SCIENCE PARK II OFFICE BUILDING LEASE

Exhibit 10.7

 

SCIENCE PARK II OFFICE BUILDING LEASE

BY AND BETWEEN

 

Science Park II LLC (as “Landlord”)

 

AND

 

Integral Systems, Inc. (as “Tenant”)

 

 

 

LEASE

 

This Lease is made and entered into this              day of May, 2002, by and between Science Park II LLC, a Colorado limited liability company (“Landlord”), and Integral Systems, Inc. (“Tenant”), a Maryland corporation.

 

Premises.

 

1.1 Landlord leases to Tenant 22,546 square feet of net rentable floor space on the 1st floor of the Science Park II Office Building (the “Building”), 980 Technology Court, Colorado Springs, Colorado 80915 to be known as Suite No. 100      (the “Premises”) as described in Exhibit “A”, to be used for      and for no other purpose, on the terms and conditions set forth herein.

 

Term.

 

2.1 The term of this lease shall be for Five (5) years and Seventeen (17) days commencing on the 15th day of May, 2002 or such other date set forth in Article 9 herein, and shall end on the 31st day of May, 2007, unless sooner terminated pursuant to any of the provisions of this Lease. Landlord and Tenant agree to execute a written addendum setting forth the commencement date and termination date if different than set forth above.

 

Base Rent.

 

3.1 Tenant agrees to pay to Landlord at the principal office of Landlord, or to such other place or party as may be designated from time to time by Landlord, as Base Rent for the Premises, without setoff, abatement or deduction (except as otherwise expressly provided in this Lease), and without demand, the total sum of $976,931.27 payable in advance in equal monthly installments as follows:

 

 

Years are the successive twelve month periods following June 1, 2002. Rent shall commence on June 1, 2002 even though Tenant shall have the right to occupy the space as early as May 15, 2002.

 

The first months rent payment shall be due and payable upon lease execution by Tenant, with successive payments on the first day of each month thereafter. Monthly rental for a partial month shall be prorated at the rate of 1/30th of the full monthly rental rate per day.

 

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This Lease is made on an absolute net basis, and Base Rent is not intended to cover taxes, insurance and operating expenses allocable to the Premises.

 

Late Charges.

 

4.1 If Tenant fails to make any installments of Base Rent, Additional Rent or any other sum due Landlord hereunder within ten (10) days after such amount is due, than such late payments shall bear a late charge equal to five percent (5%) of the delinquent payment for the month or portion thereof after the date such payment was due. Any balances due past thirty (30) days shall bear interest at a rate of 1 and  ¹ / 2 percent per month.

 

Additional Rent.

 

5.1 In addition to all other payments to Landlord by Tenant required hereunder, Tenant shall pay to the Landlord in each year or portion thereof during the term of this Lease, or any renewal or extension thereof, as Additional Rent Tenant’s Pro Rata Share, as defined in Subparagraph 5.2 below, of operating expenses, as defined in Subparagraph 6.1, based on the ratio of the square footage of the Premises to the total square footage of the building. This shall be payable monthly, on the first day of each month, to Landlord at the address given below. Landlord shall have the right to adjust the amount in the event that the actual operating expenses change. Tenant shall receive notice of the adjusted amount no less than thirty (30) days prior to the date when such sums are due and payable at the commencement of this Lease. Tenant’s estimated pro rata share is $5.75 per square foot per year, or $10,803.29 to be remitted monthly along with the base rent installment.

 

5.2 The term, “Tenant’s Pro Rata Share” means the ratio of the net rentable square feet of floor space of the Premises to the total net rentable square feet of floor space in the Building and is agreed to be 67.93 percent (.6793).

