Exhibit 10.3
COMMERCIAL LEASE
THIS LEASE dated this 17th day of August, 1998, by and between CEDERSTRAND
RENTALS, a Washington general partnership (Landlord), and WATCHGUARD, INC., a
Washington corporation ("Tenant").
The parties covenant and agree as follows:
1. Premises. The Landlord does hereby lease to Tenant, and Tenant does
hereby lease from Landlord those certain premises (hereinafter referred to as
"premises" or "leased premises") commonly known as approximately 2,800 square
feet of the first floor (excluding entry, hall, stairs and other common areas)
which premises is more particularly shown in Exhibit 1 attached hereto, which is
a portion of the building commonly known as 000 Xxxxx Xxxxxx Xxxxx, Xxxxxxx,
Xxxxxxxxxx, which property is legally described in Exhibit 2 attached hereto.
Tenant shall have the exclusive use of four (4) parking spaces (two (2) parking
spaces inside fenced area) which spaces shall be designated by Landlord when
Tenant takes possession of premises.
2. Business Purpose. The premises are to be used for the warehousing and
storage purposes and ancillary office functions related thereto. The premises
shall be used for no other purpose without the prior written consent of
Landlord, which consent shall not be unreasonably withheld. In no case shall
the use of the premises by Tenant impinge upon the quiet enjoyment by other
tenants of their premises in the building. Tenant shall have access to the
premises and the parking spaces 24 hours per day, 7 days per week, 52 weeks per
year.
3. Term. The term of this Lease shall be for two (2) years commencing on
the 15th day of August, 1998, and terminating on the 14th day of August, 2000.
4. Option to Renew. At the expiration of the two (2) year term of this
Lease, Tenant shall have two options to renew this Lease for an additional one
(1) year period each. Tenant shall exercise the option by providing written
notice to Landlord not later than four (4) months prior to expiration of the
then current term of the Lease. For each option period, the base rent as
provided in paragraph 5 shall be increased following amounts:
Third lease year $3,640.00 per mo.
Fourth lease year $3,780.00 per mo.
1
5. Base Rent. As base rent for the premises, the Tenant shall pay to the
Landlord before the 1st day of each rental month, the following amounts:
First lease year $3,360.00 per mo.
Second lease year $3,500.00 per mo.
6. Improvements Paid by Landlord. Tenant accepts the bare space in its
present "as is-where is" condition with the following exceptions which are the
only improvements which shall be made by Landlord:
(a) Broom clean the entire space, including steam cleaning the carpets
in the office of the space.
(b) Provide adequate lighting in the warehouse space.
(c) Confirm that all lighting, HVAC to office space and power to the
premises are in good working order at the time of occupancy.
(d) Securely demise the leased premises from any other space in the
building.
(e) Provide a single restroom for the exclusive use of the leased
premises.
Landlord shall expeditiously complete all build-out of said improvements,
provided that at all times restroom facilities are made available to Tenant.
Landlord represents that there are no material defects in the building.
7. Improvements Paid by Tenant. With the exception of those items stated
in paragraph 6, Tenant shall pay for any and all costs associated with any
improvements made by Tenant on the premises, all of which shall be done in
accordance with paragraph 24 and all applicable building codes and land use
codes.
8. Repairs and Maintenance. Common area maintenance, roof, foundation,
structural integrity of the building and major repairs or replacement of the
existing plumbing HVAC and electrical service and fixtures shall all be at
Landlord's sole cost and expense provided that Tenant shall replace all burned
out light bulbs, shall unplug any plugged toilet or waste pipe, and Tenant shall
repair any damage caused by the negligence of Tenant, its employees, agents, or
invitees. The premises have been inspected and are accepted by Tenant in their
present condition. After taking possession of the premises, Tenant shall at all
times keep the premises in a neat, clean and sanitary condition and shall
replace any glass of windows or doors as may become cracked or broken in the
leased premises. Tenant will at all times
2
preserve the said premises in as good a repair as they are now or may hereafter
be put to at Tenant's sole expense, except that Tenant shall not be obligated to
repair any damage by casualty or reasonable wear and tear.
