SUBLEASE AGREEMENT
This
Sublease Agreement (“Sublease”) is made as of the 11th day of September, 2006,
by and between XXXXXXX & XXXXX, INC., a California corporation
(“Sublandlord”), and INNOVATIVE CARD TECHNOLOGIES, INC., a Delaware Corporation
(“Subtenant”).
RECITALS
This
Sublease is made with regard to the following facts:
A. Sublandlord
is the tenant under that certain Office Lease dated January 31, 1994, which
was
amended by a First Amendment dated March 24, 1999, and by a Second Amendment
dated April 15, 2003 (collectively the “Master Lease”), with CA-10880 Wilshire
Limited Partnership, a Delaware limited partnership (as successor in interest
to
10880 Property Corporation, a Delaware corporation) (the “Master Landlord”). A
copy of that Master Lease is attached to this Sublease as Exhibit A and
incorporated herein by this reference. Under the Master Lease, Sublandlord
leases approximately 19,182 rentable square feet of office space (the
“Premises”) located on the 9th floor of the building (the “Building”) located at
00000 Xxxxxxxx Xxxxxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000.
B. Subtenant
desires to sublease from Sublandlord a portion of the Premises (the “Subleased
Premises”), as detailed on Exhibit “B” attached hereto and incorporated herein
by this reference. Sublandlord has agreed to sublease the Subleased Premises
to
Subtenant on the terms, covenants and conditions stated in this Sublease. The
Subleased Premises shall be known as Suite 950.
C. NOW,
THEREFORE, in consideration of the mutual covenants contained in this Sublease,
and for valuable consideration, the receipt and sufficiency of which are
acknowledged by the parties, the parties agree as follows:
1. Sublease.
Sublandlord subleases to Subtenant and Subtenant subleases from Sublandlord
the
Subleased Premises, subject to the terms, covenants, and conditions contained
in
this Sublease. Sublandlord and Subtenant agree that the Subleased Premises
contain 6,218 rentable square feet of space. If either party discovers that
the
rentable square feet is different than stated above it shall have no effect
on
the rent due hereunder.
2. Term.
Subject
to the condition set forth in Section 13.6 below, the terms and provisions
of this Sublease shall be effective between Sublandlord and Subtenant as of
the
date of this Sublease. The term of this Sublease will commence on
October 1, 2006 (the “Commencement Date”), and will expire, unless sooner
terminated on July 31, 2009 (the “Expiration Date”). Should Subtenant fail to
surrender and vacate the Subleased Premises by the Expiration Date, Subtenant
shall be subject to the applicable terms of the Master Lease, including, without
limitation, Article 16 (Holding Over) thereof. Any occupancy by Subtenant prior
to the Commencement Date shall be subject to all terms of this Sublease, except
the payment of monthly rent; provided, however, Subtenant shall be responsible
for all other charges incurred by Subtenant pursuant to this Sublease,
including, but not limited to, Sections 8.8 and 13.10 hereof,
below.
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3. Rent.
3.1 Payment
of Rent; Late Charges.
Subtenant will pay the rent addressed to Sublandlord at Xxxxxxx & Xxxxx,
Inc., 00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxx Xxxxxxx, Xxxxxxxxxx 00000,
Attention: Xxxxxxx X. Xxxxxxx, Esq.. The rent will be due on the first (1st)
day
of each month during the term of this Sublease. If any installment of base
rent
is not received by Sublandlord on or before the fifth (5th) day of the month,
a
late fee of five percent (5%) of the amount of base rent then delinquent shall
be charged to Subtenant. This late fee amount constitutes a fair and reasonably
estimate of the cost and expense Sublandlord will incur as a result of
Subtenant’s delinquent payment, the exact amount of which would be extremely
difficult to ascertain. In addition, delinquent rent shall accrue interest,
chargeable beginning on the first (1st) day of the month, at a rate of ten
percent (10%) per annum. Furthermore, in the event that the term of this
Sublease begins or ends on a date that is not the first day of the month, base
rent will be prorated as of that date. Concurrent with Subtenant’s execution of
this Sublease, Subtenant will deliver to the Sublandlord the first month’s base
rent in the amount of $16,788.60. During the period commencing on the
Commencement Date through and including September 30, 2007, base rent shall
be
$16,788.60 per month. During the period commencing on October 1, 2007 through
and including September 30, 2008, base rent shall be $17,292.25. During the
period commencing on October 1, 2008 through and including July 31, 2009, base
rent shall be $17,811.00. If Subtenant fails to pay base rent or other rent
or
charges due hereunder, or a default (as defined in the Master Lease) occurs,
Sublandlord may use, apply or retain all or any portion of the Security Deposit
(as defined in Section 3.2 below) for the payment of any amount due Sublandlord
or to reimburse or compensate Sublandlord for any liability, cost, expense,
loss
or damage (including attorney’s fees) which Sublandlord may suffer or incur by
reason thereof. In the event that Subtenant has never been in default under
the
terms of this Sublease or the Master Lease, the rent due for the 25th
month of
this Sublease shall be applied from the security deposit (as defined below).
