cabling installed at the Premises which shall have been installed by Lessee or which Lessor shall have installed pursuant to this Lease or at the request of Lessee. Such wiring and cabling shall include but not be limited to (a) wiring and cabling above the ceiling panels, behind or within walls, and under or within floors, (b) wiring and cabling for voice, data, security or other purposes, (c) wiring and cabling installed pursuant to this Paragraph 10, pursuant to Exhibit B, or otherwise, and (d) all related installations, equipment aqd items whatsoever.
| 11. | Repairs |
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I1.01 Subject to Paragraph 11.02 below, Lessee shall, at all times and at its sole cost and expense, keep all parts of the Premises (including Lessee Improvements and Lessee Alterations) in good order, and in a neat, clean and safe condition. If Lessee does not perform required maintenance, Lessor shall have the right, without waiver of Default nor of any other right or remedy, to perform such obligations of Lessee on Lessee's behalf, and Lessee will reimburse Lessor for any costs incurred immediately upon demand.
11.02 Lessor shall perform all repairs required in the Premises. All costs incurred by Lessor in making such repairs shall be Operating Expenses; provided, Lessee shall reimburse Lessor for 100% of any such costs incurred by Lessor (a) due to the act or omission of Lessee (including but not. limited to clogging of plumbing, stain removal, and repair of damage to the Premises), or (b) for repairs or maintenance in excess of or other than routine Building standard repairs and maintenance as determined by Lessor in its reasonable discretion (for example, maintenance of any above standard dedicated HVAC unit, repair of built-in appliances, or periodic replacing of above standard light bulbs).
| 12. | Insurance |
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12.0l Lessee will not do or permit anything to be done within or about the Premises or the Property which will increase the existing rate of any insurance on any portion of the Property or cause the cancellation of any insurance policy covering any portion of the Property. Lessee will, at its sole cost and expense, comply with any requirements of any insurer of Lessor.
12.02Lessee agrees to maintain policies of insurance described in this Paragraph. Lessor reserves the right, from time to time, to require additional coverage's (including, for example, flood insurance, if the Premises is located in a flood hazard zone), and/or to require higher amounts of coverage's. Any additional and/or higher must conform to reasonable industry standards. No insurance policy of Lessee shall have a deductible greater than $50,000.
(a)
(b)
Workers' Compensation Employer's Liability
Commercial General Liability
Combined single limit per occurrence this location
Statutory Requirements
Not less than $1,000,000.00 Not less than $1,000,000.00
Not less than $2,000,000.00 aggregate
The Commercial General Liability policies shall insure on an occurrence and not a claims-made basis and cover the Premises, Project and Property. Such policies shall cover liability arising from premises, operations, independent contractors, products-completed operations, personal injury, advertising injury and liability assumed under an insured contract (specifically insuring performance of the indemnity obligations of Lessee hereunder); such policies shall not be excess.
| (c) | Automobile Liability |
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single limit including property damage
Not less than $300,000.00 combined
| (d) | "Causes of Loss -- Special Form" coverage including endorsements for flood coverage, earthquake sprinkler leak coverage, and such endorsements and supplemental as Lessor may require from time to time. This insurance coverage must be upon the Premises and all property owned by Lessee, for which Lessee is legally liable, which Lessee is obligated to repair and restore hereunder, and/or which was installed at the expense of or at the request of Lessee, including but not limited to, any Lessee Improvements, Lessee Alterations, furniture, fixtures, equipment, installations and any other personal property of Lessee, in an amount not less than their full replacement value. All proceeds of this insurance shall only be used for the repair and replacement of property so insured; Lessee hereby assigns to Lessor all its rights to receive any proceeds of such insurance policies attributable to any Lessee Improvements and Lessee Alterations if this Lease is terminated due to damage or destruction. |
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The limits of the insurance coverage required under this Lease will not limit the liability of Lessee nor relieve Lessee of any obligation hereunder. All insurance to be carried by Lessee will be primary to, and non-contributory with, Lessor's insurance, and contain cross-liability endorsements and will in addition to the above coverage specifically insure Lessor against any damage or loss that may result either directly or indirectly from any default of Lessee under Paragraph 14 (Hazardous Materials) herein. Any similar insurance carried by Lessor will be considered excess insurance only.
12.03Lessee will name Lessor (and, at Lessor's request, any mortgagee) and Lessor's agents as additional insured's on all insurance policies required of Lessee under this Lease, other than Worker's Compensation, Employer's Liability, Automobile Liability, and Fire and Extended coverage (except on Lessee Improvements or Lessee Alterations to the Premises for which Lessor shall be named an additional insured) insuring Lessor and such other additional insured's regardless of any defenses the insurer may have against Lessee and regardless of whether the subject claim is also made against Lessee. All insurance policies carried by Lessee will permit the insured, prior to any loss, to agree with a third party to waive any claim it might have against said third party without invalidating the coverage under the insurance policy, and will release Lessor (and Lessor's affiliates and subsidiaries, and all officers, partners, directors, and employees of Lessor and/or of any such subsidiary or affiliate), from any claims for damage to any person, to the Property of which the Premises are a part, any existing improvements, Lessee Improvements and Lessee Alterations to the Premises, and to any furniture, fixtures, equipment, installations and any other personal property of Lessee caused by or resulting from, risks which are to be insured against by Lessee under this Lease, regardless of cause.
12.04Lessee will deliver to Lessor (and, at Lessor's request, to any mortgagee or to any other third party), simultaneously with its execution of this Lease and thereafter at least thirty (30) days prior to expiration, cancellation or change in insurance, certificates of insurance evidencing, at a minimum, the
coverage specified in Paragraph I 2.02. All such certificates shall be in fonn and substance satisfactory to Lessor, shall affinnatively demonstrate all and requirements set forth in this Lease, shall contain no disclaimers of coverage, and shall include a finn and unconditional obligation to give to Lessor at least 10 days' prior written notice prior to cancellation or change in any coverage. All insurance required hereunder will be with companies licensed and authorized to do business in the state in which the Property is located and holding a "General Policyholders Rating" of" A VIII" or better, as set forth in the most current Best's Insurance Guide.
I 2.05 Lessor will secure and maintain insurance coverage in such limits as Lessor may deem reasonable in its reasonable judgment to afford Lessor adequate protection. The premiums for such coverage are "Insurance Premiums" under Paragraph 4.03C above. Any proceeds of such insurance shall be the sole property of Lessor to use as Lessor determines. Lessor makes no representation that the insurance policies and coverage amounts specified to be canied by Lessee or Lessor under the tenns of this Lease are adequate to protect Lessee. Lessee will provide, at its own expense, all insurance as Lessee deems adequate to protect its interests.
12.06 Without limiting the effect of any other waiver of or limitation on the liability of Lessor set forth herein, and except as provided in Paragraph 13 and/or Paragraph 14 below, neither Lessor nor Lessee shall be liable to the other party or to any insurance company (by way of subrogation or otherwise) for any loss of or damage to tangible property due to casualty regardless of negligence. For purposes of this Paragraph 12.06, "Lessor" shall include Lessor's affiliates and subsidiaries, and all officers, partners, directors, and employees of Lessor or of any such subsidiary or affiliate.
| 13. | Waiver of Claims and Indemnification |
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Lessee waives all claims against Lessor for any damage to any property in or about the Property, for any loss of business or income, and for injury to or death of any persons, regardless of the cause of any such loss or event or time of occurrence, except loss, injury or death caused by Lessor's gross negligence or willful misconduct. Lessee will indemnify, protect, defend and hold hannless Lessor from and against all claims, losses, damages, causes of action, costs, expenses and liabilities, including legal fees, arising out of Lessee's occupancy of the Premises or presence on the Property, the conduct of Lessee•s business, any Default by Lessee, and/or any act, omission or neglect of Lessee, its agents, contractors, employees, suppliers, licensees or invitees. For purposes of this Paragraph 13, "Lessor" shall include also Lessor's affiliates and subsidiaries, and all officers, partners, directors, and employees of Lessor or of any such subsidiary or affiliate.
| 14. | Hazardous Materials |
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14.01"Hazardous Materials" will mean any substance commonly referred to, or defined in any Law, as a hazardous material or hazardous substance (or other similar tenn), including but not be limited to, chemicals, solvents, petroleum products, flammable materials, explosives, asbestos, urea formaldehyde, PCB's, chlorofluorocarbons, Freon or radioactive materials. Lessee will not cause or pennit any Hazardous Materials to be brought upon, kept, stored, discharged, released or used in, under or about any portion of the Property by Lessee, or its agents without the prior written consent of Lessor, which consent may be withheld or conditioned in Lessor's sole discretion; provided, Lessee may bring into the Premises small amounts of Hazardous Materials (such as cleaning products and copy toner) which are readily available to Lessee by unregulated retail purchase if the same are necessary in Lessee's nonnal business operations. If Lessee brings any Hazardous Materials to the Premises or Property, with or without the prior written consent of Lessor (without waiver of the requirement of prior written consent), Lessee shall: (1) use such Hazardous Material only as is reasonably necessary to Lessee's business, in small, properly labeled quantities; (2) handle, use, keep, store, and dispose of such Hazardous Material using the highest accepted industry standards and in compliance with all applicable Laws; (3) maintain at all times with Lessor a copy of the most current MSDS sheet for each such Hazardous Material; and (4) comply with such other rules and requirements Lessor may from time to time impose. Upon expiration or earlier tennination of this Lease, Lessee will, at Lessee's sole cost and expense, cause all Hazardous Materials brought to the Premises or the Property by Lessee, its agents, contractors, employees, suppliers, licensees or invitees, to be removed from the Property in compliance with any and all applicable Laws.
14.02If Lessee or its agents violate the provisions of this Paragraph 14, or performs any act or omission which contaminates or expands the scope of contamination of the Premises, the Property, or any part thereof, the underlying groundwater, or any property adjacent to the Property, then Lessee will promptly, at Lessee's expense, take all investigatory and/or remedial action (collectively called "Remediation") that is necessary to fully clean up, remove and dispose of such Hazardous Materials and any contamination so caused and shall do so in compliance with any applicable Laws. Lessee will also repair any damage to the Premises and any other affected portion(s) of the Property caused by such contamination and Remediation.
14.03Lessee shall immediately provide to Lessor written notice of any investigation or claim arising out of the use by Lessee of Hazardous Materials at the Propeny or the violation of any provision of this Paragraph 14 and shall keep Lessor fully advised regarding the same. Lessee shall provide to Lessor all repons regarding the use of Hazardous Materials by Lessee at the Property and any incidents regarding the same, regardless of whether any such documentation is considered by Lessee to be confidential. Lessor retains the right to panicipate in any legal actions affecting the Property involving Hazardous Materials.
14.04Lessee will indemnify, protect, defend and forever hold Lessor, its lenders and ground lessor, if any, and the Premises, the Property, or any portion thereof, harmless from any and all damages, causes of action, fines, losses, liabilities, judgments, penalties, claims, and other costs arising out of any failure of Lessee to observe any covenants of this Paragraph 14 of this Lease. All provisions of this Paragraph 14 shall survive the expiration of this Lease and any termination of this Lease or of Lessee's right of possession. For purposes of this Paragraph 14.04, "Lessor" shall include also Lessor's affiliates and subsidiaries, and all officers, partners, directors, and employees of Lessor or of any such subsidiary or affiliate.
| 15. | Lessor's Access |
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Lessor, its agents, contractors, consultants, servants and employees, will have the right to enter the Premises at any time in the case of an emergency, and otherwise at reasonable times upon reasonable notice to examine the Premises, perform work in the Premises, show the Premises, exercise any right or remedy, or for any other purpose. For each of these purposes, Lessor will at all times have and retain any necessary keys. Lessee will not alter any lock or install new or additional locks or bolts on any door in or about the Premises without obtaining Lessor's prior written approval and will, in each event, furnish Lessor with a new key. Access by Lessor will not give Lessee the right to terminate this Lease, and will be without abatement of rent or liability on the part of Lessor.
| 16. | Damage or Destruction |
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16.01If the Premises is damaged or destroyed by fire or other casualty, Lessee will immediately give written notice to Lessor of the casualty. Lessor will have the right to terminate this Lease following a casualty if any of the following occur by giving notice to Lessee within sixty (60) days of the casualty: (i) insurance proceeds actually paid to Lessor and available for use are not sufficient to pay the full cost to fully repair the damage; (ii) Lessor determines that the Premises or the Building cannot be fully repaired within 180 days; (iii) the Premises are damaged or destroyed within the last twelve (12). months of the Lease Term; (iv) Lessee is in Default of this Lease at the time of the casualty;
(v) Lessor would be required under this Lease to abate or reduce Lessee's rent for a period in excess of six (6) months if the repairs were undertaken; or (vi) the Project, or the Building in which the Premises is located, is damaged such that the cost of repair of the same would exceed 10% of the replacement cost of the same. If Lessor elects to terminate this Lease, Lessor will be entitled to retain all applicable Lessee insurance proceeds excepting those attributable to Lessee's furniture, fixtures, equipment, and any other personal property.
16.02lf this Lease is not terminated pursuant to Paragraph 16.01, Lessor will repair the Premises and this Lease shall continue. The repair obligation of Lessor shall be limited to repair of the Premises excluding any Lessee Improvements, Lessee Alterations, and any personal property and trade fixtures of Lessee. During the period of repair, rent will be abated or reduced in proportion to the degree to which Lessee's use of the Premises is impaired, as determined by Lessor, not to exceed the total amount of rent loss insurance proceeds, directly attributable to Lessee's Premises, Lessor has received. However, rent will not be abated if Lessee or any of its agents is the cause of the,casualty.
| 17. | Transfer (Assignment/Subletting) |
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17.01Lessee will not, voluntarily or by operation of law, assign, sell, convey, sublet or otherwise transfer all or any part of Lessee's right or interest in this Lease, or allow any other person or entity to occupy or use all or any part of the Premises (collectively called ''Transfer") without first obtaining the written consent of Lessor which may be withheld or conditioned by Lessor in its reasonable discretion. Any Transfer without the prior written consent of Lessor shall be void. Without limiting the generality of the definition of "Transfer," it is agreed that each of the following shall be deemed a "Transfer" for purposes of this Paragraph: (a) an entity other than Lessee becoming the tenant hereunder by merger, consolidation, or other reorganization; and (b) a transfer of any ownership interest in Lessee (unless Lessee is an entity whose stock is publicly traded). Lessee shall provide to Lessor all information requested by Lessor concerning a Transfer. If Lessor has not granted consent in writing to -a Transfer within thiny (30) days of Lessee's request hereunder and delivery of all such information, Lessor will be deemed to have rejected Lessee's request. In no event shall Lessee mortgage, encumber, pledge or assign for security purposes all or any part of its interest in this Lease. Notwithstanding the foregoing, Lessee may assign this Lease or sublease the Premises, in whole or in part, without the express written consent of
Lessor to: (i) any corporation into which or with which Lessee has merged or consolidated; (ii) any parent, subsidiary, successor, or affiliated corporation of Lessee; (iii) any corporation which acquires all or substantially all of the assets or issued and outstanding shares of capital stock of Lessee; (iv) any partnership, the majority interest of which shall be owned by the parent of Lessee; provided the resulting entity from such merger or consolidation or the transferee, other than a parent, subsidiary or affiliated corporation of Lessee, from any such acquisition, shall have a net worth not less than Lessee's prior to the merger, consolidation, or acquisition; and provided further any such assignee or successor shall agree in writing to assume and perform all of the terms and conditions of this Lease on Lessee's part to be performed from and after the effective date of such assignment or subletting, so long as the resulting entity's use of the Premises does not violate any provision of this Lease or any applicable governmental law, rule or regulation.
17.02In the event Lessor consents to a Transfer, the Transfer will not be effective until Lessor receives a fully executed agreement regarding the Transfer, in a form and of substance acceptable to Lessor, any documents or information required by such agreement (including any estoppel certificate and any subordination agreement required by any lender of Lessor), an amount equal to all attorneys fees and other expenses of Lessor incurred in connection with the Transfer, and a Transfer fee in an amount determined by Lessor (a minimum fee of $250 is payable). Lessee agrees to pay to Lessor an amount equal to all attorneys' fees and other expenses incurred by Lessor related to a request for consent to Transfer regardless of whether such consent is granted and regardless of whether the Transfer is consummated.
17.03Fifty percent (50%) of any consideration paid to Lessee solely for assignment of this Lease, less any reasonable brokerage commission and reasonable tenant improvements paid by Lessee with respect to such assignment, shall be immediately paid to Lessor. In the event of a sublease of all or a portion of the Premises, fifty percent (50%) of all rents payable by the subtenant in excess of rents payable hereunder (allocated on a per square foot basis in the event of a partial sublease) shall be immediately due and payable to Lessor; provided, excess rental shall be calculated taking into account straight-line amortization, without interest, of any reasonable brokerage commission less any reasonable tenant improvements paid by Lessee in connection with the subject sublease transaction.
17.04Lessor may, within thirty (30) days after submission of Lessee's written request for Lessor's consent to a Transfer, terminate this Lease (or, as to a partial subletting, terminate this Lease as to the portion of the Premises proposed to be sublet) as of the date the proposed Transfer was to be effective. If Lessor terminates this Lease as to only a portion of the Premises, then (a) this Lease shall cease as to such portion of the Premises, (b) Lessee shall pay to Lessor all Base Rent and other amounts accrued through the termination date relating to the portion of the Premises covered by the proposed Transfer (allocated on an equitable basis determined by Lessor), and (c) Lessee shall execute, upon request of Lessor, an amendment hereto setting forth matters related to such partial termination. Lessor may physically separate the recaptured portion of the Premises and lease such portion of the Premises to the prospective transferee (or to any other person) without liability to Lessee.
17.05Regardless of whether consent by Lessor is granted in connection with any Transfer, no Transfer shall release Lessee from any obligation or liability hereunder; Lessee shall remain primarily liable to pay all rent and other sums due hereunder to Lessor and to perform all other obligations hereunder. Similarly, no Transfer, with or without the consent of Lessor, shall release any guarantor from its obligations under its guaranty. Upon any assignment or sublease, any rights, options or opportunities granted to Lessee hereunder to extend or renew the Lease Term, to shorten the Lease Term, or to lease additional space shall be null and void.
| 18. | Default |
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Time is of the essence in the performance of all covenants of Lessee. Lessee will be in Default if
any of the following events occurs:
18.01Lessee fails to make within five (5) days of when due, any payment of Base Rent, Additional Rent, or any other monetary payment required to be made by Lessee herein and Lessee does not cure such failure within three (3) days after Lessor gives written notice of such failure to Lessee; provided, if Lessor has given such a written notice with respect to two (2) payments due in any calendar year, then the failure by Lessee to pay any other payment due in such calendar year, on or before the date when first due, shall be a Default hereunder without any written notice from Lessor and without any grace or cure period. Notwithstanding the foregoing, Lessee shall not be in default of this Lease the first time in a twelve (12) month period that Lessee fails to pay rent when due so long as Lessee pays such overdue rent within five (5) days of written notice from Lessor that such overdue amount is due.
18.02Lessor discovers that any representation or warranty made by Lessee or any guarantor was materially false when made or that any financial statement of Lessee or of any guarantor of this Lease given to Lessor was materially false.
I8.03 Lessee makes any general arrangement or assignment for the benefit of creditors, becomes a "debtor" in a bankruptcy proceeding, is unable to pay its debts or obligations as they occur, or has an attachment, execution or other seizure of substantially all of its assets located at the Property or its interest in this Lease.
18.04Lessee fails to observe, perform or comply with any of the non-monetary terms, covenants, conditions, provisions or rules and regulations applicable to Lessee under this Lease other than as specified above in this Paragraph 18; provided, if such failure is a curable failure, then such failure shall not be a "Default" unless Lessee does not cure such failure as soon as practicable possible but in no event later than thirty (30) days following written notice of such failure from Lessor; provided, however, that if said default cannot be cured within said thirty (30) day period using reasonable diligence, no Default shall be deemed to have occurred if Lessee commences action to cure the Default within said thirty (30) day period and diligently pursues a cure thereafter.
18.05Any guarantor becomes insolvent, becomes a "debtor" in a bankruptcy proceeding, fails to perform any obligation under its guaranty, or attempts to revoke its guaranty.
| 19. | Remedies of Lessor |
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19.01If Lessee fails to perform any duty or obligation of Lessee under this Lease, Lessor may at its option, without waiver of Default nor any other right or remedy, perform any such duty or obligation on Lessee's behalf. The costs and expenses of any such performance by Lessor will be immediately due and payable by Lessee upon receipt from Lessor of the reimbursement amount required.
19.02Upon a Default, with or without notice or demand, and without limiting any other of Lessor's rights or remedies, Lessor may:
| (a) | Terminate this Lease and/or terminate Lessee's right to possession of the Premises. Upon any such termination, Lessee will immediately surrender possession of the Premises to Lessor. On termination of this Lease or Lessee's right of possession, Lessor will 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 the termination; (ii) the worth at the time of the award of the amount by which the unpaid rents which would have been earned after termination until the time of award exceeds the amount of such rental loss that Lessee proves could have been avoided; (iii) the worth at the time of the award of the amount by which the unpaid rents for the balance of the Lease Term after the time of award exceeds the amount of such rental Joss for such period that Lessee proves could be reasonably avoided; and (iv) the worth at the time of the award of any other amount necessary to compensate Lessor for all the damage proximately caused by Lessee's failure to perform its obligations under this Lease, including specifically the unamortized portion of all brokerage commissions paid in connection with this Lease and all costs of Lessor's Work (amortized without interest on a straight line basis over the initial Lease Term), and reimbursement of any free rent, deferred rent or other Lease execution inducement. The expiration or termination of this Lease, and/or the termination of Lessee's right to possession, will not release Lessee from any liability under this Lease. |
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| (b) | Continue the Lease and Lessee's right to possession and recover rent as it becomes due. Acts of maintenance or preservation, efforts to relet the Premises, removal or storage of Lessee's personal property or the appointment of a receiver to protect Lessor's interest under this Lease, will not constitute a termination of 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. |
| --- | --- |
19.03The "worth at the time of award" referred to in Paragraph 19.02(a)(i), 19.02(a)(ii), and J9.02(a)(iv) will additionally include interest computed by allowing interest at the rate of 12% per annum (or, if lower, at the maximum rate allowed by law). The "worth at the time of award" referred to in Paragraph 19.02(a)(iii) will be computed by discounting the amount at the discount rate of the Federal Reserve Bank of San Francisco in effect at the time of award, plus one percent (I%).
19.04No right or remedy conferred upon or reserved to Lessor in this Lease is intended to be exclusive of any right or remedy granted to Lessor by statute or common law, and each and every such right and remedy will be cumulative.
| 20. | Condemnation |
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If any portion of the Premises or any portion of the Building in which the Premises is located, or any portion of the Property which would substantially interfere with Lessor's ownership, or Lessor's or
Lessee• ability to conduct business is taken for any public or quasi-public purpose by any governmental authority, including but not limited to, by exercise of the right of appropriation, inverse condemnation, condemnation or eminent domain, or sold in lieu of such taking, Lessor, at its option, may terminate this Lease without recourse by Lessee. If this Lease is not terminated, Lessor will promptly proceed to restore the Premises and/or any portion of the Property used in common by all lessees to substantially the same condition as prior to such taking allowing for any reasonable effects of such taking. Should a portion of the Premises be taken in a case where Lessor does not exercise its right to terminate this Lease, Lessor will abate the rent corresponding to the term during which, and to the part of the Premises which, Lessee is deprived on account of such taking. Any award for any taking or payment made in lieu of exercise of such power will be the property of Lessor, whether such award be made as compensation for diminution of value of the leasehold or for the taking of the fee, or as severance damages; however, Lessee will be entitled to any compensation, separately awarded to Lessee for Lessee's relocation expenses.
| 21. | Estoppel Certificate |
|---|
Lessee will execute and deliver to Lessor, within ten (10) days after written request from Lessor, a written Estoppel Certificate in form prepared by Lessor certifying: (i) that this Lease is unmodified and in full force and effect (or, if modified, specifying each such modification); (ii) the Commencement Date and expiration of the Lease Term; (iii) the absence or status of any rights of Lessee to renew, extend, or otherwise alter the Lease Term or to lease additional space or alter the definition of the Premises; (iv) the date to which rent and any other charges are paid in advance, if any; (v) that there are not, to Lessee's knowledge, any uncured Defaults on the part of Lessor, or stating the nature of any uncured Defaults; (vi) the current Base Rent amount and the amount and form of the Security Deposit on deposit with Lessor;
(vii) that Lessor has completed any promised improvements to the Premises and paid any promised improvement allowance (or detailing any work to be performed or allowance to be paid); and (viii) any other information requested, including but not limited to, any requested information regarding Hazardous Materials. Any such Estoppel Certificate may be relied upon by Lessor, and also by any actual or prospective buyer or lender of the Property and any other third party designated by Lessor (the "Beneficiaries"). If Lessee fails to execute and deliver such Estoppel Certificate within such ten (10) day period, then without waiver of Default or of any other right or remedy of Lessor, Lessor shall have the right to deliver to the Beneficiaries a completed Substitute Estoppel Certificate regarding this Lease certifying the matters which Lessee was requested to certify in the Estoppel Certificate. A notice enclosing a copy of the Substitute Estoppel Certificate shall be simultaneously sent to Lessee. Each statement in the Substitute Estoppel Certificate shall be deemed true, and shall be binding upon Lessee, unless Lessee provides, within five (5) days of the receipt of Lessor's notice, written notice addressed to Lessor and the Beneficiaries disagreeing with such statement on specific grounds. Lessee shall defend and indemnify Lessor regarding any claim that a statement in the Substitute Estoppel Certificate to which Lessee did not so disagree is inaccurate.
| 22. | Notices |
|---|
All communications and notices required under this Lease shall be in writing and shall be addressed to the respective address of the receiving party set forth in Paragraph 1 above. All notices to Lessee shall be given by reputable overnight courier, U. S. mail (First Class, postage prepaid), or hand delivery, and shall be deemed received (i) if mailed, on the earlier of actual receipt or three (3) days after such mailing, (ii) one business day following delivery by Lessor to such an overnight courier, or (iii) upon hand delivery. Any notice to Lessee may also be given by posting at the Premises and shall be effective upon such posting. Notices to Lessor shall be sent to Lessor by U. S. mail, postage prepaid, registered or certified mail with return receipt requested to the address indicated in Paragraph 1 and shall be deemed received five (5) days after such mailing. At any time during the Lease Term, Lessor or Lessee may specify a different Notice Address by providing written notification to the other..
| 23. | Holdover |
|---|
If Lessee remains in possession of all or any part of the Premises with Lessor's prior written consent after the expiration or termination of this Lease or of Lessee's right to possession, such possession will constitute a month-to-month tenancy which may be terminated by either Lessor or Lessee upon thirty (30) days written notice and will not constitute a renewal or extension of the Lease Term. If Lessee remains in possession after such expiration or termination without Lessor's prior written permission, such possession will constitute a tenancy-at-will terminable upon forty-eight (48) hours' notice by Lessor and will not constitute a month-to-month tenancy nor a renewal or extension of the Lease Term. In the event of a month-to-month tenancy or tenancy-at-will under this Paragraph, Lessee's Base Rent will be two hundred percent (200%) of the Base Rent payable during the last month of the Lease Term, any other sums due under this Lease will be payable in the amounts and at the times specified in this Lease, and all options, rights of refusal, expansions and/or renewals shall be null and void. Any tenancy under this Paragraph will be subject to every other term, condition and covenant contained in this Lease. Lessee agrees to defend, indemnify and hold Lessor harmless from any claim or cause of action arising out of related to the failure of Lessee to surrender possession of the Premises to
Lessor upon the expiration of this Lease or upon any such termination. Notwithstanding the foregoing, Lessee shall have the option to holdover for a period of up to three (3) months following the expiration of the lease term at 115% of the last rent due under the terms of the lease. Lessee shall be required to provide Lessor one-hundred eighty (180) days notice prior to lease the lease expiration date.
| 24. | Default by Lessor; Limitation of Liability; Real Estate Investment Trust |
|---|
24.01In the event Lessor fails to perform any obligation required to be performed under this Lease, Lessee will notify Lessor in writing of such failure. Lessor shall not be deemed in Lessor Default hereunder unless and until such notice is actually received by Lessor and Lessor fails within thirty (30) days of receipt of such notice to commence to make a good faith effort to cure the failure or thereafter ceases to pursue such cure to completion.
24.02The obligations of Lessor under this Lease shall be binding only on the undersigned Lessor and not upon any of its subsidiaries or affiliates nor upon any partners, investors, trustees, directors, officers, employees, agents, shareholders, advisors or managers of Lessor in their individual capacities. With respect to any obligations of Lessor to Lessee under this Lease and with respect to any liabilities arising at the Property, Lessee's sole and exclusive remedy shall be a claim against the undersigned Lessor.
24.03In consideration of the benefits accruing hereunder, Lessee on behalf of itself and all of its Transferees covenants and agrees that, in the event of any actual or alleged Lessor Default of this Lease or in the event of any other claim or cause of action by Lessee, Lessee's recourse against Lessor for any monetary damages (over and above damages actually paid by available insurance, if any) will be limited to Lessor's interest in the amount of equity Lessor would have in the Property if the Property were encumbered by debt in an amount equal to fifty percent (50%) of the value of the Property; calculations of equity shall be made as of the initial date Lessee notifies Lessor of the actual or alleged Default or other claim the Property. Any judgment against Lessor shall be satisfied only out of an offset against Rents and out of the Property; no other assets of Lessor shall be subject to levy, execution or other enforcement procedure for the satisfaction of any judgment by Lessee against Lessor. Any claims by Lessee against Lessor will be limited to actual damages only and will not, under any circumstances, include lost profits or consequential damages.
24.04If Lessor is a real estate investment trust, and if Lessor in good faith determines that its status as a real estate investment trust under the applicable provisions of the Internal Revenue Code of 1986, as heretofore or hereafter amended, will be jeopardized because of any provision of this Lease, Lessor may require reasonable amendments to this Lease and Lessee shall not unreasonably withhold or delay its consent thereto, provided that such modifications do not in any way, (i) increase the obligations of Lessee under this Lease or (ii) adversely affect any rights or benefits to Lessee under this Lease. Lessor shall pay all reasonable costs incurred by Lessee, including without limitation, legal fees incurred for reviewing any such proposed modifications.
24.05Lessee represents that, to its knowledge, no person or entity who is a significant indirect owner of Lessor, owns actually or constructively a 10% or more interest in Lessee. Lessee will promptly notify Lessor if it learns that any such ownership interest exists. Significant owners of Lessor at this time include Public Storage, Inc. and New York Common Retirement Fund.
24.06Lessor and any successor Lessor have the right to sell the Property or any portion of it, or to assign its interest in this Lease, at any time and from time to time. Upon the sale or any other conveyance by Lessor of the Property, or a portion thereof which includes the Premises, Lessor will be released from all obligations and liability under this Lease arising out of any iict, event, occurrence or omission occurring or existing after the date of such conveyance.
| 25. | Subordination |
|---|
Without the necessity of any additional document being executed by Lessee for the purposes of effecting a subordination, and at the election of Lessor or any mortgagee or any ground lessor with respect to the land of which the Premises are a part, this Lease will be subject and subordinate at all times to: (i) all ground leases or underlying leases which may now exist or hereafter be executed affecting the Property, and (ii) the lien of any mortgage or deed of trust which may now exist or hereafter be executed in any amount for which the Property, ground leases or underlying leases, or Lessor's interest or estate in any of said items is specified as security. Lessor or any mortgagee or ground lessor will have the right, at its election, to subordinate or cause to be subordinated any ground lessee or underlying leases or any such liens to this Lease. If Lessor's interest in the Premises is acquired by any ground lessor or mortgagee, or in the event any proceedings are brought for the foreclosure of, or in the event of exercise of. power of sale under, any mortgage or deed of trust made by Lessor covering the Premises, or in the event a conveyance in lieu of foreclosure is made for any reason, Lessee will, notwithstanding any subordination and upon the request of such successor in interest to Lessor, attorn to and become the Lessee of the
successor in interest to Lessor and recognize such successor in interest as the Lessor under this Lease, provided Lessee's interests hereunder shall not be disturbed so long as Lessee is not in Default hereunder. Lessee acknowledges that although this Paragraph is self-executing, Lessee covenants and agrees to execute and deliver, upon demand by Lessor and in the form requested by Lessor, or any other mortgagee or ground lessor, any additional documents evidencing the priority or subordination of this Lease with respect to any such ground leases or underlying leases or the lien of any such mortgage or deed of trust, provided Lessee's interests hereunder shall not be disturbed so long as Lessee is not in Default hereunder. Lessee agrees that any person or entity who acquires title to the Premises pursuant to a foreclosure of a deed of trust or mortgage, or deed in lieu thereof, or the termination of an underlying ground lease or master lease (a "Foreclosing Party"), even if such Foreclosing Party elects to have Lessee attom to the Foreclosing Party under this Lease, shall not be (i) liable for any act or omission of any prior lessor or with respect to events occurring prior to its acquisition of ownership, (ii) subject to any offsets or defenses which Lessee might have against any prior lessor, (iii) bound by prepayment of more than one month's rent, (iv) liable for any security deposit not actually received by such person or entity, (v) bound by any amendment or modification to this Lease not consented to in writing by the holder of the mortgage, deed of trust, ground lease or master lease or the Foreclosing Party, or (vi) liable for any obligation or liability accruing under this Lease after the Foreclosing Party assigns its interest under this Lease to a third party. Any such Foreclosing Party is expressly made a third party beneficiary of the foregoing provisions, and all other provisions of this Lease which are for the benefit of a Foreclosing Party, which rights shall survive a foreclosure of the deed of trust or mortgage.
| 26. | Force Majeure |
|---|
Lessor will not be deemed in Lessor Default or have liability to Lessee, nor will Lessee have any right to terminate this Lease or abate rent or assert a claim of partial or constructive eviction, because of Lessor's failure to perform any of its obligations under this Lease if the failure is due in part or in full to reasons beyond Lessor's reasonable control. If this Lease specifies a time period for performance of an obligation by Lessor, that time period will be extended by the period of any delay in Lessor's performance caused by such events as described herein.
| 27. | Miscellaneous Provisions |
|---|
27.01Whenever the context of this Lease requires, the word "person" shall include any entity, and the singular shall include the plural and the plural shall include the singular. If more than one person or entity is Lessee, the obligations of each such person or entity under this Lease will be joint and several. Without diminishing the provisions of Paragraph 17, the terms, conditions and provisions of this Lease will apply to and bind the heirs, successors, executors, administrators and assigns of Lessor and Lessee.
27.02The captions and headings of this Lease are used for the purpose of convenience only and shall not be construed to interpret, limit or extend the meaning of any part of this Lease. This Lease contains all of the agreements and conditions made between Lessor and Lessee and may not be modified in any manner other than by a written agreement signed by both Lessor and Lessee. Any statements, promises, agreements, warranties or representations, whether oral or written, not expressly contained herein will in no way bind Lessor and Lessee expressly waives all claims for damages by reason of any statements, promises, agreements, warranties or representations, if any, not contained in this Lease. No provision of this Lease shall be deemed to have been waived by Lessor unless such waiver is in writing signed by a regional vice president or higher of Lessor or of Lessor's management company, and no custom or practice which may develop between the parties during the Lease Term shall waive or diminish the Lessor's right to enforce strict performance by Lessee of any terms of the Lease. No waiver by Lessor of a Default by Lessee of any term, covenant or condition of this Lease will be deemed a waiver of any other term, covenant or condition of this Lease, or of any subsequent Default by Lessee of the same or any other term, covenant or condition of this Lease. No delay or omission by Lessor to seek a remedy for any Lessee Default of this Lease shall be deemed a waiver by Lessor of its remedies or rights with respect to such Default. Additionally, regardless of Lessor's knowledge of a Default at the time of such acceptance, the acceptance of rent or any other payment by Lessor will not constitute a waiver by Lessor of any Default by Lessee. The duties and warranties of Lessor are limited to those expressly stated in this Lease and do not and shall not include any implied duties or implied warranties, now or in the future. No representations or warranties have been made by Lessor other than those contained in this Lease. This Lease is governed and construed in accordance with the laws of the state in which the Premises are located, and venue of any legal action will be in the county where the Premises are located.
| 27.03 | Time is of the essence for the pe1formance of each term, condition and covenant of this |
|---|
Lease.
27.04This Lease has been fully reviewed by both parties and shall not be strictly or adversely construed against the drafter. If any provision contained herein is determined to be invalid, illegal or unenforceable in any respect, then (a) such provision shall be enforced to the fullest extent allowed, and
| (b) | such invalidity, illegality, or unenforceability will not affect any other provision of this Lease. |
|---|
27.05Lessee hereby agrees not to disclose any tenns of this Lease without the prior written consent of Lessor. Lessee shall not record this Lease or any short fonn memorandum hereof.
27.06The rights and obligations of the parties under this Lease shall survive the expiration of this Lease and the termination of this Lease and/or of Lessee's right of possession.
27.07Lessor and Lessee each warrant to the other that it has not dealt with any broker or agent in connection with this Lease, other than the person(s) listed in Paragraph I above. Lessor and Lessee each agree to indemnify the other against • all costs, expenses, legal fees and other liability for commissions or other compensation claimed by any other broker or agent by reason of the act or agreement of the indemnifying party.
27.08Lessee shall not permit or allow any activity in the Premises which will have an adverse effect on indoor air quality, including smoking and any remodeling activity or introduction of materials which would have such an effect. Lessor shall have the right, but not the obligation, to monitor indoor air quality within the Project. Lessee shall take such steps to protect and to improve indoor air quality as Lessor may request from time to time.
27.09Lessor has no duty to provide security for any portion of the Project. To the extent Lessor elects to provide any security, Lessor is not warranting the effectiveness of any security personnel, services, procedures or equipment and Lessee shall not rely on any such personnel, services, procedures or equipment. Lessor shall not be liable for failure of any such security personnel, services, procedures or equipment to prevent or control, or to apprehend anyone suspected of, personal injury or property damage in, on or around the Project.
27.10The grant of any consent or approval required from Lessor under this Lease shall be proved only by proof of a written document signed and delivered by Lessor expressly setting forth such consent or approval. Unless otherwise specified herein, any such consent or approval may be withheld in Lessor's sole discretion. Any consent may be issued subject to conditions determined by Lessor, in its sole discretion. Notwithstanding any other provision of this Lease, the sole and exclusive remedy of Lessee for any alleged or actual improper withholding, delaying or conditioning of any consent or approval by Lessor shall be the right to specifically enforce any right of Lessee to require issuance of such consent or approval on conditions allowed by this Lease; in no event shall Lessee have the right to terminate this Lease, to collect monetary damages, or to pursue any other remedy for any actual or alleged improper withholding, delaying or conditioning of any consent or approval, regardless of whether this Lease requires that such consent or approval not be unreasonably withheld, conditioned or delayed.
27.11Lessee agrees to abide by, keep and observe all Rules and Regulations set forth in Exhibit "D" and all additions and amendments to the same of which Lessor provides written notice to Lessee. Lessor will not be responsible to Lessee for any nonperformance by any other lessee, occupant or invitee of the Property of any said Rules and Regulations.
27.12Lessee will not place any signage on or about the Property, or on any part thereof, without the prior written consent of Lessor which Lessor may withhold or condition in its sole discretion. All Lessee signage will comply with the tenns and conditions of this Lease, the sign criteria set forth in Exhibit "C" and Exhibit "D," or other criteria which Lessor may establish from time to time.
27.13Lessee will not vacate or abandon the Premises, or permit the Premises to remain unoccupied for any period longer than fifteen (15) consecutive days any time during the Lease Term. If Lessee abandons, vacates, or surrenders the Premises, or is dispossessed by process of law, or otherwise, any personal property belonging to Lessee left in or about the Premises will, a\ the option of Lessor, be deemed abandoned and may be disposed of by Lessor at the expense and risk of Lessee.
27.14In the event any party to this Lease initiates litigation to enforce the terms of this Lease or to declare rights under this Lease, the prevailing party will be entitled to collect its reasonable attorneys fees shall include all attorneys fees incurred at and in preparation for discovery, arbitration, trial, appeal and review, including deposition attorney's fees. This attorney's fee provision shall also apply to all litigation and other proceedings in Bankruptcy Court.
27.15Submission of this document for examination and signature by Lessee is not an offer to lease and does not create a reservation or option to lease. This document will become effective and binding only upon full execution and delivery by both Lessee and Lessor.
| 27.16 | OPTION TO RENEW LEASE |
|---|
Provided Lessee is not in Default of the Lease at the time it exercises this option and has not been in Default during any other period of the Lease Tenn that has not been cured, Lessee is hereby granted one option to renew this Lease for an additional five (5) years at the Base Rent rate then in effect for
comparable space in the market at the effective date of the commencement of such renewal tenn, but not less than the last monthly rental amount payable by Lessee prior to commencement of such renewal term. Such leasing for the renewal tenn shall be, at the election of Lessor, on the same tenns and conditions as set forth in this Lease or on the tenns and conditions of the standard lease fonn then used by Lessor with respect to the Project. The within option shall be exercised by Lessee, if at all, by written notice given no sooner than twelve (12) full calendar months and no later than eight (8) full calendar months prior to the expiration of the Lease Tenn; Lessee shall include with such notice a complete set of current financial statements of Lessee and all guarantors.
In the event Lessor and Lessee are unable to agree as to the Base Rent rate applicable to such renewed tenn within thiny (30) days of Lessee's exercise of its option to renew, both parties agree to mediate their disagreement. If mediation does not resolve the disagreement in fair market value, Lessee shall have the option to refer the matter to an MAI certified appraisal procedure to determine the Base Rent rate. Lessor and Lessee shall appoint an MAI certified appraiser, such appraiser shall determine the current market rent (to be not less than the minimum rent set fonh above in this Section) and such determination shall be binding upon Lessor and Lessee. Lessor and Lessee shall each pay one-half of the fees and costs of such appraiser.