9. Utilities. Landlord shall pay natural gas, electric, sewer, water, and
garbage for the premises. The base year for such expenses shall be 1998 and
Tenant shall pay a pro rata share of any increases above the base year adjusted
to reflect 95% occupancy and a fully assessed building unless such increased
cost of utilities can be directly attributed to Tenant, in which case such
actual increased cost shall be paid by Tenant or reimbursed to Landlord by
Tenant within ten (10) days of invoice.
10. Garbage. Landlord shall provide one 2-yard capacity dumpster for the
use of all Tenants in the building, which dumpster shall be emptied not less
than one time per week. WatchGuard, Inc.'s use of the dumpster shall not be
more than one-fourth (1/4th) of its capacity, and should it become necessary to
increase such capacity as a result of the needs of a Tenant, Tenant shall
reimburse Landlord for such cost.
11. HVAC. Building standard HVAC service to the office of the premises
shall be available from 7:00 o'clock a.m. to 6:00 o'clock p.m., Monday through
Friday, on generally accepted business days and from 9:00 o'clock a.m. to 1:00
p.m. on Saturdays. Additional HVAC service for after hours use will be
available at a charge that shall be initially agreed upon and determined
according to the actual cost thereof.
12. Late Payment Penalty. Any rent, or reimbursement for elevator
service, real estate taxes, liability insurance, utilities, common area
maintenance and the like, which is not paid by Tenant within ten (10) days of
its due date, shall incur a late payment penalty of five percent (5%) of the
unpaid amount. In addition, all liquidated, unpaid amounts shall bear interest
at twelve percent (12%) per annum.
13. Care of Premises/Compliance. Except as otherwise specifically
provided herein, the Landlord shall not be called upon to make any improvements
or repair of any kind upon the said premises and the said premises shall at all
times be kept and used by Tenant in accordance with the laws of the State of
Washington and ordinances of the City of Seattle, and in accordance with all
directions, rules, and regulations of the health officer, fire marshal, building
inspector, or other proper officer of the City of Seattle at the sole cost and
expense of said Tenant; and Tenant will permit no waste, damage or injury to the
premises, and at Tenant's own cost and expense, will keep all drainage pipes
free and open and will protect water, heating, and other pipes on the premises
so that they will not freeze or become clogged, and will repair all leaks, and
will also repair all damages caused by leaks on the premises
3
by reason of Tenant's failure to protect and keep free, open, and unfrozen any
of the pipes and plumbing on said premises.
14. Use. The Tenant shall conduct and carry on in said premises, the
business for which said premises are leased, and shall not use the premises for
illegal purposes. The Tenant agrees that no stock of goods will be carried, or
anything done in or about the premises which will increase the present rate of
insurance; provided, however, if the Tenant shall engage in such business with
the consent of the Landlord, which business shall increase insurance rates,
Tenant shall pay such increase. Tenant agrees that it has determined to
Tenant's satisfaction that the premises can be used for the purposes for which
they are leased and waives any right to terminate this Lease in the event that
the premises cannot be used for such purposes or for any reason it may not be
used for such purposes during the term of the Lease.
15. Accidents and Liability. All personal property on said leased
premises shall be at the risk of Tenant. Landlord or Landlord's agent shall not
be liable for any damage, either to person or property, sustained by Tenant or
others caused by any defects now in said premises, or the building in which the
premises are located, or any service facilities, or hereafter occurring therein,
or due to the building in which the leased premises are situated, or any part or
appurtenance thereof, becoming out of repair, or caused by fire or by the
bursting or leaking of water, gas, sewer, or steam pipes, or from any act or
neglect of co-tenants or other occupants of said building, or any other persons,
or due to the happening of any accident from whatsoever cause in and about said
building. Except to the extent caused by the negligence or intentional
misconduct of Landlord or its agents, Tenant agrees to defend and hold Landlord
and Landlord's agent harmless from any and all claims for damages suffered or
alleged to be suffered in or about the leases premises by any person, firm or
corporation.
Tenant agrees to maintain public liability insurance on the premises in the
minimum limit of One Million Dollars ($1,000,000.00) for property damage and in
the minimum of One Million Dollars ($1,000,000.00) for bodily injuries and
death, and shall name Landlord as an additional insured. Tenant shall furnish
Landlord a certificate indicating that the insurance policy is in full force and
effect, that Landlord has been named as an additional insured, and that the
policy may not be cancelled unless thirty (30) days' prior written notice of the
proposed cancellation has been given to Landlord.