In
the event that Subtenant has never been in default under the terms of this
Sublease or the Master Lease, the rent due for the last month of this Sublease
shall be applied from the security deposit (as defined below).
3.2 Security
Deposit.
Concurrent with Subtenant’s execution of this Sublease, Subtenant will deliver
to the Sublandlord the security deposit (“Security Deposit”) in the amount of
$71,244.00. The Security
Deposit shall be held by Sublandlord as security for the faithful performance
by
Subtenant of all the terms, covenants and conditions of the Sublease to be
kept
and performed by Subtenant during the entirety of the Sublease Term. If
Subtenant defaults with respect to any provision of this Sublease (including,
but not limited to, the provisions relating to the payment of rent, Sublandlord
may, but shall not be required to, use, apply or retain all or any part of
the
Security Deposit (a) for the payment of any rent or any other sum in default,
(b) for the payment of any other amount which Sublandlord may spend or become
obligated to spend by reason of Subtenant's default, and/or (c) to compensate
Sublandlord for any loss or damage which Sublandlord may suffer by reason of
Subtenant's default. If any portion of the Security Deposit is so used or
applied, Subtenant shall, within five (5) days after demand therefor, deposit
cash with Sublandlord in an amount sufficient to restore the Security Deposit
to
its original amount. Failure on the part of Subtenant to so restore the Security
Deposit shall be a default under the terms of this Sublease. Subtenant
understands that Sublandlord shall not be required to keep the Security Deposit
separate from its general funds and Subtenant shall not be entitled to interest
on such Security Deposit at the end of the Sublease Term. If Subtenant shall
fully and faithfully perform every provision of this Sublease to be performed
by
it, the Security Deposit or any balance thereof shall be returned to Subtenant
within thirty (30) days after the expiration of the Sublease Term.
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4. Additional
Rent.
Subtenant acknowledges that pursuant to the terms of the Master Lease,
Sublandlord is obligated to pay Additional Rent, which includes Sublandlord’s
estimated share of common area operating expenses, taxes and insurance
(“Sublandlord’s Share”). Subtenant agrees that in addition to the base rent due
under Section 3.1 above, Subtenant shall pay to Sublandlord thirty two and
one-half percent (32.5%) of Sublandlord’s Share of Additional Rent (“Subtenant’s
Share”) for any increase in such Additional Rent in excess of the amount due for
calendar year 2006. Subtenant shall pay Subtenant’s Share to Sublandlord at
least five (5) days prior to the date Sublandlord must pay its share of
Additional Rent to Master Landlord pursuant to the terms of the Master Lease.
Notwithstanding the foregoing, for purposes of this Sublease, the Base Year
shall mean calendar year 2006.
5. Use.
Subtenant agrees to use the Subleased Premises for general office space in
accordance with the provisions of the Master Lease and this Sublease, and for
no
other purpose.
6. Master
Lease.
As
applied to this Sublease, the words “Landlord” and “Tenant” in the Master Lease
will be deemed to refer to Sublandlord and Subtenant, respectively, under this
Sublease.
Except
as
otherwise expressly provided in Section 8 of this Sublease, the covenants,
agreements, provisions, and conditions of the Master Lease to the extent that
they relate to the Subleased Premises and to the extent that they are not
inconsistent with the terms of this Sublease are made a part of and incorporated
into this Sublease as if recited in full in this Sublease.