Upon detennination of the Base Rent rate, Lessor shall deliver to Lessee either an amendment to this Lease renewing the Lease Tenn, or a new lease for the renewal tenn based upon the fonn of the standard lease then used by Lessor with respect to the Project. Lessee shall execute and deliver the submitted document to Lessor within ten (10) days accompanied by payment of the amount of money which, when added to any existing Security Deposit, shall increase the Security Deposit amount to a sum which bears the same relationship to the renewal Base Rent as the original Security Deposit bears to the Base Rent with respect to the initial Lease Tenn.
Notwithstanding any provision hereof, during the thiny (30) day period allowed for the parties to agree upon the renewal Base Rent rate, Lessor shall have the right to rescind the exercise of the renewal option by written notice in the event Lessor detennines, in its reasonable discretion, that the financial statements delivered by Lessee with the renewal notice are not satisfactory to Lessor.
The rights of Lessee under this Paragraph are not assignable separately from this Lease. Such rights of Lessee shall tenninate upon: (a) any assignment, sublease, or other Transfer, and/or (b) any monetary default and/or (c) any tennination of this Lease or of Lessee's right of possession hereunder; provided, however, in the event Lessee shall have exercised this renewal option and Lessor subsequently terminates this Lease or Lessee's right of possession hereunder for Default, the damages to which Lessor shall be entitled shall include damages with respect to the renewal term.
| 27.17 | Mediation First |
|---|
Any disputes under the Lease, after first attempting to be resolved through mediation, including with respect to the detennination of Additional Rent and/or Fair Market Rent, shall be resolved by binding arbitration under the rules of the Arbitration Service of Penland, or such other procedures as shall be mutually agreed upon between Lessor and Lessee, as set for the in the lease. Pending the final detennination of any dispute, Lessee shall pay the last Base Rent amount due under the Initial Term and make up any shortfall immediately after final detennination of Fair Market Rent.
| 27.18 | The following Exhibits are attached to this Lease and by this reference made a pan |
|---|
hereof: "A-1", "A-2", uA-3", "A-4", "B", °C", and "D".
IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease as of the Lease Execution Date.
THIS LEASE, WHETHER OR NOT EXECUTED BY LESSEE, IS SUBJECT TO ACCEPTANCE BY LESSOR, ACTING BY ITSELF OR BY ITS AGENT BY THE SIGNATURE ON THIS LEASE OF ITS SENIOR VICE PRESIDENT, VICE PRESIDENT, REGIONAL MANAGER OR DIRECTOR OF LEASING.
LESSOR:LESSEE:
PS Business Parks, L.P.
A California Limited Partnership By PS Business Parks, Inc.
Its Ge era! Partner
Digimarc Corporation A Delaware Corporati
By:President & COO
Date:
S:;._-...,;l""--''f,_-
o.,_,t"'
_Date:
M-,-'-,q-."'""d,
t.z_.._,_2.dd_i., ,_
Lease Execution Date
Lessor Fed. ID #: 95-4609260
PREMISES "A-1" FIRST FLOOR
PREMISES "A-1" SECOND FLOOR
BUILDING "A-2"
Creekside Corporate Park
SW Nimbus Avenue and Hall Boulevard, Beaverton, Oregon
.Owner
. PS.'Bllllnal Parks
l5455 NW Greenbrier Parkway, Suite 245, Beaverton, Oregon 97006
Phone: !!03.629.9400 Fax: 503.629.4821
www.creeksldecorporatepark.com
PROJECT "A-3"
Creekside Corporate Park
SW Nimbus Avenue and Hall Boulevard, Beaverton, Oregon
!f2li\ <lJT) 05L
'8305
O
:"\juC}
88
Jj:J
Restaurant
-8 8500Hotel
D, \u-), 5"'
8505i;J"":Jc:::>
08705 Ji(
"°'
(/" -/')l
TannisCourtlli['"', I 70
Volleyball Courtz
-?-,f>-
, .-r
5
4llfl)) oe
92051 I
93t05
--------- -----• --•-•--•• -••••• ----•••-
Owner
,PS•Jlallneu Parka
_ . 154115 NW Grembrter Parkway, Sulle 245, Beaverton, Oregon 97006
Phom:!503.629.9'00• Pax:_!503.629.4821'
www.aeebldecorporat,opark.com
PROPERTY "A-4"
Creekside Corporate Park
SW Nimbus Avenue and Hall Boulevard, Beaverton, Oregon
(JL
,!Glli') !:dT'riJl ll!£5
J'C:> ,
83051!/11ci
rrm
Ndlj.,-Restaurant
8505llill'i..c::>)a
Cl
08705 ]J(lUtn
85
- i ,1:..\lw; . wr
Tennis Court111ITrrh zj 8770
\h>HoybaH Court
1
-?-,§•)!!,.{
0
, .-r
4,tI,I)1l)(; i•'"'
93t05
---------•••••••-•--•-••-•-••-••-••--••--••-••----------•-------•
Owner
PSBulnNoParb
1M55 NW Greenbrier Parkway, Suite 245, Beaverton, Oregon 97006
Phone: 503.629.MOO Fax: 503.629.482l
www.cneksidecorpon,tepark.com
EXHIBITB
WORKLE'ITER
| 1. | Lessor's Work. |
|---|---|
| I. | I.Plans and Costs. |
| --- | --- |
If Lessor has agreed to alter or improve the Premises prior to delivery of possession to Lessee, then this box is checked: 621. All such alterations and improvements shall be described on plans and specifications to be approved by the parties as described below (the "Plans").
(a)Approval of Plans. Lessor shall have Plans prepared and shall submit the same to Lessee for review, comment, and approval. The parties shall agree upon the final Plans and a related estimate of the "Costs of Lessor's Work" by May 11 2004 (the "Plan Approval Date). If Lessee does not approve plans by the plan Approval Date, the number of days of delay in such approval beyond the Plan Approval Date shall be deemed days of delay attributable to and caused by Lessee.
(b)Lessor's Work Defined. The work to be performed by Lessor as shown on the Plans, as the same may be modified by change order as discussed below, is referred to as "Lessor's Work."
(c), Costs. The "Costs of Lessor's Work" shall include all costs incurred by Lessor in connection with Lessor's Work including but not limited to all design costs (architectural, engineering, mechanical and other design costs), all hard and soft construction costs, and all costs of materials, general conditions, permits and inspection fees. In addition, Lessee may use a portion of the Work Allowance for moving costs, cabling, furniture, fixtures and equipment. Lessee understands and agrees that (i) the actual Costs of Lessor's Work can only be determined after all Lessor's Work is completed, (ii) the actual Costs of Lessor's Work may exceed the estimate and also any other estimate communicated to Lessee prior to or during the course of completing Lessor's Work, and (iii) the actual Costs of Lessor's Work may increase for reasons, including but not limited to, Change Orders, increased costs resulting from any act or omission of Lessee, unforeseen or hidden conditions discovered during the course of construction, or additional costs or delays caused by any governmental authority or agency requirement. The Costs of Lessor's Work shall include a reasonable fee as compensation to Lessor for coordination and supervision of Lessor's Work and any Lessee Improvements.
(d)Payment. Lessor shall pay the Costs of Lessor's Work up to $1,555,301 ($33,75 per square foot) (the "Lessor's Work Allowance"). In the event the initial estimate of the Costs of Lessor's Work approved pursuant to the above provisions exceeds the Lessor's Work Allowance, Lessee shall pay the excess to Lessor upon approval of the Plans and such initial estimate. Seventy-five (75%) percent shall be due prior to commencement of construction and twenty-five (25%) percent shall be due at Substantial Completion.
(e)Payment Delays. If Lessee fails to pay to Lessor any amount required by this Work Letter, as and when due, then, without waiver of default or of other rights and remedies, Lessor shall have the right to suspend Lessor's Work until payment is received; the number of days by which any such suspension delays substantial completion shall be deemed days of delay attributable to and caused by Lessee.
(f)Architects/Space Planning. Lessor has engaged LRS Architects to complete space plan and design development drawings. If Lessee is dissatisfied with the space plan, Lessee shall have the option at their cost to select their own architect, subject to the reasonable approval of Lessor. Such costs can be included in the cost of Lessor's Work.
1.2.Construction. The construction obligation of Lessor is to substantially complete Lessor's Work substantially in accordance with the Plans. Lessor shall use reasonable efforts to substantially complete Lessor's Work three weeks prior to the scheduled Commencement Date set forth in Section 1 of the Lease; provided the consequences of delay in substantial completion of Lessor's Work are those set forth in the Lease. Both the initial Tenant improvement work, as well as any subsequent major work in the premises shall be performed by Lessor. Lessee shall have the benefit of competitive bidding for work to be performed by Lessor's contractor. Any fees for overhead or supervision of Lessor's work in the premises shall be consistent with reasonable industry standards and all costs for work to be performed in the premises shall be subject to Lessor and Lessee prior approvals.
Plans.
| 1.3. | Changes in the Plans. |
|---|---|
| (a) | A "Change Order" is a Lessor required or Lessee requested change to the |
| --- | --- |
| (b) | Lessor shall have the right to require a Change Order based on applicable |
| --- | --- |
codes, actual site conditions, and/or ambiguities or inconsistencies in the Plans.
(c)Lessee may request from time to time a Change Order. If Lessee wishes to request a Change Order, Lessee will submit in writing to Lessor a detailed request of the change. Lessor is not obligated to approve any Lessee requested change. If Lessor does approve the same, Lessor will deliver to Lessee a written statement, hereinafter referred to as "Lessor's Change Order Statement", of the estimated costs and expenses of the change with a reasonable estimate, if applicable, of the additional time required for substantial completion of Lessor's Work.
(d)Within three (3) business days following receipt by Lessee of Lessor's Change Order Statement, Lessee will provide Lessor its written authorization to proceed with the change. If the change increases the Costs of Lessor's Work and the total Costs of Lessor's Work exceed the Allowance, Lessee shall pay the amount required at the time of providing authorization to proceed. If Lessee does not provide such written authorization to Lessor's Change Order Statement accompanied by payment of such required amount within this time period, Lessee's request for a Change Order shall be deemed cancelled. All delays attributable to Lessee requested changes, whether or not approved by Lessor and whether or not cancelled by Lessee, shall be deemed delays caused by Lessee. Lessee shall pay to Lessor any costs incurred by Lessor regarding a Lessee requested change that is cancelled.
1.4.Completion and Delivery. Possession of the Premises shall be delivered to Lessee when Lessor's Work is substantially completed in accordance with the Plans, as reasonably determined by Lessor or on such earlier date, if any, as is determined pursuant to the operation of Section
2.03 of the Lease. Within three (3) days of written request by Lessor, Lessee shall execute and deliver to Lessor a confirmation letter prepared by Lessor affirming substantial completion of Lessor's Work, the date of Lessor's delivery of the Premises, and such other matters as Lessor may reasonably request.
1.5 Punch list Work. Lessor's Work shall be deemed substantially completed even if minor items of work which do not materially adversely affect Lessee's ability to conduct its business remain to be completed or corrected (hereinafter referred to as "Punch list Items"). Lessee shall notify Lessor of any Punch list Items by written notice given within ten (I 0) days following receipt of Lessor's written notification of substantial completion of Lessor's Work. Lessee shall be deemed to have approved Lessor's Work if Lessee does not deliver such a list to Lessor within such time period and to have approved all of Lessor's Work except only properly and timely listed Punch list Items. The obligation of Lessor regarding Punch list Items shall be to complete the same to industry standard. Lessor shall have complete access to the Premises for the purpose of performing punch list work. Any dispute as to Punch list Items shall be resolved by an architect or other qualified professional designated by Lessor, but such dispute shall not delay the date upon which Lessor's Work is deemed substantially complete.
2.Lessee Improvements. Any work of improvement Lessee proposes to undertake which is within the definition of "Lessee Improvements" set forth in Section 10.01 of the Lease shall be subject to the following provisions (and also subject to the provisions of Section 10 of the Lease). If no such Lessee Improvements are to be undertaken by Lessee, then the provisions of Paragraph 2 of this Work Letter shall be disregarded.
2.1.Lessee Plans. Lessee must obtain the prior written approval of Lessor regarding complete plans and specifications for the Lessee Improvements. If such plans and specifications are already approved, the approved plans and specifications (or a list of the same) are attached as Schedule 2; otherwise, Lessee shall submit plans and specifications for the approval of Lessor pursuant to Paragraph 10 of the Lease.
2.2.Scheduling; Avoidance of Inconvenience. Following completion of Lessor's Work. subject to a punch list, Lessor shall deliver a C.O. or temporary C.O. to Lessee and grant a period of three (3) weeks prior occupancy to move-in to the Premises which will include installation of FF&E, telecommunications and computer cabling. In the event Lessor separately gives written permission to Lessee allowing any portion of Lessee Improvements to be installed or materials to be delivered prior to substantial completion of Lessor's Work, then (a) Lessee waives any claims for delays in its work and shall instruct its contractor to follow the directives and orders of Lessor's contractor, and (b) Lessee shall schedule its work such that union and non-union workers will not be working side by side at the Premises, and (c) any damage to Lessor's Work shall be deemed to have been caused by Lessee and its contractor unless conclusively proved otherwise by Lessee. Lessee shall have the right to retain its own specialty contractors to perform any portion of the work necessary to construct and outfit the Premises (which will not be part of the general contractor's scope of work nor shall a mark-up be added). The Lessee's
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contractors' work shall include, but not be limited to, data cabling, telephone and data equipment, security, audio/visual equipment, and furniture systems. Lessee's contractor(s) and Lessor's ccintractor(s) shall work in harmony during the period of Lessee fit-up. Lessee and Lessee's contractors shall have reasonable access to the Premises during the construction (to be coordinated with the General Contractor to install cabling and for the purpose of inspecting the work in progress.
2.3.Inspection. Lessor and Lessor's agents shall have the right, but not the obligation, to inspect the construction of Lessee Improvements from time to time. If Lessor shall give Lessee written notice of faulty construction or any other deviation from the approved plans, Lessee shall promptly make the necessary corrections to Lessor's reasonable satisfaction. However, neither the right herein granted to Lessor to make such inspections, nor the making of such inspections by Lessor, shall operate as a waiver of any rights of Lessor to require good and workmanlike performance of all Lessee Improvements in strict accordance with plans approved by Lessor. Notwithstanding any inspection by Lessor, Lessee acknowledges that Lessor's sole interest in doing so is to protect the Building and Lessor's interests. Accordingly, Lessee shall not rely upon Lessor's inspections or approvals, and agrees that Lessor shall not be the guarantor of, nor responsible for, the quality of any of Lessee Improvements or the conformity of any Lessee Improvements with approved plans or with any applicable legal requirements. Lessee shall be solely responsible for, and shall remedy, at Lessee's sole expense, any and all defects and nonconformities in Lessee Improvements that may appear during or after the completion thereof.
2.4.Ownership of Lessee Improvements. Unless otherwise specified by Lessor, ownership of and responsibility for all Lessee Improvements shall be governed by the provisions of the Lease.
2.5.Delays. The parties expressly acknowledge and agree that none of Lessee's obligations under the Lease (including Lessee's obligation to pay rent) shall be delayed, terminated or otherwise affected on account of any delay in completion of the Lessee Improvements from any cause. other than the fault of Lessor.
2.6.Compliance. Access to the Premises for Lessee to install Lessee Improvements is granted, when authorized under Section 2.2 above, subject to all provisions of the Lease and this Work Letter and Lessee shall be bound by and comply with all such provisions.
2.7.Costs. Lessee shall pay all costs and expenses related to Lessee Improvements as and when due in compliance with Paragraph 10 of the Lessee.
2.8.Lessee Allowance. Lessor agrees to reimburse Lessee for the costs of Lessee's Work paid by Lessee from the Lessor's Work Allowance. The Lessor's Work Allowance can only be used to reimburse hard and soft costs of improvements to the Premises including design costs or the purchase of furniture or equipment. Lessor shall pay to Lessee within forty-five (45) days after the date that Lessee requests the same; any such request shall be made only after (a) Lessee submits to Lessor satisfactory evidence of qualified expenditures, final completion of and full payment for all Lessee Improvements and expenses, and compliance with all requirements of the Lease and this Work Letter regarding the Lessee Improvements, (b) Lessee accepts the Premises and Lessor's Work and takes full occupancy of the Premises, and (c) General Contractor and all other service providers are paid in full. Lessor shall have no obligation to pay the TI Allowance at any time that a Lessee Default occurs and is outstanding, at any time following termination of the Lease or of Lessee's right of possession, or if proper request for the same is not made on or before ninety (90) days following the Commencement Date.
3.Default. Any failure by Lessee under the terms of this Work Letter shall constitute a Default under the Lease in accordance with the provisions of the Lease, and shall entitle Lessor to exercise all remedies set forth in the Lease.
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EXHIBIT"C"
SIGN CRITERIA
Conformity by Lessee to the following Sign Criteria requirements shall be strictly enfo1t:ed and are terms and conditions of the Lease.
| 1. | GENERAL REQUIREMENTS |
|---|
IA. The term "Signage" as used herein and elsewhere within the Lease shall include, but not be limited to, any signs, placards, banners, pennants, lettering, insignias, trademarks, marquees, art work, and any and all other display and advertising materials.
IB. Lessee shall not install or display any Signage anywhere on the Premises, Project or Property without Lessor's prior written consent, such consent not to be unreasonably withheld, delayed or conditioned. Such Signage approval by Lessor, shall include, but not be limited to, Lessee Signage installed or displayed on or attached to any glass areas, doors, roofs, walls, landscaped areas, walkways, vehicles, machinery or other apparatus, whether permanently affixed to or from time to time on or about the Property. Lessor hereby consents to Lessee's installation of signage on the Building's roof, eyebrow and at Project monuments.
1C.Lessor reserves the right to designate the location and quantity of all Lessee Signage.
ID. The size, design, content, color and other physical aspects of Lessee Signage, as well as the materials, fabrication and installation methods to be employed, must be approved by Lessor, in writing, prior to commencement of any Signage fabrication or installation. No exposed conduit, tubing, "J" box or raceway is permitted on any Lessee Signage. Aashing, moving or audible Lessee Signage is prohibited. The composition, size, style, height, color, etc. of Lessor approved signage is attached hereto.
IE. All Lessee Signage must comply with any and all governing Jaws, codes, regulations, covenants and restrictions. No labels will be permitted on the exposed surface of any Lessee Signage, except those labels required by any governing authority.
1F. The Lease Section 27.12 shall control with respect to the allocation of the cost and expense related to signage.
10.Should Lessee fail to maintain its Signage at a standard to be determined by Lessor in its reasonable discretion, then Lessor may, without any recourse by Lessee or liability by Lessor to Lessee, remove or restore such sub-standard Signage. Any Lessee Signage removed or restored on behalf of Lessee by Lessor, shall be at Lessee's sole cost and expense, payable immediately upon demand by Lessor.
1H. Lessor reserves the right to require Lessee to have Signage and, if so required, Lessee Signage must be completed and installed within 60 days after Lessee's Lease Tenn commences. Lessor reserves the right to require Lessee to utilize vendors preapproved or designated by Lessor for all Lessee Signage and Signage related matters. In the event Lessor designates, refers or approves a specific sign vendor, Lessor shall not be responsible or liable in any way for any disputes between such vendor and Lessee.
11.All Lessee Signage shall only contain Lessee's choice of either its legal name or its Trade Name as it appears in the Lease. No Lessee Signage or Lessee Signage content shall create any claim, expressed or implied, of a Transfer as defined in the Lease.
IJ. Upon expiration or earlier termination of the Lease, or if Lessee installs or displays Signage which does not comply with the terms and conditions of this Sign Criteria, Lessor, in addition to any other remedy, reserves the right to require Lessee to remove its Signage, or any part thereof, and to require Lessee to repair and restore all areas and surfaces of the Property affected by such removal. Such restoration and repair work shall include, but not be limited to, removal of any associated electrical wiring, patching of damaged areas and painting to match surrounding surfaces. Should Lessee, after demand by Lessor, fail to remove any Signage designated for removal by Lessor or fail to repair and restore any affected areas, Lessor shall have the right to do so at Lessee's sole cost and expense.
1K. Subject to the other terms hereof, Lessee will have the right to display Lessee;s signage on the sign monument to be located outside the Building, as well as on the walls of elevator lobbies of the floors of the Premises adjacent to entry doors and on the lobby directory for the Premises. All interior signs shall be provided at the sole cost of Lessor, with any and all costs and expenses incurred in
27
connection with the monument sign for Lessee to be included as part of the Costs of Lessor's Work and deducted from the Lessor's Total Work Allowance. Section 27.12 of the Lease shall govern with respect to the requirement of Lessor's approval for Lessee's signage.
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EXHIBIT"D"
RULES AND REGULATIONS
1.0I The following Rules and Regulations now in effect govern Lessee's use of the Premises and any part of the Project or Property used in common by Lessee. Lessee will be bound by such Rules and Regulations and agrees to use its reasonable efforts to cause Lessee's employees, agents, contractors, suppliers, invitees and licensees to observe the same.
1.02Wherever Lessor provides standard window coverings, such coverings shall not be altered, removed or replaced by Lessee. Wherever Lessor does not provide standard window coverings, selection and installation of window coverings by Lessee shall be subject to Lessor's prior written approval, such approval not to be unreasonably withheld, delayed or conditioned. If Lessor objects to any item attached to, or used in connection with or on any window, other glass area, or interior or exterior wall, Lessee will immediately upon notification remove such objectionable item or discontinue such use. Further, Lessee agrees not to place anything in close proximity to any window or glass area of the Premises that may appear from the outside of the Premises.
1.03Lessee will not use any sidewalks, hallways, entrances, elevators, stairways, exits, lobbies or any other areas used in common by lessees of the Property other than for normal ingress or egress; Lessee shall not obstruct use of any such area. Lessor will in all cases retain the right to control and prevent access to such areas by all persons whose presence in the reasonable judgment of Lessor would be prejudicial to the safety, character, reputation and/or interest of the Property and/or its lessees. Neither Lessee nor its employees, agents, contractors, suppliers, invitees or licensees shall go on any roof or ladder, in any mechanical rooms, or climb on any exterior structures of any nature on the Property without Lessor's prior written consent, such consent not to be unreasonably withheld, delayed or conditioned.
1.04Lessor reserves the right, exercisable without notice and without liability to Lessee, to change the name, street and/or address of any part of the Property. With the exception of Lessee's address, Lessee shall not use the name of the Property or any part thereof in connection with promoting or advertising Lessee's business. Lessor will have the right to prohibit publicity by Lessee, which in Lessor's reasonable opinion impairs the reputation or marketability of the Property or any part thereof.
1.05Lessee shall not keep or allow to be used any foul or noxious gas or substance in or about the Premises. Nor shall Lessee occupy or use the Premises in any manner that is objectionable or offensive to other lessees or Lessor by reason of odor, noise, vibration or interference in any way. Any equipment or device of Lessee which causes noise or vibration that may be transmitted to any structural portion of the Property or to any part therein to such a degree as to be objectionable to any lessee or Lessor must be approved in writing by Lessor prior to its installation and be placed and maintained by Lessee, at Lessee's expense, on vibration eliminators or other devices sufficient to eliminate such noise or vibration. Lessee shall keep the Premises free of rodents, insects and other vermin.
1.06Lessee will not use or keep in the Premises, or on or about the Property, any kerosene, gasoline or flammable or combustible fluid or material other than those limited quantities necessary for the operation or maintenance of general office equipment.
1.07Lessor reserves the right to exclude or expel from the Property any person who, in Lessor's reasonable judgment, is intoxicated or under the influence of liquor or drugs or who is in violation of any of the rules and regulations of the Property.
1.08Lessee shall not alter or re-key any lock or bolt or install any new or additional locks or bolts on any doors of the Premises without prior written consent from Lessor, such consent not to be unreasonably withheld, delayed or conditioned. Upon the termination of its tenancy, Lessee will provide Lessor with all keys, whether furnished or otherwise procured, and shall be responsible for the cost of replacing any keys that are lo t.
1.09The Premises will not be used for lodging or for any improper, immoral or objectionable purpose. No cooking will be done or permitted on the Premises (except in the kitchen area) or elsewhere on the Property without Lessor's consent, except that the preparation of coffee, tea, hot chocolate and similar beverages and employee use of a microwave oven will be permitted, provided that such equipment and use is in accordance with all applicable federal, state, county and city laws, codes, ordinances and any manufacturer's guidelines and recommendations. Tenant will be allowed to barbeque on a deck or on the parking area behind the Premises.
I.IO Lessee will not solicit business from other lessees of the Property. Canvassing, soliciting, peddling and distribution of handbills or any other written material is prohibited, and Lessee will cooperate with Lessor to prevent such activities.
I.I I Lessee agrees to comply with and not to restrict or impair in any way, all safety, fire protection and evacuation procedures and regulations established by Lessor or any governmental agency. Lessee shall not do or permit any act or bring anything on the Property or any part thereof which shall obstruct or unreasonably interfere with the rights of other lessees.
1.12Except for the ordinary hanging of pictures and wall decorations, Lessee will not mark, drive nails, screw, cut or drill into the partitions, woodwork, ceilings or plaster, or in any way deface, mar, paint or penetrate the Premises or
29
any part of the Property, except in ac.ance with the Lessee Alteration provisioJf the Lease. Additionally, Lessee will not affix any floor covering to the floor of the Premises in any manner except as approved by Lessor.
1.13No electrical wiring, outlets or apparatus shall be installed or altered by Lessee, except in accordance with the Lessee Alteration provisions of the Lease. Lessor reserves the right to direct where and how telephone and other telecommunication wires are to be introduced to the Premises. Lessee may not alter or overburden the designed capacity of any existing electrical outlets.
1.14Lessee shall not place or affix any radio or television antennas, satellite dishes, loudspeakers or other similar devices, awnings, outside furniture, etc. on the roof, exterior walls or outside of any building or on any other part of the Property without Lessor's prior written approval, such approval not to be unreasonably withheld, delayed or conditioned. Additionally Lessee will not place any signs, advertising, billboards, lighting, or any other devices or means of advertising or identification on property adjacent to the Property that in Lessor's opinion obstructs, impairs, restricts or in any way, in Lessor's reasonable opinion, negatively affects the Property or would not be permitted by the terms of this Lease or these Rules and Regulations if such action were taken on the Property.
1.15Lessor reserves the right to prescribe the weight, size and position of all equipment, materials, furniture or other property brought on to the Property. Such Lessor approved items shall be moved in or about the Property under the direction of Lessor and in a manner and at such times that will not inconvenience any lessee. Lessor reserves the right to prohibit or impose conditions upon the installation of objects which may overload any floor.
1.16Subject to the terms of Paragraph 8 of this Lease, all parking facilities of the Property shall be regulated by Lessor and may be modified or amended as Lessor deems necessary. Lessee shall not permit or allow any vehicles that belong to or that are controlled by Lessee or Lessee's employees, customers or invitees to be loaded, unloaded or parked in areas other than those designated by Lessor for such activities. Users of the parking areas will obey all posted signs and not impede the flow of traffic. For sale signs for vehicles must be on the vehicle. Washing, waxing, cleaning or servicing of any vehicle is prohibited. No campers, recreational vehicles or trailers are permitted and all disabled vehicles must be removed within 24 hours. No vehicles shall be brought into or kept in the Premises. Lessor reserves the right to tow, without cost or liability to Lessor, any vehicle: l) parked in an unauthorized or illegal parking area or; 2) whose audio theft alarm system remains engaged for an unreasonable period; and 3) belonging to any violator of any of Lessor's parking rules and regulations. Further, in addition to all of its other rights and remedies. Lessor reserves the right to refuse to permit any person to park within the Property who violates any of these or any other rules or regulations which Lessor may establish.
1.17Lessee shall not do any act that will create any additional costs to maintain the appearance or cleanliness of any part of the Property. No dirt or other substances shall be disposed of anywhere on the Property, including but not limited to in any hallways, stairways, elevators or lobbies or on any parking areas, landscaping, walkways or in any other areas used in common with other lessees.
l. 18 Lessee assumes any and all responsibility for protecting its Premises from theft, robbery and pilferage, which includes keeping Premises doors locked and all doors into common areas such as doors into entrances, public corridors, lobbies, etc., closed, except for normal ingress and egress.
1.19No signage, notices or advertisements may be placed by Lessee anywhere outside of its Premises and all signage must comply with the Sign Criteria exhibit attached to and made a part of this Lease and any other terms and conditions of these Rules and Regulations and the Lease.
1.20Lessee shall not use any method of heating or air conditioning other than as provided by Lessor without Lessor's prior written consent, such consent not to be unreasonably withheld, delayed or conditioned.
1.21Lessor may prohibit smoking within Lessee's Premises, the Project, or any part thereof, and may require Lessee and any of its agents, employees, suppliers, customers, guests and invitees who desire to smoke, to smoke within specifically designated smoking areas which Lessor may change from time to time. It will be Lessee's sole responsibility to ascertain from Lessor the specific smoking program in effect at the Property at the time of its lease commencement. Any smoking program implemented by Lessor will be strictly enforced.
1.22Rest room partitions, mirrors, wash basins and other plumbing fixtures shall not be used for any purpose other than that for which they were constructed and no sweepings, trash or other substances shall be disposed of therein. Any damage or injuries caused by Lessee, its employees, agents, contractors, suppliers, invitees or licensees shall be borne directly by Lessee.
1.23No heavy items may be transported by elevator if such item or items exceed the load capacity of the elevator. Lessee's initial move in and subsequent deliveries of bulky items, such as furniture, equipment, supplies, merchandise, safes and similar items will be subject to reasonable scheduling and approval of persons moving such items by Lessor. Deliveries during normal office hours shall be limited to normal office supplies and other small items. Lessee shall be responsible for protecting elevator interior and exterior finishes and flooring whenever items are transported in them on Lessee's behalf.•
1.24Lessee will not waste electricity, water or air conditioning and agrees to cooperate fully with Lessor in this regard and to comply with any Lessor or governmental energy-saving rules, laws and regulations.
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1.25Lessee understands t: air conditioning and heating systems su. y cool air and heat to large zones regulated by zonal thennostats. Lesso1 shall detennine the locations of, make any modifications to, and have exclusive control over all such thennostats, their settings, the zones and all parts of the system. Lessee agrees to cooperate with other parties within its zone(s) to maximize the comfort level of all parties and shall not touch, adjust, tamper with, or otherwise affect any thennostat or any part of the heating/cooling systems. Lessee will direct all problems related to heating/cooling systems directly to Lessor.
1.26Subject to the tenns of Paragraph 9 of this Lease, Lessor shall be under no obligation to provide heating or air conditioning services to the building during off-hours (between 6:00 p.m. and 7:00 a.m., Monday through Friday and on non-business days). Lessee may request additional heating or air conditioning during off hours and, should Lessor agree to supply such service, Lessee will reimburse Lessor for all costs and expenses incurred, as detennined by Lessor in its sole discretion.
1.27Lessor and its agents reserve the right to exclude from the building any unknown person, or any person otherwise improperly identified. Lessor shall in no case be liable for any damages for any error with regard to the admission to or exclusion from the building of any person. In the case of invasion, mob, riot, public excitement or any other circumstance which Lessor, in its sole discretion, believes will place lessees and/or the Property in jeopardy, Lessor reserves the right to prevent access to the building during the continuance of same by such action as Lessor may deem appropriate.
1.28Lessee's designated representative shall notify Lessor promptly of any required maintenance items for which Lessor is responsible. Employees of Lessor will not perfonn any work or do anything outside of their regular duties unless under special instruction by Lessor.
1.29No Lessee shall employ any person or persons other than the janitor of Lessor for the purpose of cleaning its Premises unless otherwise agreed to by Lessor in writing. No Lessee shall cause any unnecessary labor by reason of Lessee's carelessness or indifference in the preservation of good order and cleanliness. Lessor shall not be responsible to any lessee for any loss of property on the Premises or on or about the Property, however occurring, or for any damage done to any effects of any lessee by the janitor or any other employee or any other person.
1.30Neither Lessee nor any of its employees, agents, contractors, suppliers, invitees or licensees may use on any portion of the Premises, Project or Property any hand truck except those equipped with rubber tires and side guards or such other material-handling equipment as Lessor may approve or require.
1.31These Rules and Regulations impose obligations upon Lessee which are in addition to the obligations of Lessee set forth in the Lease. Nothing in these Rules and Regulations will be construed in any way to diminish or to waive, in whole or in part, the tenns, covenants, agreements and conditions of the Lease. In the event that provisions of both these Rules and Regulations and also of the Lease regulate the same subject matter, Lessee shall comply with all such provisions; if any such provisions are in direct conflict, the provisions of the Lease shall control. Lessor shall enforce these Rules and Regulations in a nondiscriminatory manner as against all tenants of the Building and Project subject to reasonable variances granted by Lessor.
1.32Lessor reserves the right to adopt such additional reasonable and nondiscriminatory Rules and Regulations (whether similar or dissimilar to these Rules and Regulations), and/or such amendments to any Rule or Regulation, as, in its judgment, may from time to time be appropriate and Lessee agrees to abide by all such additional Rules and Regulations and amendments which may be adopted.
1.33Notwithstanding anything to the contrary contained in the Lease, Lessee shall have the right, on a first come-first served, reservation basis to use the common conference rooms located on the Property.
| 1.34 | Landlord agrees to allow Tenant to place a bike rack outside the Premises. |
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31•
LANDLORD CONSENT TO ASSIGNMENT AND ASSUMPTION OF LEASE
This LANDLORD CONSENT TO ASSIGNMENT AND ASSUMPTION OF LEASE
(the "Agreement") is effective as of August 1, 2008, by and among PS BUSINESS PARKS, L.P., a California limited partnership ("Landlord"), L-1 SECURE CREDENTIALING, INC. (formerly known as Digimarc Corporation), a Delaware corporation ("Assignor"), and DIGIMARC CORPORATION (formerly known as DMRC Corporation), a Delaware corporation ("Surviving Party").
RECITALS:
| A. | Landlord, as landlord, and Assignor, as tenant, are parties to that certain Full Service Lease dated March 22, 2004 (the "Lease"). Pursuant to the Lease, Landlord has leased to Assignor space currently containing approximately 46,083 rentable square feet (the "Premises") located at 9405 SW Gemini Drive, Beaverton, Oregon 97008 (the "Building"). |
|---|---|
| B. | Assignor desired to assign to DMRC LLC, a Delaware limited liability company ("Merging Party"), and Merging Party desired to assume from Assignor, all of Assignor's right, title and interest in, to and under the Lease (the "Assignment"). |
| --- | --- |
| C. | Assignor and Merging Party entered into that certain Bill of Sale, Assignment and Assumption Document ("Assignment Agreement") attached hereto as Exhibit A whereby Assignor assigned all of its right, title and interest in and to the Lease to Merging Party. Following such Assignment, Merging Party entered into an Agreement and Plan of Merger with Surviving Party (the "Merger Agreement") whereby Merging Party and Surviving Party merged (the "Merger"), and, as a consequence of the Merger, all right, title and interest of Assignor and Merging Party under the Lease was transferred to, and assumed by Surviving Party (the "Transfer"). As a result of this Merger, Merging Party no longer exists. |
| --- | --- |
| D. | Assignor and Surviving Party have requested Landlord's consent to the Assignment, the Merger and the Transfer of Assignor's interest under the Lease (1) to Merging Party pursuant to the Assignment and the Assignment Agreement; and (2) then to Surviving Party pursuant to the Merger, the Transfer and the Merger Agreement. |
| --- | --- |
| E. | Landlord has agreed to give such consent upon the terms and conditions contained in this Agreement. |
| --- | --- |
NOW THEREFORE, in consideration of the foregoing recitals, which by this reference are incorporated herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord, Assignor and Surviving Party agree and represent as follows:
| 1. | Assignment Agreement; Assignment and Assumption. Assignor and Surviving Party (as the successor to Merging Party) hereby represent and warrant that: (a) a true, complete |
|---|
{2095-0138/00078537;5}
and correct copy of the Assignment Agreement is attached hereto as Exhibit A; (b) the Assignment Agreement fully assigns all of Assignor's right, title and interest in the Lease to Merging Party. Effective as of August 1, 2008 (the "Effective Date"), Assignor assigned to Merging Party all of Assignor's rights, title and interest in, to and under the Lease, including, without limitation, all interest in the Security Deposit, if any, as described in Paragraph 1.07 of the Lease, previously delivered by Assignor to Landlord (the "Security Deposit"). As of the Effective Date, Merging Party, for itself and its successors and assigns, assumed all of Assignor's right, title, and interest in, to and under the Lease and agreed to pay, perform, observe and be bound by all of the covenants, agreements, provisions, conditions and obligations of the tenant under the Lease, including but not limited to, the obligation to pay Landlord for all rent, adjustments of rent and other additional charges payable pursuant to the terms of the Lease, which shall accrue from and after the Effective Date. Nothing contained in the Assignment Agreement shall be deemed to amend, modify or alter in any way the terms, covenants and conditions set forth in the Lease.
| 2. | Merger Agreement; Merger; Assignment and Assumption. Surviving Party hereby represents and warrants that: (a) the Merger Agreement, the Merger and/or the Transfer fully assigned or otherwise transferred, by operation of law or otherwise, all of Merging Party's right, title and interest in, to and under the Lease (including, without limitation, all interest in the Security Deposit) to Surviving Party; and (b) following the Merger and Transfer, Surviving Party has assumed and is bound by, whether by operation of law or otherwise, all of the covenants, agreements, provisions, conditions and obligations of the tenant under the Lease, including but not limited to, the obligation to pay Landlord for all rent, adjustments or rent and other additional charges payable pursuant to the terms of the Lease. Nothing contained in the Merger Agreement shall be deemed to amend, modify or alter in any way the terms, covenants and conditions set forth in the Lease. |
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| 3. | Representations. |
| --- | --- |
| 3.1 | Assignor hereby represents and warrants that Assignor: (i) had full power and authority to assign to Merging Party its entire right, title and interest in the Lease and with respect to the entire Security Deposit, if any; (ii) had not previously transferred or conveyed its interest in the Lease to any person or entity, collaterally or otherwise; (iii) had full power and authority to enter into the Assignment Agreement; and (iv) has full power and authority to enter into this Agreement. |
| --- | --- |
| 3.2 | Surviving Party (as the successor to Merging Party) hereby represents and warrants that Merging Party: (i) had full power and authority to assume all of Assignor's right, title and interest in, to and under the Lease, including the entire Security Deposit, if any; and (ii) had full power and authority to enter into the Assignment Agreement. |
| --- | --- |
| 3.3 | Surviving Party (as the successor to Merging Party) hereby represents and warrants that Merging Party: (i) had full power and authority to assign or otherwise transfer its entire right, title and interest in the Lease (including the entire Security Deposit) |
| --- | --- |
2
{2095-0138/00078537;5}
to Surviving Party; (ii) had not previously transferred or conveyed its interest in the Lease to any person or entity, collaterally or otherwise; (iii) had full power and authority to enter into the Merger Agreement, the Merger and the Transfer; (iv) in connection with the Merger and the Transfer, assigned all of Merging Party's rights, title, interest and obligations under the Lease, whether by operation of law or otherwise, to Surviving Party; and (v) had assigned or otherwise transferred, by operation of law or otherwise, the entire Security Deposit, if any, as described in Paragraph 1.07 of the Lease, to Surviving Party, and Merging Party had full power and authority to do the same.
| 3.4 | Surviving Party hereby represents and warrants that Surviving Party: (i) had full power and authority to enter into the Merger Agreement, the Merger and the Transfer; (ii) has full power and authority to enter into this Agreement; (iii) in connection with the Merger and the Transfer, assumed all of Merging Party's right, title, interest and obligations under the Lease, whether by operation of law or otherwise; and (iv) assumed by operation of law or otherwise, the entire Security Deposit, if any, as described in Paragraph 1.07 of the Lease, and Surviving Party had full power and authority to do the same. |
|---|---|
| 3.5 | Surviving Party further represents and warrants that, following the Merger and the Transfer: (i) Surviving Party has a stockholder equity that is at least equal to $40 million as of the date of this Agreement; and (ii) the business in the Premises will continue to be operated for the use and in the manner provided in the Lease. |
| --- | --- |
| 4. | Minimum Stockholder Equity. If the stockholder equity of Surviving Party is ever less than $15 million, Landlord has the right, upon thirty days notice to Surviving Party, to increase the amount of the Security Deposit to an amount equal to Landlord's then unamortized capital investment portion of Lessor's Work Allowance (including any additional sum(s) paid by Landlord in connection with the Cost of Lessor's Work, as described in Paragraph l.l(d) of Exhibit B of the Work Letter attached to the Lease), provided that the maximum amount of the Security Deposit which may be demanded by Landlord shall be equal to no more than six months of rent. |
| --- | --- |
| 5. | Option to Renew. Irrespective of any Lease language to the contrary, the option to renew the Lease, as described in Section 27.16 of the Lease, is hereby assigned to Surviving Party; provided that this option to renew shall be personal to Surviving Party and shall not be transferable or exercisable by or for the benefit of any assignee or subtenant other than Surviving Party. |
| --- | --- |
| 6. | No Greater Rights. Unless otherwise stated in this Agreement, in no event shall the Assignment Agreement, the Merger Agreement or the other provisions of this Agreement be construed as granting or conferring upon Surviving Party any greater rights than those contained in the Lease nor shall there be any diminution of the rights and privileges of the Landlord under the Lease, nor shall the Lease be deemed modified in any respect. |
| --- | --- |
3
{2095-0138/00078537;5}
| 7. | Deliveries. Prior to Landlord's execution ofthis Agreement and as a condition precedent to the effectiveness of this Agreement, Surviving Party shall: (a) deliver to Landlord a fully executed copy of the Assignment Agreement; (b) deliver to Landlord written notice that the Merger and Transfer have been finalized, and to the extent feasible, a fully executed copy of the Merger Agreement; and (c) upon request of Landlord, its successors or assigns, provide Landlord with such other information regarding the Assignment, the Assignment Agreement, the Merger, the Transfer and/or the Surviving Party that Landlord may reasonably require, which additional information shall include, evidence of the name change of Assignor and of the good standing of Surviving Party. |
|---|---|
| 8. | Landlord's Review Fee and Costs. Upon Assignor's execution and delivery of this Agreement, Surviving Party shall pay to Landlord: (a) the sum of $250; and (b) Landlord's reasonable out-of-pocket costs within five (5) business days of Landlord's request thereof all in consideration for Landlord's review and preparation of this Agreement. |
| --- | --- |
| 9. | Landlord's Consent. In reliance upon the agreements and representations contained in this Agreement, Landlord hereby consents to the Assignment, the Merger and the Transfer. This Agreement shall not constitute a waiver of the obligation of the tenant (or any successor party) under the Lease to obtain Landlord's consent to any subsequent assignment, sublease, merger or other transfer under the Lease, nor shall it constitute a waiver of any existing defaults under the Lease. |
| --- | --- |
| 10. | Notice Address. Any notices to Surviving Party shall be effective when served to Surviving Party at the Premises in accordance with the terms of the Lease. From and after the Effective Date, notices to Assignor shall be served at the following address: L-1 Identity Solutions, Inc., 177 Broad Street, Stamford, CT 06901, Attn.: Mark Molina, Fax: 203-504-1104. |
| --- | --- |
| 11. | No Modifications. None of the terms in this Agreement may be modified unless in writing and signed by all parties to this Agreement. Unless otherwise stated in this Agreement, nothing contained in this Agreement shall be deemed to amend, modify or alter in any way the terms, covenants and conditions set forth in the Lease. |
| --- | --- |
| 12. | Authority. Each signatory of this Agreement represents hereby that he or she has the authority to execute and deliver the same on behalf of the party hereto for which such signatory is acting. Each signatory of this Agreement represents hereby that he or she has the authority to execute and deliver the same on behalf of the party hereto for which such signatory is acting. Surviving Party hereby represents and warrants that neither Merging Party or Surviving Party, nor any persons or entities holding any legal or beneficial interest whatsoever in Merging Party or Surviving Party, are (i) the target of any sanctions program that is established by Executive Order of the President or published by the Office of Foreign Assets Control, U.S. Department of the Treasury ("OFAC"); (ii) designated by the President or OFAC pursuant to the Trading with the Enemy Act, 50 |
| --- | --- |
U.S.C. App.§ 5, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701- 06, the Patriot Act, Public Law 107-56, Executive Order 13224 (September 23, 2001) or any Executive Order of the President issued pursuant to such statutes; or (iii) named on
4
{2095-0138/00078537;5}
the following list that is published by OFAC: "List of Specially Designated Nationals and Blocked Persons." If the foregoing representation is untrue at any time during the Term, an Event of Default under the Lease will be deemed to have occurred, without the necessity of notice to Surviving Party.
| 13. | Financial Statements and Credit Reports. Notwithstanding anything to the contrary contained in the Lease, and in addition to the terms and conditions of the Lease, at Landlord's request, Surviving Party shall deliver to Landlord copies, certified by an officer of Surviving Party as being a true and correct copy, of Surviving Party's most recent audited financial statement, or, if unaudited, certified by Surviving Party's chief financial officer as being true, complete and correct in all material respects. Surviving Party hereby authorizes Landlord to obtain one or more credit reports on Merging Party and Surviving Party at any time, and shall execute such further authorizations as Landlord may reasonably require in order to obtain a credit report. |
|---|---|
| 14. | Hazardous Materials/Failure to Perform. Surviving Party shall protect, defend, indemnify and hold each and all of Landlord, Landlord's investment manager, and the trustees, boards of directors, officers, general partners, beneficiaries, stockholders, employees and agents of each of them harmless from and against any and all loss, claims, liability or costs (including court costs and attorney's fees) incurred by reason of any actual or asserted failure of Merging Party and/or Surviving Party to fully comply with all applicable environmental laws, rules, statues, ordinances and/or codes, and/or the presence, handling, use or disposition in or from the Premises of any hazardous materials by Merging Party, Surviving Party and/or any of Merging Party's or Surviving Party's employees, agents, invitees, or contractors (even though permissible under all applicable environmental laws, rules, statues, ordinances and/or codes and/or the provisions of the Lease, as amended), or by reason of any actual or asserted failure of Surviving Party to keep, observe, or perform any provision of the Lease, as amended hereby. |
| --- | --- |
| 15. | Counterparts. This Agreement may be executed in counterparts and shall constitute an agreement binding on all parties notwithstanding that all parties are not signatories to the original or the same counterpart provided that all parties are furnished a copy or copies thereof reflecting the signature of all parties. |
| --- | --- |
| 16. | Brokers. Surviving Party and Assignor each hereby represent to Landlord that it has dealt with no broker in connection with this Agreement. Surviving Party agrees to indemnify and hold Landlord, its members, principals, beneficiaries, partners, officers, directors, employees, investors, managers, mortgagee(s) and agents, and the respective principals and members of any such agents harmless from all claims of any brokers claiming to have represented Merging Party, Surviving Party and/or Assignor, as the case may be, in connection with this Agreement. |
| --- | --- |
IN WITNESS WHEREOF, Landlord, Assignor and Surviving Party have executed this Agreement effective on the day and year first above written.