 

5.3 Landlord shall provide to Tenant a statement of Tenant’s projected Pro Rata Share of Operating Expenses at the beginning of each calendar year, and Tenant shall pay the entire amount due and owing in twelve (12) equal monthly installments together with the Base Rent payments, to Landlord at the following address:

 

 

In the event Tenant’s Pro Rata Share of the actual Operating Expenses for such calendar year shall exceed the aggregate of the projected Operating Expenses installments actually collected by Landlord from Tenant, Tenant shall pay to Landlord within thirty (30) days following Tenant’s receipt of a statement, the amount of such excess. However, if Tenant’s Pro Rata Share of the actual Operating Expenses for such calendar year is less than the

 

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aggregate of the projected Operating Expenses installments actually collected by Landlord from Tenant, Landlord shall pay to Tenant within thirty (30) days after Tenant’s receipt of the statement, the amount of the overpayment of the projected Operating Expenses installments. If the expiration or termination of this Lease occurs other than on the last day of a calendar year, the amount to be paid by Tenant or reimbursed to Tenant hereunder shall be a pro rata amount based on the ratio of the number of days of the term of this Lease in such last calendar year to 365 days.

 

5.4 Tenant shall have the right to audit and inspect the books and records of Landlord with respect to any cost or items which are passed through to Tenant upon ten (10) days written notice by Tenant to Landlord provided, however that Tenant must notify Landlord in writing within ninety (90) days of receipt by Tenant of any invoice for such costs or items of Tenants intent to audit. Landlord shall cooperate with Tenant in providing Tenant reasonable access to its books and records at the principal place of business of Landlord during normal business hours of this purpose. Landlord shall credit or refund to Tenant any overcharge of such items as disclosed by the audit within thirty (30) days following completion of such audit. In the event the audit discloses an undercharge of such items as billed to Tenant, Tenant shall pay Landlord the amount of such undercharge within thirty (30) days following completion of the audit. Tenant shall be responsible for the costs of the audit.

 

5.5 The obligation of Tenant for the payment of Base Rent and Additional Rent shall survive the termination of this lease. Failure or delay of Landlord in connection with this paragraph shall not constitute a waiver or renunciation of its rights therein.

 

Operating Expenses.

 

6.1 For the purpose of this Lease, Operating Expenses shall mean the total amounts incurred or paid by Landlord in connection with the ownership, management, maintenance, repair, replacement and operation of the Building. Such expenses shall include, but shall not be limited to: janitorial and cleaning contracts; cleaning supplies and equipment; all management costs, typical of a first class office building in Colorado Springs, Colorado; heating and air conditioning; electricity (other than additional electricity supplied to and paid by individual tenants); maintenance or repair of the exterior and interior of the Building including the roof and parking surface; insurance premiums; landscaping services; leasing or amortization of capital improvements made to the Building after the date of the execution of this Lease that reduce the operating or energy expenses, so long as leasing or amortization costs do not exceed the savings resulting from such expenditure, improve life safety or security systems, or are required under any governmental law or regulation that was not applicable at the time the Building was constructed, such cost to be amortized over such reasonable period as determined at Landlord’s sole discretion, together with

 

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interest on the unamortized balance at a rate equal to three percent (3%) per annum at the time such capital improvement is put into service; and taxes. Taxes, for the purposes of this paragraph, shall mean: personal property taxes on property and equipment used in the operation and maintenance of the Building; all real estate taxes including state equalization factor, if any payable (adjusted after protest or litigation, if any) for any part of the term of this Lease, exclusive of penalties or discounts, on the Property; any taxes which shall be levied in lieu of any such taxes on the gross rentals of the Building; any special assessments against the Property which shall be required to be paid during the calendar year in respect to which taxes are being determined; and the expense of contesting the amount or validity of any such taxes, charges, or assessments, including tax consultant fees, such expense to be applicable to the period of the item contested. Notwithstanding any other provision contained in this Lease, if there is more than one tenant occupying the Building, Tenant shall be required to pay any increased cost of any utilities and services, including, without limitation, janitorial, electricity and HVAC, resulting from any substantial or recurrent use of the Premises at any time other than typical hours of operation for an business office for such utilities and services or any use beyond what Landlord agrees to furnish as described above, or resulting from special electrical, cooling or ventilating needs created in certain areas by telephone equipment, computers or other similar equipment or uses. Any failure to pay any excess costs as described above shall constitute a breach of this Lease and shall entitle Landlord to the same rights and remedies as provided in this Lease for failure to pay rent. Landlord shall have the right to utilize and rely upon any reasonable method in determining the amount and cost of any such excess utilities and service usage by Tenant.

 

Security for Performance of Lease.