The
rights and obligations of the Master Landlord and the Tenant under the Master
Lease will be deemed the rights and obligations of Sublandlord and Subtenant,
respectively, under this Sublease, and will inure to the benefit of, and be
binding on, Sublandlord and Subtenant, respectively. As between the parties
to
this Sublease only, in the event of a conflict between the terms of the Master
Lease and the terms of this Sublease, the terms of this Sublease will
control.
7. Performance
by Sublandlord; Status of Master Lease
7.1 Sublandlord’s
Performance Conditioned on Master Landlord’s Performance.
Subtenant recognizes that Sublandlord is not in a position to render any of
the
services or to perform any of the obligations required of Master Landlord by
the
terms of the Master Lease. Therefore, despite anything to the contrary in this
Sublease, Subtenant agrees that performance by Sublandlord of its obligations
under this Sublease is conditioned on performance by the Master Landlord of
its
corresponding obligations under the Master Lease, and Sublandlord will not
be
liable to Subtenant for any default of the Master Landlord under the Master
Lease.
Subtenant
will not have any claim against Sublandlord based on the Master Landlord’s
failure or refusal to comply with any of the provisions of the Master Lease
unless that failure or refusal is a result of Sublandlord’s act or failure to
act. Despite the Master Landlord’s failure or refusal to comply with any of
those provisions of the Master Lease, this Sublease will remain in full force
and effect and Subtenant will pay the base rent and additional rent and all
other charges provided for in this Sublease without any abatement, deduction
or
setoff. Except as expressly provided in this Sublease, Subtenant agrees to
be
subject to, and bound by, all of the covenants, agreements, terms, provisions,
and conditions of the Master Lease, as though Subtenant was the Tenant under
the
Master Lease.
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7.2 Preservation
of Master Lease.
Subtenant will refrain from any act or omission that would result in the failure
or breach of any of the covenants, provisions, or conditions of the Master
Lease
on the part of the Tenant under the Master Lease.
8. Variations
from Master Lease.
As
between Sublandlord and Subtenant, the terms and conditions of the Master Lease
are modified as stated below in this Section 8:
8.1 Base
Rent; Term.
Despite
anything to the contrary stated in the Master Lease, the term of this Sublease,
base rent and additional rent payable under this Sublease are as stated in
Sections 2, 3 and 4 above.
8.2 Brokers.
The
parties to this Sublease warrant to each other that neither party dealt with
any
broker or finder in connection with the consummation of this Sublease other
than
First Property Realty Corporation (“FPRC”), which exclusively represents
Sublandlord, and Stone Xxxxxx (“SM”), which exclusively represents Subtenant and
each party agrees to protect, defend, indemnify and hold the other party
harmless from and against any and all claims or liabilities for brokerage
commissions or finder’s fees arising out of that party’s acts in connection with
this Sublease to anyone other than FPRC and SM. The provisions of this
Section 8.2 will survive the expiration or earlier termination of this
Sublease. The commission or fees payable to FPRC and SM will be paid by
Sublandlord under the terms of separately executed agreements.
8.3 Insurance
and Condemnation Proceeds.
Despite
anything contained in the Master Lease to the contrary, as between Sublandlord
and Subtenant only, in the event of damage to or condemnation of the Subleased
Premises, (i) all insurance proceeds received by or available to Sublandord
pursuant to its insurance policies covering the Subleased Premises (or initially
received by or available to Master Landlord pursuant to its insurance policies
covering the Subleased Premises and thereafter delivered to Sublandlord for
reimbursement of the damage to the Subleased Premises repaired by Sublandlord),
and (ii) all condemnation awards received by Sublandlord under the Master Lease
will be deemed to be the property of Sublandlord. Notwithstanding the
receipt or availability of insurance proceeds and/or condemnation
awards, Sublandlord shall have no obligation to rebuild or restore the
Subleased Premises or any portion thereof affected by damage, destruction,
or
condemnation. Subtenant shall maintain during the term hereof liability and
property damage insurance in such amounts and coverages and in such form as
are
required of Sublandlord under the terms of the Master Lease, but only for the
Subleased Premises. All such insurance shall specifically name Master Lessor
and
Sublandlord (together with any other party or parties as required under the
terms of the Master Lease) as parties insured thereunder. Such insurance shall
not be subject to cancellation, termination or change with respect to Master
Lessor, Sublandlord or such other parties without thirty (30) days’ prior
written notice. A duplicate original of the policy or a certificate of such
insurance shall be delivered to each of Master Lessor and
Sublandlord
prior to
the commencement of the Sublease
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8.4 Notices.