5
{2095-0138/00078537;5}
LANDLORD:
PS BUSINESS PARKS, L.P.,
a California limited partnership
ASSIGNOR:
L-1 SECURE CREDENTIALING, INC.
(formerly known a Digimarc Corpoon), a
Delaware co,.-n•-
By:PS Business Parks, Inc.,
a _,its General Partner
By:
| Name: Coby A. Holley Title: | Vice President |
|---|
Title:
Dated: Septembe J,2008
Dated: September 30, 2008
SURVIVING PARTY:
DIGIMARC CORPORATION (formerly
known as DMRC Corporation),
a Delawn;orporation
By: Name: {lµhe/-1 Chc,fF'IIJ.ffj
Title: Ch/.cf /..e,J(J,/ 0/lfi<r:cJf(/('ta/
Dated: September lJ,2008
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
6
{2095-0138/00078537;5}
EXHIBIT A - COPY OF ASSIGNMENT AGREEMENT
attached to and made a part of the Agreement effective August 1, 2008, between PS BUSINESS PARKS, L.P., a Delaware corporation, as Landlord,
DIGIMARC CORPORATION, a Delaware corporation, as Assignor,DMRC LLC, a Delaware limited liability company, as Merging Party, and DMRC CORPORATION, a Delaware corporation, as Surviving Party.
[SEE ATTACHED]
Exhibit A-1
{2095-0138/00078537;5}
BILL OF SALE, AS&GNMENT AND ASSUMPTION AGREEMENT
This BILL OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT, dated
as of August l, 2008 (this "Agreement"), is made by and betwe.cn DJGIMARC CORPORATION. a Delaware COipOratiou ("J)igimarc"), and DMRC LLC, a Delaware limited liability company and a wholly owned subsidiary of Digimarc ("llMRC"), pursuant to the Separation Agreement. dated as of August I, 2008 (the "Separation A,m:ement"), by and among Digimare, DMRC, DMRC Corporation, a Delaware oorporation and a wholly-owned subsidiary ofDMRC ("DMRC Sub"), and, solely with respect to Section 3.02, Section 4.09(b)(iii) and Section 4.13 thereof, L-1 Identity Solutions. Inc.. a Delaware corporation.
Capitalized terms used herein without definition shall have the respective meanmgs ascribed
thereto in the Separation Agreement.
Seetien 1.Traufer ofDMRC Aasets
Digimarc, for good and valuable consideration. the receipt and sufficiency of which are hereby acknowledged. does hereby sell, assign. transfer. convey and deliver to DMRC. free and clear of all Encumbrances, aU of Digi.marc's right, title and interest in and to, and all obligations, liabilities and duties ofDigimarc under or with respect to. the DMRC Assets, other than any Delayed Transfer Assets.
Seetioal.Aasamptiou of LiabiHtia
DMRC, for good and valuable consideration. the receipt and sufficiency of which are hereby acknowledged. hereby accepts such sale, assignment, transfer and conveyance of the DMRC Assets and hereby assumes all DMRC Liabilities. other than any Delayed Transfer Liabilities, and agrees to pay, perform and/or discharge all of such obligations, liabilities and duties as and when the same become due.
Section 3.NO REPRESENTATIONS OR WA.RRAN11ES.
EXCEPT AS SET FORTH IN THE SEPARATION AGREEMENT, DIGlMARC MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED (JNCLUDINO THOSE REFERRED TO 1N THE UNIFORM COMMERCIAL CODE OR 1N ANY STATUTE OR RULE OF LAW TIIAT CAN BE LIMITBD OR WAJVED AND WOULD OTHERWISE BE APPLICABLE TO REAL PROPERTY), AND THE DMRC ASSETS SHALL BE DEEMED TO BE "AS IS, WHERE IS" ON THE DATE HEREOF, AND IN 1llE.IR THEN PRESENT CONDITION, AND DMRC SHAIL RELY UPON ITS OWN EXAMINATION THEREOF. IN ANY EVENT. DIGIMARC MAK.ES NO WARRANTY OF MERCHANTABILITY, SUITABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR QUALITY, WITH RESPECT TO ANY OF THE DMRC ASSETS, OR AS TO THE CONDIDON OR WORKMANSHlP THEREOF OR THE ABSENCE OF ANY DEFECTS THEREIN. WHETHER LATENT OR PATENT.
Exhibit A-2
{2095-0138/00078537;5}
Anipwat; No Ripa la Tldnl Partt.
This Ap,ement shall be binding upon and inure to the benefit of the parties bmelo and their n=speetive sugecssors and permitted assigns. Nothing expressed or implied herein is intended to confer upon any person or entity, other than DMRC and Digimarc and their respective successors and permitted a.ips, myrights, remedies, obligations or liabilities under or by reason oftbis Agreement.
Aaeadmat
This Agreement may not be amended or modified except by an imtrument in writing siped by Digimarc and DMR.C.
Ge'ffraill& Law
This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware applicable to contracts executed and to be performed in the State of Delaware. The parties irrevocably consent to the exclusive jurisdiction and venue of tbe state and federal courts 1oeated in the State of Delaware in conncdion withany action relating to thisAp:iement.c.........._ l'aewi-ile Sipatua
This Agreement may be executed in one or m<ft counterparts, and by the different parties berdo in sepnte counterparts, each of which when executed shall be deemed to be an oriaiml but all of which taken together shall comtitute one and the same apem.eat. The parties agree that for purposes of this Agreement and the otba'ducu1ue11ts, agreements, and ccrtifialtcs ddnrdin OODDeetion with the tnmsacdons contmnplated mmbyt delivery via facsimile of an executed siplture pap to this Apeement. such document, agreement or
certificate shall be as effective as delivery ofa mania.Uy signed sia;nature pap to this
Asuch document, apeemeat or certificate.
[Remainder of Paae Intentionally Left Blank]
Exhibit A-3
{2095-0138/00078537;5}
IN WlTNBSS WHBR.BOF', eada of theparties hereto has caused this BlLL OF SALB, ASSIGNMENT AND ASSUMPTJON AOREBMENT to beaec:uted byitldulyaalbmiml oflicc:r..
DIGIMARC CORPORATION
By{&,
Name:
Title!
Na-e:
Title:
Exhibit A-4
{2095-0138/00078537;5}
FIRST AMENDMENT AND
LESSOR CONSENT TO ASSIGNMENT AND ASSUMPTION
THIS FIRST AMENDMENT and LESSOR CONSENT TO ASSIGNMENT AND ASSUMPTION
(collectively, this "Agreement" and sometimes referred to herein as the "Amendment") is made and entered into as of the 13^th^ day of May, 2010, by and between PS BUSINESS PARKS, LP., a California limited partnership ("Lessor'), DIGIMARC CORPORATION, a Delaware Corporation ("Lessee" or "Assignor'') and DIGIMARC CORPORATION, an Oregon corporation ("Surviving Entity").
RECITALS
| A. | Lessor and Lessee (formerly known as DMRC Corporation, and as successor in interest to L-1 Secure Credentialing, Inc., a Delaware corporation, formerly known as Digimarc Corporation) are parties to that certain lease dated March 22, 2004 (the "Lease"). Pursuant to the Lease, Lessor has leased to Lessee space currently containing approximately 46,083 rentable square feet (the "Premises") located at 9405 SW Gemini Drive, Beaverton, Oregon 97008 (the "Building"), which is a part of the project commonly referred to as Creekside Corporate Park (the "Project"). |
|---|---|
| B. | Lessee and Surviving Entity have entered into an Agreement and Plan of Merger (the "Merger Agreement") whereby Lessee has been merged with and into Surviving Entity with Surviving Entity to remain as the surviving entity (the "Merger"). As a consequence of the Merger, all right, title and interest of Lessee under the Lease was transferred to, and assumed by, the Surviving Entity (the "Transfer'). |
| --- | --- |
| C. | Lessee and Surviving Entity have requested Lessor's consent to the Merger and Transfer. Lessor has agreed to give such consent upon the terms and conditions contained in this Consent. |
| --- | --- |
| D. | The Lease by its terms shall expire on August 31, 2011 ("Prior Termination Date"), and the parties desire to extend the Term of the Lease, all on the following terms and conditions. |
| --- | --- |
| E. | Lessor, Lessee and Surviving Entity mutually desire that the Lease be amended on and subject to the following terms and conditions. |
| --- | --- |
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lessor and Lessee agree as follows:
| A. | Amendment. Lessor, Lessee and Surviving Entity agree that, effective as of the date hereof, the Lease shall be amended in accordance with the following terms and conditions: | ||
|---|---|---|---|
| I. | Extension. The Term of the Lease is hereby extended for a period of 60 months and shall expire on August 31, 2016 ("Extended Termination Date"), unless sooner terminated in accordance with the terms of the Lease. That portion of the Term commencing the day immediately following the Prior Termination Date ("Extension Date") and ending on the Extended Termination Date shall be referred to herein as the "Extended Term". | ||
| --- | --- | ||
| II. | Base Rent. The Base Rent, Additional Rent and all other charges under the Lease shall be payable as provided therein with respect to the Premises through and including December 31, 2010, subject to the Cap (as defined in Section IV below) on Lessee's Proportionate Share of Operating Expenses for calendar year 2010). Notwithstanding anything to the contrary contained in the Lease, effective as of January 1, 2011, the schedule of Base Rent payable with respect to the Premises for the balance of the original Term and the Extended Term is the following: | ||
| --- | --- | ||
| Period | Annual Rate Per Square Foot | Annual Base Rent | Monthly Base Rent |
| --- | --- | --- | --- |
| 1/1/11-12/31/11 | $16.75 | $771,890.25 | $64,324.19 |
| 1/1/12-12/31/12 | $17.34 | $799,079.28 | $66,589.94 |
| 1/1/13-12/31/13 | $17.95 | $827,189.88 | $68,932.49 |
| 1/1/14-12/31/14 | $18.58 | $856,222.20 | $71,351.85 |
| 1/1/15-12/31/15 | $19.23 | $886,176.12 | $73,848.01 |
| 1/1/16- 8/31/16<br><br><br>--- - | $19.90 | $917,051.76* | $76,420.98 |
'Tenant shall only be liable for the Monthly Base Rent due for each month within the period of January 1, 2016 -August 31, 2016 and not the entire Annual Base Rent.
All such Base Rent shall be payable by Lessee in accordance with the terms of the Lease, as amended hereby.
Ill.Additional Security Deposit. No additional security deposit shall be required in connection with this Amendment.
{2095-0217/00122181;3}
| IV. | Operating Expenses. For the period commencing on January 1, 2011 and ending on the Extended Termination Date, Lessee shall pay for Lessee's Proportionate Share of the increase in Operating Expenses over the Base Year in accordance with the terms of the Lease, as amended hereby, provided, however, during such period, the Base Year for the computation of Lessee's Proportionate Share of Operating Expenses is amended from 2005 to 2011. Notwithstanding the foregoing or anything to the contrary set forth in Article 4 of the Lease, effective January 1, 2011, electricity for the Premises and the Building (to the extent that the Premises constitutes 100% of the Building and except to the extent attributable to the common areas of the Project and/or Property) shall no longer be a part of the definition of Utility and Service Costs (as defined in Section 4.03B of the Lease) and shall no longer be included as a part of Operating Expenses. Instead, electricity costs for the Premises and the Building (to the extent that the Premises constitutes 100% of the Building and except to the extent attributable to the common areas of the Project and/or Property) shall be treated as a separate and distinct category which shall no longer be subject to the Base Year and instead shall be subject to a Premises Electricity Cost Expense Stop as more fully described in Section V below. Lessor and Lessee acknowledge and agree that, pursuant to Section 4.05B of the Lease, Lessee owes Lessor approximately $33,000.00 in connection with Lessee's underpayment of actual Operating Expenses for calendar year 2009 (the "2009 Operating Expense Underpayment"). Lessor hereby (i) waives any claim to the 2009 Operating Expense Underpayment, (ii) agrees that the existence of the 2009 Operating Expense Underpayment is not, and was not, a Default, event of default, or other similar occurrence under the Lease, and (iii) agrees that Tenant has fully paid all of its obligations on account of Operating Expenses attributable to calendar year 2009. In addition, notwithstanding anything herein or in the Lease to the contrary, Lessee's Proportionate Share of Operating Expenses for calendar year 2010 shall not exceed the sum of $54,420.00 (the "Cap"); provided, however, that the Cap set forth herein shall not be deemed applicable to any additional space added to the Premises at any time or from time to time, unless expressly so provided in any amendment to the Lease. In consideration of the foregoing, Lessee hereby waives any interest in any overpayment of actual Operating Expenses for calendar year 2010, which amounts, if any, shall be for the sole benefit of Lessor, it being understood that Lessee shall not be entitled to any credit, abatement or other concession in connection therewith. Lessor agrees to act in a commercially reasonable manner in incurring Operating Expenses, taking into consideration the class and the quality of the Building and Project and shall extrapolate Operating Expenses in accordance with the methodology used to extrapolate Operating Expenses in comparable buildings owned by Lessor and its affiliates in the geographic area in which the Building and Project is located. Lessee agrees to act in a commercially reasonable manner to control those items of Operating Expenses within Lessee's reasonable control to avoid an unreasonable increase in Operating Expenses incurred during the 2010 and 2011 calendar years. |
|---|---|
| V. | Premises Electricity Cost!;. |
| --- | --- |
| A. | Premises Electricity Costs Stop. Effective January 1, 2011, the Premises Electricity Costs Stop for the balance of the current Term and the Extended Term shall be $115,207.50. Throughout the balance of the current Term and the Extended Term, Lessee shall pay, as Additional Rent, Lessee's Proportionate Share of the total amount, if any, by which Premises Electricity Costs (as defined below) for each calendar year during the balance of the current Term and Extended Term exceed the Premises Electricity Costs Stop (the "Premises Electricity Costs Excess"). If Premises Electricity Costs in any calendar year decrease below the amount of the Premises Electricity Costs Stop, Lessee's Proportionate Share of Utility and Service Costs shall be $0. |
| --- | --- |
| B. | Premises Electricity Costs. Premises Electricity Costs shall only include the actual cost of electricity provided to the Premises and Building. All other costs incurred by Lessor related to electricity, including costs for the provision of electricity to the common areas, shall continue to be included as part of Utility and Service Costs. |
| --- | --- |
| C. | Premises Electricity Costs Excess Payments. Lessee's estimated payments of Premises Electricity Costs Excess shall be made monthly on or before the first day of each calendar month during the balance of the current Term and the Extended Term, each in the amount of Lessor's then current estimate as outlined below. Lessee's Proportionate Share of Premises Electricity Costs Excess will be prorated for partial months. Lessee's Proportionate Share of Premises Electricity Costs Excess shall be determined and paid as follows: |
| --- | --- |
| (i) | Lessee's Premises Electricity Costs Excess estimates: As soon as is practical following the end of each calendar year, Lessor will provide Lessee with a determination of (provided, however, that Lessor shall exercise reasonable efforts to provide such determination within 120 |
| --- | --- |
days following the end of each calendar year): (a) Lessee's annual share of estimated Premises Electricity Costs Excess for the then current calendar year; (b) Lessee's monthly Premises Electricity Costs Excess estimate for the then current year; and, (c) Lessee's retroactive estimate correction billing (for the period of January 1st through the date immediately prior to the commencement date of Lessee's new monthly
2
{2095-0217/00122181:3)
Premises Electricity Costs Excess estimate) for the difference between Lessee's new and previously billed monthly Premises Electricity Costs Excess estimates for the then current year.
| (ii) | Lessee's Proportionate Share of actual annual Premises Electricity Costs Excess: Each year, Lessor will provide Lessee with a determination refiecting the total Premises Electricity Costs and Premises Electricity Costs Excess for the previous calendar year as soon as practical following the end of each calendar year; provided, however, that Lessor shall exercise reasonable efforts to provide such determination within 120 days following the end of each calendar year. If Lessee's estimated Premises Electricity Costs Excess billed for the previous calendar year is less than Lessee's Proportionate Share of the actual Premises Electricity Costs Excess for the prior calendar year, Lessee shall pay to Lessor the difference due within thirty (30) days of delivery of Lessor's invoice. If Lessee has paid more than its Proportionate Share of Premises Electricity Costs Excess for the preceding calendar year, Lessor will credit the overpayment toward Lessee's future Premises Electricity Costs obligations or, if after expiration of the Extended Term, shall refund such excess to Lessee within thirty (30) days following the making of the determination. Monthly Premises Electricity Costs Excess estimates are due on the 1^st^ of each month and shall commence in the month specified by Lessor. Lessee's retroactive estimate correction, if any, shall be due, in full, within thirty (30) days following delivery of Lessor's correction and, in the event of any overpayment, Lessor will credit the overpayment toward Lessee's future Premises Electricity Costs obligations. |
|---|---|
| D. | Audit. Lessee shall have the right to audit Premises Electricity Costs in the same manner as set forth in Section 4.07 of the Lease with respect to Lessee's right to audit Operating Expenses. Notwithstanding the foregoing, Tenant shall have the right, which right shall be exercised no more than twice per calendar year, to request copies of electric bills attributable to the Premises for then current calendar year and Landlord shall deliver such copies to Tenant promptly following Tenant's request. |
| --- | --- |
| VI. | Improvements to PreJnises_. |
| --- | --- |
| A. | Condition of Premises. Lessee is in possession of the Premises and accepts the same "as is" without any agreements, representations, understandings or obligations on the part of Lessor to perform any alterations, repairs or improvements, except as may be expressly provided otherwise in this Amendment and subject to Lessor's obligations with respect to repairs under Article 11 of the Lease. |
| --- | --- |
| B. | Responsibility for Improvements to Premises. Lessee may perform improvements to the Premises in accordance with the Work Letter attached hereto as Exhibit A and Lessee shall be entitled to an improvement allowance in connection with such work as more fully described in Exhibit A. |
| --- | --- |
| C. | HVAC. Lessor hereby agrees to (a) replace the three (3) existing 25 ton roof-top HVAC units and control systems serving the Building and various portions Premises and (b) retrofit the VAV boxes associated with each specific HVAC unit over the next three calendar years as follows: |
| --- | --- |
(i)Lessor to replace the existing roof-top HVAC unit designated by the parties as RTU#1 and the base control system before the end of calendar year 2010. Lessor and Lessee will reasonably cooperate with one another to coordinate the replacement of such unit with the construction of the Lessee Improvements (as defined in Exhibit A attached hereto) except that in no event shall any delay in Lessee's construction schedule affect Lessor's obligation to replace such system before the end of calendar year 201O;
(ii)Lessor to replace a second existing roof-top HVAC unit and make necessary additions to the then existing base control system to accommodate the same before the end of calendar year 2011; and
| (iii) | Lessor to replace the third and final existing roof-top HVAC unit and make necessary additions to the then existing base control system to accommodate the same before the end of calendar year 2012. |
|---|
All of the new HVAC units shall be of tonnage commensurate with and appropriate to those being replaced. All new units shall meet government standards for refrigerant type and energy efficiency (410 a 13 SEER). The control system shall be direct digital, either BACnet or LON capable, with alarm points and alerts. Building manager functions shall be included. Lessor shall install units which shall
3
{2095-0217/00122181;3}
maintain the existing redundancy for the existing server room and Lessor shall plan and install the system for such existing redundancy to be maintained.
Except to the extent caused by Lessee or any of Lessee's agents', contractors' or employees' acts and/or omissions or as a result of casualty, Lessor shall perform such replacements at its sole cost and expense and such costs shall not be included in Operating Expenses; provided, however, that Lessee shall reimburse Lessor for the cost and expense of the unit to be installed in calendar year 2012 as described in C(iii) above (the "2012 Unit") by payments of monthly Additional Rent in an amount that would fully amortize the cost and expense of the 2012 Unit over fifteen (15) years. Such Additional Rent obligation shall continue until such cost and expense is fully amortized or until the expiration of the Extended Term, as it may be extended from time to time, whichever comes first.
| VII. | Roof S.2.ace for[)ish/Ant!!_nna. |
|---|---|
| A. | As of the date of this Amendment, Lessee shall have the right to lease space on the roof of the Building, at no additional cost to Lessee, for the purpose of installing (subject to the terms and conditions set forth in Article 10 of the Lease), operating and maintaining a dish/antenna not exceeding 36 inches in diameter (the "Dish/Antenna"). The location of the space on the roof to be leased by Lessee is referred to herein as the "Roof Space". Lessor reserves the right to relocate the Roof Space as reasonably necessary during the Term. Lessor's designation shall take into account Lessee's use of the Dish/Antenna. Notwithstanding the foregoing, Lessee's right to install the Dish/Antenna shall be subject to the approval rights of Lessor (which approval rights may include review by Lessor's architect and/or engineer) with respect to the plans and specifications of the Dish/Antenna, the manner in which the Dish/Antenna is attached to the roof of the Building and the manner in which any cables are run to and from the Dish/Antenna, which approval shall not be unreasonably withheld or delayed. In the event Lessee replaces the Dish/Antenna during the Term, the precise specifications and a general description of any replacement Dish/Antenna along with all documents Lessor reasonably requires to review the installation of such replacement Dish/Antenna (the "Plans and Specifications") shall be submitted to Lessor for Lessor's written approval no later than 20 days before Lessee commences to install such Dish/Antenna, which approval shall not be unreasonably withheld or delayed. Lessee shall be solely responsible for obtaining and maintaining all necessary governmental and regulatory approvals and for the cost of installing, operating, maintaining and removing the Dish/Antenna. If Lessor determines that the Dish/Antenna equipment does not comply with the approved Plans and Specifications, that the Building has been damaged during installation of the Dish/Antenna or that the installation was defective, Lessor shall notify Lessee of any noncompliance or detected problems and Lessee promptly shall cure the defects. If Lessee fails to promptly cure the defects, Lessee shall pay to Lessor upon demand the cosi as reasonably determined by Lessor, of correcting any defects and repairing any damage to the Building caused by such installation. If at any time Lessor, in its sole discretion, deems it necessary, Lessee shall provide and install, at Lessee's sole cost and expense, appropriate aesthetic screening, reasonably satisfactory to Lessor, for the Dish/Antenna (the "Aesthetic Screening"). |
| --- | --- |
| B. | Lessor agrees that Lessee, upon reasonable prior written notice to Lessor, shall have access to the roof of the Building and the Roof Space solely for the purpose of maintaining, repairing and removing the Dish/Antenna, the appurtenances and the Aesthetic Screening, if any, all of which shall be performed by Lessee or Lessee's authorized representative or contractors, which shall be reasonably approved by Lessor, at Lessee's sole cost and risk. It is agreed, however, that only authorized engineers, employees or properly authorized contractors of Lessee, FCC (defined below) inspectors, or persons under their direct supervision will be permitted to have access to the roof of the Building and the Roof Space. Lessee further agrees to exercise firm control over the people requiring access to the roof of the Building and the Roof Space in order to keep to a minimum the number of people having access to the roof of the Building and the Roof Space and the frequency of their visits. It is further understood and agreed that the installation, maintenance, operation and removal of the Dish/Antenna, the appurtenances and the Aesthetic Screening, if any, is not permitted to damage the Building or the roof thereof, or interfere with the use of the Building and roof by Lessor. Lessee agrees to be responsible for any damage caused to the roof or any other part of the Building, which may be caused by Lessee or any Lessee Entity. |
| --- | --- |
| C. | Lessee agrees to install and maintain only equipment of types and frequencies which will not cause unreasonable interference to Lessor or any other Lessee of the Building. In the event Lessee's equipment causes such interference, Lessee will change the frequency on which it transmits and/or receives and take any |
| --- | --- |
{2095-0217100122181:3}
4
other steps necessary to eliminate the interference. If said interference cannot be eliminated within a reasonable period of time, in the judgment of Lessor, then Lessee agrees to remove the Dish/Antenna from the Roof Space. Lessee shall, at its sole cost and expense, and at its sole risk, operate and maintain the Dish/Antenna in a good and workmanlike manner, and in compliance with all Building, electric, communication, and safety codes, ordinances, standards, regulations and requirements, now in effect or hereafter promulgated, of the Federal Government, including, without limitation, the Federal Communications Commission (the "FCC"), the Federal Aviation Administration ("FAA") or any successor agency of either the FCC or FAA having jurisdiction over radio or telecommunications, and of the state, city and county in which the Building is located. Under this Lease, the Lessor and its agents assume no responsibility for the licensing, operation and/or maintenance of Lessee's equipment. Lessee has the responsibility of carrying out the terms of its FCC license in all respects. The Dish/Antenna shall be connected to Lessor's power supply in strict compliance with all applicable Building, electrical, fire and safety codes. Neither Lessor nor any Lessor Entity shall be liable to Lessee for any stoppages or shortages of electrical power furnished to the Dish/Antenna or the Roof Space because of any act, omission or requirement of the public utility serving the Building, or the act or omission of any other Lessee, invitee or licensee or their respective agents, employees or contractors, or for any other cause beyond the reasonable control of Lessor, and Lessee shall not be entitled to any rental abatement for any such stoppage or shortage of electrical power. Neither Lessor nor any Lessor Entity shall have any responsibility or liability for the conduct or safety of any of Lessee's representatives, repair, maintenance and engineering personnel while in or on any part of the Building or the Roof Space.
| D. | The Dish/Antenna, the appurtenances and the Aesthetic Screening, if any, shall remain the personal property of Lessee, and shall be removed by Lessee at its own expense at the expiration or earlier termination of the Lease or Lessee's right to possession under the Lease. Lessee shall repair any damage caused by such removal, including the patching of any holes to match, as closely as possible, the color surrounding the area where the equipment and appurtenances were attached. Lessee agrees to maintain all of Lessee's equipment placed on or about the roof or in any other part of the Building in proper operating condition and maintain same in satisfactory condition as to appearance and safety in Lessor's sole discretion. Such maintenance and operation shall be performed in a manner to avoid any interference with any other Lessees or Lessor. Lessee agrees that at all times during the Term, it will keep the roof of the Building and the Roof Space free of all trash or waste materials produced by Lessee or Lessee's agents, employees or contractors. |
|---|---|
| E. | In light of the specialized nature of the Dish/Antenna, Lessee shall be permitted to utilize the services of its choice for operation, removal and repair of the Dish/Antenna, the appurtenances and the Aesthetic Screening, if any, subject to the reasonable approval of Lessor. Notwithstanding the foregoing, Lessee must provide Lessor with prior written notice of any such removal or repair and coordinate such work with Lessor in order to avoid voiding or otherwise adversely affecting any warranties granted to Lessor with respect to the roof. If necessary, Lessee, at its sole cost and expense, shall retain any contractor having a then existing warranty in effect on the roof to perform such work (to the extent that it involves the roof), or, at Lessee's option, to perform such work in conjunction with Lessee's contractor. In the event Lessor contemplates roof repairs that could affect Lessee's Dish/Antenna, or which may result in an interruption of Lessee's telecommunication service, Lessor shall formally notify Lessee at least 30 days in advance (except in cases of an emergency) prior to the commencement of such contemplated work in order to allow Lessee to make other arrangements for such service. |
| --- | --- |
| F. | Lessee shall not allow any provider of telecommunication, video, data or related services (collectively, "Communication Services") to locate any equipment on the roof of the Building or in the Roof Space for any purpose whatsoever, nor may Lessee use the Roof Space and/or Dish/Antenna to provide Communication Services to an unaffiliated Lessee, occupant or licensee of another building, or to facilitate the provision of Communication Services on behalf of another Communication Services provider to an unaffiliated Lessee, occupant or licensee of the Building or any other building. Lessee acknowledges that Lessor may at some time establish a standard license agreement (the "License Agreement") with respect to the use of roof space by Lessees of the Building. Lessee, upon request of Lessor, shall enter into such License Agreement with Lessor provided that such agreement does not materially alter the rights of Lessee hereunder with respect to the Roof Space. Lessee specifically acknowledges and agrees that the terms and conditions of Article 13 of the Lease shall apply with full force and effect to the Roof Space and any other portions of the roof accessed or utilized by Lessee, its representatives, agents, employees or contractors. |
| --- | --- |
{2095-0217100122181;3}
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| G. | If Lessee defaults under any of the terms and conditions of this Section or the Lease, and Lessee fails to cure said default within the time allowed by Article 18 of the Lease, Lessor shall be permitted to exercise all remedies provided under the terms of the Lease, including removing the Dish/Antenna, the appurtenances and the Aesthetic Screening, if any, and restoring the Building and the Roof Space to the condition that existed prior to the installation of the Dish/Antenna, the appurtenances and the Aesthetic Screening, if any. If Lessor removes the Dish/Antenna, the appurtenances and the Aesthetic Screening, if any, as a result of an uncured default, Lessee shall be liable for all costs and expenses Lessor incurs in removing the Dish/Antenna, the appurtenances and the Aesthetic Screening, if any, and repairing any damage to the Building, the roof of the Building and the Roof Space caused by the installation, operation or maintenance of the Dish/Antenna, the appurtenances, and the Aesthetic Screening, if any. Lessee's rights pursuant to this Section are personal to the named Lessee under the Lease and are not transferable, except with respect to a transfer for which Lessor's consent is not required pursuant to Section 17.01 of the Lease. |
|---|---|
| VIII. | Other Pertinent Provisions. Lessor and Lessee agree that, effective as of the date of this Amendment (unless different effective date(s) is/are specifically referenced in this Section), the Lease shall be amended in the following additional respects: |
| --- | --- |
| A. | Operating Expenses. Section 4.02 of the Lease is hereby amended by adding the following at the end thereof: |
| --- | --- |
"Operating Expenses shall exclude the following:
| (i) | Any ground lease rental; |
|---|
(ii)Costs of capital improvements, replacements or equipment and any depreciation or amortization expenses thereon, except to the extent (A) reasonably intended to produce a reduction in Operating Expenses, (B) required by any Laws, or for health or safety purposes, (C) for commercially reasonable improvements to or replacements of any components of the Common Areas, which costs shall be uniformly applied to all tenants of the Project, or (D) for reimbursement of the 2012 Unit as described in Section VI.C above.
| (iii) | Rentals for items (except when needed in connection with normal repairs and maintenance of permanent systems) which if purchased, rather than rented, would constitute a capital improvement excluded in clause (ii) above; |
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(iv)Costs incurred by Lessor for the maintenance of, or the repair of damage to, the Building, Project and/or Property, to the extent that Lessor is reimbursed by insurance proceeds or directly by Lessees;
(v)Costs, including permit, license and inspection costs, incurred with respect to the installation of Lessee or other occupant improvements made for Lessees or other occupants in the Building, the Project and/or the Property or incurred in renovating or otherwise improving, decorating, painting or redecorating vacant space for or the premises of other Lessees or other occupants of the Building;
(vi)Marketing costs, including leasing comm1ss1ons, attorneys' fees in connection with the negotiation and preparation or enforcement of letters, deal memos, letters of intent, leases, subleases and/or assignments, space planning costs, and other costs and expenses incurred in connection with lease, sublease and/or assignment negotiations and transactions with present or prospective Lessees or other occupants of the Building, Project or the Property;
| (vii) | Costs incurred by Lessor due to the violation by Lessor of the terms and conditions of any lease of space in the Building or the Project; |
|---|---|
| (viii) | interest, principal, points and fees on debt or amortization payments on any mortgage or deed of trust or any other debt instrument encumbering the Building, Project or Property or the land on which the Building or Project is situated; |
| --- | --- |
(ix)Except for making repairs or keeping permanent systems in operation while repairs are being made, rentals and other related expenses incurred in leasing air conditioning systems, elevators or other equipment ordinarily considered to be of a capital nature;
{2095-0217/00122181;3}
6
(x)Advertising and promotional expenditures (except for retail property promotions);
(xi)Costs incurred in connection with upgrading the Building, Project or Property to comply with disability, life, fire and safety codes in effect prior to the issuance of the temporary certificate of occupancy for the Building;
| (xii) | Interest, fines or penalties incurred as a result of Lessor's failure to make payments when due unless such failure is commercially reasonable under the circumstances; |
|---|---|
| (xiii) | Costs arising from Lessor's charitable or political contributions; |
| --- | --- |
(xiv)The depreciation of the Building and other real property structures on the Property;
(xv)Lessor's general corporate overhead and general administrative expenses not related to the operation of the Building or the Project;
(xvi)Any bad debt loss, rent loss or reserves for bad debts or rent loss, or reserves for equipment or capital replacement."
| B. | Lessee Alterations. Notwithstanding anything to the contrary contained in Sections 10.05 and/or 10.6 of the Lease, Lessee shall not be required to remove any Lessee Alterations made by Lessee which have been consented to by Lessor pursuant to Section 10.02 of the Lease or any wiring and cabling installed at the Premises by Lessee; provided, however, that Lessor reserves the right to elect, upon ninety (90) days prior written notice to Lessee, to require Lessee to remove any low voltage wiring installed by Lessee at the Premises on or before the termination of the Lease pursuant to Section 10.06 of the Lease. |
|---|---|
| C. | Holdover. The percentage set forth in third sentence of Section 23 of the Lease is hereby amended from two hundred percent (200%) to "one hundred fifty percent (150%)". |
| --- | --- |
| D. | Estoppel Certificate. The references to ten (10) days in the first and third sentences of Section 21 of the Lease are hereby each deleted in their entirety and replaced with "fifteen (15) days". |
| --- | --- |
| E. | Subordination. The fourth sentence of Section 25 of the Lease is hereby deleted in its entirety and replaced with the following: |
| --- | --- |
"Lessee acknowledges that although this Paragraph is self-executing, Lessee covenants and agrees to execute and deliver, within fifteen (15) days of demand by Lessor and in the form reasonably requested by Lessor, or any other mortgagee or ground lessor, any additional documents evidencing the priority or subordination of this Lease with respect to any such ground leases or underlying lease or the lien of any such mortgage or deed of trust, provided Lessee's interests hereunder shall not be disturbed so long as Lessee is not in default hereunder."
| F. | Lessor's Work. The parties hereby acknowledge and agree that Lessor has fully performed all of its obligations pursuant to Exhibit B (Work Letter) of the Lease. |
|---|---|
| B. | Consent to Merger and Assignment and Assumption. Lessor hereby consents to the Merger and Assignment, subject to the following terms and conditions, all of which are hereby acknowledged and agreed to by Assignor and Surviving entity. |
| --- | --- |
| I. | Assignment and Assumption. Lessee and Surviving Entity hereby represent and warrant that (a) the Merger Agreement and/or Merger fully assigned or otherwise transfered, by operation of law or otherwise, all of Lessee's right, title and interest in the Lease to the Surviving Entity (the "Transfer"); and (b) following the Merger, the Surviving Entity has assumed and shall be bound by, whether by operation of law or otherwise, all of the covenants, agreements, provisions, conditions and obligations of the lessee under the Lease, including but not limited to, the obligation to pay Lessor for all adjustments of rent and other additional charges payable pursuant to the terms of the Lease. Nothing contained in the Merger Agreement shall be deemed to amend, modify or alter in any way the terms, covenants and conditions set forth in the Lease. |
| --- | --- |
| II. | R presentations. |
| --- | --- |
{2095-0217/00122181:3)
7
| A. | Assignor hereby represents and warrants that Assignor: (i) had full power and authority to assign to Surviving Entity its entire right. title and interest in the Lease and with respect to the entire Security Deposit, if any; (ii) had not previously transferred or conveyed its interest in the Lease to any person or entity, collaterally or otherwise; (iii) had full power and authority to enter into the Merger Agreement and complete the Merger and has full power and authority to enter into this Consent; (iv) in connection with the Merger, has assigned all of Assignor's rights, title, interest and obligations under the Lease, whether by operation of law or otherwise, to the Surviving Entity; and (iv) has full power and authority to enter into this Agreement. |
|---|---|
| B. | The Surviving Entity hereby represents and warrants that the Surviving Entity: (i) had full power and authority to assume all of Assignor's right, title and interest in, to and under the Lease, including the entire Security Deposit, if any; and (ii) had full power and authority to enter into the Merger Agreement, the Merger and this Consent. |
| --- | --- |
| C. | Lessee and the Surviving Entity represent and warrant that following the Merger, (i) all or substantially all of the assets of Lessee will be owned by the Surviving Entity, |
| --- | --- |
(ii) the Surviving Entity will have a net worth that is equal to or greater than the net
worth of Lessee as of the date of this Agreement; and (iii} the business in the Premises will continue to be operated for the use and in the manner provided in the Lease.
111.
IV.
V.
VI.
VII.
No Greater Rights. In no event shall the Merger Agreement or the other provisions of this Agreement be construed as granting or conferring upon the Lessee or the Surviving Entity any greater rights than those contained in the Lease nor shall there be any diminution of the rights and privileges of the Lessor under the Lease, nor shall the Lease be deemed modrfied in any respect.
Deliveries. Prior to Lessor's execution of this Agreement and as a condition precedent to the effectiveness of this Agreement, Surviving Entity shall: (a} deliver to Lessor written notice that the Merger and Transfer have been finalized, and to the extent feasible, a fully executed copy of the Merger Agreement; and (B) upon request of Lessor, its successors or assigns, provide Lessor with financial statements evidencing the net worth of Surviving Entity and evidence of the name change of Assignor and of the good standing of Surviving Entity.