 

7.1 On the date of the execution, of this Lease Tenant shall deposit with Landlord the sum of Twenty-Five Thousand, Eight Hundred and 00/100 Dollars ($25,800.00), as security for the full and faithful performance by Tenant of the terms of this Lease. Landlord may use, apply, or retain the whole or any part of said security to the extent required for the payment of any rent as to which Tenant is in default, or for any sum which Landlord may expend or may be required to expend by reason of Tenant’s default in respect of any of the terms of this Lease. Any sums so used or applied by Landlord from said security deposit shall immediately be repaid by Tenant to Landlord after notice. Upon termination of this Lease, Landlord shall return to Tenant the security deposit hereinabove provided for, less any sums used or applied upon any default and not reimbursed. In the event of a bona fide sale subject to this Lease, Landlord shall have the right to transfer the security deposit to the purchaser, and upon such transfer Landlord shall be released by Tenant from all liability for the return of such security.

 

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Improvements and Finish.

 

8.1 Landlord shall construct and finish the interior of the Premises pursuant to the terms and conditions set forth in the Addendum, attached hereto, and the plans and specifications mutually approved in writing by Landlord and Tenant. Any work in addition to any of the items specifically enumerated in the Addendum shall be performed by Tenant at Tenant’s cost and expenses, subject to Landlord prior written consent thereto. Any equipment or work other than those items specifically enumerated in the Addendum which Landlord installs or constructs on the Premises on Tenant’s behalf shall be paid for by Tenant within fifteen (15) days after receipt of a statement therefore at cost. Any additional work requested by Tenant shall be commenced only if approved by written change orders signed by both Landlord and Tenant.

 

Possession.

 

9.1 If Landlord, for any reason, whatsoever, cannot deliver possession of the Premises to Tenant on or before the commencement date set forth in Article 2, this Lease shall not be void or voidable, nor shall Landlord be liable to Tenant for any loss or damage resulting therefrom. In such event, the rent as set forth herein shall not commence until possession of the Premises is made available to Tenant. If the Premises are ready for occupancy prior to the commencement date set forth in Article 2, and Tenant takes early occupancy, the term of the lease shall commence on such occupancy date and shall continue through the ending date set forth in Article 2, and Tenant shall pay rental for such early period of occupancy at a rate proportionate to the rental reserved herein during the first year of the lease.

 

9.2 Possession of the Premises shall be deemed delivered when tendered for occupancy, and the tenant improvements agreed to between Landlord and Tenant have been substantially completed. Tenant agrees to take possession upon substantial completion. If only minor or unsubstantial details of construction, decoration, or mechanical adjustments remain to be completed on the Premises then the commencement of the term of the lease shall not be delayed and the payment of rent under the lease will commence on the commencement date set forth in the lease regardless of any contrary provisions of the lease. If a delay in substantial completion shall be due to special work, changes, alterations, or additions to the Premises required by or made by Tenant; or if such delay is due to Tenant’s delay or default in submitting plans, supplying information, approving plans or specs, or authorizing changes or otherwise; or if such delay is caused by any other delay or default of Tenant, then the Premises shall be deemed substantially complete and ready for occupancy on the commencement date.

 

Acceptance of Premises.

 

10.1 By occupying the Premises, Tenant accepts the same and acknowledges that the Premises are in the condition called for

 

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hereunder, unless Tenant furnishes Landlord with a notice in writing specifying any defect in the Premises (the “Punch List”) on or before thirty (30) days after taking possession thereof. Landlord shall make the repairs indicated on the Punch List as provided in the Addendum to this Lease.

 

Use.

 

11.1 Tenant will occupy the Premises for general office use and for no other purpose. Tenant will not use or permit in the Premises anything that will increase the rate of fire insurance thereon or which would prevent Landlord from obtaining reduced rates for long term insurance policies, or maintain anything that may be dangerous to life or limb, or in any manner, deface, injure or commit waste in, on, or about said Building or any portion thereof, or overload the floors, or permit any objectionable noise or odor to escape or be emitted from said Premises, or permit anything to be done upon the Premises in any way tending to create a nuisance or to disturb any other tenants of the Building, or to injure the reputation of the Building or to use or permit the use of the Premises for lodging or sleeping purposes, or for any immoral or illegal purposes. Tenants will comply, at Tenant’s own cost and expense, with all orders, notices, regulations, or requirements of any municipality, state or other governmental authority respecting the use of the Premises.