Any
notice that may or must be given by either party under this Sublease will be
delivered (i) personally, (ii) by certified mail, return receipt
requested, or (iii) by a nationally recognized overnight courier, addressed
to the party to whom it is intended. Any notice given to Sublandlord or
Subtenant shall be sent to the respective address set forth on the signature
page below, or to such other address as that party may designate for service
of
notice by a notice given in accordance with the provisions of this
Section 8.4. A notice sent pursuant to the terms of this Section 8.4
shall be deemed delivered (A) when delivery is attempted, if delivered
personally, (B) three (3) business days after deposit into the United
States mail, or (C) the day following deposit with a nationally recognized
overnight courier.
8.5 Amounts
Payable.
All
amounts payable under this Sublease by Subtenant are payable directly to
Sublandlord.
8.6 Provisions
of Master Lease Not Applicable.
All
provisions of the Master Lease apply to this Sublease, except for the following
provisions: the Master Lease Sections 21.2, 29.26, 29.28, Exhibit D, Exhibit
H,
the First Amendment to the Master Lease Sections III, VI, and VIII, and the
Second Amendment to the Master Lease Sections VIII. F, and VIII H through J.
8.7 “As-Is.”
Sublandlord will deliver to Subtenant, and Subtenant hereby accepts from
Sublandlord, the Subleased Premises in their current “as is” condition;
provided, however, following the execution of this Sublease, Sublandlord, shall,
at its cost, construct a reception area and demising wall in accordance with
the
space plan attached hereto as Exhibit “C” and incorporated herein by this
reference. Any other improvements not designated on said plan shall be at the
sole cost and expense of Subtenant and done only after the approval of
Sublandlord and pursuant to the terms of the Master Lease. Subtenant
acknowledges that the work to be performed by Sublandlord shall be performed
during the term of this Sublease, and that such work shall not result in any
abatement of rent and shall not be deemed to constitute a constructive eviction
of Subtenant from the Subleased Premises. Sublandlord
and Subtenant acknowledge that the Sublease Premises contain certain equipment,
furniture and other non-fixed improvements as listed in the Furniture Inventory
included on Exhibit “D” attached hereto and incorporated herein by this
reference (collectively, the "Furniture"). In consideration for the rents to
be
paid by Subtenant hereunder, Sublandlord hereby grants to Subtenant the right
to
use such Furniture throughout the Sublease Term; however, all actual ownership
rights to such Furniture shall belong to Sublandlord. In the event that any
of
such Furniture is damaged, lost or stolen during the Sublease Term (with
reasonable wear and tear expected), for whatever reason, all costs of repair
or
replacement of such Furniture shall be borne solely by Subtenant. In the event
that Subtenant has failed to repair or replace such Furniture on or before
the
termination of the Sublease Term, Sublandlord shall give written notice of
such
failure to Subtenant within fifteen (15) days after the termination of the
Sublease Term to Subtenant. If Subtenant fails to repair or replace such
Furniture within thirty (30) days of Sublandlord's notice, Sublandlord may
thereafter repair or replace such damaged, lost or stolen Furniture in its
reasonable discretion and Subtenant shall be obligated to reimburse 110% of
Sublandlord's actual costs for such repair and/or replacement; such obligation,
shall survive the Sublease Term. The election whether to repair or to replace
any lost, damaged or stolen Furniture shall be Sublandlord's election to be
exercised in its reasonable discretion.
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8.8 Parking.
Sublandlord
shall provide up to nineteen (19) unreserved parking spaces from Sublandlord's
lease allocation in the parking structure. All parking spaces will be at the
then prevailing building rates, which charges shall be paid directly to the
parking operator by Subtenant.