Lessor's Consent. In reliance upon the agreements and representations contained in this Consent, Lessor hereby consents to the Merger and the Transfer. This Consent shall not constitute a waiver of the obligation of the lessee under the Lease to obtain the Lessor's consent to any subsequent assignment, sublease or other transfer under the Lease, nor shall it constitute a waiver of any existing defaults under the Lease.
Notice Address. Any notices to Surviving Entity shall be effective when served to the Surviving Entity at the Premises in accordance with the terms of the Lease.
No Waiver. Lessor's consent to the Merger and Assignment shall not be construed as a waiver by Lessee of its rights under Article 17 of the Lease to future assignments of the lease or subleases of the Premises without Lessor's consent in certain instances, as more particularly described therein. Lessor hereby acknowledges and agrees that all rights under the Lease which are "personal" to the named Lessee or non-transferable, including without limitation the rights set forth in Section A.VII of this Amendment, have been transferred to Surviving Entity and are henceforward deemed to be personal to Surviving Entity.
| C. | MisJ:;ellaneou . |
|---|---|
| I. | This Amendment sets forth the entire agreement between the parties with respect to the matters set forth herein. There have been no additional oral or written representations or agreements. Under no circumstances shall Lessee be entitled to any rent abatement. improvement allowance, leasehold improvements, or other work to the Premises, or any similar economic incentives that may have been provided Lessee in connection with entering into the Lease, unless specrfically set forth in this Amendment. |
| --- | --- |
| II. | Except as herein modified or amended, the provisions, conditions and terms of the Lease shall remain unchanged and in full force and effect. |
| --- | --- |
| Ill. | In the case of any inconsistency between the provisions of the Lease and this Amendment, the provisions of this Amendment shall govern and control. |
| --- | --- |
| IV. | Submission of this Amendment by Lessor is not an offer to enter into this Amendment but rather is a solicitation for such an offer by Lessee. Lessor shall not be bound by this Amendment until Lessor has executed and delivered the same to Lessee. |
| --- | --- |
8
{2095-0217/00122181;3}
| V. | The capitalized terms used in this Amendment shall have the same definitions as set forth in the Lease to the extent that such capitalized terms are defined therein and not redefined in this Amendment. |
|---|---|
| VI. | Lessee hereby represents to Lessor that Lessee has dealt with no broker in connection with this Amendment, other than CresaPartners. Lessee agrees to indemnify and hold Lessor, its members, principals, beneficiaries, partners, officers, directors, employees, mortgagee(s) and agents, and the respective principals and members of any such agents (collectively, the "Lessor Related Parties") harmless from all claims of any brokers claiming to have represented Lessee in connection with this Amendment. Lessor hereby represents to Lessee that Lessor has dealt with no broker in connection with this Amendment. Lessor agrees to indemnify and hold Lessee, its members, principals, beneficiaries, partners, officers, directors, employees, and agents, and the respective principals and members of any such agents (collectively, the "Lessee Related Parties") harmless from all claims of any brokers claiming to have represented Lessor in connection with this Amendment. Lessor agrees to pay a brokerage commission to CresaPartners in accordance with the terms of a separate written commission agreement to be entered into between Lessor and CresaPartners. |
| --- | --- |
| VII. | Each signatory of this Amendment represents hereby that he or she has the authority to execute and deliver the same on behalf of the party hereto for which such signatory is acting. Lessee hereby represents and warrants that neither Lessee, nor any persons or entities holding any legal or beneficial interest whatsoever in Lessee, are (i) the target of any sanctions program that is established by Executive Order of the President or published by the Office of Foreign Assets Control, U.S. Department of the Treasury ("OFAC"); (ii) designated by the President or OFAC pursuant to the Trading with the Enemy Act, 50 U.S.C. App. § 5, the International Emergency Economic Powers Act, 50 |
| --- | --- |
U.S.C. §§ 1701-06, the Patriot Act, Public Law 107-56, Executive Order 13224 (September 23, 2001) or any Executive Order of the President issued pursuant to such statutes; or (iii) named on the following list that is published by OFAC: "List of Specially Designated Nationals and Blocked Persons." If the foregoing representation is untrue at any time during the Term, a Default under the Lease will be deemed to have occurred, without the necessity of notice to Lessee.
| VIII. | Redress for any claim against Lessor under the Lease and this Amendment shall be limited to and enforceable only against and to the extent of Lessor's interest in the Building. The obligations of Lessor under the Lease are not intended to and shall not be personally binding on, nor shall any resort be had to the private properties of, any of its trustees or board of directors and officers, as the case may be, its investment manager, the general partners thereof, or any beneficiaries, stockholders, employees, or agents of Lessor or the investment manager. |
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[SIGNATURE PAGE FOLLOWS]
{2095-0217/00122181:3)9
IN WITNESS WHEREOF, Lessor and Lessee have duly executed this Amendment as of the day and year first above written.
LESSOR:
PS BUSINESS PARKS, L.P.,
a California limited partnership
By:PS BUSINESS PARKS, INC.,
a California corporation
By: c , £ I -J-b I /Ll
| Name: Coby A.Jolley Title: | Vice President |
|---|
LESSEE:
4@
DIGIMARC CORPORATION,
a elaware corporatio
By.
Name: ,,t/I(: fttl-€ It: /W 0/t'P!;Ll I/
Title:
J!Ur>v..a' Ch
:::Or
SURVIVING ENTITY: DIGIMARC CORPORATION,
Name: .A-frc/4,,e/ € M C[J,,,,e_f"
Title:_ f {/ [>tf-A C,ro
{2095-0217/00122181;3}
10
EXHIBIT A
LESSEE IMPROVEMEJIIT 8 REl;MEl',IT
This Exhibit is attached to and made a part of the Amendment by and between PS BUSINESS PARKS, LP., a California limited partnership ("Lessor") and DIGIMARC CORPORATION, an Oregon corporation ("Lessee") for space in the Building located at 9405 SW Gemini Drive, Beaverton, Oregon 97008. Capitalized terms not otherwise defined in this Exhibit A shall have the meaning given to such terms in the Lease of which this Exhibit A is a part.
| 1. | Lessee, following the full and final execution and delivery of the Amendment to which this Exhibit A is attached, shall have the right to perform alterations and improvements in the Premises, including, but not limited to, modifications, alterations and improvements to the server rooms (the "Server Rooms Modifications") which are located in the Premises (the "Lessee Improvements"). Notwithstanding the foregoing, Lessee and its contractors shall not have the right to perform the Lessee Improvements in the Premises unless and until Lessee has complied with all of the terms and conditions of Article 10 of the Lease (except for the requirement of obtaining advance lien waivers, which requirement shall be superseded by the terms of Section 2 below), including, without limitation, approval by Lessor of the final plans for the Lessee Improvements and the contractors to be retained by Lessee to perform such Lessee Improvements. Lessee shall be responsible for all elements of the design of Lessee's plans (including, without limitation, compliance with law, functionality of design, the structural integrity of the design, the configuration of the Premises and the placement of Lessee's furniture, appliances and equipment), and Lessor's approval of Lessee's plans shall in no event relieve Lessee of the responsibility for such design. Lessor's approval of the contractors to perform the Lessee Improvements shall not be unreasonably withheld. The parties agree that Lessor's approval of the general contractor to perform the Lessee Improvements shall not be considered to be unreasonably withheld if any such general contractor (a) does not have trade references reasonably acceptable to Lessor, (b) does not maintain insurance as required pursuant to the terms of the Lease, (c) does not have the ability to be bonded for the work in an amount of no less than 150% of the total estimated cost of the Lessee Improvements, (d) does not provide current financial statements reasonably acceptable to Lessor, or (e) is not licensed as a contractor in the state/municipality in which the Premises is located. Lessee acknowledges the foregoing is not intended to be an exclusive list of the reasons why Lessor may reasonably withhold its consent to a general contractor. |
|---|---|
| 2. | Provided Lessee is not in default under the terms of the Lease, Lessor agrees to contribute the sum of $368,664.00 (the "Lessee Improvement Allowance") toward the cost of performing the Lessee Improvements in preparation of Lessee's occupancy of the Premises. The Lessee Improvement Allowance may only be used for the cost of permitting, preparing design and construction documents and mechanical and electrical plans for the Lessee Improvements and for hard costs in connection with the Lessee Improvements. The Lessee Improvement Allowance, less a 10% retainage (which retainage shall be payable as part of the final Lessee Improvements, in periodic disbursements within 30 days after receipt of the following documentation: (a) an application for payment and sworn statement of the contractor substantially in the form of AIA Document G-702 covering all work for which disbursement is to be made to a date specified therein; (b) a certification from an AIA architect substantially in the form of the Architect's Certificate for Payment which is located on AIA Document G702, Application and Certificate of Payment; |
| --- | --- |
| (c) | contractor's, subcontractor's and material supplier's conditional waivers of liens which shall cover all |
| --- | --- |
Lessee Improvements for which disbursement is being requested and all other statements and forms required for compliance with the mechanics' lien laws of the state in which the Premises is located, together with all such invoices, contracts, or other supporting data as Lessee or Lessee's Mortgagee may reasonably require; (e) a cost breakdown for each trade or subcontractor performing the Lessee Improvements;
| (d) | plans and specifications for the Lessee Improvements, together with a certificate from an AIA architect that such plans and specifications comply in all material respects with all laws affecting the Building, Property and Premises; (f) copies of all construction contracts for the Lessee Improvements, together with copies of all change orders, if any; and (g) a request to disburse from Lessee containing an approval by Lessee of the work done and a good faith estimate of the cost to complete the Lessee Improvements. Upon completion of the Lessee Improvements, and prior to final disbursement of the Lessee Improvement Allowance, Lessee shall furnish Lessor with: (i) general contractor and architect's completion affidavits; (ii) full and final waivers of lien; (iii) receipted bills covering all labor and materials expended and used; (iv) as-built plans of the Lessee Improvements; and (v) the certification of Lessee and its architect that the Lessee Improvements have been installed in a good and workmanlike manner in accordance with the approved plans, and in accordance with applicable Laws. In no event shall Lessor be required to disburse the Lessee Improvement Allowance more than one time per month. If the Lessee Improvements exceed the Lessee Improvement Allowance, Lessee shall be entitled to the Lessee Improvement Allowance in accordance with the terms hereof, but each individual disbursement of the Lessee Improvement Allowance shall be disbursed in the proportion that the Lessee Improvement Allowance bears to the total cost for the Lessee Improvements, less the 10% retainage referenced above. Notwithstanding anything herein to the contrary, Lessor shall not be obligated to disburse any portion of the Lessee Improvement Allowance during the continuance of an uncured default under the Lease, and Lessee's obligation to disburse shall only resume when and if such default is cured. |
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3.In no event shall the Lessee Improvement Allowance be used for the purchase of equipment, furniture or other items of personal property of Lessee. Notwithstanding the foregoing, Lessee shall be
{2095-0217/00122181;5}
A-1
entitled to apply the Lessee Improvement Allowance to the cost of purchasing and installing equipment which is necessary and related to the Server Rooms Modifications, which equipment shall be located at all times in the Premises and be for the use of Lessee. If Lessee does not submit a request for payment of the entire Lessee Improvement Allowance to Lessor in accordance with the provisions contained in this Exhibit A by November 30, 2011, any unused amount shall accrue to the sole benefit of Lessor, it being understood that Lessee shall not be entitled to any credit, abatement or other concession in connection therewith. Notwithstanding the foregoing, Lessee shall not submit a request for payment of any portion of the Lessee Improvement Allowance prior to January 1, 2011. Lessee shall be responsible for all applicable state sales or use taxes, if any, payable in connection with the Lessee Improvements and/or Lessee Improvement Allowance. Lessor shall be entitled to deduct from the Lessee Improvement Allowance a construction management fee for Lessor's oversight of the Lessee Improvements in the amount of $5,000.00 and such construction management fee shall be in lieu of the fee required under Section 10.03 of the Lease.
| 4. | Without limiting the "as-is" provisions of the Lease and this Amendment, Lessee accepts the Premises in its "as-is" condition and acknowledges that Lessor has no obligation to make any changes or improvements to the Premises or, except as provided above with respect to the Lessee Improvement Allowance and as provided in Section A.VI of the Amendment with respect to the HVAC, to pay any costs expended or to be expended in connection with any such changes or improvements in the Premises. |
|---|
5.This Exhibit A shall not be deemed applicable to any additional space added to the Premises at any time or from time to time, whether by any options under the Lease or otherwise, or to any portion of the original Premises or any additions to the Premises in the event of a renewal or extension of the original Term of the Lease, whether by any options under the Lease or otherwise, unless expressly so provided in the Lease or any amendment or supplement to the Lease. Lessee shall not perform any work in the Premises (including, without limitation, cabling, wiring, fixturization, painting, carpeting, replacements or repairs) except in accordance with Article 10 of the Lease.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
{2095-0217/00122181;5}
A-2
SECOND AMENDMENT TO LEASE
2d--
THIS SECOND AMENDMENT TO LEASE (this "Amendment") is made and entered into as ofthisday of July, 2015, by and between PD OFFICE OWNER 9, L.P., a Delaware limited partnership ("Lessor"), and DIGIMARC CORPORATION, an Oregon corporation ("Lessee").
WITNESSETH THAT:
WHEREAS, pursuant to that certain lease dated March 22, 2004, which lease has been previously amended by that certain First Amendment and Lessor Consent to Assignment and Assumption dated May 13, 2010 (the "First Amendment"; collectively, the "Lease"), Lessor leases to Lessee, and Lessee leases from Lessor, space containing approximately 46,083 rentable square feet (as amended below, the "Premises") located at 9405 SW Gemini Drive, Beaverton, Oregon 97008 (the "Building"), which is part of the property commonly referred to as Creekside Corporate Park (the "Property").
WHEREAS, the Term of the Lease expires on August 31, 2016, and Lessor and Lessee desire to extend the Term subject to the terms and conditions hereof.
NOW THEREFORE, in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the Lease is hereby amended and the parties hereto do hereby agree as follows:
| 1. | Extension of Term. The Term of the Lease is hereby extended for ninety-one |
|---|
(91) months (the "Second Extended Term"), commencing on September 1, 2016 (the "Extended Term Commencement Date") and expiring on March 31, 2024 (the "Extended Term Termination Date"), unless tenninated earlier in accordance with the Lease.
2.Rentable Area of the Premises. Effective as of the Extended Term Commencement Date, Lessor and Lessee agree that the Premises shall consist of 47,164 rentable square feet and any reference in the Lease to "46,083" shall be changed to "47,164".
3.Lessee Allowance.Lessee may perform improvements to the Premises (the "Improvements") and, provided that Lessee is not then in Default under the Lease, Lessor agrees to provide Lessee with an allowance in an amount not to exceed $707,460.00 ($15.00 per rentable square foot) (the "Allowance").Any portion of the Allowance that is not requested for disbursement by Lessee by December 31, 2017, shall accrue to the sole benefit of Lessor, it being agreed that Lessee shall not be entitled to any credit, offset, abatement or payment with respect thereto. Lessee shall not be entitled to requisition a portion of the Allowance for the purchase and installation of any equipment, furniture or other items of personal property, except for an amount not to exceed $353,730.00 ($7.50 per rentable square foot) for the cost of purchasing and installing any IT cabling, IT equipment (such as a network switch), UPS battery backup, generator and specialized HVAC equipment to be used in connection with the conduct of Lessee's business at the Premises. The Allowance shall be disbursed by Lessor in accordance with the requirements of the third (3^rd^) through last sentence of paragraph 2 of the Work Letter attached to the First Amendment as Exhibit A.
Prior to the construction of the Improvements, Lessee will submit plans for the Improvements for Lessor's written approval pursuant to Paragraph 10 of the Lease. Lessee agrees that (a) the Improvements shall utilize materials of equal or better quality as Building standards; (b)
1
(00020016.DOCX:4)
Lessee agrees to select one of the following general contractors to perfonn the Improvements: BnK Construction, Commercial Contractors Inc. (CCI) or Summit Construction; and (c) Lessee shall otherwise comply with its obligations under the Lease with respect to construction of the improvements and Lessee Alterations. Lessor agrees not to charge Lessee any construction management or supervisory fees in connection with the construction of the Improvements.
4.Lessor Work. Lessor shall perfonn the work described on Exhibit A attached hereto and made a part hereof at Lessor's sole cost and expense (and without reimbursement through Operating Expenses).
5.Monthly Base Rent. The schedule of Base Rent payable with respect to the Premises during the Second Extended Tenn is the following:
| Period of Second Extended Term | Annual Amount Per Square Foot | Annual Base Rent | Monthly Base Rent |
|---|---|---|---|
| September 1, 2016 - March 31, 2017* | $0.00 | $0.00 | $0.00 |
| April 1, 2017 -August 31, 2017 | $15.00 | $707,460.00 | $58,955.00 |
| September 1, 2017 - August 31, 2018 | $15.45 | $728,683.80 | $60,723.65 |
| September 1, 2018 - August 31, 2019 | $15.91 | $750,379.20 | $62,531.60 |
| September 1, 2019 - August 31, 2020 | $16.39 | $773,017.92 | $64,418.16 |
| September 1, 2020 - August 31, 2021 | $16.88 | $796,128.36 | $66,344.03 |
| September 1, 2021 - August 31, 2022 | $17.39 | $820,182.00 | $68,348.50 |
| September 1, 2022 - August 31, 2023 | $17.91 | $844,707.24 | $70,392.27 |
| September 1, 2023 - March 31, 2024 | $18.45 | $870,175.80 | $72,514.65 |
All such Monthly Base Rent shall be payable by Lessee in accordance with the terms of the Lease.
*So long as Lessee is not in Default under the Lease, Lessee shall not be obligated to pay Base Rent for the period from September I, 2016 through and including March 31, 2017.
6.Operating Expenses. Commencing upon the commencement of the Second Extended Term, Paragraph 4 of the Lease and Sections IV and VIII.A of the First Amendment are hereby amended as follows:
A.Lessee's obligation to pay Operating Expenses shall be on a so-called "net" basis without regard to any Expense Base Year or Base Year Operating Expenses. Any references to Expense Base Year or to Base Year Operating Expenses in the Lease are deleted. Lessor shall no longer gross-up expenses as previously allowed under Paragraph 4.04 of the Lease. As a result, Paragraph 4.04 of the Lease is hereby amended by adding the following at the end thereof: "Except as otherwise noted herein, commencing upon the commencement of the Second Extended Term, Lessee will pay as Additional Rent Lessee's Proportionate Share (of the Project and/or Building, as designated from time to time by Lessor) of Operating Expenses, subject to the limitations set forth in Paragraph 4.02 of the Lease, as amended hereby, and this Amendment."
B.Lessee's Proportionate Share of the Prope11y of 7.8842%, Lessee's Proportionate Share ofthe Project of39.0964% and Lessee's Proportionate Share of the Building of 100% shall remain unchanged. Paragraph 4.02(8) is hereby amended by deleting "5% of Annual Base Rent" and replacing it with "3.5% of Annual Base Rent plus Lessee's Proportionate Share of Operating Expenses for the same annual period as the relevant Annual Base Rent". The non-cumulative 5% limitation on increase in CAM expenses set forth in the third full sentence of
2
{00020016.DOCX:4)
Paragraph 4.02 of the Lease is of no further force and effect, and Lessor and Lessee agree as follows: "Any increases in Controllable Operating Expenses for the Project and Controllable Operating Expenses for the Building, as such terms are defined below, shall be limited to 5% per calendar year, calculated calendar year to calendar year on a cumulative basis. For instance, if Controllable Operating Expenses for the Project and Controllable Operating Expenses for the Building increase on 2% between the first and second year, and then increase 9% between the second and third year, Landlord shall be permitted to pass through an 8% increase between year two (2) and three (3). As used herein, "Controllable Operating Expenses for the Project" are the following costs and expenses incurred by Lessor for the Project (other than the Building): (1) landscaping costs, (2) the cost of security patrols, (3) signage costs, (4) costs and salaries and contract labor and office supplies incurred by Landlord for property management of the Project (other than the Building), but not the property management fees (which are limited by Paragraph 4.02(8) above). As used herein, "Controllable Operating Expenses for the Building" are costs, salaries and contract labor and office supplies incurred by Landlord for property management of the Building, but not the property management fees (which are limited by Paragraph 4.02(8) above). Lessor and Lessee agree that the foregoing 5% limitation shall not apply to any other Operating Expenses for the Project and/or the Building, except for the Controllable Operating Expenses for the Project and Controllable Operating Expenses for the Building detailed above.
C.Effective as of the date of this Amendment, Lessor shall not retroactively pass-through to Lessee any retroactive errors in prior pass-through of Operating Expenses, Real Property Taxes or Utilities and Service Costs of any kind occurring prior to calendar year 2014 that may result in additional cost to Lessee.
As amended hereby, Lessee shall pay Lessee's Proportionate Share of Operating Expenses in accordance with the tenns of the Lease. Notwithstanding the foregoing, so long as Lessee is not in Default under the Lease, Lessee shall not be obligated to pay any Operating Expenses (whether through estimated monthly payments or otherwise) for the period from September 1, 2016 through and including March 31, 2017.
7.Electricity. Commencing April 1, 2017 and continuing during the remainder of the Second Extended Tenn, the provisions of Section V of the First Amendment are ofno force and effect and the following tenns and conditions shall apply to the provision of electricity to the Premises: Lessee shall obtain and pay for electrical energy to, or for the use of Lessee in, the Premises by direct application to, and arrangement with, the public utility serving the Property. Upon written request by Lessee, Lessor shall reasonably cooperate with Lessee to assist Lessee in obtaining such electrical energy, including, without limitation, executing any documents as may be necessary to effect Lessee obtaining such electrical energy. If either the quantity or character of electrical service is changed by the public utility or other company supplying electrical service to the Property or is no longer available or suitable for Lessee's requirements (except to the extent directly attributable to Lessor or Lessor's agents, contractors or employees) (collectively, an "Electrical Service Event"), such Electrical Service Event shall not (a) constitute an actual or constructive eviction, in whole or in part, or entitle Lessee to any abatement or diminution of Base Rent, or (b) relieve Lessee from any of its obligations under this Lease, or (c) impose any liability upon Lessor or its agents by reason of inconvenience or annoyance to Lessee, injury to or interruption of Lessee's business or otherwise. Lessee's use of electrical service shall not exceed the capacity serving the Premises as of the dateof this Amendment. Other than as may be expressly set forth in the Lease, Lessor shall not be liable in any way to Lessee 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 Property with electricity, or for any other reason not directly attributable to Lessor or Lessor's agents, contractors or employees, provided, however, that
3
{00020016.DOCX:4}
in such instance, Lessor shall use commercially reasonable efforts to cause the electricity to be restored as soon as practicable thereafter.
8.Services. Lessor and Lessee agree that, commencing April I, 2017 and continuing during the remainder of the Second Extended Term, Lessor shall have no obligation to provide the electricity as described in Paragraph 9.0lA of the Lease. Paragraph 9.01 B. of the Lease is hereby modified to provide that Lessor will not charge a fee for after hours heating and air conditioning.
9.Condition of Premises. Lessee is currently in possession of the Premises and accepts the same "as is" without any agreements, representations, understandings or obligations on the part of Lessor to perfonn any alterations, repairs or improvements, except as expressly provided for herein. Paragraph 2.04 of the Lease is hereby modified to provide that Lessor will not require Lessee to remove any Lessee Alterations that are presently in the Premises as of the date of this Amendment upon surrender of the Premises at the end of the Extended Tenn; provided, however, that the foregoing shall not relieve Lessee of such removal and restoration obligations under the Lease with respect to Lessee Alterations to the Premises made from and after the date of this Amendment.
| 10. | Addresses for Notices. The addresses for notices to Lessor under the Lease are: PD OFFICE OWNER 9, L.P. |
|---|
c/o Starwood Capital Group 591 West Putnam Avenue Greenwich, CT 06880 Attention: L. Read Mortimer
With a copy to:
PD OFFICE OWNER 9, L.P.
c/o Starwood Capital Group 591 West Putnam Avenue Greenwich, CT 06880 Attention: General Counsel
11.Option to Renew Lease. Lessor and Lessee agree that Lessee is granted one option to renew the Lease for an additional five (5) years commencing on April 1, 2024 and ending March 31, 2029 and otherwise pursuant the terms of Paragraph 27.16 (OPTION TO RENEW LEASE), as amended hereby. Paragraph 27.16 is hereby amended as follows:
A.The Base Rent for the renewal term shall be the base rent then in effect for comparable space in the market at the effective date of the commencement of the renewal tenn as determined in Paragraph 27.16. Lessor shall have no right to substitute the standard lease fonn then used by Lessor with respect to the Project, and any reference in Paragraph 27.16 to Lessor's fonn of standard lease then used by Lessor with respect to the Project is deleted.
B.Notwithstanding the last paragraph of Paragraph 27.16 of the Lease, the rights of Lessee under Paragraph 27.16 are transferable pursuant to an assignment of the Lease for which Lessor's consent is not required under Paragraph 17.01 of the Lease.
| 12. | Miscellaneous. |
|---|
4
{00020016.DOCX:4}
A.This Amendment sets forth the entire agreement between the parties with respect to the matters set forth herein. There have been no additional oral or written representations or agreements. Under no circumstances shall Lessee be entitled to any rent abatement, improvement allowance, leasehold improvements, or other work to the Premises, or any similar economic incentives that may have been provided Lessee in connection with entering into the Lease, unless specifically set forth in this Amendment or the Lease.
B.As of the date of this Amendment, to the actual knowledge of Lessee (without inquiry), there are no defaults on the part of Lessor under the Lease which are continuing beyond applicable notice and cure periods. As of the date of this Amendment, to the actual knowledge of Lessor (without inquiry), there are no defaults on the part of Lessee under the Lease which are continuing beyond applicable notice and cure periods.
C.This Amendment shall not be valid and binding on Lessor and Lessee unless and until it has been completely executed by and delivered to both parties.
D.Except as expressly amended and modified in this Amendment, the Lease shall otherwise remain in full force and effect, the parties hereto hereby ratifying and confirming the same. In the case of any inconsistency between the provisions of the Lease and this Amendment, the provisions of this Amendment shall govern and control.
E.The capitalized terms used in this Amendment shall have the same definitions as set forth in the Lease to the extent that such capitalized tenns are defined therein and not redefined in this Amendment.
F.Lessee represents to Lessor that Lessee has dealt with no broker in connection with this Amendment, except Jones Lang LaSalle Brokerage, Inc. ("JLL"). Lessee agrees to indemnify and hold Lessor, its members, principals, beneficiaries, partners, officers, directors, employees, mortgagees and agents harmless from all claims of any brokers other than JLL claiming to have represented Lessee in connection ,vith this Amendment. Lessor represents to Lessee that Lessor has dealt with no broker in connection with this Amendment, except JLL. Lessor agrees to indemnify and hold Lessee, its members, principals, beneficiaries, partners, officers, directors, employees, and agents, and the respective principals and members of any such agents harmless from all claims of any brokers claiming to have represented Lessor in connection with this Amendment. Lessor agrees to pay the commission earned by JLL in connection with this Amendment pursuant to their separate agreement.
G.Lessor represents that its signatory of this Amendment has the authority to execute and deliver the same on behalf of Lessor. Lessee represents that its signatory of this Amendment has the authority to execute and deliver the same on behalf of Lessee. Lessee represents that it has not made any assignment, sublease, transfer, conveyance of the Lease or any interest therein or in the Premises. Lessor represents that it has not made any conveyance of any interest in the Premises, except for the Lease. Lessor and Lessee each further represents and warrants that neither Lessor nor Lessee, as applicable, nor any persons or entities holding any legal or beneficial interest whatsoever in Lessor or Lessee, as applicable, are (i) the target of any sanctions program that is established by Executive Order of the President or published by the Office of Foreign Assets Control, U.S. Department of the Treasury ("OFAC"); (ii) designated by the President or OFAC pursuant to the Trading with the Enemy Act, 50 U.S.C. App. § 5, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701-06, the Patriot Act, Public Law 107-56, Executive Order 13224 (September 23, 2001) or any Executive Order of the President
5
{00020016.DOCX:4}
issued pursuant to such statutes; or (iii) named on the following list that is published by OFAC: "List of Specially Designated Nationals and Blocked Persons."
[SIGNATURES CONTINUE ON NEXT PAGE]
6
{00020016.DOCX:4}
IN WITNESS WHEREOF, Lessor and Lessee have duly executed this Amendment as of the day and year first above written.
LESSOR:
PD OFFICE OWNER 9, L.P., a Delaware
limited partnership
By: PD OFFICE OWNER 9 GP, L.L.C. a
Delaware limited liability company, its General Partner
By:- =------'-f- lt----fk-- -----
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Name:L. -,, vv, .[
Title:V1ui.-
LESSEE:
DIGIMARC CORPORATION, an Oregon
co,po, /J,
By:/;jf
Name:]<phexT P. U11..nu1..e,JS
Title:z.VP
7
{00020016.DOCX:4}
EXHIBIT A LESSOR WORK
ALL LESSOR WORK LISTED BELOW SHALL BE COMPLETED WITHIN A REASONABLE AMOUNT OF TIME FOLLOWING THE FULL EXECUTION OF THIS AMENDMENT (OR WITHIN THE TIME SPECIFICALLY STATED, IF APPLICABLE).
I. HV AC roof unit no. 4 to be replaced. Lessor will commence work on replacing this unit within a reasonable time following the execution of this Amendment. If HVAC roof unit no. 4 is not fully replaced on or prior to December 31, 2015, any and all costs and expenses for the repair and maintenance of HVAC roof unit no. 4 shall be excluded from Operating Expenses until such time as HVAC roof unit no. 4 is fully replaced as required under this Exhibit A.
| 2. | Main lobby entry will be upgraded consistent with the rendering attached, which shall include replacement of the storefront window system. |
|---|---|
| 3. | The cracks in the exterior walls shall be filled, and the exterior walls of the building, the sprinkler door and the deck wrought iron shall be painted in the new building color scheme. |
| --- | --- |
| 4. | Sound mitigation installations to be made at the elevator room. It is understood that such installations may only dampen, and not completely confine noise, due to the location of the elevator room. |
| --- | --- |
| 5. | Lessor has completed and passed the annual test of the Fire Alarm systems. |
| --- | --- |
| 6. | Three (3) windows in Intaligio conference room to be replaced. |
| --- | --- |
| 7. | The rain gutter above the IT areaentry that is rusted shall be removed, replaced and painted to match the building fa<;:ade color scheme. |
| --- | --- |
| 8. | Landscaping in front of the Building shall be upgraded as part of the building renovation. |
| --- | --- |
8
{00020016.DOCX:4}
EXHIBIT F
Subtenant’s Initial Alterations
28
155462073.4
HB: 4860-1276-1863.7
INITIAL ALTERATIONS
We have two critical path projects to support the moving efforts, along with changing of plugs in the main datacenter (MDF), all work is to be performed by professional services, that licensed and bonded appropriately, please find details for the projects below and all quotes include plug changes attached:
Project #1 – Security improvements
This project will expand the video coverage of the building to include not only the internal areas but external coverage as well. The project will leverage the current internal locations but will require the addition of 19 external points. Each point will have a new CAT6 Plenum rated cable installed to the closest current wiring termination point through conduit to each of the points noted in red on the diagram below.
Exterior Security Camera (19)
‐Exterior penetration with conduit
‐Plenum grade CAT 6 to the IDF/MDF
Project #2 – Expand internal connectivity
This project will require the addition of 46 CAT6 Plenum rated cables and 3 Armored fiber cables. The expansion will allow:
| • | Support of additional connectivity for wireless access points *as noted below |
|---|
| • | Fiber connectivity into two lab areas *as noted below |
|---|---|
| • | Increased connectivity to wiring closets to allow redundancy for higher availability *as noted below |
| --- | --- |
Additional Wireless Access Points (23)
‐Plenum grade CAT6 to the designated IDF/MDF rooms (single blue dots)
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Additional Plenum CAT6 cabling (25)
‐6 – CAT6 | Robot Lab 1 (1C022/EXAM) to IDF 1W020 on a new 24 port patch panel RU35 (SWT-58) (blue dot)
‐8 – CAT6 | Robot Lab 2 (1C023/CONF) to IDF 1W020 on a new 24 port patch panel RU20 (SWT-56) (blue dot)
‐Armored 12 strand fiber and tray | COM Lab (1C021/WELLNESS) to MDF/DC on R2B (light blue dot)
‐3 – CAT6 | EMB Lab (2W006/SUPPLY STORAGE) to IDF 2W021 (blue dot)
‐
‐4 – CAT6 | PSG Printer (1C016/Electrical) to MDF R1C on RU22 (blue dot)
‐2 – CAT6 | POS Scanner (1E024/Chair Storage) to MDF R1C on RU22 (blue dot)
‐Armored 12 strand fiber and tray | CDS Lab (1C014)/MAIL RM) to MDF/DC on R2B (light blue dot)
‐Armored 12 strand fiber and tray from IDF (1W020) to MDF R1B (light blue dot)
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:
Dynalectric Company 2225 NW 20th Avenue Portland, OR 97209
Phone: 503.226.6771
Fax: 503.226.7818
OR CCB: 66793
January 17, 2022 To: Bill Miles
Digimarc
9405 SW Gemini Drive Beaverton OR 97008
Re: Digimarc office move to 8500 Creekside Revision Changes made in BOLD
We are pleased to offer for your consideration our electrical proposal for the above-mentioned project. This proposal is based on a site walk and information provided. Below is a list of inclusions, exclusions, and clarifications to our price.
Proposed scope of work:
| 1. | Provide and install (2) L6-30 at UPS rack server room, to be located near the UPS branch panelboard. |
|---|---|
| 2. | Provide and install (4) L6-30 at UPS rack server room, to be located at the end of the racking. |
| --- | --- |
| 3. | Provide labor and materials to cut in and install (3) quad receptacles in the new Printer room, all to be shared on the same circuit per bid walk instructions. |
| --- | --- |
| 4. | Provide labor and materials to cut in and install (3) quad receptacles and (1) GFCI duplex receptacle in the Robot lab room (specific heights can be determined at install). |
| --- | --- |
| 5. | Provide labor and materials to cut in and install (4) L6-30 receptacles at 60” (+, -) in the Robot Lab for new server rack. |
| --- | --- |
| 6. | Provide labor and materials to cut in and install (2) L6-30 receptacles at 60” (+, -) in the Mail room (specific heights can be determined at install). |
| --- | --- |
| 7. | Provide labor and materials to cut in and install (2) cut in duplex receptacles in the Embedder Lab to be shared on the same circuit. |
| --- | --- |
| 8. | Note: MC cabling to be utilized for all branch circuitry wiring as discussed onsite. |
| --- | --- |
| 9. | Provide labor and materials to core drill (19) locations for exterior camera locations on the first floor (assume 1” core). |
| --- | --- |
| 10. | Provide labor and materials to install (1) conduit chase and (1) exterior box at each above-mentioned location. |
| --- | --- |
| 11. | Provide and install (1) quad receptacle in room 1E024 (assume to be recessed). |
| --- | --- |
| 12. | Coordination of work timing and duration with customer. |
| --- | --- |
| 13. | Update of panel schedules to reflect system changes. |
| --- | --- |
| 14. | Permitting as required for the project. |
| --- | --- |
Exclusions:
| 1. | No replacement of existing receptacles, switches, or trim plates included. |
|---|---|
| 2. | No cleaning, ballast repair, or lamp replacement on existing light fixtures included. |
| --- | --- |
| 3. | No cutting, patching or painting of drywall or other surfaces is included in this proposal. |
| --- | --- |
| 4. | No coring, GPR scanning, saw cutting or patch back is included in this proposal. |
| --- | --- |
| 5. | No Fire Alarm work included in this proposal. |
| --- | --- |
| 6. | No AV system, security system work, low voltage voice and data cabling, testing, trim out or permitting is included. |
| --- | --- |
| 7. | No temporary power or lighting included due to the unknown requirements for this work. |
| --- | --- |
| 8. | No new service work, transformers, panelboards, subpanels, etc. We have assumed that the existing panelboards are in good working condition and have adequate capacity for the project. |
| --- | --- |
Clarifications:
Page 1 of 2
Dynalectric Company 2225 NW 20th Avenue Portland, OR 97209
Phone: 503.226.6771
Fax: 503.226.7818
OR CCB: 66793
| 1. | Pricing valid for 30 days from date of proposal only, we reserve the right to adjust pricing after 30 days. |
|---|---|
| 2. | Construction schedule is mutually agreed upon. All labor at straight time, weekdays, unless otherwise noted. |
| --- | --- |
| 3. | All work to be completed during normal business hours unless noted otherwise above. Monday-Friday 7:00am-3:30pm. Labor at straight time rates. |
| --- | --- |
| 4. | No labor or material has been taken into consideration for the repair of existing electrical installations needed to make them functional or NEC code compliant. |
| --- | --- |
| 5. | Lighting fixture packages and/or parts specified by others that require a down payment prior to material delivery shall not be the financial responsibility of Dynalectric Oregon. |
| --- | --- |
| 6. | We have included a .39% tax for Oregon House Bill 3427, or other version of sales or Gross Receipts taxes. |
| --- | --- |
| 7. | This proposal, including but not limited to pricing and schedule, is made contingent upon the Work addressed herein not being adversely affected, either directly or indirectly, by the COVID-19 pandemic and/or the Corona virus. This proposal is further conditioned upon the parties agreeing, in writing, prior to beginning any work, that any delays, shortages, or extra costs incurred as a result of the COVID-19 pandemic or Corona virus will entitle Contractor to a change order equitably addressing impacts to its performance and costs. |
| --- | --- |
| 8. | Subcontract and construction schedule shall be mutually agreed upon. |
| --- | --- |
| 9. | No considerations for accelerated schedule have been made in this proposal. If schedule is to be accelerated, additional costs must be negotiated prior to commencement of work. |
| --- | --- |
| 10. | To the extent this quotation/proposal includes materials and/or equipment that contain or are comprised of steel, copper, aluminum and petroleum-based products the price set forth herein for such items is guaranteed for a period of 30 days from the date of this quotation/proposal. The parties agree that the pricing for such items in this quotation/proposal is guaranteed only for such time, and after such time, Dynalectric reserves the right to increase the price set forth herein for such items to reflect the then-current price of such items. In addition, any materials and/or equipment that contain manufactured components or are finished goods from countries with newly imposed trade tariffs, trade barriers or embargos by the U.S. Department of Commerce and the U.S. Trade Representative (USTR) are also subject to price increases. |
| --- | --- |
Summary:
$ 18,885.00
Total Proposal
Thank you,
Ben Eidem
Ben Eidem
Assistant Project Manager / Estimator (503) 849-9943
beidem@dyna-oregon.com
Page 2 of 2
| PROPOSAL | |
|---|---|
| Digimarc<br><br><br>8500 SW Creekside Pl Beaverton, OR 97008<br><br><br>(503) 469-4848 | Creekside Move<br><br><br><br><br><br><br><br><br><br><br><br>Revision:2 Modified:1/14/2022 |
Presented By:
Hyphn
620 NE 19th Ave
Portland, OR 97232 United States hyphn.com
hyphn.com
SCOPE OF WORK
Network Cabling:
| • | Install (2) Cat6 to (1) wallplate location in 1E024/Chair Storage. Route to MDF R1C RU22. |
|---|---|
| • | Install (3) Cat6 to each of (2) wallplate locations in Robot Lab 1. Route to IDF 1W020. |
| --- | --- |
| • | Install (4) Cat6 to each of (2) wallplate locations in Robot Lab 2. Route to IDF 1W020. |
| --- | --- |
| • | Install (4) Cat6 to (1) wallplate location in 1C016/Electrical. Route to MDF R1C RU22. |
| --- | --- |
| • | Relocate (1) Cat6 from each of (2) wallplate locations and place together in new wallplate location. |
| --- | --- |
| • | Place new 24-port patch panel at head-end location to accommodate new connections. |
| --- | --- |
| • | Terminate, label and test all cabling. |
| --- | --- |
Wireless Access Points:
| • | Install (1) Cat6 to each of (23) new owner provided access point locations. See notes below for routing. |
|---|---|
| • | Place new 24-port patch panel at each head-end location to accommodate new connections. |
| --- | --- |
| • | Relocate (11) existing access points. Locations shown on prints. |
| --- | --- |
| • | Remove (9) existing access points, coil abandoned cable and mark for future use. |
| --- | --- |
| • | Terminate, label and test all cabling. |
| --- | --- |
Security Cameras:
| • | Install (1) Cat6 to each of (19) new camera locations and install owner provided cameras. See notes for routing. |
|---|---|
| • | Place new 24-port patch panel at each head-end location to accommodate new connections. |
| --- | --- |
| • | Remove (22) existing cameras and install new owner provided camera in existing location. |
| --- | --- |
| • | Terminate, label and test all cabling. Point and focus all cameras. |
| --- | --- |
Access Control:
| • | Relocate (1) existing access control devices to adjacent door and reroute wiring. |
|---|---|
| • | Verify labeling exists on all existing wiring before removing from panel. |
| --- | --- |
| • | Remove existing panels. Existing wiring to be landed on new control panels to be installed. |
| --- | --- |
| • | Program access control system, label all wiring and test system functionality. |
| --- | --- |
Fiber Extensions: [Data Center]:
| • | Install 24-strand OM4 armored fiber between Data Center and IDF 1W020. |
|---|---|
| • | Splice cassettes on both ends of connection and place in associated enclosures. |
| --- | --- |
| • | In IDF, install 1U rack mounted splice tray and place cassette here. |
| --- | --- |
| • | In Data Center, place cassette into new 2U splice tray installed in rack. New 2U tray replaces existing 1U tray, move existing fibers into new tray. |
| --- | --- |
[CDS Lab]:
| • | Install 12-strand OM4 armored fiber between lab and Data Center. |
|---|---|
| • | Splice cassettes on both ends of connection and place in associated enclosures. |
| --- | --- |
| • | In Lab, install wall-mount enclosure to house cassette. |
| --- | --- |
| • | In Data Center, place cassette into new 2U splice tray installed in rack. |
| --- | --- |
[COM Lab]:
| • | Install 12-strand OM4 armored fiber between lab and Data Center. |
|---|---|
| • | Splice cassettes on both ends of connection and place in associated enclosures. |
| --- | --- |
| • | In Lab, install wall-mount enclosure to house cassette. |
| --- | --- |
| • | In Data Center, place cassette into new 2U splice tray installed in rack. |
| --- | --- |
| • | Label and test all strands. |
| --- | --- |
Pathway:
| • | Place J-hooks as needed for horizontal cabling to new locations. |
|---|
Page 1 of 1
Hyphn
Network Cabling
1D2 SL Wallplate Location [1E024 to MDF R1C RU22]
Wiring for a dual data network wall location. (2) Cat6 cables, jacks and wallplate.