 

Services.

 

12.1 Landlord shall furnish adequate water, climate control and janitorial services to the Premises as set forth in this Lease, including the rules and regulations attached hereto as Exhibit “B”. Such climate control shall be furnished in accordance with said rules and regulations. Landlord shall not be liable for the stoppage or interruption of any said services or for the utilities caused by riots, strikes, labor disputes, accidents, necessary repairs or any conditions beyond Landlord’s control. Landlord shall be the sole judge as to the amount and kind of services and utilities to be provided under the provisions hereof, and any additional services or utilities required by Tenant shall be at Tenant’s cost and expense. Tenant agrees not to connect or alter any utilities or equipment provided by Landlord without obtaining Landlord’s prior written consent.

 

Use of Electricity.

 

13.1 Tenant’s use of electricity in the Premises shall be for office purposes and shall not at any time exceed the capacity of any of the electrical conductors and equipment in or serving the Premises.

 

13.2 In order to ensure that such capacity is not exceeded and to avert possible adverse effect on the Building’s electrical service, Tenant shall not, without Landlord’s prior written consent in each instance, which shall not be unreasonably

 

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withheld or delayed, connect any additional fixtures, appliance or equipment (other than office equipment) to the Building’s electric distribution system or make any alteration or addition to the electric system of the Premises existing at the commencement of the term hereof. If Landlord does not object or respond to such a request from Tenant within five (5) business days following Landlord’s receipt of such request, Landlord shall be deemed to have consented thereto. If Landlord grants such consent, the cost of all additional risers and other equipment required therefor shall be paid as additional rent by Tenant to Landlord upon demand. Furthermore, Tenant shall pay on demand as additional rent to Landlord the cost of any electric current or other energy used and consumed by Tenant for any other purpose, including, without limitation, the operation of heavy duty accounting equipment, copy equipment and computer equipment. Landlord hereby acknowledges that Tenant will be entitled to use all of the electrical capacity available to the Building for the period of time that Tenant is the sole occupant within the Building. At such time that the remainder of the Building is leased to a party other than Tenant, the electrical capacity of the Building shall be required to be shared in a reasonable manner between Building occupants, including a reasonable decrease in Tenant’s usage, if the reasonable office use of the other Building tenant results in electric capacity issues within the Building. Tenant also hereby acknowledges that it shall pay all utility charges and related costs incurred at the Building until such time as the Option to Expand is terminated. If Tenant does not elect to Exercise the Option to Expand, Tenant will thereafter be obligated to pay its prorata share of utility charges, subject to the terms and conditions of Section 6.1.

 

13.3 Tenant shall pay as additional rent, on demand, the cost of any metering which may be required by Landlord to measure any excess usage of electricity, water or other utility or energy.

 

Alterations.

 

14.1 Tenant will make no alterations in, or additions to, the Premises without obtaining the prior written consent of Landlord. Landlord may impose such conditions on its consent as Landlord deems appropriate.

 

Tenant Repair.

 

15.1 If any apparatus, or elements of the Building used for the purpose of climate control, or if the water pipes, drainage pipes, electric lighting or the room or outside walls of the Building or parking facilities of Landlord become damages or destroyed through the negligence, carelessness or misuse of Tenant, its agents, employees, or anyone permitted by Tenant to be in the Building, then the cost of the necessary repairs, replacements or alterations shall be borne by Tenant, who shall pay the same on demand to Landlord as additional rent.

 

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15.2 Tenant shall keep the Premises in as good order, condition and repair as when they were entered upon, loss by fire (unless caused by the negligence of Tenant, its agents, employees or invitees), accident or ordinary wear and tear excepted. If Tenant fails to keep the Premises in such good order, condition and repair as required hereunder to the reasonable satisfaction of Landlord, as soon as reasonably possible after written demand, Landlord may restore the Premises to such good order and condition and make such repairs without liability to Landlord and upon completion thereof, Tenant shall pay to Landlord, as additional rent, upon demand, the cost of restoring the Premises to such good order and condition and of the making of such repairs.