9. Indemnity.
Subtenant agrees to protect, defend, indemnify, and hold Sublandlord harmless
from and against any and all liabilities, claims, expenses, losses and damages
(including reasonable attorney fees and costs), that may at any time be asserted
against Sublandlord by (a) the Master Landlord for failure of Subtenant to
perform any of the covenants, agreements, terms, provisions, or conditions
contained in the Master Lease that Subtenant is obligated to perform under
the
provisions of this Sublease; or (b) any person as a result of Subtenant’s
use or occupancy of the Subleased Premises, except to the extent any of the
foregoing is caused by the negligence or willful misconduct of Sublandlord.
The
provisions of this Section 9 will survive the expiration or earlier
termination of the Master Lease or this Sublease. Sublandlord shall not be
responsible or liable to Subtenant for any and all liabilities, claims,
expenses, losses and damages (including reasonable attorney fees and costs)
due
to any action or inaction on the part of Master Landlord relating to the
Building or the Subleased Premises.
10. Cancellation
of Master Lease.
In the
event the Master Lease is canceled or terminated for any reason, or
involuntarily surrendered by operation of law before the expiration date of
this
Sublease, Subtenant agrees, at the sole option of the Master Landlord, to attorn
to the Master Landlord for the balance of the term of this Sublease and on
the
then executory terms of this Sublease.
That
attornment will be evidenced by an agreement in form and substance reasonably
satisfactory to the Master Landlord. Subtenant agrees to execute and deliver
such an agreement at any time within ten (10) business days after request by
the
Master Landlord. Subtenant waives the provisions of any law now or later in
effect that may provide Subtenant any right to terminate this Sublease or to
surrender possession of the Subleased Premises in the event any proceeding
is
brought by the Master Landlord to terminate the Master Lease.
11. Certificates.
Each
party to this Sublease will, from time to time as requested by the other party,
on not less than ten (10) days prior written notice, execute, acknowledge,
and
deliver to the other party a statement in writing certifying that this Sublease
is unmodified and in full force and effect (or if there have been modifications
that this Sublease is in full force and effect as modified and stating the
modifications). That statement will certify the dates to which base rent,
additional rent, and any other charges have been paid. That statement will
also
state whether, to the knowledge of the person signing the certificate, the
other
party is in default beyond any applicable grace period provided in this Sublease
in the performance of any of its obligations under this Sublease. If the other
party is in default beyond any applicable grace period, the statement will
specify each default of which the signer then has knowledge. It is intended
that
this statement may be relied on by others with whom the party requesting that
certificate may be dealing.
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12. Assignment
or Subleasing.
Subject
to the rights of the Master Landlord and the restrictions contained in the
Master Lease in connection with an assignment or subletting, Subtenant is not
entitled to assign this Sublease or to sublet all or any portion of the
Subleased Premises without the prior written consent of Sublandlord, which
consent shall not be unreasonably withheld. Subtenant shall provide Sublessor
with notice (“Notice”) of Subtenant’s desire to assign or sublease all or a
portion of the Subleased Premises. The Notice shall include the name of the
assignee or sublessee, contact information for such party, and relevant
financial information to allow the Master Landlord and Sublandlord to make
their
decision to consent or not consent. Sublandlord shall be entitled to retain
fifty percent (50%) of all amounts received in connection with any such sublease
or assignment in excess of Subtenant’s rent obligation under this Sublease.
Notwithstanding the foregoing, in the event Subtenant wants to sublease or
assign more than twenty five percent (25%) of the Subleased Premises,
Sublandlord shall have the right to recapture such space by providing Subtenant
notice of such desire within thirty (30) days of receipt of the
Notice.
13. General
Provisions
13.1 Severability.
If any
provision of this Sublease or the application of any provision of this Sublease
to any person or circumstance is, to any extent, held to be invalid or
unenforceable, the remainder of this Sublease or the application of that
provision to persons or circumstances other than those as to which it is held
invalid or unenforceable, will not be affected, and each provision of this
Sublease will be valid and be enforced to the fullest extent permitted by
law.
13.2 Entire
Agreement; Waiver.
This
Sublease constitutes the final, complete and exclusive statement between the
parties to this Sublease pertaining to the Subleased Premises, supersedes all
prior and contemporaneous understandings or agreements of the parties, and
is
binding on and inures to the benefit of their respective heirs, representatives,
successors, and assigns. No party has been induced to enter into this Sublease
by, nor is any party relying on, any representation or warranty outside those
expressly set forth in this Sublease. Any agreement made after the date of
this
Sublease is ineffective to modify, waive, release, terminate, or effect an
abandonment of this Sublease, in whole or in part, unless that agreement is
in
writing, is signed by the parties to this Sublease, and specifically states
that
that agreement modifies this Sublease.