1Arlington LV1
Low Voltage Mounting Bracket
1Commscope SL FP 2Port A.WHT
Faceplate Kit, labeled, 1-gang, 2 port, alpine white
500Commscope Uniprise-CS34P-Bl
CS34P ETL Verified Category 6 U/UTP Cable, plenum, blue jacket, 4 pair count, 1000 ft (305 m) length, CommPak
2Commscope USL600-A.WHT
USL600-A.WHT - Commscope CAT6 SL Almond White Jack
2Commscope USL600-BLK
Uniprise USL Series Modular Jack, RJ45, category 6, T568A/T568B, unshielded, without dust cover, black
1D4 SL Wallplate Location [1C016 to MDF R1C RU22]
Wiring for a quad data network wall location. (4) Cat6 cables, jacks and wallplate.
1Arlington LV1
Low Voltage Mounting Bracket
1Commscope SL FP 4Port A.WHT
Faceplate Kit, labeled, 1-gang, 4 port, alpine white
1000Commscope Uniprise-CS34P-Bl
CS34P ETL Verified Category 6 U/UTP Cable, plenum, blue jacket, 4 pair count, 1000 ft (305 m) length, CommPak
4Commscope USL600-A.WHT
USL600-A.WHT - Commscope CAT6 SL Almond White Jack
4Commscope USL600-BLK
Uniprise USL Series Modular Jack, RJ45, category 6, T568A/T568B, unshielded, without dust cover, black
Equipment:
Labor:
$978.51
$1,067.37
Network Cabling Total$2,045.88
Creekside Move
Project No : DIGIM-0007Rev. 21/18/2022
Page 2 of 18
* Price Includes Accessories
Wireless Access Points: 1st Floor East
1
8
9.6
.
-Install (8) new Cat6 to individually designated WAP locations. Cabling to route to MDF R1A swt-99.
-Reroute cabling for (6 of 7) existing WAPs to new locations marked on print.
-Remove (3) existing WAPs and coil cabling marked for future use.
.
Commscope SL Patch Panel 24-port 1U
Discrete Distribution Module Panel, SL, UTP, 1U, 24 port
D1 SL Ceiling WAP Location
Wiring for wireless access point location, (1) Cat6 to each individual WAP.
2000Commscope Uniprise-CS34P-Bl
CS34P ETL Verified Category 6 U/UTP Cable, plenum, blue jacket, 4 pair count, 1000 ft (305 m) length, CommPak
8Commscope USL600-BLK
Uniprise USL Series Modular Jack, RJ45, category 6, T568A/T568B, unshielded, without dust cover, black
Hyphn LV - General Labor
Labor allocation for removing and/or relocating existing WAPs.
Equipment:
Labor:
$1,286.06
$2,219.35
Wireless Access Points: 1st Floor East Total$3,505.41
Creekside Move
Project No : DIGIM-0007Rev. 21/18/2022
Page 3 of 18
* Price Includes Accessories
Wireless Access Points: 1st Floor West
.
-Install (7) new Cat6 to individually designated WAP locations. Cabling to route to IDF 1W020 swt-56.
-Reroute cabling for (2 of 5) existing WAPs to new locations marked on print.
-Remove (2) existing WAPs and coil cabling marked for future use.
.
1Commscope SL Patch Panel 24-port 1U
Discrete Distribution Module Panel, SL, UTP, 1U, 24 port
7D1 SL Ceiling WAP Location
Wiring for wireless access point location, (1) Cat6 to each individual WAP.
1750Commscope Uniprise-CS34P-Bl
CS34P ETL Verified Category 6 U/UTP Cable, plenum, blue jacket, 4 pair count, 1000 ft (305 m) length, CommPak
7Commscope USL600-BLK
Uniprise USL Series Modular Jack, RJ45, category 6, T568A/T568B, unshielded, without dust cover, black
6Hyphn LV - General Labor
Labor allocation for removing and/or relocating existing WAPs.
Equipment:
Labor:
$1,134.69
$1,707.65
Wireless Access Points: 1st Floor West Total$2,842.34
Creekside Move
Project No : DIGIM-0007Rev. 21/18/2022
Page 4 of 18
* Price Includes Accessories
Wireless Access Points: 2nd Floor East
1
6
4.8
.
-Install (6) new Cat6 to individually designated WAP locations. Cabling to route to IDF 2E007 swt-64.
-Reroute cabling for (2 of 4) existing WAPs to new locations marked on print.
-Remove (2) existing WAPs and coil cabling marked for future use.
.
Commscope SL Patch Panel 24-port 1U
Discrete Distribution Module Panel, SL, UTP, 1U, 24 port
D1 SL Ceiling WAP Location
Wiring for wireless access point location, (1) Cat6 to each individual WAP.
1500Commscope Uniprise-CS34P-Bl
CS34P ETL Verified Category 6 U/UTP Cable, plenum, blue jacket, 4 pair count, 1000 ft (305 m) length, CommPak
6Commscope USL600-BLK
Uniprise USL Series Modular Jack, RJ45, category 6, T568A/T568B, unshielded, without dust cover, black
Hyphn LV - General Labor
Labor allocation for removing and/or relocating existing WAPs.
Equipment:
Labor:
$983.32
$1,433.95
Wireless Access Points: 2nd Floor East Total$2,417.27
Creekside Move
Project No : DIGIM-0007Rev. 21/18/2022
Page 5 of 18
* Price Includes Accessories
Wireless Access Points: 2nd Floor West
.
-Install (2) new Cat6 to individually designated WAP locations. Cabling to route to IDF 2W021 swt-69.
-Reroute cabling for (1 of 3) existing WAPs to new locations marked on print.
-Remove (2) existing WAPs and coil cabling marked for future use.
.
| 1 | Commscope SL Patch Panel 24-port 1U |
|---|
Discrete Distribution Module Panel, SL, UTP, 1U, 24 port
| 2 | D1 SL Ceiling WAP Location |
|---|
Wiring for wireless access point location, (1) Cat6 to each individual WAP.
500Commscope Uniprise-CS34P-Bl
CS34P ETL Verified Category 6 U/UTP Cable, plenum, blue jacket, 4 pair count, 1000 ft (305 m) length, CommPak
2Commscope USL600-BLK
Uniprise USL Series Modular Jack, RJ45, category 6, T568A/T568B, unshielded, without dust cover, black
4.8Hyphn LV - General Labor
Labor allocation for removing and/or relocating existing WAPs.
Equipment:
Labor:
$377.84
$815.15
Wireless Access Points: 2nd Floor West Total$1,192.99
Creekside Move
Project No : DIGIM-0007Rev. 21/18/2022
Page 6 of 18
* Price Includes Accessories
Security Cameras
.
-East side cameras route to R1A, installs to new 24-port patch panel placed in RU39.
-West side cameras route to IDF 1W020, installs to Rack 1, RU22, SWT-56.
.
1Commscope SL Patch Panel 24-port 1U
Discrete Distribution Module Panel, SL, UTP, 1U, 24 port
| Equipment: | $75.10 |
|---|---|
| Labor: | $29.75 |
| Security Cameras Total | $104.85 |
Creekside Move
Project No : DIGIM-0007Rev. 21/18/2022
Page 7 of 18
* Price Includes Accessories
Security Cameras: Exterior
.
-East side cameras route to R1A, installs to new 24-port patch panel placed in RU39.
-West side cameras route to IDF 1W020, installs to Rack 1, RU22, SWT-56.
.
.
-Exterior penetrations to be provided by others.
.
19Verkada CD62-30E-HW
[OFE] - Powerful, Ultra HD 4K outdoor dome with 3x optical zoom and intelligent edge-based video analytics.
4750Commscope Uniprise-CS34P-Bl
CS34P ETL Verified Category 6 U/UTP Cable, plenum, blue jacket, 4 pair count, 1000 ft (305 m) length, CommPak
19Commscope USL600-BLK
Uniprise USL Series Modular Jack, RJ45, category 6, T568A/T568B, unshielded, without dust cover, black
19Verkada ACC-MNT-2
[OFE] - Mounting arm kit for pendant cap
19Verkada ACC-MNT-8
[OFE] - Pendant cap mount kit
| Equipment: | $2,876.03 |
|---|---|
| Labor: | $8,922.40 |
| Security Cameras: Exterior Total | $11,798.43 |
Creekside Move
Project No : DIGIM-0007Rev. 21/18/2022
Page 8 of 18
* Price Includes Accessories
Creekside Move
Project No : DIGIM-0007Rev. 21/18/2022
Page 9 of 18
Security Cameras: Interior
.
-East side cameras route to R1A, installs to new 24-port patch panel placed in RU39.
-West side cameras route to IDF 1W020, installs to Rack 1, RU22, SWT-56.
.
| 22.8Hyphn LV - General Labor<br><br><br>Labor allocated to camera swaps in existing locations. Includes removal of existing cameras and installation of new Verkada cameras. | |
|---|---|
| Equipment: | $0.00 |
| Labor: | $2,261.00 |
| Security Cameras: Interior Total | $2,261.00 |
| Access Control | |
| 4.8Hyphn AC - General Labor | |
| Labor allocated to removal of existing access control panels including verifying labels on wiring and and tailoring to accommodate new head-end panels. | |
| 6Verkada AC41-HW | |
| [OFE] - Verkada Access combines enterprise-grade access control with a powerful, cloudbased management platform for a solution that’s always simple, secure, and ready<br><br><br>for scale. |
6Hyphn Pathway Material -Fixed
6Verkada ACC-BAT-4AH
[OFE] - Verkada 4AH Backup Battery for AC41
| Equipment: | $600.00 |
|---|---|
| Labor: | $5,350.40 |
| Access Control Total | $5,950.40 |
* Price Includes Accessories
Creekside Move
Project No : DIGIM-0007Rev. 21/18/2022
Page 10 of 18
Access Control: Existing Locations
1Digimarc - Access Door [Relocate]
| 1 | ADVLS HES 5000C-630 [OFE] - Electronic Door strike |
|---|
250Belden 18-2C-CMP-NA
[OFE] - 6300UE 877U1000 Unshielded Electronic Cable, Plenum, PVC Insulation, Natural, 18 AWG, 2 Conductor, 1000 ft. Box
1GRI GRI George 180MC-12-W Contact
[OFE] - RECESSED 3/4" STEEL DOOR CLOSED LOOP / MC-180 DOOR CHANNEL MAGNET, WHITE
250Belden 22-2C-CMP-NA
[OFE] - 6500UE 877U1000 Unshielded Electronic Cable, Plenum, PVC Insulation, Natural, 22 AWG, 2 Conductor, 1000 ft. Reel
1Kantech Kantech T-REX LT-NL
[OFE] - T.REX REQUEST TO EXIT DETECTOR W/ TAMPER AND TIMER (WHITE)
250Belden 22-2C-CMP-NA
[OFE] - 6500UE 877U1000 Unshielded Electronic Cable, Plenum, PVC Insulation, Natural, 22 AWG, 2 Conductor, 1000 ft. Reel
1Verkada AC31-HW
[OFE] - AD31 Multi-format Card Reader
1Arlington LV1
Low Voltage Mounting Bracket
250Belden 22-4C-CMP-NA
[OFE] - 6502UE 877U1000 Unshielded Electronic Cable, Plenum, PVC Insulation, Natural, 22 AWG, 4 Conductor, 1000 ft. Reel
Equipment:
Labor:
$1.55
$1,528.26
Access Control: Existing Locations Total$1,529.81
* Price Includes Accessories
CDS Lab
.
-Fiber routes to Data Center, installs in new 2U splice tray.
.
300Commscope OM4 MM 12str Armr Plenum Fiber
LazrSPEED® Fiber Distribution Cable, OM4, Interlocking Aluminum Armor, Plenum, 12 Fiber, Aqua
| 1 | Commscope Fiber Splice Enclosure, Wall Mount Single Cassette |
|---|
Wall Mount Building Enclosure configured for one LGX/1000 Style module, splice cassette or adapter pack
| 2 | Commscope OM4 LC Cassette PNL-CS-12LCX-PT OM4 Splicing cassette, 12LC , 900µm |
|---|
Equipment:
Labor:
$1,950.26
$3,185.00
CDS Lab Total$5,135.26
Creekside Move
Project No : DIGIM-0007Rev. 21/18/2022
Page 11 of 18
* Price Includes Accessories
Com Lab
300
1
2
2
.
-Fiber routes to Data Center, installs in new 2U splice tray.
-Copper routes to IDF 1W020 Rack 1 RU22 , ports 11-24.
-3-port copper installs to Robot Lab 1 1C022.
-4-port copper installs to Robot Lab 2 1C023.
.
Commscope OM4 MM 12str Armr Plenum Fiber
LazrSPEED® Fiber Distribution Cable, OM4, Interlocking Aluminum Armor, Plenum, 12 Fiber, Aqua
| 1 | Commscope Fiber Splice Enclosure, Wall Mount Single Cassette |
|---|
Wall Mount Building Enclosure configured for one LGX/1000 Style module, splice cassette or adapter pack
| 2 | Commscope OM4 LC Cassette PNL-CS-12LCX-PT OM4 Splicing cassette, 12LC , 900µm |
|---|
Commscope SL Patch Panel 24-port 1U
Discrete Distribution Module Panel, SL, UTP, 1U, 24 port
D3 SL Wallplate Location
Wiring for a triple data network wall location. (3) Cat6 cables, jacks and wallplate.
2Arlington LV1
Low Voltage Mounting Bracket
2Commscope SL FP 3Port A.WHT
Faceplate Kit, labeled, 1-gang, 3 port, alpine white
1500Commscope Uniprise-CS34P-Bl
CS34P ETL Verified Category 6 U/UTP Cable, plenum, blue jacket, 4 pair count, 1000 ft (305 m) length, CommPak
6Commscope USL600-A.WHT
USL600-A.WHT - Commscope CAT6 SL Almond White Jack
6Commscope USL600-BLK
Uniprise USL Series Modular Jack, RJ45, category 6, T568A/T568B, unshielded, without dust cover, black
D4 SL Wallplate Location
Wiring for a quad data network wall location. (4) Cat6 cables, jacks and wallplate.
Creekside Move
Project No : DIGIM-0007Rev. 21/18/2022
Page 12 of 18
* Price Includes Accessories
2Arlington LV1
Low Voltage Mounting Bracket
2Commscope SL FP 4Port A.WHT
Faceplate Kit, labeled, 1-gang, 4 port, alpine white
2000Commscope Uniprise-CS34P-Bl
CS34P ETL Verified Category 6 U/UTP Cable, plenum, blue jacket, 4 pair count, 1000 ft (305 m) length, CommPak
8Commscope USL600-A.WHT
USL600-A.WHT - Commscope CAT6 SL Almond White Jack
8Commscope USL600-BLK
Uniprise USL Series Modular Jack, RJ45, category 6, T568A/T568B, unshielded, without dust cover, black
Equipment:
Labor:
$4,303.70
$5,671.49
Com Lab Total$9,975.19
Creekside Move
Project No : DIGIM-0007Rev. 21/18/2022
Page 13 of 18
* Price Includes Accessories
Data Center
.
-Replace 1U splice tray with new 2U splice tray. Move existing fiber to new enclosure. Land new fibers from COM/CDS Labs in this tray.
-Install 24-strand armored OM4 between Data Center and IDF 1W020. Data Center side lands in new 2U enclosure. IDF side lands in new 1U enclosure.
| . | ||
|---|---|---|
| 1 | Commscope Fiber Splice Tray, Rack Mount SD-2U | |
| Standard Density 2U sliding Panel, accepts (6) LGX/1000 style splice cassettes, modules or panels, providing up to 72 duplex LC ports | ||
| 300 | Commscope OM4 MM 24str Armr Plenum Fiber | |
| LazrSPEED® Fiber Distribution Cable, OM4, Interlocking Aluminum Armor, Plenum, 24 Fiber, Aqua | ||
| 1 | Commscope Fiber Splice Tray, Rack Mount SD-1U | |
| --- | --- |
Standard Density 1U sliding Panel, accepts (3) LGX/1000 style splice cassettes, modules or panels, providing up to 36 duplex LC ports
| 2 | Commscope OM4 LC Cassette PNL-CS-24LCX-PT LazrSPEED® OM4 Splicing cassette, 24LC , 900μm |
|---|
3.6Hyphn LV - General Labor
Labor allocated to swapping exisitng splice tray to larger version and moving cassettes.
Equipment:
Labor:
$3,939.15
$4,354.00
Data Center Total$8,293.15
Creekside Move
Project No : DIGIM-0007Rev. 21/18/2022
Page 14 of 18
* Price Includes Accessories
Pathway
100
100
Caddy J-Hook 2" dia w/ Clip
2" J-Hook w/ Clip
Caddy J-Hook 3/4" dia w/ Clip
CADDY® CABLECAT J-Hook 3/4 in. Dia., Assembled to 4Z34, 1/8 thru 3/8 in. Flange
| Equipment: | $1,273.00 |
|---|---|
| Labor: | $952.00 |
| Pathway Total | $2,225.00 |
General
1Hyphn Miscellaneous Parts-Fixed
Miscellaneous Parts including but not limited to velcro, zipties, tape, screws/bolts, and pathway.
1Ideal Industries RJ-45 Mod Plug
Modular Plugs, RJ-45, 50 per Package, 8 Contact 8 Position, Data Cords
| Equipment: | $1,050.64 |
|---|---|
| Labor: | $5.95 |
| General Total | $1,056.59 |
Creekside Move
Project No : DIGIM-0007Rev. 21/18/2022
Page 15 of 18
* Price Includes Accessories
Permit
1Hyphn Low Voltage Permit
Low Voltage Permit and Fees
| Equipment: | $142.50 |
|---|---|
| Labor: | $119.00 |
| Permit Total | $261.50 |
Terms and Conditions
1Hyphn Invoicing Payment Terms: Exception 1
Exception to Section 1.D. of the Terms and Conditions agreement:
Deposits: No deposit required.
1Hyphn Invoicing Payment Terms: Exception 2
Exception to Section 2.A. of the Terms and Conditions agreement:
Payment Terms: Balance is due in full net 30 days from date of invoice.
1Hyphn Not to Exceed
Not to Exceed Amount. The Agreement amount is considered to be a Not-to- Exceed amount, which amount shall be the maximum amount payable and shall not be exceeded unless adjusted by a Supplemental Agreement.
1Hyphn Terms and Conditions
Please enter the below url in your web browser to view our Technology Terms and Conditions.
https://www.hyphn.com/technology-terms
By signing below you are agreeing that you have read and accept the above referenced terms and conditions as written.
Equipment:
Labor:
$0.00
$0.00
Terms and Conditions Total$0.00
Creekside Move
Project No : DIGIM-0007Rev. 21/18/2022
Page 16 of 18
* Price Includes Accessories
| Equipment Subtotal: | $20,972.35 |
|---|---|
| Labor Subtotal: | $39,622.72 |
| Project Subtotal: | $60,595.07 |
Creekside Move
Project No : DIGIM-0007Rev. 21/18/2022
Page 17 of 18
* Price Includes Accessories
PROJECT SUMMARY
| Equipment: | $20,972.35 |
|---|---|
| Labor: | $39,622.72 |
| CAT Tax: | $242.38 |
| Grand Total: | $60,837.45 |
Client:Charles BeckDate
Contractor:
Hyphn
Date
Creekside Move
Project No : DIGIM-0007Rev. 21/18/2022
Page 18 of 18
Dynalectric Company 2225 NW 20th Avenue Portland, OR 97209
Phone: 503.226.6771
Fax: 503.226.7818
OR CCB: 66793
January 26, 2022 To: Bill Miles
Digimarc
9405 SW Gemini Drive Beaverton OR 97008
Re: Digimarc office move to 8500 Creekside Revision 3 Changes made in BOLD
We are pleased to offer for your consideration our electrical proposal for the above-mentioned project. This proposal is based on a site walk and information provided. Below is a list of inclusions, exclusions, and clarifications to our price.
Proposed scope of work:
| 1. | Provide and install (2) L6-30 at UPS rack server room, to be located near the UPS branch panelboard. |
|---|---|
| 2. | Provide and install (4) L6-30 at UPS rack server room, to be located at the end of the racking. |
| --- | --- |
| 3. | Provide labor and materials to cut in and install (3) quad receptacles in the new Printer room, all to be shared on the same circuit per bid walk instructions. |
| --- | --- |
| 4. | Provide labor and materials to cut in and install (3) quad receptacles and (1) GFCI duplex receptacle in the Robot lab room (specific heights can be determined at install). |
| --- | --- |
| 5. | Provide labor and materials to cut in and install (4) L6-30 receptacles at 60” (+, -) in the Robot Lab for new server rack. |
| --- | --- |
| 6. | Provide labor and materials to cut in and install (2) L6-30 receptacles at 60” (+, -) in the Mail room (specific heights can be determined at install). |
| --- | --- |
| 7. | Provide labor and materials to cut in and install (2) cut in duplex receptacles in the Embedder Lab to be shared on the same circuit. |
| --- | --- |
| 8. | Note: MC cabling to be utilized for all branch circuitry wiring as discussed onsite. |
| --- | --- |
| 9. | Provide labor and materials to core drill (19) locations for exterior camera locations on the first floor (assume 1” core). |
| --- | --- |
| 10. | Provide waterproofing and/or caulking at all exterior penetrations (assume painting complete by others). |
| --- | --- |
| 11. | Provide labor and materials to install (1) conduit chase and (1) exterior box at each above-mentioned location. |
| --- | --- |
| 12. | Provide and install (1) quad receptacle in room 1E024 (assume to be recessed). |
| --- | --- |
| 13. | Coordination of work timing and duration with customer. |
| --- | --- |
| 14. | Update of panel schedules to reflect system changes. |
| --- | --- |
| 15. | Permitting as required for the project. |
| --- | --- |
Exclusions:
| 1. | No replacement of existing receptacles, switches, or trim plates included. |
|---|---|
| 2. | No cleaning, ballast repair, or lamp replacement on existing light fixtures included. |
| --- | --- |
| 3. | No cutting, patching or painting of drywall or other surfaces is included in this proposal. |
| --- | --- |
| 4. | No coring, GPR scanning, saw cutting or patch back is included in this proposal. |
| --- | --- |
| 5. | No Fire Alarm work included in this proposal. |
| --- | --- |
| 6. | No AV system, security system work, low voltage voice and data cabling, testing, trim out or permitting is included. |
| --- | --- |
| 7. | No temporary power or lighting included due to the unknown requirements for this work. |
| --- | --- |
| 8. | No new service work, transformers, panelboards, subpanels, etc. We have assumed that the existing panelboards are in good working condition and have adequate capacity for the project. |
| --- | --- |
Page 1 of 2
Dynalectric Company 2225 NW 20th Avenue Portland, OR 97209
Phone: 503.226.6771
Fax: 503.226.7818
OR CCB: 66793
Clarifications:
| 1. | Pricing valid for 30 days from date of proposal only, we reserve the right to adjust pricing after 30 days. |
|---|---|
| 2. | Construction schedule is mutually agreed upon. All labor at straight time, weekdays, unless otherwise noted. |
| --- | --- |
| 3. | All work to be completed during normal business hours unless noted otherwise above. Monday-Friday 7:00am-3:30pm. Labor at straight time rates. |
| --- | --- |
| 4. | No labor or material has been taken into consideration for the repair of existing electrical installations needed to make them functional or NEC code compliant. |
| --- | --- |
| 5. | Lighting fixture packages and/or parts specified by others that require a down payment prior to material delivery shall not be the financial responsibility of Dynalectric Oregon. |
| --- | --- |
| 6. | This proposal, including but not limited to pricing and schedule, is made contingent upon the Work addressed herein not being adversely affected, either directly or indirectly, by the COVID-19 pandemic and/or the Corona virus. |
| --- | --- |
| 7. | Subcontract and construction schedule shall be mutually agreed upon. |
| --- | --- |
| 8. | No considerations for accelerated schedule have been made in this proposal. If schedule is to be accelerated, additional costs must be negotiated prior to commencement of work. |
| --- | --- |
| 9. | To the extent this quotation/proposal includes materials and/or equipment that contain or are comprised of steel, copper, aluminum and petroleum-based products the price set forth herein for such items is guaranteed for a period of 30 days from the date of this quotation/proposal. The parties agree that the pricing for such items in this quotation/proposal is guaranteed only for such time, and after such time, Dynalectric reserves the right to increase the price set forth herein for such items to reflect the then-current price of such items. In addition, any materials and/or equipment that contain manufactured components or are finished goods from countries with newly imposed trade tariffs, trade barriers or embargos by the U.S. Department of Commerce and the U.S. Trade Representative (USTR) are also subject to price increases. |
| --- | --- |
Summary:
| Total Proposal | $ 18,885.00 |
|---|
Thank you,
Ben Eidem
Ben Eidem
Assistant Project Manager / Estimator (503) 849-9943
beidem@dyna-oregon.com
Page 2 of 2
EXHIBIT G
Items Installed on the Roof
Five (5) Trane roof top units for cooling the general administrative space Two (2) Trane condenser units that support the data room
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155462073.8
HB: 4860-1276-1863.11
dmrc-ex1026_103.htm
Exhibit 10.26
LEASE AGREEMENT
BETWEEN
PORTLAND 1 LLC, a Delaware limited liability company
("Landlord") AND
DIGIMARC CORPORATION, an Oregon corporation
("Tenant")
CREEKSIDE CORPORATE PARK 8500 SW CREEKSIDE PLACE BEAVERTON, OREGON
4073687.v10
LEASE AGREEMENT
THIS LEASE AGREEMENT (the "Lease") is made and entered into as of February
, 2022, by and between PORTLAND 1, LLC, a Delaware limited liability company ("Landlord") and DIGIMARC CORPORATION, an Oregon corporation ("Tenant").
| 1. | Basic Lease Information. |
|---|
1.01"Building" shall mean the building located at 8500 SW Creekside Place, Beaverton, Oregon, and commonly known as the 8500 Building. "Rentable Square Footage of the Building" is deemed to be 65,496 rentable square feet. The Building is part of the "Project" commonly known as Creekside Corporate Park, which contains 442,312 rentable square feet of space. The Building and the Project are depicted on Exhibit A attached hereto.
1.02"Premises" shall mean the entire Building. Landlord and Tenant agree that "Rentable Square Footage of the Premises" is deemed to be 65,496 rentable square feet. Landlord and Tenant stipulate and agree that the Rentable Square Footage of the Project, Rentable Square Footage of the Building, and the Rentable Square Footage of the Premises are correct.
| 1.03 | "Commencement Date" shall mean September 1, 2028. |
|---|
1.04"Expiration Date" shall mean the last day of the calendar month that is twenty-five (25) months after the Commencement Date.
1.05"Term" shall mean the period commencing on the Commencement Date and ending on the Expiration Date, unless terminated early in accordance with this Lease.
1.06"Permitted Use" shall mean general office use for sales and service, training, and other ancillary uses.
| 1.07 | "Base Rent": | ||
|---|---|---|---|
| Term/Period | Annual Base Rent per Square Foot | Base Rent Per Annum | Monthly Base Rent |
| --- | --- | --- | --- |
| Months 1 - 12 | $21.00 | $1,375,416.00 | $114,618.00 |
| Months 13 - 24 | $21.63 | $1,416,678.40 | $118,056.53 |
| Month 25 | $22.28 | $1,459,250.80 | $121,604.23 |
1.08"Tenant's Proportionate Share of the Building" shall be computed by dividing the Rentable Square Footage of the Premises by the Rentable Square Footage of the Building and, as of the date of this Lease, shall be 100%. "Tenant's Proportionate Share of Project" shall be computed by dividing the Rentable Square Footage of the Premises by the Rentable Square Footage of the Project and, as of the date of this Lease, shall be 14.81%.
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1.09Estimated Initial Monthly Operating Expenses: On the earlier to occur of (a) the date that is sixty (60) days before the Commencement Date, or (b) within ten (10) days after receipt of written request from Tenant within the twelve (12) month period before the Commencement Date, Landlord shall inform Tenant of the then-current estimated Operating Expenses for calendar year 2028.
| 1.10 | "Security Deposit": An aggregate amount equal to $121,604.23 comprised of (a) |
|---|
$46,604.23 due within two (2) business days after mutual execution of this Lease, and (b)
$75,000 (the "Gemini Deposit") which Landlord and Tenant acknowledge and agree serves as Tenant’s security deposit under the Gemini Drive Lease (defined below). After Tenant’s surrender of the Gemini Drive Premises with all Tenant’s obligations under the Gemini Drive Lease fully performed, without any further action on the part of Tenant, the portion of the Gemini Deposit not applied by the Landlord pursuant to the Gemini Drive Lease shall be credited by Landlord to the aggregate Security Deposit under this Lease. If Landlord applies any portion of the Gemini Deposit pursuant to the Gemini Drive Lease, Tenant shall immediately pay an amount equal to such applied portion of the Gemini Deposit to Landlord in cash to be held by Landlord as of part of the Security Deposit under this Lease.
| 1.11 | "Guarantor": None. |
|---|
1.12"Brokers": Tenant's broker: Eric Turner and Craig Reinhart of Jones Lang LaSalle Brokerage, Inc.; Landlord's broker: Deron Jones of Jones Lang LaSalle Brokerage, Inc.
1.13Parking Spaces: 3.4 spaces per 1,000 square feet of the Premises, which spaces shall be used at no cost to Tenant during the Term of this Lease in common with other tenants of the Project.
| 1.14 | Tenant's Billing Address: 8500 SW Creekside Place, Beaverton, Oregon 97008 |
|---|
1.15Landlord's Remittance Address: Attn: Property Manager, 15455 NW Greenbrier Pkwy., Suite 245, Beaverton, Oregon 97006
| 1.16 | Addresses for Notices: |
|---|
If to Landlord:Portland 1 LLC
Attn: Property Manager
15455 NW Greenbrier Pkwy, Suite 245
Beaverton, Oregon 97006
| with a copy to: | CapitaLand Group Attn: Rein Gabrielsen |
|---|
575 5^th^ Avenue, Suite 3005 New York, NY 10017
| If to Tenant: | Digimarc Corporation Attn:_Chief Financial Officer 8500 SW Creekside Place Beaverton, Oregon 97008 |
|---|
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4073687.v10
All capitalized terms used without definition in the text of this Lease are as defined in this Section 1 (Basic Lease Information).
1A. Gemini Drive Lease
Landlord and Tenant are parties to that certain Full Service Lease dated March 22, 2004, as amended and assigned (the "Gemini Drive Lease"), with respect to certain premises located at 9405 SW Gemini Drive, Beaverton, Oregon (the "Gemini Drive Premises"). The term of the Gemini Drive Lease is currently scheduled to expire on March 31, 2024.
1B. FiServ Sublease
As of the date of this Lease, the Premises is subject to that certain Lease Agreement dated February 2018 (the "FiServ Lease") between Landlord, as successor in interest to PD Office Owner 11, L.P., as landlord, and FiServ Solutions, LLC ("FiServ"), as tenant. At or about the same time as this Lease is executed by Landlord and Tenant, Tenant will be entering into a sublease with FiServ for the entire Premises (the "FiServ Sublease"). The term of the FiServ Sublease will continue through August 31, 2028. In the event the FiServ Sublease is terminated on account of a breach or default thereunder by Tenant, such termination shall constitute an immediate Default by Tenant under this Lease. The FiServ Sublease prohibits both FiServ and Tenant from voluntarily terminating the FiServ Sublease. If the FiServ Sublease is terminated for cause as expressly permitted by the terms and conditions of the FiServ's Lease, then this Lease shall automatically terminate. Landlord, FiServ and Tenant are parties to that certain Consent to Sublease of approximately even date herewith with respect to the FiServe Sublease (the “Landlord Consent”). Landlord and Tenant acknowledge and agree that certain terms and conditions of the Landlord Consent affect the parties’ rights under this Lease and, accordingly, the terms and conditions of the Landlord Consent are incorporated herein by reference as if fully set forth in this Lease.
1C. Relocation Allowance
So long as no Default exists, the FiServ Sublease has been fully-executed and Landlord's written consent thereto has been obtained, and Tenant is occupying the Premises, Landlord shall reimburse Tenant for up to $327,480.00 ($5.00/RSF) for Tenant's reasonable, documented, out- of-pocket costs incurred to relocate its business from the Gemini Drive Premises to the Premises, including costs of relocation, setup and acquisition of Tenant's furniture, fixtures and equipment, security, fire suppression and other associated charges (the "Relocation Allowance"). The Relocation Allowance shall be paid to Tenant within thirty (30) days after all of the foregoing conditions have been satisfied and Tenant has provided Landlord with reasonable, supporting documentation of all of Tenant's relocation costs for Landlord's review; provided, that any portion of the Relocation Allowance not requested by Tenant within one (1) year after the date of this Lease shall be forfeited and any unused portion of the Relocation Allowance shall be forfeited. Any forfeited amount of the Relocation Allowance shall accrue to the sole benefit of Landlord and shall not be used for or applied to the payment of Rent. In the event of a Default by Tenant that results in the termination of this Lease: (a) from and after such Default, Tenant
3
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shall forfeit the right to receive any unpaid portion of the Relocation Allowance; and (b) Tenant shall, within ten (10) business days after written demand by Landlord, pay to Landlord the entire Relocation Allowance or, if the Lease is terminated in accordance with the terms of this Section
1.C after January 31, 2026, the Unamortized Allowance (as hereinafter defined). If the Lease is terminated in accordance with the terms of this Section 1.C after January 31, 2026, the Relocation Allowance shall be amortized on a straight-line basis in equal monthly installments over the period commencing February 1, 2026, through the expiration of the Term of this Lease. For purposes of this Lease, the "Unamortized Allowance" shall mean that portion of the Relocation Allowance that has not been amortized as of the date that this Lease is terminated in accordance with the terms of this Section 1.C.
| 2. | Lease Grant |
|---|
Landlord hereby leases the Premises to Tenant, and Tenant hereby leases the Premises from Landlord, on and subject to the terms and conditions of this Lease. "Property" shall mean the Building and the parcel of land owned by Landlord on which the Building, the parking facilities and other improvements, if any, serving the Building are located. If the Project is part of a larger complex of structures, the term "Property" may include the entire complex as set forth in Section 1.01 where appropriate in Landlord's reasonable discretion.
| 3. | Possession. |
|---|
As a result of the FiServ Sublease, Tenant will be in possession of the Premises on the Commencement Date. On the Commencement Date, Tenant shall continue to occupy and possess the Premises in its "as is" condition and configuration without any representations or warranties by Landlord or any obligation of Landlord to perform any improvements or alterations (other than as may be specified herein).
| 4. | Rent. |
|---|
4.01Tenant shall pay Landlord, without any setoff or deduction, all Base Rent and Additional Rent due for the Term (collectively referred to as "Rent"). "Additional Rent" means all sums (exclusive of Base Rent) that Tenant is required to pay Landlord under this Lease. Tenant shall pay and be liable for all rental, sales and use taxes (but excluding income taxes), if any, imposed upon or measured by Rent. Recurring monthly charges of Base Rent and Additional Rent shall be due and payable in advance on the first day of each calendar month without notice or demand. All other items of Rent shall be due and payable by Tenant on or before the date that is ten (10) business days after receipt of an invoice therefor from Landlord. Rent shall be made payable to the entity, and sent to the address, Landlord designates in such invoice (if applicable) and shall be made by good and sufficient check or by wire transfer pursuant to an account designated by Landlord upon request or by other means acceptable to Landlord. Rent for any partial month during the Term shall be prorated based on the number of days in such month. Tenant's covenant to pay Rent is independent of every other covenant in this Lease.
4.02Tenant shall pay Landlord an administration fee equal to three percent (3%) of all past due Rent, provided that Tenant shall be entitled to a grace period of five (5) business days for the first late payment of Rent during the Term of this Lease. In addition, past due Rent shall accrue
4
4073687.v10
interest at twelve percent (12%) per annum until paid. Landlord's acceptance of less than the correct amount of Rent shall be considered a payment on account of the earliest Rent due. No endorsement or statement on a check or letter accompanying payment shall be considered an accord and satisfaction.
4.03So long as Tenant is not in Default under this Lease beyond any applicable notice and cure period, Tenant shall not be obligated to pay Base Rent for the first month of the Term (September 2028); provided, that the right to such abated Rent shall be forfeited or such abated Rent shall be immediately due and payable, as the case may be, in the event of a Default by Tenant that results in the termination of this Lease. Upon mutual execution of this Lease, Tenant shall pay the Base Rent for the second month of the Term (October 2028).
| 4.04 | Tenant shall pay Tenant's Proportionate Share of Operating Expenses in accordance with |
|---|
Exhibit B of this Lease.
| 5. | Compliance with Laws; Use. |
|---|
5.01The Premises shall be used for the Permitted Use and for no other use whatsoever. Tenant shall comply with all Laws regarding the operation of Tenant's business and the use, condition, configuration and occupancy of the Premises. Tenant shall promptly provide Landlord with copies of any notices it receives regarding an alleged violation of Law. Landlord makes no representations to Tenant that the conduct of Tenant's business in the Premises will be in compliance with Law. As used in this Lease, "Law(s)" means all present and future statutes, codes, ordinances, orders, rules and regulations of any municipal or governmental entity whether in effect now or later, including, without limitation, the Americans with Disabilities Act (the "ADA") and regulations promulgated thereunder and the provisions of other leases with other tenants of the Building.
| 5.02 | Tenant shall, at its sole cost and expense, promptly comply with any Laws that relate to |
|---|
(a)the Base Building (as defined herein), but only to the extent such obligations are triggered by Tenant's use of the Premises, other than for general office use, or Alterations or improvements in the Premises performed or requested by Tenant or (b) the Premises. As used in this Lease, "Base Building" shall include the structural portions of the Building, the public restrooms and the mechanical, electrical and plumbing systems and equipment located in the internal core of the Building on the floor or floors on which the Premises are located.
5.03To the best of Landlord's knowledge, the Premises is compliant with the ADA as the date of this Lease. Tenant shall be responsible for causing the Premises to comply with the ADA at Tenant's sole cost and expense in connection with the performance of work for Tenant's initial occupancy of, and any subsequent alterations or improvements to, the Premises; except, that Landlord shall be responsible for performing any ADA-required alterations or improvements to the exterior of the Building that are required by applicable governmental authorities and not arising from or relating to any alterations or improvements performed by Tenant.
5.04As used in this Lease, "Hazardous Materials" will mean any substance commonly referred to, or defined in any Law, as a hazardous material or hazardous substance (or other similar term), including but not be limited to, chemicals, solvents, petroleum products,
5
4073687.v10
flammable materials, explosives, asbestos, urea formaldehyde, PCB's, chlorofluorocarbons, freon or radioactive materials. Tenant will not cause or permit any Hazardous Materials to be brought upon, kept, stored, discharged, released or used in, under or about any portion of the Property by Tenant, Tenant Related Parties (as defined herein) or their agents without the prior written consent of Landlord, which consent may be withheld or conditioned in Landlord's sole discretion; provided, Tenant may bring into the Premises small amounts of Hazardous Materials (such as cleaning products and copy toner) which are readily available to Tenant by unregulated retail purchase if the same are necessary in Tenant's normal business operations. If Tenant or any Tenant Related Party brings any Hazardous Materials to the Premises or Property, with or without the prior written consent of Landlord (without waiver of the requirement of prior written consent), and in executing this Lease Tenant acknowledges and agrees that by its direct or indirect involvement in the introduction of any Hazardous Materials to the Premises or Property, with or without the consent of the Landlord, that Tenant accepts full and complete responsibility for such Hazardous Materials and henceforth on will be considered the "Responsible Party" as defined by any applicable governmental authority and/or Law. Further, Tenant shall: (a) use such Hazardous Material only as is reasonably necessary to Tenant's business, in small, properly labeled quantities; (b) handle, use, keep, store, and dispose of such Hazardous Material using the highest accepted industry standards and in compliance with all applicable Laws; (c) maintain at all times with Landlord a copy of the most current MSDS sheet for each such Hazardous Material; and (d) comply with such other rules and requirements Landlord may from time to time impose, or with any definition of Hazardous Materials or Law as it may be implemented or modified during or after the term of this Lease. Upon expiration or earlier termination of this Lease, Tenant will, at Tenant's sole cost and expense, cause all Hazardous Materials brought to the Premises or the Property by Tenant, to be removed from the Property in compliance with any and all applicable Laws.
5.05If Tenant violates the provisions of this Section 5, or performs any act or omission which contaminates or expands the scope of contamination of the Premises, the Property, or any part thereof, the underlying groundwater, or any property adjacent to the Property, or violates or allegedly violates any applicable Law, then Tenant will promptly, at Tenant's expense, take all investigatory and/or remedial action (collectively called "Remediation"), as directed or required by any governmental authority that is necessary to fully clean up, remove and dispose of such Hazardous Materials and any contamination so caused and shall do so in compliance with any applicable Laws. Tenant will also repair any damage to the Premises and any other affected portion(s) of the Property caused by such contamination and Remediation.