16. Liens and Insolvency. Tenant shall keep the leased premises and the
property in which the leased premises are situated, free from any liens arising
out of any work performed, materials furnished, or obligations incurred by
Tenant. In the event Tenant becomes insolvent, voluntarily or involuntarily
bankrupt, or if a receiver,
4
assignee or other liquidating officer is appointed for the business of Tenant,
then the Landlord may cancel this Lease at Landlord's option.
17. Assignment. Tenant shall not let or sublet the whole or any part
thereof, nor assign this Lease or any part thereof without the written consent
of Landlord. This Lease shall not be assignable by operation of law. If
consent is once given by Landlord to the assignment of his Lease, or any
interest therein, Landlord shall not be barred from afterwards refusing to
consent to any further assignment. Consent to sublet or assignment shall not be
unreasonably withheld. Tenant shall reimburse Landlord's reasonable attorneys'
fees and costs incurred relative to any assignment or sublet proposed by Tenant.
18. Access. Tenant will allow Landlord or Landlord's agent free access at
all reasonable times to leased premises for the purpose of inspection or of
making repairs, additions, or alterations to the leased premises, the building
or any property owned by or under the control of Landlord, but this right shall
not be construed as an agreement on the part of Landlord to make any repairs
except as specifically provided in this Lease. Reasonable times for entry for
inspection, repairs or alterations shall be defined as normal business hours
upon twenty-four (24) hours' advance written notice (which includes notice by
facsimile), except in emergencies.
19. Possession. Tenant shall be provided possession of the premises on
the Lease commencement date, provided, however, that Landlord shall have an
additional thirty (30) days after said Lease commencement date to complete
construction of improvements set forth in paragraph 6 above.
20. Damage or Destruction. In the event the premises are damaged to such
an extent as to render the same untenantable in whole or in a substantial part
thereof, or are destroyed, it shall be optional with Landlord to repair or
rebuild the same; and after the happening of any such contingency, Tenant shall
give Landlord immediate written notice thereof. Landlord shall have no more
than thirty (30) days after date of such notification to notify Tenant in
writing of Landlord's intentions to repair or rebuild said premises, or the part
so damaged as aforesaid, and if Landlord elects to repair or rebuild said
premises, Landlord shall prosecute the work of such repairing or rebuilding
without unnecessary delay, and during such period the rent of said premises
shall be abated in the same ratio that portion of the premises rendered for the
time being unfit for occupancy shall bear to the whole of the leased premises.
If Landlord shall fail to give the notice aforesaid, or does not complete the
repairs within six (6) months of the date of damage, Tenant shall have the right
to declare this Lease terminated by written notice served upon Landlord or
Landlord's agent.
5
In the event the building in which the premises hereby leased are located
shall be damaged (even though the premises hereby leased shall not be damaged
thereby) to such an extent that in the opinion of Landlord it shall not be
practicable to repair or rebuild, or is destroyed, then it shall be optional
with Landlord to terminate this Lease by written notice served on Tenant within
ninety (90) days after such damage or destruction.
21. Notices. Any notice required to be served in accordance with the
terms of this Lease shall be sent by mail. Notice to Landlord shall be directed
to X.X. Xxx 00000, Xxxxxxx, Xxxxxxxxxx 00000, and, after taking possession of
the premises, notices from Landlord shall be sent to Tenant at the leased
premises.
22. Governmental Fees. All fees which relate to the conduct of Tenant's
business on the premises or relate to any improvements made on the premises by
Tenant shall be paid by Tenant.
23. Signs. Landlord will provide building standard signage for Tenant at
the main building entrance and adjacent to Tenant's entry door. All signage
shall be mutually agreed upon and subject to all City codes.
24. Alterations. Tenant shall not make any alterations, additions or
improvements in the premises without the prior written consent of Landlord in
writing first obtained which consent shall not be unreasonably withheld as to
nonstructural changes, and all alterations, additions and improvements which
shall be made shall be at the sole cost and expense of Tenant, and shall become
the property of the Landlord, and shall remain in and be surrendered with the
premises as a part thereof of the termination of this Lease, without
disturbance, molestation or injury. If Tenant shall perform work with the
consent of Landlord, as aforesaid, Tenant agrees to comply with all laws,
ordinances, rules and regulations of the City of Seattle or any other authorized
public authority. Tenant agrees that Landlord has the right to make alterations
to the premises and to the building in which the premises are situated and
Landlord shall not be liable for any damage which Tenant might suffer by reasons
of such undertaking. Landlord shall have reasonable access to the premises for
the purpose of accessing utilities for the building or for the purpose of making
modifications to the building as may be needed to accommodate other tenants in
the building.