13.3 Captions.
Captions to the sections in this Sublease are included for convenience only
and
do not modify any of the terms of this Sublease.
13.4 Further
Assurances.
Each
party to this Sublease will at its own cost and expense execute and deliver
such
further documents and instruments and will take such other actions as may be
reasonably required or appropriate to evidence or carry out the intent and
purposes of this Sublease.
13.5 Governing
Law.
This
Sublease will be governed by and in all respects construed in accordance with
the laws of the State of California.
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13.6 Consent
of Landlord.
The
Master Landlord’s written consent to this Sublease in accordance with the terms
of Article 14 of the Master Lease is a condition subsequent to the validity
of
this Sublease. If the Master Landlord’s consent has not been obtained and a copy
of that consent delivered to Subtenant by the eleventh (11th) business day
following the date the Transfer Notice (as such term is defined in Section
14.2
of the Master Lease) is delivered to Master Landlord, Subtenant shall thereafter
have the ongoing right, subject to the terms of this Section 13.6, to
terminate this Sublease pursuant to a notice (the “Termination Notice”) so
stating delivered to Sublandlord. If Sublandlord fails to deliver to Subtenant
the consent of Master Landlord to this Sublease within ten (10) days following
receipt of the Termination Notice (the “Termination Date”), this Sublease shall
automatically terminate and the parties shall be released from any further
obligations under this Sublease. If, however, Sublandlord delivers to Subtenant
the consent of Master Landlord on or before the Termination Date, the condition
subsequent set forth in this Section 13.6 shall be satisfied and this
Sublease shall continue in full force and effect.
13.7 Capitalized
Terms.
All
terms spelled with initial capital letters in this Sublease that are not
expressly defined in this Sublease will have the respective meanings given
such
terms in the Master Lease.
13.8 Word
Usage.
Unless
the context clearly requires otherwise, (a) the plural and singular numbers
will each be deemed to include the other; (b) the masculine, feminine, and
neuter genders will each be deemed to include the others; (c) “shall,”
“will,” “must,” “agrees,” and “covenants” are each mandatory; (d) “may” is
permissive; (e) “or” is not exclusive; and (f) “includes” and
“including” are not limiting.
13.9 Form
W-9.
Concurrently with the execution and delivery of this Sublease to Sublandlord,
Subtenant shall deliver to Sublandlord a copy of its Form W-9 Request for
Taxpayer Identification Number and Certification.
13.10 Building
Services.
Pursuant to the Master Lease, Master Landlord shall (i) furnish standard office
heating, ventilating and air conditioning (HVAC) during the standard hours
which
are currently 8:00 a.m. to 6:00 p.m., Monday through Friday, and 9:00 a.m.
to
1:00 p.m. Saturdays, excluding holidays, (ii) clean the Subleased Premises
five
(5) days per week, excluding holidays, and (c) furnish to the Subleased Premises
electricity for standard office lighting fixtures and equipment and accessories
customary for office space. Sublandlord shall not be responsible or liable
to
Subtenant for any and all liabilities, claims, expenses, losses and damages
(including reasonable attorney fees and costs) due to any change in the above
services or for any failure on the part of Master Landlord to deliver such
services to the Subleased Premises. Subtenant shall be responsible for directly
paying Master Landlord for all extra services required by Subtenant, including,
but not limited to, (i) extra cleaning requirement, (ii) after hours HVAC usage,
(iii) additional utility needs, and (iv) replacement of non-building standard
light bulbs such as those located in the conference room.
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The
parties have executed this Sublease as of the date specified above.
| “SUBLANDLORD”: | ||
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XXXXXXX
& XXXXX, INC.,
a
California corporation
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By:
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Name:
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Title:
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| “SUBTENANT”: | ||
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INNOVATIVE
CARD TECHNOLOGIES, INC.
a
Delaware corporation
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By:
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Name:
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Title:
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By:
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Name:
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Title:
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