5.06Tenant shall immediately provide to Landlord written notice of any investigation or claim arising out of the use by Tenant or any Tenant Entity of Hazardous Materials at the Property or the violation of any provision of this Section 5, or alleged violation of any Law and shall keep Landlord fully advised regarding the same. Tenant shall provide to Landlord all reports regarding the use of Hazardous Materials by Tenant at the Property and any incidents regarding the same, regardless of whether any such documentation is considered by Tenant to be confidential. Landlord retains the right to participate in any Remediation and/or legal actions affecting the Property involving Hazardous Materials arising from Tenant's actual or alleged violation of any provision of this Section 5 or applicable Law.
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5.07Tenant will indemnify, protect, defend and forever hold Landlord, its lenders and ground lessor, if any, Landlord Related Parties (as defined herein) the Premises, the Property, or any portion thereof, harmless from any and all damages, causes of action, fines, losses, liabilities, judgments, penalties, claims, and other costs, including, but not limited to, any Landlord Related Parties' costs incurred during its participation in any Remediation and/or legal actions as specified in this Section 5, arising out of any failure of Tenant or Tenant Related Party to observe any covenants of this Section 5. All provisions of this Section 5 shall survive the expiration of this Lease and any termination of this Lease or of Tenant's right of possession.
5.08Landlord will indemnify, protect, defend and forever hold Tenant harmless from any and all damages, causes of action, fines, losses, liabilities, judgments, penalties, claims, and other costs, including, but not limited to, any Hazardous Materials in, on or around the Property not otherwise brought onto the Property by Tenant or any Tenant Related Party. All provisions of this Section 5 shall survive the expiration of this Lease and any termination of this Lease or of Tenant's right of possession.
5.09Tenant shall comply with the Rules and Regulations attached as Exhibit C (the "Rules and Regulations") and such amendments to the Rules and Regulations as may be adopted by Landlord from time to time and delivered to Tenant in writing; provided, however, no such amendments to the Rules and Regulations shall contradict or abrogate any right or privilege herein granted to Tenant hereunder. Landlord shall use reasonable efforts to enforce the Rules and Regulations, as may be amended, in a reasonable and non-discriminatory manner against all tenants on the Property.
| 6. | Utilities. |
|---|
6.01Landlord shall redistribute or furnish electrical energy to or for the use of Tenant in the Premises for the operation of lighting fixtures and the electrical receptacles in the Premises in a manner that is generally consistent with the Permitted Use.
6.02If either the quantity or character of electrical service is changed by the public utility or other company supplying electrical service to the Property or is no longer available or suitable for Tenant's requirements (collectively, an "Electrical Service Event"), such Electrical Service Event shall not (a) constitute an actual or constructive eviction, in whole or in part, or entitle Tenant to any abatement or diminution of Base Rent, or (b) relieve Tenant from any of its obligations under this Lease, or (c) impose any liability upon Landlord or its agents by reason of inconvenience or annoyance to Tenant, injury to or interruption of Tenant's business or otherwise.
6.03Tenant shall obtain and pay for electricity and natural gas for the use of Tenant in the Premises by direct application and arrangement with the public utility serving the Building. If Tenant uses electricity or natural gas in excess of that supplied by Landlord pursuant to this Section 6.03 of this Lease, Landlord shall have the option of installing sub-meters at Landlord's expense to measure Tenant's consumption of electricity and natural gas supplied to the Premises.
6.04Tenant's use of electrical service shall not exceed the amounts which, in Landlord's reasonable judgment, are consistent with the Permitted Use. Tenant shall not make, or perform or
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permit the making or performing of, any alterations to wiring installations or other electrical facilities in or serving the Premises without the prior written consent of Landlord in each instance.
6.05Landlord shall not be liable in any way to Tenant for any failure or defect in the supply or character of electric energy or natural gas furnished to the Premises by reason of any requirement, act or omission of the public utilities serving the Property or for any other reason not directly attributable to Landlord, provided, however, that in such instance, Landlord shall use commercially reasonable efforts to cause the electricity or natural gas to be restored as soon as practicable thereafter.
| 7. | Building Services. |
|---|
7.01Landlord agrees to furnish to the Premises, the following services and utilities subject to the Rules and Regulations, as amended: (a) water for use in the Premises; (b) customary heat and air conditioning ("HVAC") required for the use and occupation of the Premises; (c) natural gas for use in the Premises; (d) electricity for use in the Premises; (e) elevator service; (f) building standard janitorial service; and (g) access to the Building and Premises for Tenant and its employees 24 hours per day/7 days per week, subject to the terms of this Lease.
7.02Landlord shall provide Tenant with the Parking Spaces on the terms of the Lease. The current allocation of unreserved parking spaces to Tenant is set forth in the Basic Lease Information. All parking will comply with the terms and conditions of this Lease and applicable Rules and Regulations. The parking privileges granted to Tenant are personal to Tenant. Tenant shall not assign or sublet parking privileges other than in connection with an approved or permitted assignment of this Lease or permitted sublease.
7.03Landlord agrees, at Landlord's sole cost, to install Building standard signage identifying Tenant at the entryway to the Project. Any requests to change the initial signage shall be at the Tenant's sole cost. Tenant, at its sole cost and expense, shall have the right to place its signage on any existing monument sign serving the Building and on the exterior of the Building, subject to all applicable Laws, prior written approval from the City of Beaverton and prior written approval from Landlord (which approval shall not be unreasonably withheld or delayed, but may be subject to conditions deemed reasonable by Landlord). Further, upon expiration or earlier termination of this Lease, all Tenant-installed signage shall be removed by Tenant at Tenant's sole cost and expense and the condition of the Building and/or Premises shall be restored to its prior condition at Tenant's sole cost and expense.
7.04Subject to the provision to Tenant of at least twenty-four (24) hours' advance written notice, Landlord shall have access to all air-cooling, fan, ventilating and machine rooms and electrical closets and all other mechanical installations of Landlord installed or located within the Premises (collectively, the "Mechanical Areas"), and Tenant shall not construct partitions or other obstructions which may unreasonably interfere with Landlord's access thereto or the moving of Landlord's equipment to and from the Mechanical Areas. Tenant shall not enter the Mechanical Areas or tamper with, adjust, or otherwise affect the Mechanical Areas or install any supplementary or auxiliary HVAC equipment to serve the Premises without Landlord's prior consent in each instance. Landlord shall not be responsible if the normal operation of the HVAC
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System (defined below) shall fail to provide cooled or heated air by reason of (a) any machinery or equipment installed by or on behalf of Tenant, or (b) any rearrangement of partitioning or other Alterations made or performed by or on behalf of Tenant. Tenant at all times shall cooperate fully with Landlord and shall abide by the Building Rules and Regulations which Landlord may reasonably prescribe for the proper functioning and protection of the Building System providing HVAC to the Premises (the "HVAC System").
| 8. | Leasehold Improvements. |
|---|
All improvements in and to the Premises performed by or at the direction of Tenant, including any Alterations (collectively, "Leasehold Improvements") shall remain upon the Premises at the end of the Term without compensation to Tenant, provided that Tenant, at its expense, in compliance with all applicable Laws, shall (a) close up any slab penetrations in the Premises and
(b)remove Cable (as defined in this Lease), any gas/tank lines installed by Tenant or at the direction of Tenant or any Tenant Related Party within the Premises and any Alterations that, in Landlord's reasonable judgment, are of a nature that would require removal and repair costs that are materially in excess of the removal and repair costs associated with standard office improvements (such other items collectively are referred to as "Required Removables"). Required Removables shall include, without limitation, internal stairways, raised floors, personal baths and showers, supplemental HVAC units and equipment, vaults, rolling file systems and structural alterations and modifications. Notwithstanding the foregoing and for the avoidance of doubt, as of the Effective Date of this Lease, Landlord and Tenant acknowledge and agree that the Premises does not contain any Required Removables (including any such Required Removables as may be carried-over pursuant to the FiServ Sublease). If applicable, the Required Removables shall be removed by Tenant before the Expiration Date. At least ten (10) days prior to commencing the removal of any Cable or Required Removables or the closing of any slab penetrations, Tenant shall notify Landlord of its intention to remove such Cable or Required Removables or effect such closings, and provide to Landlord, for its approval, structural or other drawings describing the proposed removal, and if Landlord notifies Tenant within such ten (10) day period, Tenant shall not remove such Cable and/or Required Removables and/or close such slab penetrations, and the Cable and/or Required Removables not so removed shall become the property of Landlord upon the Expiration Date or sooner termination of the Term. Tenant shall repair damage caused by the installation or removal of any Cable or Required Removables. If Tenant fails to perform its obligations in a timely manner, Landlord may perform such work at Tenant's expense.
| 9. | Repairs and Alterations. |
|---|
9.01Tenant shall promptly provide Landlord with notice of any conditions within the Premises that are dangerous or in need of maintenance or repair. Tenant shall, at its sole cost and expense, perform all maintenance and repairs to the Premises that are not Landlord's express responsibility under this Lease, and keep the Premises in good condition and repair, reasonable wear and tear excepted. Tenant's repair and maintenance obligations include, without limitation, repairs to: (a) floor coverings; (b) interior partitions; (c) doors; (d) demising walls; (e) electronic, fiber, phone and data cabling and related equipment that is installed by or for the exclusive benefit of Tenant (collectively, "Cable"); (f) supplemental air conditioning units installed by Tenant or at the direction of Tenant or any Tenant Related Party within the Premises, kitchens, including hot
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water heaters, plumbing, and similar facilities exclusively serving the Premises; and (g) Alterations. Subject to the terms of Section 15 below, to the extent Landlord is not reimbursed by insurance proceeds, Tenant shall reimburse Landlord for the cost of repairing damage to the Building caused by the acts of Tenant, Tenant Related Parties and their respective contractors and vendors. If Tenant fails to commence and diligently proceed with any repairs to the Premises for more than fifteen (15) days after notice from Landlord (although notice shall not be required in an emergency), Landlord may make the repairs, and Tenant shall pay the reasonable cost of the repairs, together with an administrative charge in an amount equal to five percent (5%) of the cost of the repairs.
9.02Landlord shall keep and maintain in good repair and working order and perform maintenance upon the: (a) structural elements of the Building; (b) foundation of the Building; (c) roof of the Building and (d) the Building HVAC, the HVAC System, and the electrical and plumbing systems located outside of the Premises that serve the Premises.
9.03Tenant shall not make alterations, repairs, additions or improvements or install any Cable (collectively referred to as "Alterations") without first obtaining the written consent of Landlord in each instance. Landlord will not unreasonably withhold, condition or delay its consent to Alterations so long as such Alterations (i) are non-structural and do not affect the Building Systems, (ii) with respect only to fire and life safety systems are performed only by Landlord's designated contractors or with respect to mechanical, engineering, electrical plumbing and HVAC by contractors approved by Landlord to perform such Alterations, (iii) affect only the Premises and are not visible from outside of the Premises or the Building, (iv) do not affect the certificate of occupancy issued for the Building or the Premises, (v) are reasonably consistent with the design, construction and equipment of the Building, and (vi) do not adversely affect (other than to a de minimis extent) any Building System or service furnished by Landlord in connection with the operation of the Building. Notwithstanding the foregoing, Tenant shall, subject to the provisions of this Section 9.03, be permitted to make Alterations following ten (10) days' notice to Landlord, but without Landlord's prior consent, to the extent that such Alterations:
(a) are of a cosmetic nature such as painting, wallpapering, hanging pictures and installing carpeting; (b) are not visible from the exterior of the Premises or Building; (c) will not affect the Base Building; (d) do not require work to be performed inside the walls or above the ceiling of the Premises; and (e) the costs thereof do not exceed $50,000.00, in the aggregate, within any twelve (12) month period (the "Cosmetic Alterations").
9.04Except for Cosmetic Alterations, prior to starting any Alterations, Tenant shall furnish to Landlord (a) plans and specifications, (b) names of contractors reasonably acceptable to Landlord (provided that Landlord may designate specific contractors with respect to Base Building), (c) required permits and approvals, (d) evidence of contractors and subcontractors insurance in amounts reasonably required by Landlord and naming Landlord as an additional insured, and (e) any security for performance in amounts reasonably required by Landlord.
9.05Alterations shall be constructed in a good and workmanlike manner using materials of a quality reasonably approved by Landlord (except for Cosmetic Alterations which shall not require Landlord's approval). Tenant shall reimburse Landlord for any reasonable out-of-pocket costs and expenses incurred by Landlord or by any third-party on behalf of Landlord in connection with Landlord's review of any plans specifications for any Alterations. In addition,
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Tenant shall reimburse or pay Landlord, as the case may be, for the lesser of: (i) Landlord’s actual costs and expenses incurred by Landlord in connection with Landlord's oversight and coordination of any Alterations (except for Cosmetic Alterations); and (ii) five percent (5%) of the cost of the Alterations (except for Cosmetic Alterations). Upon completion, except for any Cosmetic Alterations, Tenant shall furnish to Landlord "as-built" plans for all Alterations, completion affidavits and full and final waivers of lien, and certificates of final approval for such Alterations required by any governmental authority.
| 10. | Landlord's Access. |
|---|
10.01Subject to Section 10.02, Landlord reserves the right at all reasonable times and upon at least forty-eight (48) business hours prior written notice to Tenant, and otherwise accompanied by Tenant during any such entry, to enter the Premises to (i) inspect them; (ii) to show the Premises to prospective purchasers, mortgagees or tenants, or to the ground or underlying lessors; (iii) post notices of non-responsibility; or (iv) alter, improve or repair the Premises or the Building if necessary to comply with current building codes or other applicable Laws, or for structural alterations, repairs or improvements to the Building. Notwithstanding anything to the contrary contained in this Section 10, Landlord may enter the Premises at any time to (A) perform services required of Landlord; (B) take possession due to any breach of this Lease in the manner provided herein; and (C) perform any covenants of Tenant which Tenant fails to perform. Any such entries by Landlord into the Premises shall be without the abatement of Rent and shall include the right to take such reasonable steps as required to accomplish the stated purposes. Landlord shall take commercially reasonable steps to minimize any interference with Tenant's access to and use of the Premises and any work which may be required to be performed by Landlord hereunder shall be performed after normal business hours if reasonably practical. If reasonably necessary, Landlord may temporarily close all or a portion of the Premises to perform repairs and alterations; provided, however, except in emergencies, Landlord will not close the Premises if the work can reasonably be completed on weekends and after Tenant's business hours.
10.02Notwithstanding anything to the contrary set forth in this Section 10.01 above, Tenant may reasonably designate in writing certain reasonable areas of the Premises as "Secured Areas" should Tenant require such areas for the purpose of securing certain valuable property or confidential or proprietary information. In connection with the foregoing, Landlord shall not enter such Secured Areas except in the event of an emergency, or to perform repair and maintenance obligations, subject to the following terms of this Section 10.02. Landlord need not clean any area designated by Tenant as a Secured Area and shall only maintain or repair such secured areas to the extent (i) such repair or maintenance is required in order to maintain and repair the Base Building; (ii) as required by applicable Laws, or (iii) in response to specific requests by Tenant and in accordance with a schedule reasonably designated by Tenant, subject to Landlord’s reasonable approval, and only after providing Tenant at least forty-eight (48) business hours’ advanced notice and subject to the following limitations: (a) access must be during hours reasonably designated by Tenant when confidential materials are not present or confidential activities are not being conducted; provided, however, Tenant shall be solely responsible to reimburse Landlord within thirty (30) days of request for any over-time charges incurred by Landlord in accommodating Tenant, (b) Landlord and all other visitors must be escorted by a designated Tenant representative, and Tenant shall make such representative
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reasonably available, and (c) Landlord and all other visitors must sign a commercially reasonable nondisclosure agreement.
10.03Landlord has the right at any time to (a) change the name, number or designation by which the Building is commonly known, or (b) alter the Property (other than the Premises) to change the arrangement or location of entrances or passageways, doors and doorways, and corridors, elevators, stairs, toilets, or other public parts of the Property without any such acts constituting an actual or constructive eviction and without incurring any liability to Tenant, so long as such changes do not deny Tenant reasonable access to the Premises or materially impair Tenant's right to use the Premises for the Permitted Use. Without limiting the generality of the foregoing, Landlord shall have the right to erect and maintain sidewalk bridges and/or scaffolding on or about the Property and/or the Building. Landlord shall use reasonable efforts to minimize interference with Tenant's use and occupancy of the Premises during the making of such changes or alterations, provided that Landlord shall have no obligation to employ contractors or labor at overtime or other premium pay rates or to incur any other overtime costs or additional expenses whatsoever.
| 11. | Assignment and Subletting. |
|---|
11.01Tenant shall not assign, sublease, transfer, mortgage, pledge, encumber or otherwise transfer any interest in this Lease or allow any third party to use any portion of the Premises (collectively or individually, a "Transfer") without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed. Any Transfer in violation of this Section 11 shall, at Landlord's option, be deemed a Default by Tenant as described in Section 18, and shall be voidable by Landlord. In no event shall any Transfer, release or relieve Tenant from any obligation under this Lease, and Tenant shall remain primarily liable for the performance of the tenant's obligations under this Lease, as amended from time to time.
11.02Notwithstanding anything to the contrary contained herein, Landlord's consent is not required for any Transfer to an Affiliate (defined below), as long as the following conditions are met: (i) at least ten (10) business days before the Transfer, Landlord receives written notice of the Transfer (as well as any documents or information reasonably requested by Landlord regarding the Transfer or transferee); (ii) if the Transfer is an assignment, transferee assumes in writing all of Tenant's obligations under this Lease relating to the Premises; and (iii) transferee has a net worth equal to or greater than Tenant's net worth as of the date of this Lease. For purposes hereof, (i) the term "Affiliate" means an entity which is controlled by, controls, or is under common control with, Tenant; and (ii) the term "control" and its corollaries shall mean the ownership, directly or indirectly, of more than fifty percent (50%) of the voting securities of, or possession of the right to vote, in the ordinary direction of its affairs, of more than fifty percent (50%) of the voting interest in, any person or entity.
11.03Tenant shall provide Landlord with financial statements for the proposed transferee, a fully executed copy of the proposed assignment, sublease or other Transfer documentation and such other information as Landlord may reasonably request. Within fifteen (15) business days after receipt of the required information and documentation, Landlord shall either (a) consent to the Transfer by execution of a consent agreement in a form reasonably designated by Landlord, or (b) reasonably refuse to consent to the Transfer in writing. Whether or not Landlord consents
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to any proposed Transfer, Tenant shall pay Landlord's review and processing fees, as well as any reasonable professional fees (including, without limitation, attorneys', accountants', architects', engineers' and consultants' fees) incurred by Landlord, within thirty (30) days after written request by Landlord.
11.04If Landlord consents to a Transfer, as a condition thereto which the parties hereby agree is reasonable, Tenant shall pay to Landlord fifty percent (50%) of any "Transfer Premium," as that term is defined in this Section 11.04, received by Tenant from such Transferee. "Transfer Premium" shall mean all rent, additional rent or other consideration payable by such Transferee in connection with the Transfer in excess of the Rent payable by Tenant under this Lease during the term of the Transfer (on a per rentable square foot basis if less than all of the Premises is transferred); after deducting the reasonable expenses incurred by Tenant for (i) any changes, alterations and improvements to the Premises in connection with the Transfer, (ii) any free base rent, free additional rent, improvement allowances or other economic concessions reasonably provided to the Transferee, and (iii) any brokerage commissions paid in connection with the Transfer. "Transfer Premium" shall also include, but not be limited to, key money, bonus money or other cash consideration paid by Transferee to Tenant in connection with such Transfer, and any payment in excess of fair market value for services rendered by Tenant to Transferee or for assets, fixtures, inventory, equipment, or furniture transferred by Tenant to Transferee in connection with such Transfer. Notwithstanding anything to the contrary specified herein, under no circumstance shall Tenant be obligated to pay to Landlord any Transfer Premium if the aggregate economic consideration in connection with any such Transfer does not result in a Transfer Premium.
| 12. | Liens. |
|---|
Tenant shall not permit mechanics' or other liens to be placed upon the Property, Premises or Tenant's leasehold interest in connection with any work or service done or purportedly done by or for the benefit of Tenant or its transferees. Tenant shall give Landlord notice at least ten (10) days prior to the commencement of any work in the Premises to afford Landlord the opportunity, where applicable, to post and record notices of non-responsibility provided that any request for consent to the Alteration in respect of such work shall constitute such notice. Tenant, within 30 days of notice from Landlord, shall fully discharge any lien by settlement, by bonding or by insuring over the lien in the manner prescribed by the applicable Law and shall provide evidence satisfactory to Landlord that such lien has been removed or bonded within such 30-day period. Tenant's failure to cure same shall be deemed a Default under this Lease and, in addition to any other remedies available to Landlord as a result of such Default by Tenant, Landlord, at its option, may bond, insure over or otherwise discharge the lien. Tenant shall reimburse Landlord for any amount paid by Landlord, including, without limitation, reasonable attorneys' fees.
| 13. | Indemnity and Waiver of Claims. |
|---|
Except to the extent caused by the gross negligence or willful misconduct of Landlord or any Landlord Related Parties, Tenant shall indemnify, defend and hold Landlord and Landlord Related Parties harmless against and from all liabilities, obligations, damages, penalties, claims, actions, costs, charges and expenses, including, without limitation, reasonable attorneys' fees and other professional fees (if and to the extent permitted by Law) (collectively referred to as
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"Losses"), which may be imposed upon, incurred by or asserted against Landlord or any of the Landlord Related Parties by any third party and arising out of or in connection with any damage or injury occurring in the Premises or any wrongful acts or omissions (including violations of Law) of Tenant, the Tenant Related Parties or any of Tenant's transferees, contractors or licensees. Except to the extent caused by the negligence or willful misconduct of Tenant or any Tenant Related Parties, Landlord shall indemnify, defend and hold Tenant, its trustees, members, principals, beneficiaries, partners, officers, directors, employees and agents ("Tenant Related Parties") harmless against and from all Losses which may be imposed upon, incurred by or asserted against Tenant or any of the Tenant Related Parties by any third party and arising out of or in connection with the wrongful acts or omissions (including violations of Law) of Landlord or the Landlord Related Parties. Unless otherwise caused by the gross negligence or willful misconduct of Landlord or any Landlord Related Parties (as defined below), Tenant hereby waives all claims against and releases Landlord and its trustees, members, principals, beneficiaries, partners, officers, shareholders, directors, employees, contractors, licensees, invitees, servants, agents, representatives and Mortgagees (the "Landlord Related Parties") from all claims for any injury to or death of persons, damage to property or business loss in any manner related to (a) Force Majeure, (b) acts of third parties, (c) the bursting or leaking of any tank, water closet, drain or other pipe, unknown fire, explosion, falling plaster, steam, gas, electricity, electrical or electronic emanations or disturbance, water, rain, snow or leaks from any part of the Building or from the pipes or caused by dampness, vandalism, malicious mischief, (d) the inadequacy or failure of any security or protective services, personnel or equipment, or (e) any matter not within the reasonable control of Landlord.
| 14. | Insurance. |
|---|
14.01Tenant shall maintain the following insurance ("Tenant's Insurance"): (a) Commercial General Liability Insurance applicable to the Premises and its appurtenances providing, on an occurrence basis, a minimum combined single limit of $2,000,000.00; (b) Property/Business Interruption Insurance written on an All Risk or Special Cause of Loss Form, including sprinkler leakage, at replacement cost value and with a replacement cost endorsement covering all of Tenant's business and trade fixtures, equipment, movable partitions, furniture, merchandise and other personal property within the Premises ("Tenant's Property") and any Leasehold Improvements performed by or for the benefit of Tenant; (c) Workers' Compensation Insurance in amounts required by Law; and (d) Employers Liability Coverage of at least $1,000,000.00 per occurrence. Any company writing Tenant's Insurance shall have an A.M. Best rating of not less than A-VIII. All Commercial General Liability Insurance policies shall name as additional insureds Landlord (or its successors and assignees), the managing agent for the Building (or any successor) and their respective members, principals, beneficiaries, partners, officers, directors, employees, and agents, and other designees of Landlord and its successors as the interest of such designees shall appear and shall be primary and noncontributory to any insurance which may be carried by Landlord. In addition, Landlord shall be named as a loss payee with respect to Property Insurance on the Leasehold Improvements. All policies of Tenant's Insurance shall contain endorsements that the insurer(s) shall give Landlord and its designees at least thirty (30) days' advance written notice of any cancellation, termination, material change or lapse of insurance. Tenant shall provide Landlord with a certificate of insurance evidencing Tenant's Insurance prior to the earlier to occur of the Commencement Date or the date Tenant is provided with possession of the Premises, and thereafter as necessary to assure that Landlord always has
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current certificates evidencing Tenant's Insurance and the Additional Insured Endorsement CG 20 11 11 85 or its equivalent is required to be provided as soon as it is available. Landlord shall maintain so called All Risk property insurance on the Building at replacement cost value as reasonably estimated by Landlord and liability insurance applicable to the Building, together with such other insurance coverage as Landlord, in its reasonable judgment, may elect to maintain.
14.02Tenant will not do or permit anything to be done within or about the Premises or the Property which will increase the existing rate of any insurance on any portion of the Property or cause the cancellation of any insurance policy covering any portion of the Property (including, without limitation, any liability coverage). Tenant will, at its sole cost and expense, comply with any requirements of any insurer of Landlord. Tenant agrees to maintain policies of insurance described in this Section 14. Landlord reserves the right, from time to time, to require additional coverage (including flood coverage if the Premises is located in a flood hazard zone) and/or to require higher amounts of coverage; provided, however, that any such additional coverage shall not exceed coverage for comparable commercial office buildings within the Beaverton, Oregon market.
| 15. | Subrogation. |
|---|
Landlord and Tenant hereby waive and shall cause their respective property insurance carriers to waive any and all rights of recovery, claims, actions or causes of action against the other for any loss or damage with respect to Tenant's Property, Alterations, the Building, the Premises, or any contents thereof, including rights, claims, actions and causes of action based on negligence, which loss or damage is (or would have been, had the insurance required by this Lease been carried) covered by insurance. For the purposes of this waiver, any deductible with respect to a party's insurance shall be deemed covered by and recoverable by such party under valid and collectable policies of insurance.
| 16. | Casualty Damage. |
|---|
16.01Tenant shall give prompt notice to Landlord if all or any portion of the Premises becomes untenantable by fire or other casualty to the Premises (collectively a "Casualty"). In the event of such Casualty, Landlord, by notice to Tenant within sixty (60) days after the date of such Casualty, shall have the right to terminate this Lease if: (1) the Premises have been materially damaged and there is less than one (1) year of the Term remaining on the date of the Casualty;
(2) any Mortgagee requires that the insurance proceeds be applied to the payment of the mortgage debt; or (3) a material uninsured loss to the Building or Premises occurs. If this Lease is so terminated, (a) the Term shall expire upon the date set forth in Landlord's notice, which shall not be less than thirty (30) days after such notice is given, and Tenant shall vacate the Premises and surrender the same to Landlord no later than the date set forth in the notice, (b) Tenant's liability for Rent shall cease as of the date of the damage, (c) any prepaid Rent for any period after the date of the damage shall be refunded by Landlord to Tenant, and (d) Landlord shall be entitled to collect all insurance proceeds of policies held by Landlord or Tenant providing coverage for Alterations and other improvements to the Premises. Landlord shall retain such proceeds from Tenant's insurance only to the extent that Landlord performed or paid
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for such Alterations and improvements, whether by contribution, offset or otherwise, and the balance of such proceeds, if any, shall be paid to Tenant.
16.02If this Lease is not terminated, Landlord shall promptly and diligently, subject to reasonable delays for insurance adjustment or other matters beyond Landlord's reasonable control, restore the Premises and common areas. Such restoration shall be to substantially the same condition that existed prior to the Casualty, except for modifications required by Law or any other modifications to the common areas deemed desirable by Landlord. Upon notice from Landlord, Tenant shall assign or endorse over to Landlord (or to any party designated by Landlord) all property insurance proceeds payable to Tenant under Tenant's Insurance with respect to any Alterations performed by or for the benefit of Tenant; provided if the estimated cost to repair such Alterations exceeds the amount of insurance proceeds received by Landlord from Tenant’s insurance carrier, the excess cost of such repairs shall be paid by Tenant to Landlord prior to Landlord’s commencement of repairs. Within fifteen (15) days of demand, Tenant shall also pay Landlord for any additional excess costs that are determined during the performance of repairs. In no event shall Landlord be required to spend more for the repairs and/or restoration than the insurance proceeds received by Landlord. Landlord shall not be liable for any inconvenience or annoyance to Tenant or injury to the business of Tenant occasioned by damage by fire or other casualty or the repair thereof. Landlord will not carry insurance of any kind on Tenant's Property or Alterations and shall not be obligated to restore or repair any damage to Tenant's Property, Alterations or any Required Removables. Provided that Tenant is not in Default, during any period of time that all or a material portion of the Premises is rendered untenantable as a result of a Casualty, the Rent shall abate for the portion of the Premises that is untenantable and not used by Tenant. Landlord shall have the right to adapt the restoration of the Premises as contemplated by this Section 16.02 to comply with applicable Laws that are then in effect.
16.03In addition to Landlord's rights under Section 16.01, if the Premises are totally damaged or are rendered wholly untenantable, or if the Building is so damaged that in Landlord's opinion, substantial alteration, demolition, or reconstruction of the Building is required (whether or not the Premises are so damaged or rendered untenantable), then in either of such events, Landlord may, not later than sixty (60) days following the date of the damage, give Tenant a notice terminating this Lease. If this Lease is so terminated, (a) the Term shall expire upon the date set forth in Landlord's notice, which shall not be less than thirty (30) days after such notice is given, and Tenant shall vacate the Premises and surrender the same to Landlord no later than the date set forth in the notice, (b) Tenant's liability for Rent shall cease as of the date of the damage, (c) any prepaid Rent for any period after the date of the damage shall be refunded by Landlord to Tenant, and (d) Landlord shall be entitled to collect all insurance proceeds of policies held by Landlord or Tenant providing coverage for Alterations and other improvements to the Premises. Landlord shall retain such proceeds from Tenant's insurance only to the extent that Landlord performed or paid for such Alterations and improvements, whether by contribution, offset or otherwise, and the balance of such proceeds, if any, shall be paid to Tenant.
16.04Notwithstanding anything set forth to the contrary in this Section 16, in the event a Casualty to the Premises and/or Building renders the Premises untenantable during the final year of the Term and Tenant's inability to use the Premises is reasonably expected to continue until at least the earlier of the (a) Expiration Date, or (b) the 180th day after the date when such Casualty
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occurs, then either Landlord or Tenant may terminate this Lease by notice to the other party within thirty (30) days after the occurrence of such Casualty and this Lease shall expire on the thirtieth (30th) day after the date of such notice.
| 17. | Condemnation. |
|---|
Either party may terminate this Lease if any material part of the Premises is taken or condemned for any public or quasi-public use under Law, by eminent domain or private purchase in lieu thereof (a "Taking"). Landlord shall also have the right to terminate this Lease if there is a Taking of any portion of the Building or Property which would have a material adverse effect on Landlord's ability to profitably operate the remainder of the Building. The terminating party shall provide written notice of termination to the other party within forty-five (45) days after it first receives notice of the Taking. The termination shall be effective as of the effective date of any order granting possession to, or vesting legal title in, the condemning authority. If this Lease is not terminated, Base Rent and Tenant's Pro Rata Share shall be appropriately adjusted to account for any reduction in the square footage of the Building or Premises. All compensation awarded for a Taking shall be the property of Landlord. The right to receive compensation or proceeds are expressly waived by Tenant, however, Tenant may file a separate claim for Tenant's Property and Tenant's reasonable relocation expenses, provided the filing of the claim does not diminish the amount of Landlord's award. If only a part of the Premises is subject to a Taking and this Lease is not terminated, Landlord, with reasonable diligence, will restore the remaining portion of the Premises as nearly as practicable to the condition immediately prior to the Taking.
| 18. | Events of Default. |
|---|
18.01Tenant Default. In addition to any other default specifically described in this Lease, each of the following occurrences shall be a "Default": (a) Tenant's failure to pay any portion of Rent within five (5) business days after it was due ("Monetary Default"); provided, that Tenant shall be entitled to two (2) written notices from Landlord of such failure to pay each calendar year during the Term; (b) Tenant's failure (other than a Monetary Default) to comply with any term, provision, condition or covenant of this Lease, if the failure is not cured within fifteen (15) business days after written notice to Tenant; provided, however, if Tenant's failure to comply cannot reasonably be cured within fifteen (15) business days, Tenant shall be allowed additional time (not to exceed sixty (60) days) as is reasonably necessary to cure the failure so long as Tenant begins the cure within fifteen (15) business days and diligently pursues the cure to completion; (c) Tenant or any Guarantor becomes insolvent, makes a transfer in fraud of creditors, makes an assignment for the benefit of creditors, admits in writing its inability to pay its debts when due or forfeits or loses its right to conduct business unless in the case of such a proceeding filed against Tenant or any guarantor the same is dismissed within sixty (60) days;
(d) Tenant's interest in this Lease shall pass to any third party, whether by operation of Law or otherwise, except as expressly permitted under Section 11; (e) Tenant does not take possession of or abandons any portion of the Premises; (f) Tenant is in default beyond any notice and cure period under the FiServ Sublease that results in a termination of the FiServ Sublease; or (g) if Landlord applies or retains any portion of the Security Deposit, and Tenant fails to deposit with Landlord the amount so applied or retained by Landlord, or to provide Landlord with a replacement Letter of Credit, if applicable, within five (5) business days after written notice by Landlord to Tenant stating the amount applied or retained. If Landlord provides Tenant with
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notice of Tenant’s failure to comply with any specific provision of this Lease on two (2) separate occasions during any twelve (12) month period and such failures to comply are of the same or substantially similar nature, Tenant’s subsequent violation of such provision in the same or substantially similar nature shall, at Landlord’s option, be an incurable Default by Tenant. All notices sent under this Section 18 shall be in satisfaction of, and not in addition to, notice required by Law.
18.02Landlord Default. Notwithstanding anything to the contrary set forth in this Lease, Landlord shall be in default in the performance of any obligation required to be performed by Landlord pursuant to this Lease if Landlord fails to perform such obligation within thirty (30) days after the receipt of notice from Tenant specifying in detail Landlord’s failure to perform; provided, however, 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 in default under this Lease if it shall commence such performance within such thirty (30) day period and thereafter diligently pursues the same to completion. Upon any such default by Landlord under this Lease, Tenant may, except as otherwise specifically provided in this Lease to the contrary, exercise any of its rights provided at law or in equity.
| 19. | Remedies. |
|---|
19.01Upon Default, Landlord shall have the right to pursue any one or more of the following remedies:
(a)Landlord may serve a written five (5) day notice of cancellation of this Lease upon Tenant, and upon the expiration of the five (5) days, this Lease and the Term shall end and expire as fully and completely as if the expiration of the five (5) day period set forth in the notice was the Expiration Date stated herein, and Tenant shall then quit and surrender the Premises to Landlord, but Tenant shall remain liable for damages as provided in this Section
19.If Tenant fails to surrender the Premises, Landlord, in compliance with Law, may enter upon and take possession of the Premises and remove Tenant, Tenant's Property and any party occupying the Premises. Tenant shall pay Landlord, on demand, all past due Rent and other losses and damages Landlord suffers as a result of Tenant's Default, including, without limitation, all Costs of Reletting and any deficiency that may arise from reletting or the failure to relet the Premises. "Costs of Reletting" shall include all reasonable costs and expenses incurred by Landlord in reletting or attempting to relet the Premises, including, without limitation, legal fees, brokerage commissions, and the cost of alterations and the value of other concessions or allowances granted to a new tenant.
(b)Terminate Tenant's right to possession of the Premises and, in compliance with Law, remove Tenant, Tenant's Property and any parties occupying the Premises. Landlord may (but shall not be obligated to) relet all or any part of the Premises, without notice to Tenant, for such period of time and on such terms and conditions (which may include concessions, free rent and work allowances) as Landlord in its absolute discretion shall determine. Landlord may collect and receive all rents and other income from the reletting. Tenant shall pay Landlord on demand all past due Rent, all Costs of Reletting and any deficiency arising from the reletting or failure to relet the Premises. The re-entry or taking of possession of the Premises shall not be construed as an election by Landlord to terminate this Lease.
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19.02In lieu of calculating damages under Section 19.01, Landlord may elect to receive as damages the sum of (a) all Rent accrued through the date of termination of this Lease or Tenant's right to possession, and (b) an amount equal to the total Rent that Tenant would have been required to pay for the remainder of the Term discounted to present value at a discount rate equal to the sum of the then current "prime rate," as announced in The Wall Street Journal, plus two percent (2%) minus the then present fair rental value of the Premises for the remainder of the Term, similarly discounted, after deducting all anticipated Costs of Reletting.
19.03If Tenant is in Default of any of its non-monetary obligations under the Lease, Landlord shall have the right to perform such obligations. Tenant shall reimburse Landlord for the cost of such performance upon demand together with an administrative charge equal to ten percent (10%) of the cost of the work performed by Landlord. The repossession or re-entering of all or any part of the Premises shall not relieve Tenant of its liabilities and obligations under this Lease. No right or remedy of Landlord shall be exclusive of any other right or remedy. Each right and remedy shall be cumulative and in addition to any other right and remedy now or subsequently available to Landlord at Law or in equity.
| 20. | Limitation of Liability. |
|---|
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS LEASE, THE LIABILITY OF LANDLORD (AND OF ANY SUCCESSOR LANDLORD) SHALL BE LIMITED TO LANDLORD'S (AND ANY SUCCESSOR TO LANDLORD) INTEREST IN THE PROPERTY. TENANT SHALL LOOK SOLELY TO LANDLORD'S INTEREST IN THE PROPERTY FOR THE RECOVERY OF ANY JUDGMENT OR AWARD AGAINST LANDLORD OR ANY LANDLORD RELATED PARTY. NEITHER LANDLORD NOR ANY LANDLORD RELATED PARTY SHALL BE PERSONALLY LIABLE FOR ANY JUDGMENT OR DEFICIENCY, AND IN NO EVENT SHALL LANDLORD OR ANY LANDLORD RELATED PARTY BE LIABLE TO TENANT FOR ANY LOST PROFIT, DAMAGE TO OR LOSS OF BUSINESS OR ANY FORM OF SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGE. BEFORE FILING SUIT FOR AN ALLEGED DEFAULT BY LANDLORD, TENANT SHALL GIVE LANDLORD AND THE MORTGAGEE(S) WHOM TENANT HAS BEEN NOTIFIED HOLD MORTGAGES, NOTICE AND REASONABLE TIME TO CURE THE ALLEGED DEFAULT.
| 21. | Permitted Dogs. |
|---|
Tenant shall be permitted to bring Permitted Dogs (defined below) into the Premises, subject to the Rules and Regulations attached hereto as may be amended or supplemented from time to time and the following terms and conditions:
21.01Before a dog can be considered a "Permitted Dog" for the purposes herein, Tenant must obtain Landlord's prior written consent as to each such dog, which shall not be unreasonably withheld. In connection therewith, Tenant must provide Landlord with (i) the dog owner’s name,
(ii) evidence that all current vaccinations have been obtained with respect to such dog, (iii) the type of dog and other information about the dog reasonably requested by Landlord, and (iv) evidence that Tenant's liability insurance provided pursuant to this Lease covers dog-related injuries and damage.
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21.02All Permitted Dogs shall be strictly controlled and supervised at all times by Tenant's employees, shall not be left unattended in the Premises or the Property at any time, shall not be permitted to walk or otherwise roam through the Property (including the parking facilities) unattended or off-leash and shall not be permitted to foul, damage or otherwise mar any part of the Premises or the Property. No dog shall be permitted to enter the Building or the Property if he/she previously exhibited dangerous or aggressive behavior.
21.03All Permitted Dogs shall be on a leash at all times that they are not entirely within the Premises. Tenant shall not allow Permitted Dogs to the Premises or the Property if any of the Permitted Dogs become ill or contract a disease that could potentially threaten the health or well- being of any tenant or occupant of the Premises or the Property (which diseases shall include, without limitation, rabies, leptospirosis, flea infestation and lyme disease).
21.04Tenant shall immediately remove any waste and excrement of any Permitted Dogs from the Property and properly clean the affected area to the standard required by Landlord. Tenant shall be responsible for any additional cleaning costs and all other costs which may arise from the presence of the Permitted Dogs at the Premises or the Property in excess of the costs that would have been incurred had the Permitted Dogs not been allowed in or around the Premises.
21.05Tenant assumes responsibility for, and agrees at the sole discretion of Landlord, to indemnify, defend, protect and hold Landlord and Landlord's agents, employees and partners harmless from, any and all claims, losses, costs, damages, expenses, liabilities and/or causes of actions, arising from, resulting from or connected with any and all acts of, or the presence of, any Permitted Dogs in, on or about the Premises or the Property (including, but not limited to, biting or causing bodily injury to any other tenant, subtenant, occupant, licensee or invitee of the Property, or damage to the Premises (including any tenant improvements therein), Building and/or the property of, Landlord or any other tenant, subtenant, occupant, licensee or invitee of the Property.
21.06No Permitted Dog shall interfere with other tenants, licensees, invitees or those having business in the Property. No Permitted Dogs shall bark excessively or otherwise create a nuisance (e.g., jump on any tenant, subtenant, occupant, licensee or invitee of the Property, or growl) at the Property. Permitted Dogs shall not be in the common areas, except en-route to or from the Premises. Tenant shall not permit any dog related noises or odors to emanate from the Premises, and in no event shall Permitted Dogs be kept in the Premises overnight.
21.07Tenant shall comply with all applicable rules, regulations and Laws associated with or governing the presence of the Permitted Dogs within the Premises and the Property and all additional rules and regulations as may be reasonably adopted by Landlord from time to time (including, without limitation, as to how and where any dog waste is to disposed of) and/or as reasonably required by Landlord's lender, and such presence shall not violate the certificate of occupancy for the Building.
| 22. | Security Deposit. |
|---|
22.01Tenant shall deposit with Landlord that portion of the Security Deposit specified in Section 1.10 above upon the execution of this Lease in cash as security for the faithful
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performance and observance by Tenant of the terms, covenants and conditions of this Lease, including the surrender of possession of the Premises to Landlord as herein provided. Landlord shall not be required to pay Tenant any interest on the Security Deposit and shall be permitted to commingle the Security Deposit with other deposits and funds being held by Landlord.