25. Default and Reentry. If any rents above reserved, or any part
thereof, shall be and remain unpaid when the same shall become due, or if Tenant
shall violate or default in any of the covenants and agreements herein
contained, then Landlord may cancel this Lease upon giving the notice required
by law, but in no event, except a delinquency in the rent, less than ten (10)
days' notice of and opportunity to cure
6
said violation or default, and reenter said premises, but notwithstanding such
reentry by Landlord, the liability of Tenant for the rent provided for herein
shall not be extinguished for the balance of the term of this Lease and Tenant
covenants and agrees to make good to Landlord any deficiency arising from a
reentry and reletting of the premises at a lesser rental than herein agreed to.
Tenant shall pay such deficiency each month as the amount thereof is ascertained
by the lessor.
26. Cost and Attorneys' Fees. If by reason of any default on the part of
Tenant it becomes necessary for Landlord to employ an attorney or in case
Landlord shall bring suit to recover any rent due hereunder, or for breach of
any provision of this Lease or to recover possession of the leased premises, or
if Tenant shall bring any action for any relief against Landlord, declaratory or
otherwise, arising out of this Lease, then the prevailing party shall be
entitled to recovery of all costs of this dispute, including reasonable
attorneys' fees, expert witness fees, and the costs and fees incurred in any
arbitration, court proceeding or appeal.
27. Nonwaiver of Breach. The failure of Landlord to insist upon strict
performance of any of the covenants and agreements of this Lease, or to exercise
any right herein conferred in any one or more instances, shall not be construed
to be a waiver or relinquishment of any such, or any other covenants or
agreements, but the same shall be and remain in full force and effect.
28. Removal of Property. At the conclusion of the tenancy, Tenant shall
have the right and the obligation to remove all of its furnishings, equipment
and trade fixtures on the premises. In the event of any lawful entry in, or
taking possession of, the leased premises as aforesaid, Landlord shall have the
right, but not the obligation, to remove from the leased premises all personal
property located therein, and may store the same in any place selected by
Landlord, including but not limited to a public warehouse, at the expense and
risk of the owners thereof, with the right to sell such stored property, after
commercially reasonable notice to Tenant and to any party holding a perfected
security interest in such property, and after it has been stored for a period of
thirty (30) days or more. The proceeds of sale shall first be applied to the
cost of such sale, second to the payment of reasonable charges for moving and
storage, if any, and third to the payment of any other sums of money which may
then be due from Tenant to Landlord under any of the terms hereof or to any
creditor of Tenant holding a perfected security interest in the priority
established by law, and the balance, if any, to be paid to Tenant.
29. Heirs and Successors. Subject to the provisions hereof pertaining to
assignment and subletting, the covenants and agreements of this Lease shall be
binding upon the heirs, legal representatives, successors and assigns of any or
all of the parties hereto.
7
30. Hold-Over. If Tenant shall, with the written consent of Landlord,
hold over after the expiration of the term of this Lease, such tenancy shall be
for an indefinite period of time on a month-to-month tenancy, which tenancy may
be terminated as provided by the laws of the State of Washington. During such
tenancy, Tenant agrees to pay to Landlord the same rental rates as set forth
herein, unless a different rate is agreed upon, and to be bound by all of the
terms, covenants and conditions as herein specified, so far as applicable.
31. Subordination. This Lease is subject and thereby subordinated to all
present and future mortgages, deeds of trust and other encumbrances affecting
the demised premises of the property of which said premises are a part. Tenant
agrees to execute, at no expense to Landlord, any instrument which may be
reasonably deemed necessary or desirable by Landlord to further effect the
subordination of this Lease to any mortgage, deed of trust or encumbrance.
Notwithstanding the foregoing provisions of this section, no such subordination
shall adversely affect Tenant's rights under this Lease.