 

Trade and Other Fixtures.

 

16.1 Any and all installations, alterations, changes, additions, partitions, fixtures or improvements to the Premises, other than Tenant’s trade fixtures, including, but not limiting the generality of the foregoing, all fixtures, lighting fixtures, cooling equipment, built-ins, partitions, wall coverings, tiled linoleum and power wiring shall be the property of the Landlord upon any termination of this Lease. Notwithstanding anything herein contained, Landlord shall be under no obligation to repair, maintain, or insure such installation, changes, alterations, additions, partitions, fixtures, or improvements made or installed by or on behalf of Tenant. Upon termination of the Lease, or within thirty (30) days thereof, Landlord, at its sole discretion, may remove all installations or alterations made by or on behalf of Tenant pursuant to this Article and Landlord may elect to have the Premises restored to their original condition, ordinary wear and tear excepted. Tenant agrees to pay to Landlord all costs and expenses of such removal and restorations within thirty (30) days of receipt from Landlord of notice of said expenses or costs incurred. The obligation to pay such expenses or costs shall survive the termination of the Lease.

 

Lien Protection.

 

17.1 Tenant agrees that at no time during the term of this Lease will Tenant permit a lien or encumbrance of any kind or nature to come into existence against the Premises or the Building. If at any time a lien or encumbrance is filed against the Premises, Tenant agrees it will deposit with Landlord in cash an amount equal to one hundred fifty percent (150%) of the amount of the lien and shall leave the same on deposit with Landlord until said lien is discharged. Landlord shall have the option, but not the responsibility, to satisfy any such lien or encumbrance, and if Landlord pays any such lien or encumbrance, Tenant shall pay to Landlord as additional rent, the amount of such payment on the next following day when monthly installments of rent are due hereunder. If Landlord satisfies any such lien or encumbrance, it may make such payment without inquiry into the accuracy of the amount of such lien or encumbrance or the validity of the lien or encumbrance.

 

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Insurance.

 

18.1 In addition to Tenant’s obligation to pay its Pro Rata Share of the cost of insurance pursuant to Article 6 hereof, Tenant shall pay all premiums due in connection with the insurance Tenant is required to carry under the terms of this Lease and shall furnish Landlord with copies of paid receipts evidencing the payment thereof. All such policies shall be written with companies satisfactory to Landlord and authorized to do business in the State of Colorado. Landlord shall not unreasonably withhold its consent to the placement of insurance with companies proposed by Tenant, so long as the proposed companies have a rating of at least B XIII in the “Best’s Key Rating Guide”.

 

18.2 During the term of this Lease, Tenant shall keep the Premises insured for the protection of Landlord and Landlord’s assignees who shall be so named as additional insured in any such policies, by maintaining bodily injury and property damage insurance including blanket contractual liability broad form property damage, personal injury, completed operations products liability and fire damage legal liability insurance on a commercial general liability form. Such insurance shall be written on a combined single limit basis in an amount of not less than One Million Dollars ($1,000,000.00) and such higher limits as the Landlord may reasonably require from time to time. Tenant shall maintain, at his sole cost and expense, any other form or forms of insurance in amounts and for such risks as Landlord may reasonably require from time to time including, but not limited to, insurance for the full replacement cost of Tenant’s personal property and fixtures located on the Premises on an open perils basis insurance against “all risks of direct physical loss”. Workman’s Compensation Insurance as required by statute including employer’s liability insurance in the limits of $100,000/$500,000/$100,000. All policies of insurance required shall name Landlord and Tenant as insureds and provide that the proceeds of such insurance shall be payable to Landlord and Tenant, as their interests may appear. Tenant shall deliver to Landlord not more than thirty (30) days after execution of this Lease and thereafter at least thirty (30) days prior to expiration of such policy, Certificates of Insurance evidencing the above coverage which shall expressly provide that at least thirty (30) days prior written notice shall be given to Landlord in the event of a material alteration or cancellation of the coverage.