22.02If Tenant Defaults, beyond applicable notice and cure periods, in the payment or performance of any the terms, covenants or conditions of this Lease, including the payment of Rent, Landlord may use, apply or retain the whole or any part of the cash Security Deposit to the extent required for the payment of any Rent or any other sum as to which Tenant is in Default, including (a) any sum which Landlord may expend or may be required to expend by reason of Tenant's Default, and (b) any damages to which Landlord is entitled pursuant to this Lease or applicable Laws, whether such damages accrue before or after summary proceedings or other reentry by Landlord. If Landlord uses, applies or retains any part of the Security Deposit, Tenant, upon demand, shall deposit with Landlord the amount so applied or retained so that Landlord shall have the full Security Deposit on hand at all times during the Term. If Tenant shall fully and faithfully comply with all of the terms, covenants and conditions of this Lease, the Security Deposit (or so much thereof as remains) shall be returned to Tenant no later than 45 days following the Expiration Date and after delivery of possession of the Premises to Landlord in the manner required by this Lease. Tenant expressly agrees that Tenant shall have no right to apply any portion of the Security Deposit against any of Tenant's obligations to pay Rent hereunder.
22.03Upon a sale of the Building or the Property or a leasing of the Building, or any financing of Landlord's interest therein, Landlord shall have the right to transfer the cash Security Deposit to the vendee, Tenant or Mortgagee. Tenant shall look solely to the new landlord or Mortgagee for the return of such cash Security Deposit, and the provisions of this Section 22 shall apply to every transfer or assignment made of the Security Deposit to a new landlord. Tenant will not assign or encumber, or attempt to assign or encumber, the cash Security Deposit, and neither Landlord nor its successors or assigns shall be bound by any such actual or attempted assignment or encumbrance.
22.04The cash Security Deposit, if any, shall not be deemed an advance Rent deposit or an advance payment of any other kind, or a measure or limitation of Landlord's damages or constitute a bar or defense to any of the Landlord's other remedies under this Lease or at Law or in equity upon Tenant's Default.
| 23. | Holding Over. |
|---|
If Tenant fails to surrender all or any part of the Premises at the expiration or termination of this Lease, occupancy of the Premises after expiration or termination shall be that of a tenancy at sufferance. Tenant's occupancy shall be subject to all the terms and provisions of this Lease, and Tenant shall pay an amount (on a per month basis without reduction for partial months during the holdover) equal to 150% of the sum of the Base Rent due for the period immediately preceding the holdover. If Tenant fails to surrender the Premises upon the termination or expiration of this Lease, in addition to any other liabilities to Landlord accruing therefrom, Tenant shall protect, defend, indemnify and hold Landlord harmless from all loss, costs (including reasonable attorneys' fees) and liability resulting from such failure, including, without limiting the generality
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of the foregoing, any claims made by any succeeding tenant founded upon such failure to surrender and any lost profits to Landlord resulting therefrom. No holdover by Tenant or payment by Tenant after the expiration or termination of this Lease shall be construed to extend the Term or prevent Landlord from immediate recovery of possession of the Premises by summary proceedings or otherwise.
| 24. | Subordination to Mortgages; Estoppel Certificate. |
|---|
24.01Tenant accepts this Lease subject and subordinate to any mortgage(s), deed(s) of trust, ground lease(s) or other lien(s) now or subsequently arising upon the Premises, the Building or the Property, and to renewals, modifications, refinancings and extensions thereof (collectively referred to as a "Mortgage"). The party having the benefit of a Mortgage shall be referred to as a "Mortgagee". This clause shall be self-operative, but upon request from a Mortgagee, Tenant shall execute a commercially reasonable subordination agreement in favor of the Mortgagee. As an alternative, a Mortgagee shall have the right at any time to subordinate its Mortgage to this Lease. Upon the request of Landlord or any Mortgagee, Tenant shall attorn to any successor to Landlord's interest in this Lease.
As of the date of this Lease, the Premises is not encumbered by a Mortgage. If the Premises should become subject to a Mortgage in the future, at Tenant's request and at Tenant's sole cost and expense, Landlord shall exercise commercially reasonable efforts to obtain a commercially reasonable subordination agreement from the Mortgagee that includes commercially reasonable and standard non-disturbance provisions in favor of Tenant.
If a Mortgagee or any other person shall succeed to the rights of Landlord under this Lease, whether through possession or foreclosure action, or the delivery of a new lease or deed, then at the request of the successor landlord and upon such successor landlord's written agreement to accept Tenant's attornment and to recognize Tenant's interest under this Lease, Tenant shall be deemed to have attorned to and recognized such successor landlord as Landlord under this Lease. The provisions of this Section 24.01 are self-operative and require no further instruments to give effect hereto. Tenant shall, within ten (10) business days after written request, execute and deliver any instrument that such successor landlord may reasonably request (a) evidencing such attornment, (b) setting forth the terms and conditions of Tenant's tenancy, and (c) containing such other terms and conditions as may be reasonably required by such Mortgagee or Landlord, provided such terms and conditions do not increase the Rent, materially increase Tenant's non- Rent obligations or materially and adversely affect Tenant's rights under this Lease. Upon such attornment, this Lease shall continue in full force and effect as a direct lease between such successor landlord and Tenant upon all of the terms, conditions and covenants set forth in this Lease except that such successor landlord shall not be liable for or bound by any: (i) payment of an installment of Rent which may have been made more than thirty (30) days before the due date of such installment, (ii) act or omission or default of Landlord under the Lease, (iii) credits, claims, setoffs or defenses which Tenant may have against Landlord, (iv) obligation to make any payment to Tenant which was required to be made prior to the time such successor landlord succeeded to Landlord's interest, (v) any obligation to perform any work or to make improvements to the Premises except for (A) repairs and maintenance required to be made by Landlord under this Lease, and (B) repairs to the Premises as a result of damage by fire or other casualty, or partial condemnation, pursuant to the provisions of this Lease, but only to the extent
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that such repairs can reasonably be made from the net proceeds of any insurance or condemnation awards actually made available to such successor landlord; or (vi) bound by any modification, amendment or renewal of this Lease made without the consent of any Mortgagee of whom Tenant has been given notice, or (vii) obligated to return any security deposit (if any) not actually received by any successor landlord or Mortgagee.
24.02Each party agrees at any time and from time to time, within ten (10) days after the other party's written request, to execute, acknowledge and delivery to the other party a written instrument certifying that this Lease is unmodified and in full force and effect (or if there have been modifications, that it is in full force and effect as modified and stating the modifications), and the dates to which Base Rent, Additional Rent, and other charges have been paid in advance, if any, and stating whether or not to the best knowledge of the party signing such certificate, the requesting party is in default in the performance of any covenant, agreement or condition contained in this Lease and, if so, specifying each such default of which the signer may have knowledge. It is intended that any such certification and statement delivered pursuant to this Section 24.02 may be relied upon by any prospective purchaser of the Property or any mortgagee thereof or any assignee of Landlord's interest in this Lease or of any mortgage upon the fee of the Premises or any part thereof. Without limitation, such estoppel certificate may include a certification as to the status of this Lease, the existence of any defaults, and the amount of Rent that is due and payable.
| 25. | Option to Renew. |
|---|
25.01Provided that (a) this Lease shall be in full force and effect as of the date of the Renewal Notice and as of the Expiration Date, (b) there shall not have been a Default under this Lease by Tenant, and (c) Tenant shall be in actual occupancy of the Premises (subject, however, to vacancy due to casualty or condemnation), then Tenant originally herein named shall have one
(1) option to extend the Term of this Lease for the entire Premises for a period of five (5) years (the "Renewal Term") commencing on the day after the Expiration Date. Such option shall be exercisable by written notice (the "Renewal Notice") to Landlord given not less than nine (9) months prior to, but not earlier than eighteen (18) months prior to, the Expiration Date. The Renewal Term shall commence on the day after the Expiration Date (the "Renewal Term Commencement Date") and shall expire on the fifth (5^th^) anniversary of the Expiration Date. The Renewal Term shall constitute an extension of the initial Term of this Lease and shall be upon all of the same terms and conditions as the initial Term, except that (i) there shall be no further option to renew the Term of this Lease during the Renewal Term, and (ii) the Base Rent for the Renewal Term shall be payable at a rate per annum equal to the greater of (A) the Prevailing Market Rate (as defined herein) and (B) the Base Rent paid by Tenant immediately prior to the Expiration Date. During the Renewal Term, all Additional Rent that Tenant is obligated to pay under this Lease during the initial Term hereof for Operating Expenses shall continue without interruption, it being the intention of the parties hereto that the Renewal Term shall be deemed a part of and continuation of the initial Term of this Lease. If Tenant shall duly and timely give the Renewal Notice, then not later than thirty (30) days after the date of such Renewal Notice, Landlord shall respond to Tenant's Renewal Notice with a notice to Tenant of Landlord's calculation of the Prevailing Market Rate. As used in this Lease, "Prevailing Market Rate" shall mean the arm's length fair market annual rental rate per rentable square foot under leases and renewal and expansion amendments entered into on or about the date on which
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the Prevailing Market Rate is being determined hereunder for space comparable to the Premises in the Building and buildings comparable to the Building in the Beaverton, Oregon area as of the date the Renewal Term is to commence, taking into account the specific provisions of this Lease which will remain constant, and may, if applicable, include parking charges. The determination of the Prevailing Market Rate shall take into account any material economic differences between the terms of this Lease and any comparison lease or amendment, such as rent abatements, construction costs and other concessions and the manner, if any, in which the landlord under any such lease is reimbursed for operating expenses and taxes.
25.02If Tenant shall dispute Landlord's determination of the Prevailing Market Rate, pursuant to Section 25.01, Tenant shall give notice to Landlord of such dispute within ten (10) business days of Tenant's receipt of Landlord's notice of Landlord's calculation of the Prevailing Market Rate, and such dispute shall be determined by a single arbitrator appointed in accordance with the American Arbitration Association Real Estate Valuation Arbitration Proceeding Rules. The arbitrator shall be impartial and shall have not less than then 10 years' experience in a calling related to the leasing of commercial office space in office buildings comparable to the Building, and the fees of the arbitrator shall be shared equally by Landlord and Tenant. Within fifteen (15) business days following the appointment of the arbitrator, Landlord and Tenant shall attend a hearing before the arbitrator at which each party shall submit a report setting forth its determination of the Prevailing Market Rate of the Premises as of the commencement of the Renewal Term, together with such evidence as each such party shall deem relevant. If either party fails to submit its determination, then the arbitrator shall select the determination that was submitted. The arbitrator shall, within thirty (30) days following such hearing and submission of evidence, render his or her decision by selecting the determination of fair market value submitted by either Landlord or Tenant which, in the judgment of the arbitrator, most nearly reflects the Prevailing Market Rate of the Premises for the Renewal Term. The arbitrator shall have no power or authority to select any Prevailing Market Rate other than a Prevailing Market Rate submitted by Landlord or Tenant, and the decision of the arbitrator shall be final and binding upon Landlord and Tenant. If the Prevailing Market Rate shall not have been determined by the Renewal Term Commencement Date, Tenant shall pay Base Rent in the amount equal to Landlord's determination of the Prevailing Market Rate submitted to Tenant pursuant to Section
25.01 until the Prevailing Market Rate shall have been determined by the arbitrator. Upon any such determination, the Base Rent for the Premises shall be retroactively adjusted to the Renewal Term Commencement Date between the parties.
25.03Upon request by Landlord or Tenant following the Renewal Term Commencement Date, Landlord and Tenant will mutually execute, acknowledge and deliver an amendment to this Lease setting forth the Base Rent for the Renewal Term, the Renewal Term Commencement Date, and the Expiration Date, as extended. The failure of either party to execute and deliver such an amendment shall not affect the rights or the parties under this Lease. If Tenant shall duly and timely exercise Tenant's right to the Renewal Term pursuant to the terms hereof, all of the applicable references in this Lease to the Term shall be deemed to include the Renewal Term.
25.04It is an express condition of the Renewal Option granted to Tenant pursuant to the terms of this Section 25 that time shall be of the essence with respect to Tenant's giving of the Renewal Notice within the period above provided.
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25.05The Renewal Option shall automatically terminate and become null, void and of no force and effect upon the earlier to occur of (a) the expiration or termination of this Lease by Landlord or pursuant to Law, (b) the termination or surrender of Tenant's right to possession of the Premises or any portion thereof, or (c) the failure of Tenant to timely and properly exercise the Renewal Option. The Renewal Option is personal to Tenant herein named and to any Affiliate of Tenant which is a successor to Tenant's interest under this Lease, and under no circumstances whatsoever shall any assignee or any sublessee have any right to exercise the Renewal Option granted herein.
| 26. | Notice. |
|---|
Except as otherwise expressly provided in this Lease, any consents, notices, demands, requests, approvals or other communications given under this Lease shall be in writing and delivered by hand or sent by certified mail with return receipt requested, or sent by overnight or same day courier service at the party's respective addresses set forth in the Basic Lease Information. Each notice shall be deemed to have been received on the earlier to occur of actual delivery or the date that is three (3) days after notice is deposited in the U.S. mail in the manner described above. Either party may, at any time, change its address (other than to a post office box address) by giving the other party written notice of the new address.
| 27. | Surrender of Premises. |
|---|
At the expiration or termination of this Lease or Tenant's right of possession, Tenant shall remove from the Premises the Required Removables (as specified in Section 8 above) and Tenant's Property, and quit and surrender the Premises to Landlord, vacant, broom clean, and in good order, condition and repair, ordinary wear and tear and damage which Landlord is obligated to repair hereunder excepted. If Tenant fails to remove any of the Required Removables or Tenant's Property, Landlord may deem all or any part of Tenant's Property to be abandoned and, at Tenant's sole cost and expense, shall be entitled (but not obligated) to remove, sell or dispose of Tenant's Property without notice or compensation to Tenant. Landlord shall not be responsible for the value, preservation or safekeeping of Tenant's Property. Tenant shall pay Landlord, upon demand, the expenses and storage charges incurred.
| 28. | Confidentiality. |
|---|
Landlord and Tenant each hereby agree to use commercially reasonable efforts to maintain the confidentiality of the terms set forth in this Lease and any related documents, provided that in no event shall any disclosure as required by law or as reasonably required in connection with the operation, management, leasing and/or sale of the Building or Project or the administration or enforcement of this Lease or any related document be a violation of this Section 28, nor shall the disclosure to Landlord's lender or prospective lender, any proposed purchaser of the Project or any portion thereof or interest therein, or any proposed Tenant assignee of this Lease, as may be amended, be violation of this Section 28, provided that such party has agreed in writing to maintain the confidentiality of the terms set forth in this Lease and any related documents. Further, in no event shall disclosure of the terms of this Lease and any related document to either party's affiliates, partners, members, consultants (including, without limitation, space planning, construction, legal and/or financial consultants), and investors be a violation of this Section 28.
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In no event shall Landlord, its subsidiaries, or its agents publicize or use Tenant's image or likeness for any press releases, industry publications, advertising, social media, and promotion purposes in any type of marketing including its websites without Tenant's express written consent. In no event shall either party or their subsidiaries or agents publicize the terms of the Lease in any press releases, industry publications, advertising, social media, and promotion purposes in any type of marketing including its websites without the other party's express written consent.
| 29. | Miscellaneous. |
|---|
29.01This Lease shall be interpreted and enforced in accordance with the Laws of the State of Oregon.
29.02Landlord and Tenant hereby irrevocably consent to the jurisdiction and proper venue of the State and County where the Property is located.
29.03If any term or provision of this Lease shall to any extent be void or unenforceable, the remainder of this Lease shall not be affected.
29.04If there is more than one Tenant or if Tenant is comprised of more than one party or entity, the obligations imposed upon Tenant shall be joint and several obligations of all the parties and entities, and requests or demands from any one person or entity comprising Tenant shall be deemed to have been made by all such persons or entities. Notices to any one person or entity shall be deemed to have been given to all persons and entities.
29.05Tenant represents and warrants to Landlord that each individual executing this Lease on behalf of Tenant is authorized to do so on behalf of Tenant and that Tenant is not, and the entities or individuals constituting Tenant or which may own or control Tenant or which may be owned or controlled by Tenant are not, (a) in violation of any laws relating to terrorism or money laundering, or (b) among the individuals or entities identified on any list compiled pursuant to Executive Order 13224 for the purpose of identifying suspected terrorists or on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control at its official website http//www.treas.gov/ofac/tllsdn.pdf or any replacement website or other replacement official publication of such list.
29.06If either party institutes a suit against the other for violation of or to enforce any covenant, term or condition of this Lease, the prevailing party shall be entitled to reimbursement of all of its costs and expenses, including, without limitation, reasonable attorneys' fees incurred before and in connection with trial, arbitration and on appeal.
29.07Landlord and Tenant hereby waive any right to trial by jury in any proceeding based upon a breach of this Lease. No failure by either party to declare a default immediately upon its occurrence, nor any delay by either party in taking action for a default, nor Landlord's acceptance of Rent with knowledge of a default by Tenant, shall constitute a waiver of the default, nor shall it constitute an estoppel.
29.08Whenever a period of time is prescribed for the taking of an action by Landlord, the period of time for the performance of such action shall be extended by the number of days that the
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performance is actually delayed due to strikes, acts of God, disease, shortages of labor or materials, war, terrorist acts, civil disturbances and other causes beyond the reasonable control of Landlord ("Force Majeure").
29.09Landlord shall have the right to transfer and assign, in whole or in part, all of its rights and obligations under this Lease and in the Building and Property. Upon transfer Landlord shall be released from any further obligations hereunder and Tenant agrees to look solely to the successor in interest of Landlord for the performance of such obligations, provided that, any successor pursuant to a voluntary, third party transfer (but not as part of an involuntary transfer resulting from a foreclosure or deed in lieu thereof) shall have assumed Landlord's obligations under this Lease.
29.10Landlord has delivered a copy of this Lease to Tenant for Tenant's review only and the delivery of it does not constitute an offer to Tenant or an option.
29.11Tenant represents that it has dealt directly with, and only with, Brokers as brokers in connection with this Lease. Tenant shall indemnify and hold Landlord and the Landlord Related Parties harmless from all claims of any brokers, other than Brokers, claiming to have represented Tenant in connection with this Lease. Landlord shall indemnify and hold Tenant and the Tenant Related Parties harmless from all claims of any brokers claiming to have represented Landlord in connection with this Lease. Landlord agrees to pay a brokerage commission to Broker in accordance with the terms of a separate written commission agreement to be entered into by and between Landlord and Broker.
29.12Tenant may peacefully have, hold and enjoy the Premises, subject to the terms of this Lease, provided Tenant pays the Rent and fully performs all of its covenants and agreements. This covenant shall be binding upon Landlord and its successors only during its or their respective periods of ownership of the Building.
29.13This Lease does not grant any rights to light or air over or about the Building. Landlord excepts and reserves exclusively to itself any and all rights not specifically granted to Tenant under this Lease.
29.14This Lease constitutes the entire agreement between the parties and supersedes all prior agreements and understandings related to the Premises, including all lease proposals, letters of intent and other documents. Neither party is relying upon any warranty, statement or representation not contained in this Lease. This Lease may be modified only by a written agreement signed by an authorized representative of Landlord and Tenant.
29.15Tenant hereby waives irrevocably any rights that Tenant may have in connection with any zoning lot merger or transfer of development rights with respect to the Property which would cause the Premises to be merged with or unmerged from any other zoning lot.
| 29.16 | SUPPRESSION OF CORRUPT PRACTICE |
|---|
29.16.1The group of which we (Landlord) form a part is committed to conducting business in an ethical manner and expects all its employees and parties with which it has a contractual
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relationship to conduct themselves with high ethical standards and to comply with applicable Laws for the suppression of corrupt practices ("Anti-Corruption Laws").
29.16.2Tenant represents and warrants that, to the best of its knowledge, neither Tenant nor any person who (by reference to all relevant circumstances) performs services or acts for or on behalf of Tenant in any capacity (including, without limitation, employees, agents, related corporations and subcontractors) ("Representatives") has contravened, or procured or encouraged third parties (including, to avoid any doubt, the employees of or any person acting on our behalf) to contravene, any Anti-Corruption Laws in connection with this Lease.
29.16.3Tenant must immediately notify Landlord if any person employed by Tenant or acting on Tenant's behalf or any of Tenant's Representatives, has contravened or attempted to contravene any Anti-Corruption Laws in connection with this Lease, and must take adequate steps to protect the interest of both Landlord and Tenant. All such notices to us should be sent to the Head of Group Internal Audit of CapitaLand Limited at the following email address: Whistleblowing.ACChair@capitaland.com.
29.16.4Landlord shall have the right to terminate this Lease forthwith if Tenant or any of Tenant's Representatives has contravened or attempted to contravene any Anti-Corruption Laws, whether in connection with this Lease or otherwise. Such termination shall not affect Landlord's other rights and remedies whether under this Lease or otherwise.
[No Further Text on this Page; Signature Page Follows]
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Landlord and Tenant have executed this Lease as of the day and year first above written.
| LANDLORD: |
|---|
| PORTLAND 1 LLC, a Delaware limited liability company |
| By: /s/ Rein Gabrielsen |
| Name:<br><br><br><br><br><br>Title: |
| TENANT: |
| --- |
| DIGIMARC CORPORATION, an<br><br><br>Oregon corporation |
| By: /s/ Charles Beck |
| Name:<br><br><br>Title: |
[Signature Page to Lease Agreement]
4073687.v10
EXHIBIT A
DEPICTION OF BUILDING AND PROJECT
All areas, dimensions and locations are approximate, and any physical conditions indicated may not exist as shown.
Exhibit A 1
4073687.v10
EXHIBIT B EXPENSES AND TAXES
| 1. | Operating Expenses. Tenant shall pay Tenant's Proportionate Share of the total amount of |
|---|
Operating Expenses (defined below) for each calendar year (or portion thereof) during the Term (each an “Expense Year”).
1.01"Operating Expenses" as used in the Lease shall include all costs and expenses related to the ownership, management, operation, maintenance, replacement, improvement and repair of the Premises, Building, Project and/or Property, or any part thereof, incurred by Landlord including but not limited to: (a) Property supplies, materials, labor, equipment, and tools; (b) Utility and Service Costs (as further described in Section 1.04 below), security, janitorial, trash removal, and all applicable service and maintenance agreements; (c) Property related legal, accounting, and consulting fees, costs and expenses; (d) Insurance Premiums for all policies deemed necessary by Landlord and/or its lenders, and all deductible amounts under such policies (as further described in Section 1.05 below); (e) costs and expenses of operating, maintaining, and repairing the Property, including but not limited to all interior areas and also driving, parking, loading, and other paved or unpaved areas (including but not limited to, resurfacing and striping and any snow and ice removal Landlord elects to conduct), landscaped areas (including but not limited to, tree trimming), building exteriors (including but not limited to, painting and roof work), signs and directories, and lighting; (f) capital improvements and replacements (including but not limited to, all financing costs and interest charges); provided, however, that any capital expenditure shall be amortized over its useful life as Landlord shall reasonably determine in accordance with sound real estate management and accounting practices, consistently applied; (g) compensation (including but not limited to, any payroll taxes, worker's compensation for employees, and customary employee benefits) of all persons, including independent contractors, who perform duties, or render services on behalf of, or in connection with the Property, or any part thereof, including but not limited to, Property operations, maintenance, repair, and rehabilitation; (h) Property management fees and the cost of providing space used by the Property manager and (i) Real Property Taxes.
Notwithstanding the foregoing: (i) capital expenditures shall be excluded from Operating Expenses except to the extent they arise from or are related to (a) changes in Laws after the date of this Lease or (b) the use of the Premises by Tenant; (ii) Landlord's management fee included in Operating Expenses shall not exceed 2.5% of gross revenues, including all Rent payable under this Lease, for the Building.
Notwithstanding the foregoing, Operating Expenses shall not include: (i) depreciation charges;
(ii) interest and principal payments, loan fees, penalties, attorneys’ fees and other costs related to any mortgages or loans relating to the Project; (iii) ground rental payments; (iv) advertising and promotional expenses, real estate brokerage and leasing commissions; (v) legal fees for the negotiation or enforcement of leases; (vi) cost of repair from a Casualty or taking; (vii) the cost of any repair, replacement or other expense which is the Landlord’s responsibility to pay under this Lease; (viii) cost of altering the space of other tenants or amounts expended by Landlord to perform the delinquent obligations of other tenants of the Project; (ix) costs and expenses of any insurance which is not required or permitted to be carried by Landlord pursuant to the provisions
Exhibit B 1
4073687.v10
of this Lease and is not customarily maintained by landlords of office buildings in the Beaverton market; (x) costs, expenses, fines or penalties due to Landlord’s violations of any governmental law or rule; (xi) income, excess profit or corporate capital stock tax; (xii) costs and expenses for which Landlord has been reimbursed by insurance, another service or third party; (xiii) Landlord’s general overhead and administrative expenses (including, without limitation, salaries and expenses of Landlord’s executive officers); and (xiv) costs related to maintaining Landlord’s existence as a limited partnership or other entity.
Notwithstanding any provision to the contrary set forth herein in no event shall those components of Operating Expenses constituting Controllable Expenses (defined below) in any particular Expense Year, starting with the second Expense Year, exceed on an aggregate basis, the amount that such Controllable Expenses would have been for such Expense Year had the Controllable Expenses included in the first Expense Year increased by five percent (5%) per year (on a cumulative and compounding basis). For instance, if Controllable Expenses increase two percent (2%) between the first and second year, and then increase nine percent (9%) between the second and third year, Landlord shall be permitted to pass through an eight percent (8%) increase between year two and year three. For purposes of this Lease, "Controllable Expenses" shall mean only the following costs and expenses (A) landscaping costs, (B) the cost of security patrols, (C) signage costs, (D) costs and salaries and contract labor and office supplies incurred by Landlord for property management, but not third-party property management fees (C) any insurance costs, (D) Tax expenses, and (E) costs to comply with applicable Laws and other governmental requirements. Landlord and Tenant agree that the foregoing 5% limitation shall not apply to any other Operating Expenses.
Landlord shall not (i) make a profit by charging items to Operating Expenses that are otherwise also charged separately to others and (ii) collect Operating Expenses from Tenant and all other tenants in the Project in an amount in excess of what Landlord incurs for the items included in Operating Expenses.
1.02"Real Property Taxes" shall include any fee, license fee, tax, levy, charge, or assessment (hereinafter individually and/or collectively referred to as "Tax") imposed by any authority having the direct or indirect power to tax and where such Tax is imposed against the Property, or any part thereof, or Landlord in connection with its ownership or operation of the Property, including but not limited to: (a) any Tax on rent or Tax against Landlord's business of leasing the Property; (b) any Tax by any authority for services or maintenance provided to the Property, or any part thereof, including but not limited to, fire protection, streets, sidewalks, and utilities; (c) any Tax on real estate or personal property levied with respect to the Property, or any part thereof, and any fixtures and equipment and other property used in connection with the Property;
(d) any Tax based upon a reassessment of the Property due to a change in ownership or transfer of all or part of Landlord's interest in the Property; and, (e) any Tax replacing, substituting for, or in addition to any Tax previously included in this definition. Real Property Taxes do not include Landlord's federal or state net income taxes. Real Property Taxes shall include the cost of contests of Real Property Taxes.
1.03"Utility and Service Costs" shall include all Landlord incurred utility and service costs and expenses including but not limited to costs related to water and plumbing, electricity, gas,
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lighting, steam, sewer, waste disposal, and HVAC, and all costs related to plumbing, mechanical, electrical, elevator, HVAC, and other systems.
1.04"Insurance Premiums" shall include all insurance premiums for all insurance policies maintained by Landlord from time to time related to the Property.
1.05Throughout the Term, Tenant will pay as Additional Rent its Proportionate Share of the total amount of Operating Expenses in each calendar year. Estimated payments shall be made monthly on or before the first day of each calendar month. Tenant's Proportionate Share will be prorated for partial months.
1.06Tenant's Proportionate Share of Operating Expenses shall be determined and paid as follows:
(a)Tenant's Operating Expense estimates: On or before April 1, or as soon as is practical thereafter, Landlord will provide Tenant with a determination of: (a) Tenant's annual share of estimated Operating Expenses for the then current calendar year; (b) Tenant's monthly Operating Expense estimate for the then current year; and, (c) Tenant's retroactive estimate correction billing (for the period of January 1^st^ through the date immediately prior to the commencement date of Tenant's new monthly Operating Expense estimate) for the difference between Tenant's new and previously billed monthly Operating Expense estimates for the then current year.
(b)Tenant's Proportionate Share of actual annual Operating Expenses: Each year, Landlord will provide Tenant with a determination reflecting the total Operating Expenses for the previous calendar year (each, an Operating Expense Statement"). If the total of Tenant's Operating Expense estimates billed for the previous calendar year is less than Tenant's Proportionate Share of the actual Operating Expenses, the Operating Expense Statement will indicate the payment amount and date due. If Tenant has paid more than its Proportionate Share of Operating Expenses for the preceding calendar year, Landlord will credit the overpayment toward Tenant's next due Operating Expense obligations. Monthly payments to Landlord of Operating Expense estimates are due on the 1^st^ of each month. Tenant's retroactive estimate correction, and actual annual Operating Expense charges, if any, shall be due within thirty (30) days after receipt of an Operating Expense Statement.
2.Unless Landlord otherwise elects, Tenant shall pay each Operating Expense in accordance with Tenant's Proportionate Share of the Building or Tenant's Proportionate Share of the Project or the Property, whichever is designated by Landlord. Landlord shall have the right to make allocations ("Allocations") to Tenant of any one or more Operating Expenses on a different basis. Landlord shall have the right to make any such Allocations in any reasonable manner (including use of estimates). For example, if Landlord deems it reasonable to do so, Landlord shall have the right to elect at any time and from time to time (a) to make any Allocation of one or more Operating Expenses based upon Tenant's Proportionate Share of the Building and to make other Allocations on Tenant's Proportionate Share of the Project or the Building, (b) to make Allocations of certain Operating Expense items among less than all Tenants and/or other than based upon the respective square footages of the tenants, (c) to make different Allocations for different Operating Expenses, and/or (d) to alter an Allocation or the method of determining an Allocation from time to time. In no event shall Landlord be liable to Tenant based upon any
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incorrect or disputed Allocation nor shall Tenant have any right to terminate this Lease by reason of such Allocation; except, that should Tenant correctly determine during any Audit (as defined below) or otherwise during the Term of this Lease that any Allocation is overstated or incorrectly applied to Tenant, Landlord shall, within ten (10) business days after written demand therefor, reimburse Tenant for such overstated or incorrect Allocation.
3.Tenant, within sixty (60) days after receiving Landlord's determination of Operating Expenses, may give Landlord written notice ("Review Notice") that Tenant intends to review Landlord's records of the Operating Expenses (excluding Real Property Taxes) for the calendar year to which the statement applies. Within a reasonable time after receipt of the Review Notice, Landlord shall make all pertinent records available for inspection that are reasonably necessary for Tenant to conduct its review. If any records are maintained at a location other than the management office for the Building, Tenant may either inspect the records at such other location or pay for the reasonable cost of copying and shipping the records. If, after Tenant has performed its review described above in this Section 3, Tenant retains an agent to review Landlord's records (an “Audit”), the agent must be with a CPA firm licensed to do business in the state where the Property is located. Tenant shall be solely responsible for all costs, expenses and fees incurred for Tenant’s own review and for any Audit. Within ninety (90) days after the records are made available to Tenant, Tenant shall have the right to give Landlord written notice (an "Objection Notice") stating in reasonable detail any objection to Landlord's statement of Operating Expenses for that year. If Tenant fails to give Landlord an Objection Notice within the ninety (90)-day period or fails to provide Landlord with a Review Notice within the sixty (60)- day period described above, Tenant shall be deemed to have approved Landlord's determination of Operating Expenses and shall be barred from raising any claims regarding Operating Expenses for that year. If Tenant provides Landlord with a timely Objection Notice, Landlord and Tenant shall work together in good faith to resolve any issues raised in Tenant's Objection Notice. If Landlord and Tenant determine that Operating Expenses for the calendar year are less than reported, Landlord shall provide Tenant with a credit against the next installment of Tenant's Proportionate Share of Operating Expenses in the amount of the overpayment by Tenant. Likewise, if Landlord and Tenant determine that Operating Expenses for the calendar year are greater than reported, Tenant shall pay Landlord the amount of any underpayment within thirty (30) days. The records obtained by Tenant shall be treated as confidential. In no event shall Tenant be permitted to examine Landlord's records or to dispute any statement of Operating Expenses unless Tenant has paid and continues to pay all Rent when due. Notwithstanding anything to the contrary specified herein: (a) if an Audit is performed and proves that total Operating Expenses for the applicable calendar year were overstated by more than five percent (5%), then Landlord shall reimburse Tenant for Tenant’s third-party costs and expenses incurred in connection with such Audit in an amount not to exceed $5,000; and (b) if an Audit is performed and fails to prove that total Operating Expenses for the applicable calendar year were overstated by more than five percent (5%), then Tenant shall reimburse Landlord for Landlord’s third-party costs and expenses incurred in connection with such Audit in an amount not to exceed $5,000.
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EXHIBIT C
RULES AND REGULATIONS
Landlord reserves the right to make such other and reasonable rules and regulations as in its judgment may from time to time be needed for safety and security, for care and cleanliness of the Building and the Project and for the preservation of good order therein. Tenant agrees to abide by all such Rules and Regulations herein stated and any additional rules and regulations which are adopted.
1.Driveways, sidewalks, halls, passages, exits, entrances, elevators, escalators and stairways shall not be obstructed by tenants or used by tenants for any purpose other than for ingress to and egress from their respective premises. The driveways, sidewalks, halls, passages, exits, entrances, elevators and stairways are not for the use of the general public and Landlord shall in all cases retain the right to control and prevent access thereto by all persons whose presence, in the judgment of Landlord, shall be prejudicial to the safety, character, reputation and interests of the Building, the Property and its tenants, provided that nothing herein contained shall be construed to prevent such access to persons with whom any tenant normally deals in the ordinary course of such tenant's business unless such persons are engaged in illegal activities. No tenant, and no employees or invitees of any tenant, shall go upon the roof of any Building, except as authorized by Landlord.
2.No signs, advertisements or notices shall be painted or affixed to windows, doors or other parts of the Building, except those of such color, size, style and in such places as are first approved in writing by Landlord. All tenant identification and suite numbers at the entrance to the Premises shall be installed by Landlord, at Tenant's cost and expense, using the standard graphics for the Building. Landlord shall have the right to remove any such sign, placard, banner, picture, name, advertisement, or notice without notice to and at the expense of Tenant, which were installed or displayed in violation of this rule. All approved signs or lettering on doors and walls shall be printed, painted, affixed or inscribed at the expense of Tenant by a person or vendor approved by Landlord and shall be removed by Tenant at the time of vacancy at Tenant's expense. Except in connection with the hanging of lightweight pictures and wall decorations, no nails, hooks or screws shall be inserted into any part of the Premises or Building except by the Building maintenance personnel without Landlord's prior approval.
3.The directory of the Building or Property, if any, will be provided exclusively for the display of the name and location of tenants only and Landlord reserves the right to charge for the use thereof and to exclude any other names therefrom.
4.No curtains, draperies, blinds, shutters, shades, screens or other coverings, awnings, hangings or decorations shall be attached to, hung or placed in, or used in connection with, any window or door on the Premises without the prior written consent of Landlord. In any event with the prior written consent of Landlord, all such items shall be installed inboard of Landlord's standard window covering and shall in no way be visible from the exterior of the Building. All electrical ceiling fixtures hung in offices or spaces along the perimeter of the Building must be fluorescent or of a quality, type, design, and bulb color approved by Landlord. No articles shall be placed or kept on the window sills to be visible from the exterior of the Building. No articles shall be
Exhibit C 1
155470117.3
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placed against glass partitions or doors which Landlord considers unsightly from outside Tenant's Premises.
5.Each tenant shall be responsible for all persons for whom it allows to enter the Building or the Property and shall be liable to Landlord for all acts of such persons. Landlord and its agents shall not be liable for damages for any error concerning the admission to, or exclusion from, the Building or the Property of any person. During the continuance of any invasion, mob, riot, public excitement or other circumstance rendering such action advisable in Landlord's opinion, Landlord reserves the right (but shall not be obligated) to prevent access to the Building and the Property during the continuance of that event by any means it considers appropriate for the safety of tenants and protection of the Building, property in the Building and the Property.
6.Tenant shall not alter any lock or access device or install a new or additional lock or access device or bolt on any door of its Premises, without the prior written consent of Landlord. If Landlord shall give its consent, Tenant shall in each case furnish Landlord with a key for any such lock. Tenant, upon the termination of its tenancy, shall deliver to Landlord the keys for all doors which have been furnished to Tenant, and in the event of loss of any keys so furnished, shall pay Landlord therefor.
7.The restrooms, toilets, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed, and no foreign substance of any kind whatsoever shall be thrown into them. The expense of any breakage, stoppage, or damage resulting from violation of this rule shall be borne by the tenant who, or whose employees or invitees, shall have caused the breakage, stoppage, or damage.
8.Tenant shall not use or keep in or on the Premises, the Building or the Property any kerosene, gasoline, or inflammable or combustible fluid or material except in strict accordance with the terms of the Lease. Tenant shall not use, keep or permit to be used or kept in its Premises any foul or noxious gas or substance. Tenant shall not allow the Premises to be occupied or used in a manner offensive or objectionable to Landlord or other occupants of the Building by reason of noise, odors and/or vibrations or interfere in any way with other tenants or those having business therein. No animals, except those assisting handicapped persons or pets in strict compliance with the Lease, shall be brought onto the Property or kept in or about the Premises.
9.Except with the prior written consent of Landlord, Tenant shall not sell, or permit the sale, at retail, of newspapers, magazines, periodicals, theater tickets or any other goods or merchandise in or on the Premises, nor shall Tenant carry on, or permit or allow any employee or other person to carry on, the business of stenography, typewriting or any similar business in or from the Premises for the service or accommodation of occupants of any other portion of the Building, or the business of a public barber shop, beauty parlor, nor shall the Premises be used for any illegal, improper, immoral or objectionable purpose, or any business or activity other than that specifically provided for in such Tenant's Lease. Tenant shall not accept hairstyling, barbering, shoeshine, nail, massage or similar services in the Premises or common areas except as authorized by Landlord.
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10.If Tenant requires telegraphic, telephonic, telecommunications, data processing, burglar alarm or similar services, it shall first obtain, and comply with, Landlord's instructions in their installation. The cost of purchasing, installation and maintenance of such services shall be borne solely by Tenant. Landlord will direct electricians as to where and how telephone, telegraph and electrical wires are to be introduced or installed. No boring or cutting for wires will be allowed without the prior written consent of Landlord. The location of burglar alarms, telephones, call boxes and other office equipment affixed to the Premises shall be subject to the prior written approval of Landlord.
11.Tenant shall not install any radio or television antenna, satellite dish, loudspeaker or any other device on the exterior walls or the roof of the Building, without Landlord's consent. Tenant shall not interfere with radio or television broadcasting or reception from or in the Building, the Property or elsewhere.
12.Tenant shall not lay linoleum, tile, carpet or any other floor covering so that the same shall be affixed to the floor of its Premises in any manner except as approved in writing by Landlord. Tenant shall not place a load upon any floor of its Premises which exceeds the load per square foot which such floor was designed to carry or which is allowed by law.
13.Tenant shall not operate or permit to be operated a coin or token operated vending machine or similar device (including, without limitation, telephones, lockers, toilets, scales, amusement devices and machines for sale of beverages, foods, candy, cigarettes and other goods), except for machines for the exclusive use of Tenant's employees and invitees. Bicycles and other vehicles are not permitted inside the Building or on the walkways outside the Building, except in areas designated by Landlord.
14.Business machines and mechanical equipment belonging to Tenant which cause noise or vibration that may be transmitted to the structure of the Building or to any space therein to such a degree as to be objectionable to Landlord or to any tenants in the Building shall be placed and maintained by Tenant, at Tenant's expense, on vibration eliminators or other devices sufficient to eliminate noise or vibration. The persons employed to move such equipment in or out of the Building must be acceptable to Landlord. Tenant shall not install, operate or maintain in the Premises or in any other area of the Building, electrical equipment that would overload the electrical system beyond its capacity for proper, efficient and safe operation as determined solely by Landlord. Tenant shall not furnish cooling or heating to the Premises, including, without limitation, the use of electric or gas heating devices, without Landlord's prior written consent. Tenant shall not use more than its proportionate share of telephone lines and other telecommunication facilities available to service the Building.
15.Each tenant shall store all its trash and garbage within the interior of the Premises or as otherwise directed by Landlord from time to time. Tenant shall not place in the trash boxes or receptacles any personal trash or any material that may not or cannot be disposed of in the ordinary and customary manner of removing and disposing of trash and garbage in the city, without violation of any law or ordinance governing such disposal.
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16.Canvassing, soliciting, distribution of handbills or any other written material and peddling in the Building and the Property are prohibited and each tenant shall cooperate to prevent the same. No tenant shall make room-to-room solicitation of business from other tenants in the Building or the Property, without the written consent of Landlord.
17.Landlord shall have the right, exercisable without notice and without liability to any tenant, to change the name and address of the Building and the Property. Without the prior written consent of Landlord, Tenant shall not use the name of the Building, Project or the Property or any photograph or other likeness of the Building, Project or the Property in connection with, or in promoting or advertising, Tenant's business except that Tenant may include the Building's, Project's or Property's name in Tenant's address.
18.Landlord may from time to time adopt systems and procedures for the security and safety of the Building and Property, its occupants, entry, use and contents. Tenant, its agents, employees, contractors, guests and invitees shall comply with Landlord's systems and procedures. Tenant shall comply with all safety, fire protection and evacuation procedures and regulations established by any governmental agency. Tenant assumes any and all responsibility for protecting its Premises from theft, robbery and pilferage, which includes keeping doors locked and other means of entry to the Premises closed.