32. Common Areas. The premises are part of a building which is occupied
or may be occupied by other tenants. Tenant agrees to conform to Landlord's
reasonable written ruses and regulations pertaining to the parts of the building
that are in common use by tenants.
33. Condemnation. In the event a substantial part of the premises is
taken by the right of eminent domain, or purchase by the condemnor, in lieu
thereof, so as to render the remaining premises untenantable, then this Lease
shall be cancelled as of the time of taking at the option of either party. In
the event of a partial taking which does not render the premises untenantable,
the rent shall be reduced in direct proportion to the taking. Tenant shall have
no claim to any portion of the compensation for the taking of the land or
building. Landlord shall have no claim to any portion of the compensation paid
to Tenant by the condemnor.
34. Subrogation Waiver. To the extent allowed by their respective
insurance policies, each of Landlord and Tenant herewith and hereby releases and
relieves the other and waives their entire right of recovery against the other
for loss or damage arising out of or incident to the perils described in
standard fire insurance policies and all perils described in the "Extended
Coverage" insurance endorsement approved for use in the site where the premises
are located, which occurs in, on or to the premises, whether due to the
negligence of either party, their agents, employees or otherwise.
Notwithstanding the foregoing, this provision shall not be construed in any
fashion which shall cause impairment of either party's primary insurance
coverage.
8
35. Surrender of Premises. Tenant agrees, upon expiration or sooner
termination of this Lease, to peacefully quit and surrender the premises without
notice, leave the premises neat and clean and to deliver all keys to the
premises to Landlord.
36. Tenant's Compliance With Environmental Laws. The parties acknowledge
that there are certain federal, state and local laws, regulations and guidelines
now in affect and that additional laws, regulations and guidelines may hereafter
be enacted, relating to or affecting the leased premises and the larger parcel
of land upon which the leased premises may be a part, concerning the impact on
the environment of construction, land use, the maintenance and operation of
structures and the conduct of business.
Tenant shall not cause, or permit to be caused, any act or practice by
negligence, or omission, or otherwise, that would adversely affect the
environment or do anything or expressly authorize anything to be done that would
violate any of said laws, regulations or guidelines. Any violation of this
covenant shall be an event of default under this Lease. Tenant shall indemnify
and hold Landlord harmless from any and all costs, expenses, claims, losses,
damages, fines, and penalties, including reasonable attorneys' fees, that may in
any manner arise out of or be imposed because of the failure of Tenant to comply
with this covenant. The foregoing shall cover all requirements whether or not
foreseeable at the present time and regardless of the expense attendant thereon.
Landlord shall not cause, or permit to be caused, any act or practice by
negligence, or omission, or otherwise, that would adversely affect the
environment or do anything or expressly authorize anything to be done that would
violate any of said laws, regulations or guidelines. Any violation of this
covenant shall be an event of default under this Lease. Landlord shall
indemnify and hold Tenant harmless from any and all costs, expenses, claims,
losses, damages, fines and penalties, including reasonable attorneys' fees, that
may in any manner arise out of or be imposed because of the failure of Landlord
to comply with this covenant. The foregoing shall cover all requirements
whether or not foreseeable at the present time and regardless of the expense
attendant thereon.
37. Authority/Consent. Any corporate officer signing this Lease on behalf
of a corporation warrants that he/she has authority to enter into this Lease on
behalf of such corporation.
38. Real Estate Commission. A real estate commission equal to three
percent (3%) of the total rent due for the initial two-year term of this Lease
will become due and owing to Leibsohn & Company by Landlord at such time as
Tenant
9
pays the first month's rent to Landlord. Landlord shall pay its agent, Xxxx
Xxxxxxxxxxx of Colliers International, in accordance with a separate agreement.
Both parties warrant and represent that there is no other commission or
liability owed to any broker or any other party as a result of consummation of
this Lease.
39. Facsimile/Counterparts. A facsimile copy of a signed copy of this
Lease shall have the same binding effect as an original. This Lease may be
executed in counterparts. Parties will circulate an original, notarized Lease as
soon as practical after exchanging facsimile copies.
IN WITNESS WHEREOF, the parties hereto have executed this Lease the day and
year first above written.