 

18.3 If Tenant shall at any time fail, neglect, or refuse to provide and maintain such insurance, Landlord shall have the option, but shall not be required, to pay for such insurance and any amounts paid therefore by Landlord shall be deemed additional rent due Landlord and shall be paid by Tenant to Landlord at the next rental payment date after any such payment, with interest thereon at the rate of eighteen percent (18%) per annum at the time that such insurance is obtained.

 

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18.4 Tenant agrees to pay any increase in premiums of insurance carried by Landlord if, in the reasonable determination of Landlord, such increase is directly related or caused by Tenant’s use of the Premises.

 

Waiver of Subrogation.

 

19.1 The parties shall obtain from their respective property insurance carriers Waivers of Subrogation against the other party, agents, employees, and, as to Tenant, invitees. Neither party shall be liable to the other for any loss or damage caused by fire or any of the risks enumerated in the standard fire insurance policy with an extended coverage endorsement if such insurance was obtainable at the time of such loss or damage.

 

Casualty Damage.

 

20.1 In the event of fire or other casualty, against which Landlord is insured, and which is not caused by the negligence of Tenant, Base Rent shall abate in the proportion that the unusable portion of the Premises is to the total area of the Premises until the Premises are rebuilt. The proportion of the Premises that is unusable will be established by an independent architect selected by Landlord after the architect consults with Tenant and Landlord. Upon receipt by Landlord of such insurance proceeds, Landlord agrees that it will with reasonable diligence repair the Premises, unless Tenant is obligated to repair under the terms hereof, or unless this Lease is terminated as hereinafter provided, subject to the provisions of Article 20.2 and 20.3.

 

20.2 If the Premises are damaged or destroyed by any cause whatsoever, and if, in the reasonable opinion of Landlord, the Premises cannot be rebuilt or made fit for the purposes of Tenant within one hundred twenty (120) days of the damage or destruction, Landlord shall so notify Tenant within forty-five (45) days from the date of the damage (the “Damage Notification”). Landlord and Tenant shall then each have the right to terminate this Lease by giving the other party written notice of its election to terminate on or before fifteen (15) days following the Damage Notification. If Landlord elects to terminate the Lease pursuant to the terms of this Section 20.2, Landlord, shall have no obligation to rebuild or make the Premises fit for Tenant. If the Lease is terminated pursuant to the terms of this Section 20.2, rent and any other payments for which Tenant is liable under this Lease shall be apportioned and paid to the date of such damage and Tenant shall immediately deliver up possession of the Premises to Landlord provided, however, that those provisions of this Lease which are designated to cover matters of termination and thereafter, shall survive the termination hereof.

 

20.3 Irrespective of whether the Premises are damaged or destroyed, in the event that fifty percent (50%) or more of the area in the Building is damaged or destroyed by any cause whatsoever, and if, in the reasonable opinion of Landlord, the said area cannot be rebuilt or made fit for the purpose of the

 

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tenants of such space within one hundred twenty (120) days after the damage or destruction, Landlord may at its option terminate this lease by giving to Tenant within forty-five (45) days after such damage, notice of termination requiring it to vacate the Premises forty-five (45) days after delivery of the notice of termination and thereupon rent and any other payments shall be apportioned and paid to the date on which possession is relinquished and Tenant shall deliver up possession of the Premises to Landlord in accordance with such notice or termination.

 

Eminent Domain.

 

21.1 If the Premises or a substantial part thereof, shall be taken in eminent domain, or conveyed under threat of condemnation proceedings, then this Lease shall forthwith terminate and end upon the taking hereof as if the original term provided in said Lease expired at the time of such taking. If only such part or portion of the Premises is taken which would not substantially and materially interfere with or adversely affect the business of the Tenant conducted at the Premises, then Landlord, at Landlord’s option to be exercised in writing within thirty (30) days after the taking thereof, may repair, rebuild or restore the Premises, and this Lease shall continue in effect. If, however, because of such taking, the Premises should be rendered untenantable or partially untenantable, then the rent, or a portion thereof, shall abate until the Premises shall have been restored.

 

21.2 In the event that an award is made for taking of such property and parcels of the Premises or the Building in condemnation proceedings, Landlord shall be entitled to receive and retain the amounts awarded or paid for such taking or conveyance; provided, however, that Tenant shall be entitled to receive and retain such a