19.No Tenant is allowed to unload, unpack, pack or in any way manipulate any products, materials or goods in the common areas of the Property including the parking and driveway areas of the Property. Movement in or out of the Building of furniture or office equipment, or dispatch or receipt by Tenant of merchandise or materials requiring the use of elevators, stairways, lobby areas or loading dock areas, shall be restricted to hours reasonably designated by Landlord. Tenant shall obtain Landlord's prior approval by providing a detailed listing of the activity, which approval shall not be unreasonably withheld. If approved by Landlord, the activity shall be under the supervision of Landlord and performed in the manner required by Landlord. Tenant shall assume all risk for damage to articles moved and injury to any persons resulting from the activity. If equipment, property, or personnel of Landlord or of any other party is damaged or injured as a result of or in connection with the activity, Tenant shall be solely liable for any resulting damage, loss or injury. Tenant shall not make deliveries to or from the Premises in a manner that might interfere with the use by any other tenant of its premises or of the common areas, any pedestrian use, or any use which is inconsistent with good business practice.
20.Smoking of any kind is strictly prohibited, at all times, at any location on the Property, except in the designated smoking area which is located at the OUTSIDE PERIMETER OF THE BUILDING ONLY. Landlord may relocate the designated smoking area at its sole discretion, at any time during the Term of this Lease.
Tenant shall be responsible for the observance of all of the foregoing Rules and Regulations and the Parking Rules and Regulations set forth below by Tenant’s employees, agents, clients, customers, invitees and guests. These Rules and Regulations are in addition to, and shall not be construed to in any way modify, alter or amend, in whole or in part, the terms, covenants, agreements and conditions of any lease of any premises in the Property. Landlord may waive any one or more of these Rules and Regulations for the benefit of any particular tenant or tenants, but
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no such waiver by Landlord shall be construed as a waiver of such Rules and Regulations in favor of any other tenant or tenants, nor prevent Landlord from thereafter enforcing any such Rules and Regulations against any or all tenants of the Building.
PARKING RULES AND REGULATIONS
| 1. | Cars must be parked entirely within painted stall lines. |
|---|---|
| 2. | All directional signs and arrows must be observed. |
| --- | --- |
3.All posted speed limits for the parking areas shall be observed. If no speed limit is posted for an area, the speed limit shall be five (5) miles per hour.
| 4. | Parking is prohibited: |
|---|---|
| (a) | in areas not striped for parking; |
| --- | --- |
| (b) | in aisles; |
| --- | --- |
| (c) | where "no parking" signs are posted; |
| --- | --- |
| (d) | on ramps; |
| --- | --- |
| (e) | in cross hatched areas; and |
| --- | --- |
| (f) | in such other areas as may be designated by Landlord. |
| --- | --- |
5.Handicap and visitor stalls shall be used only by handicapped persons or visitors, as applicable.
6.Parking stickers or any other device or form of identification supplied by Landlord from time to time (if any) shall remain the property of Landlord. Such parking identification device must be displayed as requested and may not be mutilated in any manner. The serial number of the parking identification device may not be obliterated. Devices are not transferable, and any device may not be obliterated. Devices are not transferable and any device in possession of any unauthorized holder will be void. There will be a replacement charge payable by the parker and such parker's appropriate tenant equal to the amount posted from time to time by Landlord for loss of any magnetic parking card or any parking sticker.
7.Every parker is required to park and lock his or her own car. Unless otherwise caused by the gross negligence or willful misconduct of Landlord, all responsibility for damage to cars or persons is assumed by the parker.
8.Loss or theft of parking identification devices must be reported to Landlord, and a report of such loss or theft must be filed by the parker at that time. Any parking identification devices reported lost or stolen found on any unauthorized car will be confiscated and the illegal holder will be subject to prosecution. Lost or stolen devices found by the parker must be reported to Landlord immediately to avoid confusion.
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9.Parking spaces are for the express purpose of parking one automobile per space. Washing, waxing, cleaning, or servicing of any vehicle by the parker and/or such person's agents is prohibited. The parking areas shall not be used for overnight or other storage for vehicles of any type.
10.Landlord reserves the right to refuse the issuance of parking identification or access devices to any tenant and/or such tenant's employees, agents, visitors or representatives who willfully refuse to comply with the Parking Rules and Regulations and/or all applicable governmental ordinances, laws, or agreements.
11.Tenant shall acquaint its employees, agents, visitors or representatives with the Parking Rules and Regulations, as they may be in effect from time to time.
| 12. | [Intentionally Omitted] |
|---|---|
| 13. | [Intentionally Omitted] |
| --- | --- |
14.Vehicles parked in public parking areas will be no larger than full-sized passenger automobiles or standard pick-up trucks. Landlord reserves the right, without notice to Tenant, to tow away at Tenant's sole cost and expense any vehicles parked in any parking area for any continuous period of 24 hours or more, or earlier if Landlord, in its sole discretion, determines such parking to be a hazard or inconvenience to other tenants or Landlord, or violates any rules or regulations or posted notices related to parking. Landlord shall not be responsible for enforcing Tenant's parking rights against third parties. From time to time, Landlord reserves the right, upon written notice to Tenant, to change the location, the availability and nature of parking spaces, establish reasonable time limits on parking, and, on an equitable basis, to assign specific spaces with or without charge to Tenant as Additional Rent.
15.Tenant shall at all times comply with all applicable Laws (as defined in the Lease) respecting the use of the parking facility serving the Building.
16.UNLESS OTHERWISE CAUSED BY THE GROSS NEGLIGENCE OF WILLFUL MISCONDUCT OF LANDLORD, LANDLORD SHALL NOT BE LIABLE FOR ANY LOSS, INJURY OR DAMAGE TO PERSONS USING THE PARKING FACILITY OR AUTOMOBILES OR OTHER PROPERTY THEREIN, IT BEING AGREED THAT, TO THE FULLEST EXTENT PERMITTED BY LAW, THE USE OF THE SPACES SHALL BE AT THE SOLE RISK OF TENANT AND ITS EMPLOYEES. WITHOUT LIMITING THE FOREGOING AND UNLESS OTHERWISE CAUSED BY THE GROSS NEGLIGENCE AND WILLFUL MISCONDUCT OF LANDLORD, TENANT HEREBY VOLUNTARILY RELEASES, DISCHARGES, WAIVES AND RELINQUISHES ANY AND ALL ACTIONS OR CAUSES OF ACTION FOR PERSONAL INJURY OR PROPERTY DAMAGE OCCURRING TO TENANT ARISING AS A RESULT OF PARKING IN THE PARKING FACILITY, OR ANY ACTIVITIES INCIDENTAL THERETO, WHEREVER OR HOWEVER THE SAME MAY OCCUR, AND FURTHER AGREES THAT UNLESS OTHERWISE CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LANDLORD, TENANT WILL NOT PROSECUTE ANY
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CLAIM FOR PERSONAL INJURY OR PROPERTY DAMAGE AGAINST LANDLORD OR ANY OF THE LANDLORD RELATED PARTIES FOR ANY SAID CAUSES OF ACTION. IN ALL EVENTS, TENANT AGREES TO LOOK FIRST TO ITS INSURANCE CARRIER AND TO REQUIRE THAT TENANT'S EMPLOYEES LOOK FIRST TO THEIR RESPECTIVE INSURANCE CARRIERS FOR PAYMENT OF ANY LOSSES SUSTAINED IN CONNECTION WITH ANY USE OF THE PARKING FACILITY. TENANT HEREBY WAIVES ON BEHALF OF ITS INSURANCE CARRIERS ALL RIGHTS OF SUBROGATION AGAINST LANDLORD OR LANDLORD RELATED PARTIES.
17.Landlord hereby reserves the right to enter into a management agreement or lease with another entity for the operation of the Parking Facility ("Operator"). In such event, Tenant, upon request of Landlord, shall enter into a parking agreement upon substantially the same terms hereunder with the Operator, provided that at no time shall Tenant pay or be obligated to pay for parking on or about the Project. Landlord shall have no liability for claims arising through acts or omissions of the Operator. It is understood and agreed that the identity of the Operator may change from time to time during the Term. In connection therewith, any parking lease or agreement entered into between Tenant and any Operator shall be freely assignable by such Operator or any successors thereto.
18.If Tenant or any Tenant Related Party violates the same term or condition under these Parking Rules and Regulations more than 3 times during any 12-month period, and Landlord has notified Tenant thereof, all subsequent violations of such term or condition, shall, at Landlord's election, permit Landlord to impose a $500 fine per violation payable by Tenant as Additional Rent. Such fine shall be cumulative and in addition to any other rights or remedies available to Landlord at law or equity, or provided under the Lease (all of which rights and remedies under the Lease are hereby incorporated herein, as though fully set forth).
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dmrc-ex1027_637.htm
Exhibit 10.27
CHANGE OF CONTROL RETENTION AGREEMENT
This Change of Control Retention Agreement ("this Agreement") is made as of the 1st day of January, 2022, between Digimarc Corporation, an Oregon corporation, with its principal offices at Beaverton, Oregon (hereinafter called the "Company"), and __________ (hereinafter called "Executive").
It is made with reference to the following facts:
| A. | The Board of Directors of the Company (the "Board") believes it imperative that the Company and the Board be able to rely upon Executive to continue in Executive's position, and that they be able to receive and rely upon Executive's advice as to the best interests of the Company and its shareholders, without concern that Executive might be distracted or his or her advice affected by the circumstances described in Section 1.7 below; |
|---|---|
| B. | The prior Change of Control Retention Agreement (the "Existing Agreement") between the Company and Executive expired by its terms on December 31, 2021; |
| --- | --- |
| C. | Executive is willing to enter into this Agreement for the purposes and on the terms and conditions described herein; |
| --- | --- |
NOW, THEREFORE, the parties hereto agree as follows:
| 1. | Definitions |
|---|---|
| 1.1 | "Approved Group" shall mean any employee benefit plan of the Company or of any subsidiary of the Company, or any person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan. |
| --- | --- |
| 1.2 | “Code” means the Internal Revenue Code of 1986, as amended, unless the context clearly indicates otherwise. |
| --- | --- |
| 1.3 | "Cause," when used in connection with the termination of Executive's employment by the Company, shall mean (a) the willful engaging by Executive in misconduct which is significantly injurious to the Company, monetarily or otherwise; (b) any act by the Executive of fraud, dishonesty, embezzlement, misrepresentation or theft of property of the Company; (c) Executive's conviction of or plea of no contest to a felony or any crime involving moral turpitude; (d) Executive's breach of this Agreement or any other agreements with the Company; (e) Executive's unauthorized disclosure of the Company's proprietary or confidential information or breach of any confidentiality/invention/proprietary information agreement(s) with the Company; (f) Executive's violation of the Company's Code of Ethics (if applicable), Code of Business Conduct and Ethics or any other employment rule, code or policy, as such policies currently exist or may be amended or implemented during Executive's employment with the Company; (g) Executive's failure or refusal to follow the lawful instructions of the Company, if such failure or refusal continues for a period of five (5) calendar days after the Company delivers to Executive a written notice stating the instructions that Executive has failed or refused to |
| --- | --- |
-1-
155499694.1
| follow; (h) the entry by a court of competent jurisdiction of an order, or the entering into by Executive of a consent decree, barring Executive from serving as an officer or director of a public company; or (i) Executive's failure to meet and sustain an acceptable level of performance of Executive's duties and obligations to the Company (other than by reason of Disability), which failure continues thirty (30) days after the Company has given written notice thereof to Executive. For purposes of this definition, no act, or failure to act, on Executive's part shall be considered "willful" unless done, or omitted to be done, by Executive in bad faith and without reasonable belief that the action or omission was in the best interests of the Company. | |
|---|---|
| 1.4 | "Contract Period" shall mean the period commencing on the Effective Date and ending on the first (1st) anniversary of the Effective Date. |
| --- | --- |
| 1.5 | "Current Compensation" shall mean one-twelfth (1/12th) of the Minimum Base Salary. |
| --- | --- |
| 1.6 | "Disability" shall mean a physical or mental incapacity of Executive which entitles Executive to commence the receipt of benefits under the long-term disability plan maintained by the Company. |
| --- | --- |
| 1.7 | "Effective Date" shall mean the day preceding the first to occur of the following events (the "Change of Control Events"): |
| --- | --- |
| (a) | Any Person (as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than the Approved Group or a broker, bank, or trust company holding common stock of the Company for the account of customers who are not members of a "group" (within the meaning of Section 13(d) of the Exchange Act), becoming the record or beneficial owner of 50% or more of any class of the Company's voting equity securities, as disclosed by the Company's stock records or in any other way, including, without limitation, any filing with the Securities and Exchange Commission or otherwise; or |
| --- | --- |
| (b) | Upon the purchase of 50% or more of any class of the Company's voting equity securities pursuant to any tender offer or exchange offer for shares of the Company's stock, other than one made by the Company or the Approved Group; or |
| --- | --- |
| (c) | A transaction or series of related transactions in which assets to which more than 50% of the Company's revenues (as measured during the four completed fiscal quarters immediately preceding such transaction or the first in the series of such transactions) are attributable are sold or effectively sold (such as through an exclusive license or comparable arrangement). |
| --- | --- |
| 1.8 | "Fiscal Year" shall mean the 12-month period ending on December 31. |
| --- | --- |
| 1.9 | "Good Reason," when used with reference to a voluntary termination by Executive of his or her employment with the Company, shall mean the occurrence of any of the following, without Executive's express written consent: |
| --- | --- |
| (a) | a substantial reduction in Executive's level of duties, authority or responsibilities; provided, that (i) a change in title or (ii) a change in title or status resulting from the Company, |
| --- | --- |
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| or any affiliate of the Company by which Executive is then employed, being a direct or indirect subsidiary of a parent company following a Change of Control Event, with no corresponding substantial reduction in Executive's level of duties, authority or responsibilities, shall not, in and of itself, constitute Good Reason; | |
|---|---|
| (b) | a material reduction in Executive's Minimum Base Salary, employee benefits or incentive compensation opportunity, unless such reduction is part of an overall reduction for all employees at the same level as Executive; |
| --- | --- |
| (c) | the Company's mandatory transfer of Executive to another geographic location that is more than 35 miles from the location where Executive was employed at the Effective Date, except for required travel on the Company's business to an extent substantially consistent with Executive's business travel obligations immediately prior to the Effective Date hereof; |
| --- | --- |
| (d) | the failure by the Company to obtain an assumption of the obligations of the Company to perform this Agreement by any successor to the Company, to the extent legally required; or |
| --- | --- |
| (e) | the repudiation or failure by the Company or its successor to comply with any of its obligations under this Agreement. |
| --- | --- |
| 1.10 | "Minimum Base Salary" shall mean salary at an annual rate equal to Executive's annual rate of salary on the Termination Date (or, if Executive terminates for Good Reason, within the meaning of Section 1.8(b), immediately prior to the material reduction thereof giving rise to Good Reason). |
| --- | --- |
| 1.11 | "Termination Date" shall mean the effective date as provided in this Agreement for the termination of Executive's employment. |
| --- | --- |
| 1.12 | "Without Cause," when used in connection with the termination of Executive's employment by the company, shall mean any termination of employment of Executive by the Company which is not a termination of employment for Cause or for Disability. |
| --- | --- |
| 2. | Scope of Agreement |
| --- | --- |
| 2.1 | General |
| --- | --- |
This Agreement shall apply with respect to any termination of employment of Executive which occurs during the Contract Period. It shall not apply to any termination of employment of Executive which occurs other than during the Contract Period.
| 2.2 | Termination |
|---|
This Agreement shall terminate on December 31, 2024 if Executive is still in the employ of the Company and no Contract Period is in process. Except as otherwise provided herein, in respect of payments to beneficiaries, this Agreement shall terminate automatically upon the death of Executive.
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| 3. | Termination of Employment of Executive By the Company During the Contract Period |
|---|---|
| 3.1 | General |
| --- | --- |
During the Contract Period, the Company shall have the right to terminate Executive's employment hereunder for Cause, for Disability or Without Cause upon following the procedures hereinafter specified.
| 3.2 | For Disability |
|---|
Termination of Executive's employment for Disability shall become effective on the date that disability benefits, payable to Executive in an amount equal to at least sixty-five (65%) percent of Executive's then Minimum Base Salary commence under any long-term disability plan maintained by the Company or on such later date as the Company may specify in a written notice to the Executive.
| 3.3 | For Cause |
|---|
Termination of Executive's employment for Cause shall become effective five (5) days after a written notice of intent to terminate Executive's employment, specifying the particulars of the conduct of Executive forming the basis for such termination, is given to Executive by the Board.
| 3.4 | Without Cause |
|---|
The Company shall have the absolute right to terminate Executive's employment Without Cause at any time. Termination of Executive's employment Without Cause shall be effective five (5) business days after the date of the giving to Executive by the Board of a written notice of termination, specifying that such termination is Without Cause.
| 3.5 | Effect of Termination |
|---|
Upon a termination of Executive's employment for Cause, or for Disability as provided in Section 3.2 hereof, Executive shall have no right to receive any compensation or benefits hereunder. Upon a termination of Executive's employment Without Cause, Executive shall be entitled to receive the compensation and benefits provided in Section 5 hereof.
| 4. | Termination of Employment by Executive During Contract Period |
|---|
During the Contract Period, the Executive shall be entitled to terminate his or her employment with the Company. The Executive shall give the Company written notice of voluntary termination of employment, which notice need specify only Executive's desire to terminate his or her employment and, if such termination is for Good Reason, set forth in reasonable detail the facts and circumstances claimed by Executive to constitute Good Reason. Any notice by Executive pursuant to this Section shall be effective thirty-one (31) days after receipt by the Company of such notice; provided, that Executive's termination of employment shall not be for Good Reason, if (a) the Company has, within thirty (30) days after receiving
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Executive's notice, corrected the condition that would otherwise result in Good Reason for termination, or (b) Executive fails to give the Company his/her written notice of voluntary termination of employment within ninety (90) days after the initial existence of such condition. If such termination is for Good Reason, Executive shall be entitled to receive the compensation and benefits in Section 5 hereof. If such termination is for other than Good Reason, Executive shall have no right to receive any compensation and benefits hereunder other than Executive's Minimum Base Salary and accrued vacation through the Termination Date.
| 5. | Benefits Upon Termination by the Company Without Cause or by Executive for Good Reason |
|---|
Upon the termination of the employment of Executive by the Company pursuant to Section 3.4 or by Executive for Good Reason pursuant to Section 4 hereof, and if Executive executes and does not revoke a general release of all claims in a form acceptable to the Company and substantially similar to Exhibit A attached hereto (the "General Release"), which General Release becomes effective (i.e., the Executive has executed the General Release and any revocation period has expired without Executive revoking the General Release) within sixty (60) days, or such shorter period as is specified in the General Release, after the Termination Date, Executive shall be entitled to receive the following compensation and benefits:
| 5.1 | The Company shall pay to Executive (a) Minimum Base Salary through the Termination Date, (b) Executive’s short-term incentive bonus (if any) earned, but not paid, for a completed annual bonus period, (c) a pro rata portion of Executive’s target short-term incentive bonus opportunity for the year in which the Termination Date occurs, based on the number of days that Executive was employed during that year, and (d) for the period commencing on the Termination Date and continuing until the first anniversary of the Termination Date, a monthly amount equal to the Current Compensation; provided, however, that the Company's obligation hereunder shall be reduced by the amount of any compensation Executive receives from another source for services rendered during the period that payments are being made pursuant to this Section 5.1; and provided further that any amount due to Executive under clauses (b), (c), or (d) during the period from the Termination Date to the effective date of the General Release shall be paid to Executive on the first regularly-scheduled pay date immediately following the effective date of the General Release, but, in any event not later than two and one half (2-1/2) months following the Termination Date. Executive shall provide notice of all compensation referred to in the preceding sentence to the Company as soon as reasonably practicable and, in any event, within seven (7) days of receipt of such compensation. Notwithstanding the foregoing, if the maximum period during which Executive can consider and revoke the General Release begins in one calendar year and ends in the subsequent calendar year, then no amounts due to Executive under clauses (b), (c), or (d) above shall be paid to Executive until the first regularly scheduled pay date occurring after the later of (y) the last day of the calendar year containing the Termination Date, and (z) the date on which Executive's General Release becomes effective, regardless of when Executive's General Release becomes effective; and the amount paid to Executive on such pay date shall include all amounts due to Executive for the period from the Termination Date to such pay date. |
|---|---|
| 5.2 | The Company shall pay (or, in the Company’s sole discretion) reimburse Executive for) any premiums necessary to continue Executive's (and Executive’s spouse’s and |
| --- | --- |
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| eligible dependents’) health insurance coverage under the Company's group health plan pursuant to Code Section 4980B(f) ("COBRA") (provided that Executive or Executive’s spouse or dependents, as applicable, are eligible for, and timely elect, COBRA continuation coverage under the Company's group health plan) until the earliest of (a) eighteen (18) months after the Termination Date, (b) the first date that Executive is covered under another health insurance plan or program, or (c) the date on which Executive is no longer entitled to COBRA continuation coverage under the Company's group health plan; provided, however, that Executive shall make any such premium payments due prior to the effective date of the General Release and the Company shall reimburse Executive for such premium payments at the same time as it makes the initial installment payment under Section 5.1. Executive shall provide notice of Executive's coverage under another health insurance plan or program as soon as reasonably practicable and, in any event, within seven (7) days after such coverage begins. Notwithstanding the foregoing, the Company may unilaterally amend this Section 5.2 or eliminate the benefit provided hereunder to the extent it deems necessary to avoid the imposition of excise taxes, penalties or similar charges on the Company, including, without limitation, under Code Section 4980D. | |
|---|---|
| 5.3 | Notwithstanding any other provision of this Agreement, if the Company receives confirmation from the Company's independent tax counsel or its certified public accounting firm (the "Tax Advisor") that any portion of any payment by the Company or a related entity to Executive, or any benefit received by Executive, under this Agreement or otherwise (each a "Payment") would be considered to be an "excess parachute payment" within the meaning of Code Section 280G, then the Payments (under this Agreement or otherwise) shall be reduced (the "Reduction") to the highest amount that, in the opinion of the Tax Advisor, may be paid to Executive by the Company without having any portion of any Payment treated as an "excess parachute payment"; provided that the Reduction shall not apply if, in the opinion of the Tax Advisor, the after-tax value to Executive of the total Payments prior to the Reduction is greater than the after-tax value to Executive if the total Payments are determined taking into account the Reduction. The Reduction, if any, shall be applied to the Payments by the Company in its reasonable discretion in the following order: (a) reduction of any Payments that are subject to Code Section 409A on a pro-rata basis or such other manner that complies with Code Section 409A, as determined by the Company, and (b) reduction of any Payments that are exempt under Code Section 409A. If the Tax Advisor requests, Executive and the Company shall obtain, at the Company's expense, and the Tax Advisor may rely on, the advice of a firm of recognized executive compensation consultants as to the reasonableness of any item of compensation to be received by Executive. All determinations made by the Tax Advisor shall be binding upon the parties hereto and all fees and expenses of the Tax Advisor shall be borne by the Company. |
| --- | --- |
| 5.4 | Except as specifically provided herein, the amount of any compensation or benefits provided for in this Section 5 shall not be subject to mitigation by Executive being required to seek other employment or otherwise. |
| --- | --- |
| 5.5 | The parties intend that this Agreement and the payments and other benefits provided hereunder be exempt from the requirements of Code Section 409A to the maximum extent possible, whether pursuant to the short-term deferral exception described in Treasury Regulation Section 1.409A-1(b)(4), the involuntary separation pay plan exception described in Treasury Regulation Section 1.409A-1(b)(9)(iii), or otherwise. To the extent Code Section 409A is applicable to this Agreement (and such payments and benefits), the parties intend that this |
| --- | --- |
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| Agreement (and such payments and benefits) comply with the deferral, payout and other limitations and restrictions imposed under Code Section 409A. Notwithstanding any other provision of this Agreement to the contrary, this Agreement shall be interpreted, operated and administered in a manner consistent with such intentions; provided, however that in no event shall the Company or its agents, parents, subsidiaries, affiliates or successors be liable for any additional tax, interest or penalty that may be imposed on Executive pursuant to Code Section 409A or for any damages incurred by Executive as a result of this Agreement (or the payments or benefits hereunder) failing to comply with, or be exempt from, Code Section 409A. Without limiting the generality of the foregoing, and notwithstanding any other provision of this Agreement to the contrary: |
|---|
(a)to the extent Code Section 409A is applicable to this Agreement, a termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of amounts or benefits upon or following a termination of employment unless such termination is also a "separation from service," as defined in Treas. Reg. Section 1.409A-1(h), after giving effect to the presumptions contained therein (and without regard to the optional alternative definitions available therein), and, for purposes of any such provision of this Agreement, references to "terminate," "termination," "termination of employment" and like terms shall be interpreted accordingly;
(b)if, at the time Executive separates from service, Executive is a "specified employee" within the meaning of Code Section 409A, then to the extent necessary to avoid subjecting Executive to the imposition of any additional tax or interest under Code Section 409A, amounts that would (but for this provision) be payable within six (6) months following the date of Executive's separation from service shall not be paid to Executive during such period, but shall instead be paid in a lump sum on the first business day of the seventh month following the date on which Executive separates from service or, if earlier, upon Executive's death;
(c)each payment made under this Agreement shall be treated as a separate and distinct payment and the right to a series of installment payments under this Agreement, including, without limitation, under Section 5.1 hereof, shall be treated as a right to a series of separate and distinct payments; and
(d)with regard to any provision in this Agreement that provides for reimbursement of expenses or in-kind benefits, except for any expense, reimbursement or in-kind benefit provided pursuant to this Agreement that does not constitute a “deferral of compensation,” within the meaning of Treasury Regulation Section 1.409A-1(b), (i) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during any calendar year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year, provided, that this clause (ii) shall not be violated with regard to expenses reimbursed under any arrangement covered by Code Section 105(b) solely because such expenses are subject to a limit related to the period the arrangement is in effect, (ii) such reimbursements shall be made on or before the last day of the calendar year following the calendar year in which the expense was incurred, and (iii) the right to reimbursement or in-kind benefits shall not be subject
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to liquidation or exchange for another benefit.
| 5.6 | If Executive does not properly execute the General Release or if Executive revokes or attempts to revoke the General Release or if the General Release is not effective within sixty (60) days, or within such shorter period specified in the General Release, after the Termination Date, Executive will not be entitled to any of the benefits provided under this Section 5, except those which may be otherwise required by law. |
|---|---|
| 6. | Successors; Binding Agreement |
| --- | --- |
| 6.1 | As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. |
| --- | --- |
| 6.2 | This Agreement is personal to Executive and Executive may not assign or transfer any part of his or her rights or duties hereunder, or any compensation due to Executive hereunder, to any other person, except that this Agreement shall inure to the benefit of and be enforceable by Executive's personal or legal representatives, executors, administrators, heirs, distributees, devisees, legatees or beneficiaries. |
| --- | --- |
| 7. | Modification; Waiver |
| --- | --- |
No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by Executive and by the Chief Executive Officer of the Company or such other director or officer as may be specifically designated by the Board. Waiver by any party of any breach of or failure to comply with any provision of this Agreement by the other party shall not be construed as, or constitute, a continuing waiver of such provision, or a waiver of any other breach of, or failure to comply with, any other provision of this Agreement.
| 8. | Arbitration of Disputes |
|---|---|
| 8.1 | Any disagreement, dispute, controversy or claim arising out of or relating to this Agreement or the interpretation or validity hereof shall be settled exclusively and finally by arbitration. It is specifically understood and agreed that any disagreement, dispute or controversy which cannot be resolved between the parties, including, without limitation, any matter relating to the interpretation of this Agreement, may be submitted to arbitration irrespective of the magnitude thereof, the amount in controversy or whether such disagreement, dispute or controversy would otherwise be considered justiciable or ripe for resolution by a court or arbitral tribunal. |
| --- | --- |
| 8.2 | The arbitration shall be conducted in accordance with the Commercial Arbitration Rules (the "Arbitration Rules") of the American Arbitration Association (the "AAA"). |
| --- | --- |
| 8.3 | The arbitral tribunal shall consist of one arbitrator. The parties to the arbitration jointly shall directly appoint such arbitrator within thirty (30) days of initiation of the arbitration. If the parties shall fail to appoint such arbitrator as provided above, such arbitrator shall be appointed by the AAA as provided in the Arbitration Rules and shall be a person who (a) |
| --- | --- |
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| maintains his or her principal place of business in the State of Oregon; and (b) has had substantial experience in business transactions. The Company shall pay all of the fees, if any, and expenses of such arbitrator. | |
|---|---|
| 8.4 | The arbitration shall be conducted in Portland, Oregon, or in such other city in the United States of America as the parties to the dispute may designate by mutual written consent. |
| --- | --- |
| 8.5 | At any oral hearing of evidence in connection with the arbitration, each party thereto or its legal counsel shall have the right to examine its witnesses and to cross-examine the witnesses of any opposing party. No evidence of any witness shall be presented in written form unless the opposing party or parties shall have the opportunity to cross-examine such witness, except as the parties to the dispute otherwise agree in writing or except under extraordinary circumstances where the interests of justice require a different procedure. |
| --- | --- |
| 8.6 | Any decision or award of the arbitral tribunal shall be final and binding upon the parties to the arbitration proceeding. The parties hereto hereby waive to the extent permitted by law any rights to appeal or to seek review of such award by any court or tribunal. The parties hereto agree that the arbitral award may be enforced against the parties to the arbitration proceeding or their assets wherever they may be found and that a judgment upon the arbitral award may be entered in any court having jurisdiction. |
| --- | --- |
| 8.7 | Nothing herein contained shall be deemed to give the arbitral tribunal any authority, power, or right to alter, change, amend, modify, add to, or subtract from any of the provisions of this Agreement. |
| --- | --- |
| 9. | Payment Obligations Absolute |
| --- | --- |
The Company's obligation to pay Executive the amounts provided for hereunder and to make the arrangements provided for hereunder shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against Executive or anyone else. All amounts payable by the Company hereunder shall be paid without notice or demand. Except as expressly provided herein, the Company waives all rights which it may now have or may hereafter have conferred upon it, by statute or otherwise, to terminate, cancel or rescind this Agreement in whole or in part. Subject to the right of the Company to seek arbitration under Section 8 and recover, pursuant to such arbitration, any payment made hereunder, each and every payment made hereunder by the Company shall be final and the Company will not seek to recover all or any part of such payment from Executive or from whomsoever may be entitled thereto, for any reason whatsoever.
| 10. | Notice |
|---|
All notices, requests, demands and other communications required or permitted to be given by either party to the other party by this Agreement (including, without limitation, any notice of termination of employment and any notice under the Arbitration Rules of an intention to arbitrate) shall be in writing and shall be deemed to have been duly given when delivered personally or received by certified or registered mail, return receipt requested, postage prepaid, at the address of the other party as follows:
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If to the Company, to:
Digimarc Corporation 9405 S.W. Gemini Drive Beaverton, Oregon 97008 Attn: Chief Legal Officer
If to the Executive, to:
Either party hereto may change its address, for purposes of this Section 10, by giving fifteen (15) days prior notice to the other party hereto.
| 11. | Severability |
|---|
If any term or provision of this Agreement or the application hereof to any person or circumstances shall to any extent be invalid or unenforceable, the remainder of this Agreement or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable shall not be affected thereby, and each term and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.
| 12. | Headings |
|---|
The headings in this Agreement are inserted for convenience of reference only and shall not be a part of or control or affect the meaning of this Agreement.
| 13. | Counterparts |
|---|
This Agreement may be executed in several counterparts, each of which shall be deemed an original.
| 14. | Governing Law |
|---|
This Agreement shall in all respects be governed by, and construed and enforced in accordance with, the laws of the State of Oregon.
| 15. | Payroll and Withholding Taxes |
|---|
All payments to be made or benefits to be provided hereunder by the Company shall be subject to reduction for any applicable payroll related or withholding taxes.
| 16. | Entire Agreement |
|---|
This Agreement supersedes any and all other oral or written agreements heretofore made relating to the subject matter hereof and constitutes the entire agreement of the parties relating to
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the subject matter hereof; provided, that this Agreement shall not supersede or limit or in any way affect any rights Executive may have under any other Company employee benefit plan, program or arrangement (including, without limitation, any pension, life insurance, medical, dental, health, vacation, accident and disability plans, programs and arrangements).
IN WITNESS WHEREOF, the parties have executed this Change of Control Retention Agreement as of the date first above written.
| EXECUTIVE | DIGIMARC CORPORATION |
|---|---|
| By: | By:<br>Name: ________________________<br>Title: ________________________ |
| --- | --- |
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155499694.1
EXHIBIT A SETTLEMENT AGREEMENT AND GENERAL RELEASE
This SETTLEMENT AGREEMENT AND GENERAL RELEASE (this "Agreement"), effective ________, 20__ by and between ___________ ("Executive") and Digimarc Corporation (the "Company")
RECITAL
| A. | Executive and Company are parties to, among other things, a Change of Control Retention Agreement dated as of January 1, 2022 (the "Change of Control Retention Agreement"). |
|---|---|
| B. | The Change of Control Retention Agreement provides, among other things, that if, during the Contract Period (as defined in the Change of Control Retention Agreement): (i) Company terminates the employment of Executive Without Cause (as defined in the Change of Control Retention Agreement), or (ii) the Executive resigns his or her employment for Good Reason (as defined in the Change of Control Retention Agreement) (each a "Release Condition"), then Executive shall execute this Agreement in exchange for the right to receive certain payments from Company as set forth more fully in the Change of Control Retention Agreement. |
| --- | --- |
| C. | Effective _________, 202_, a Release Condition has occurred. |
| --- | --- |
AGREEMENT
In consideration of the foregoing premises, the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
| 1. | Settlement Amount. Execution of this Agreement by Executive shall satisfy the condition that Executive execute a full release of claims as set forth in Section 5 of the Change of Control Retention Agreement and, upon satisfaction of any other conditions set forth in this Agreement or in the Change of Control Retention Agreement, Executive shall be entitled to receive the compensation set forth in Section 5 of the Change of Control Retention Agreement. |
|---|---|
| 2. | Release of Claims. Executive irrevocably and unconditionally releases and forever discharges Company, its affiliates, successors and assigns, and each of their respective officers, directors, members, employees, representatives, insurance carriers, attorneys, subsidiaries, affiliates, representatives, agents, successors, heirs, executors, administrators and assigns, and all persons acting by, through, under or in concert with any of them (collectively " Releasees "), of and from any and all claims, actions, causes of action, suits, debts, charges, complaints, liabilities, obligations, promises, agreements, controversies, damages, and expenses (including attorney's fees and costs actually incurred), of any nature whatsoever, known or unknown, in law or equity, including, without limitation of the foregoing general terms, any |
| --- | --- |
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| claims against Company and Releasees arising from or related to Executive's employment with Company or the termination thereof, and any claims arising from any alleged violation by Company of any federal, state or local statutes, ordinances or common laws, including, but not limited to, the Age Discrimination in Employment Act. | |
|---|---|
| 3. | Confidentiality. Executive agrees that the terms, amount and fact of settlement shall be kept strictly confidential and promises that neither Executive nor Executive's representatives nor agents shall disclose, either directly or indirectly, any information concerning this settlement (or the fact of settlement) to anyone, including but not limited to past, present or future employees of Company, its affiliates, successors or any other company. |
| --- | --- |
| 4. | Disclaimer of Liability. This Agreement does not constitute and shall not be construed as an admission of liability or wrongdoing by Company, its agents, employees or successors, with respect to any claims asserted by Executive, and Company expressly denies that it has done anything wrong or unlawful. |
| --- | --- |
| 5. | Release of Unknown Claims. Executive represents that Executive is not aware of any claims against Company except for those claims that are released by this Agreement. Moreover, the Parties agree and represent that it is within their contemplation that Executive may have claims against Company of which, at the time of the execution of this Agreement, they have no knowledge or suspicion, but that this Agreement extends to claims in any way based upon, connected with, or related to the matters described in Paragraph 2 above, whether or not known, claimed, or suspected by the Parties. |
| --- | --- |
| 6. | Property. As a precondition to any settlement payment in connection with this Agreement, Executive shall return to Company all property of Company in Executive's possession. |
| --- | --- |
| 7. | ADEA Notification. This Agreement contains a release of claims under the Age Discrimination in Employment Act (the "ADEA"). By executing this Agreement, Executive certifies that Executive has knowingly and voluntarily given up any claims that Executive may have under the ADEA if those claims arose before Executive signed this Agreement. Executive further certifies that the payments described in this Agreement are considerations to which Executive would not otherwise be entitled without signing this Agreement, and that these considerations constitute payment in exchange for Executive's execution of this Agreement. |
| --- | --- |
Under the ADEA, Executive may take up to twenty-one (21) days to consider the terms of this Agreement. Executive has the right to accept in less time by signing and delivering this Agreement to Company. Executive is urged to use as many of the twenty-one (21) days as necessary to consider this Agreement and to consult with Executive's attorney about it. Executive acknowledges that Executive has been given at least twenty-one (21) days to consider this Agreement prior to signing it, and Executive's signature on this Agreement is completely voluntary.
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Under the ADEA, Executive may revoke this Agreement within seven (7) days of the date on which Executive signs the Agreement. If Executive revokes, then Executive will not receive any of payments or other considerations set forth in this Agreement. TO BE EFFECTIVE, EXECUTIVE'S REVOCATION MUST BE IN WRITING AND RETURNED TO DIGIMARC CORPORATION, ATTENTION: CHIEF LEGAL OFFICER, WITHIN SEVEN (7) DAYS OF THE DATE OF EXECUTIVE'S SIGNING OF THIS AGREEMENT.
| 8. | Governing Law. This Agreement shall be governed by and construed under the laws of the State of Oregon as applied to agreements among Oregon residents, made and to be performed entirely within the State of Oregon, without giving effect to conflicts of laws principles. |
|---|
PLEASE READ CAREFULLY. THIS IS A RELEASE OF CLAIMS YOU MAY HAVE AGAINST DIGIMARC CORPORATION.
| EXECUTIVE | DIGIMARC CORPORATION |
|---|---|
| By: | By:<br>Name: <br>Title: |
| --- | --- |
| Dated: __________, 20___ | Dated: __________, 20___ |
| --- | --- |
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dmrc-ex211_8.htm
Exhibit 21.1
List of Subsidiaries
Year Ended December 31, 2021
| Name of Affiliate or Entity | Place of<br>Incorporation |
|---|---|
| Digimarc International LLC (100% ownership) | Oregon |
| Attributor Corporation (100% ownership) | Oregon |
| TVaura LLC (51% ownership) | Delaware |
| TVaura Mobile LLC (49% ownership) | Delaware |
| Digimarc GmbH (100% ownership) | Germany |
| EVRYTHING Limited (100% ownership) | United Kingdom |
| EVRYTHING Sarl (100% ownership) | Switzerland |
| EVRYTHING Beijing Information Technology Ltd. (100% ownership) | China |
| EVRYTHING Inc. (100% ownership) | Delaware |
dmrc-ex231_9.htm
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the registration statements (Nos. 333-262230, 333-196035, 333-224876, 333-196035 and 333-154524) on Forms S-8 and registration statement (No. 333-262229, 333-258584 and 333-238995) on Form S-3 of Digimarc Corporation of our report dated March 4, 2022, with respect to the consolidated financial statements of Digimarc Corporation.
/s/ KPMG LLP
Portland, Oregon
March 4, 2022
dmrc-ex311_10.htm
Exhibit 31.1
DIGIMARC CORPORATION
CERTIFICATION
I, Riley McCormack, certify that:
| 1. | I have reviewed this annual report on Form 10-K of Digimarc Corporation; | |
|---|---|---|
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| --- | --- | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| --- | --- | |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have: | |
| --- | --- | |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| --- | --- | |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| --- | --- | |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| --- | --- | |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | |
| --- | --- | |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): | |
| --- | --- | |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| --- | --- | |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. | |
| --- | --- | |
| Date: March 4, 2022 | By: | /S/ RILEY MCCORMACK |
| --- | --- | --- |
| RILEY MCCORMACK | ||
| Chief Executive Officer |
dmrc-ex312_6.htm
Exhibit 31.2
DIGIMARC CORPORATION
CERTIFICATION
I, Charles Beck, certify that:
| 1. | I have reviewed this annual report on Form 10-K of Digimarc Corporation; | |
|---|---|---|
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| --- | --- | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| --- | --- | |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have: | |
| --- | --- | |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| --- | --- | |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| --- | --- | |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| --- | --- | |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | |
| --- | --- | |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): | |
| --- | --- | |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| --- | --- | |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. | |
| --- | --- | |
| Date: March 4, 2022 | By: | /S/ CHARLES BECK |
| --- | --- | --- |
| CHARLES BECK | ||
| Chief Financial Officer |
dmrc-ex321_11.htm
Exhibit 32.1
DIGIMARC CORPORATION
CERTIFICATION
In connection with the Annual Report of Digimarc Corporation (the “Company”) on Form 10-K for the year ended December 31, 2021 as filed with the Securities and Exchange Commission (the “Report”), I, Riley McCormack, Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the U.S. Code, that to the best of my knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and |
|---|---|
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated. |
| --- | --- |
This Certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.
Date: March 4, 2022
| By: | /S/ RILEY MCCORMACK |
|---|---|
| RILEY MCCORMACK | |
| Chief Executive Officer |
dmrc-ex322_7.htm
Exhibit 32.2
DIGIMARC CORPORATION
CERTIFICATION
In connection with the Annual Report of Digimarc Corporation (the “Company”) on Form 10-K for the year ended December 31, 2021 as filed with the Securities and Exchange Commission (the “Report”), I, Charles Beck, Chief Financial Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the U.S. Code, that to the best of my knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and |
|---|---|
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated. |
| --- | --- |
This Certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.
Date: March 4, 2022
| By: | /S/ Charles Beck |
|---|---|
| Charles Beck | |
| Chief Financial Officer |