LANDLORD: TENANT:
CEDERSTRAND RENTALS, a WATCHGUARD, INC., a
Washington general partnership Washington corporation
By: /s/ Xxxxxxx X. Xxxxxxxxxxx By: /s/ Xxxxxx X. Xxxxx
--------------------------- ----------------------------
Xxxxxxx X. Xxxxxxxxxxx Xxxxx Xxxxx,
General Partner Chief Financial officer
10
STATE OF WASHINGTON )
) ss.
County of King )
On this _____ day of August, 1998, before me personally appeared Xxxxxxx X.
Xxxxxxxxxxx, to me known to be one of the general partners of Cederstrand
Rentals, the partnership that executed the within and foregoing instrument, and
acknowledged said instrument to be the free and voluntary act and deed of said
partnership, for the uses and purposes therein mentioned, and on oath stated
that he was authorized to execute said instrument.
IN WITNESS WHEREOF I have hereunto set my hand and affixed my official seal
the day and year first above written.
/s/ Xxxxxx X. Xxxxxx
----------------------------- ------------------------------------------------
Name (printed): Xxxxxx X. Xxxxxx
NOTARY SEAL Notary Public in and for the State of Washington,
residing at King County
My Commission expires: 10/25/99
----------------------------- ------------------------------------------------
STATE OF WASHINGTON )
) ss.
County of King )
On this _____ day of August, 1998, before me personally appeared Xxxxx
Xxxxx, to me known to be the Chief Financial Officer of WatchGuard, Inc., the
corporation that executed the within and foregoing instrument, and acknowledged
said instrument to be the free and voluntary act and deed of said corporation,
for the uses and purposes therein mentioned, and on oath stated that she was
authorized to execute said instrument.
IN WITNESS WHEREOF I have hereunto set my hand and affixed my official seal
the day and year first above written.
/s/ Xxxxxx X. Xxxxxx
----------------------------- ------------------------------------------------
Name (printed): Xxxxxx X. Xxxxxx
NOTARY SEAL Notary Public in and for the State of Washington,
residing at King County
My Commission expires: 10/25/99
----------------------------- ------------------------------------------------
11
EXHIBIT 2
Legal Description
PORTIONS XXXX 0, 0 XXX 0, XXXXX 000, XXXXXXX TIDE LANDS, IN KING COUNTY,
WASHINGTON, DESCRIBED AS FOLLOWS:
BEGINNING AT THE NORTHEAST CORNER OF SAID LOT 2;
THENCE WEST ALONG THE NORTH LINE OF SAID LOT 23.13 FEET TO THE EASTERLY LINE OF
STREET AS CONDEMNED IN KING COUNTY SUPERIOR COURT CAUSE NUMBER 397727, AS
PROVIDED BY ORDINANCE NO. 77088, AND AS AMENDED BY ORDINANCE XX. 00000 XX XXX
XXXX XX XXXXXXX;
THENCE ALONG THE EASTERLY LINE OF SAID STREET AS CONDEMNED, SOUTHWESTERLY ALONG
THE ARC OF A CURVE TO RIGHT HAVING A RADIUS OF 345 FEET A DISTANCE OF 79.32 FEET
TO A POINT OF TANGENCY;
THENCE SOUTHWESTERLY ALONG A LINE TANGENT TO SAID CURVE AT SAID POINT, A
DISTANCE OF 49.54 FEET TO A POINT IN THE SOUTH LINE OF SAID XXX 0, 0.00 XXXX
XXXX, XXXXXXXX XXXXX SAID SOUTH LINE FROM THE SOUTHWEST CORNER THEREOF;
THENCE CONTINUING ALONG SAID TANGENT A DISTANCE OF 6.86 FEET TO A POINT OF
CURVATURE;
THENCE SOUTHERLY ALONG THE ARC OF A CURVE TO THE LEFT HAVING A RADIUS OF 39.70
FEET, A DISTANCE OF 17.32 FEET TO A POINT IN THE SOUTH LINE OF THE NORTH 23 FEET
OF SAID LOT 4;
THENCE EAST ALONG SAID SOUTH LINE TO THE EAST LINE OF SAID LOT 4;
THENCE NORTH AND NORTHWESTERLY ALONG THE EASTERLY LINES OF SAID XXXX 0, 0 XXX 0
XX XXX XXXXX OF BEGINNING.
12
EXHIBIT I
[Floor Plan: drawing showing warehouse space, with
WatchGuard areas, other tenants' areas, and common areas marked.]
