EXHIBIT 10.7
L E A S E
THIS LEASE is made by and between Knecht' s Plumbing & Heating, a
general partnership organized under the laws of the State of California,
composed of JACK H. KNECHT, GERALD L. KNECHT, and BLAINE ENNINGA (hereinafter
called "Lessor"), and Virtual Reality Laboratories, Inc., a California
corporation.
1. Term and Premises. Lessor hereby leases to Lessee the real property
located at 3534 "A" Empleo, San Luis Obispo, California, consisting of
approximately 2,300 square feet, and more particularly described as follows:
Lot 19 of tract No. 703, in the City of San Luis Obispo, County of San
Luis Obispo, State of California, according to the map thereof recorded
October 31, 1980, in Book 10, at Page 50 of Maps.
The term of the Lease shall commence on January 1, 1996 for a period of
one year to December 31,1996.
2. Option to Rent. Lessee shall have the first option to renew the term
of this Lease for an additional two year period, commencing on the expiration of
the full term specified herein, provided Lessee shall have fully and faithfully
performed all the terms, covenants, and conditions of this Lease for the full
term specified herein.
3. Rent. Lessee shall pay rent to Lessor, for and during the term of
this Lease the sum of $1,680.00 per month. In the event the Lessee exercises the
option to extend the Lease term for the additional two year period of time, the
monthly rental for the extended term shall be $1,600.00 per month.
Lessee shall pay the fixed rent amount in monthly installments
on the first day of each month, without deduction or offset. Rent due on the
first day of the month shall be deemed by Lessor to be delinquent if not
received by the fifth (5th) day of each month. Commencing with the sixth (6th)
day of the month, Lessee shall pay to Lessor a late charge of $100.00 per month.
Lessor and Lessee agree that the late charge as set forth herein is a reasonable
sum of damages due Lessor because of Lessee's late payment of rent, and is
intended to compensate Lessor for expenses incurred as the result of Lessee's
late payment. By execution of this agreement Lessee agrees that it is
impracticable or extremely difficult to fix actual damages or late payment of
rent, and Lessee acknowledges that $100.00 is a reasonable sum for those
damages. The damages incurred by Lessor as set forth herein include but are not
limited to administrative fees, staff time, lost revenue on income.
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B. All rentals shall be paid in lawful money of the United States of
America to Lessor, without deduction or offset, at such place or places as may
be designated from time to time by Lessor.
C. At the time of executing this Lease, the Lessee shall pay to the
Lessor the sum of $3,200.00 representing payment of rent for the first and last
month of the lease term.
4. Use of Premises.
A. The premises may be used and occupied solely for a software
publishing company, and for no other purpose or purposes, without Lessor's prior
written consent. Lessee shall not do or permit anything to be done in or about
the premises or bring or keep anything therein which, will in any way increase
the rate of insurance on the building wherein the premises are situated. No
auction, fire or bankruptcy sale or sales may be conducted by Lessee without
Lessor's prior written consent.
B. Lessee shall not use or permit the use of any portion of the
premises as sleeping apartments. Lessee shall not commit or suffer to be
committed any acts or practices which may injure the building of which the
premises form a part, or be a public or private nuisance, menace to, or may
disturb the quiet enjoyment of the other tenants in the building or adjacent to
the premises. Lessee shall keep the premises and walkways adjacent thereto, and
any portion thereof used for loading and unloading, clean and free from rubbish
and dirt at all times, and shall store all trash within the premises occupied by
Lessee or within a trash area designated by Lessor and shall arrange for the
regular pickup of such trash at Lessee's expense. Lessee shall not burn any
trash of any kind.
5. Partnership. Lessor does not in any way or for any purpose hereby
become a partner of Lessee in it's business or otherwise, or a joint venturer or
a member of any joint enterprise with Lessee. Lessor shall not by virtue of
this Lease be liable for any debts, obligations or liabilities of any kind of
Lessee.
6. Utilities and services. Lessee agrees to pay for utility services,
except water, including without limitation, electricity and gas, as well as all
materials and services which may be furnished to or about the premises during
the lease term unless ordered by Lessor or other tenants of Lessor. Lessor shall
pay for water for the building as well as the Landscaping outside of the
building. Lessee shall keep the premises free and clear of any lien or
encumbrance of any kind whatsoever created or incurred by Lessee's acts or
omissions.
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7. Reasonable Inspection and Notices. Lessor shall have the right to
enter the premises at all reasonable times to inspect the same to see that the
provisions of the Lease are being carried out, to protect and secure any and all
rights of Lessor and to post such reasonable notices as Lessor may desire, to
protect the rights of Lessor against so-called mechanics liens.
8. Maintenance, Improvements and Surrender of the Premises.
A. Lessee hereby agrees that by taking possession of the premises,
he admits that the premises and the appurtenances are delivered in a safe and
tenantable condition and he agrees to exercise all reasonable care and
diligence in the occupation, use and repair thereof to avoid injury to person or
property. Lessee shall keep the premises in good condition and repair, including
without limitation, all heating and plumbing facilities, and equipment and the
interior walls and ceiling. Lessee shall be responsible for all damage or
breakage to glass, whether interior or exterior. Lessee shall also be
responsible for keeping exterior of windows and area below windows clean. The
plumbing facilities shall not be used for any purpose other than for which they
were constructed. No foreign substances of any kind shall be thrown therein. The
expense of any breakage, stoppage or damages resulting from a violation of this
provision, shall be borne by Lessee. Lessee further agrees that any damage or
injury done to the premises shall be paid for by Lessee unless caused by Lessor
or other tenants of Lessor.
B. Any improvements made to the leased premises, by Lessee, shall
become part of the real property, with the exception of trade fixtures, which
include but are not limited to cabinetry, shelving, counters and tops which are
necessary for Lessee's business operation.
C. Upon termination of this Lease, Lessee shall surrender the
premises in a good and clean condition and repair, subject to reasonable wear.
Any part or all property remaining on the premises subsequent to termination of
the lease term at Lessor's option shall automatically become Lessor's property
without cost or expense to Lessor and any part or all such property at Lessor's
option may be removed and stored at the expense and risk of Lessee.
D. Lessee shall not mark, paint, drill or in any way deface any
walls, ceilings, partitions, floors, wood, stone or iron work without Lessor's
prior written consent, which shall not be unreasonably withheld.
E. Lessee shall observe, comply with and execute all present and
future orders, regulations, directions, rules, laws, ordinances, and
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requirements of all governmental authorities and the Board of Fire Underwriters
and any other board or organization exercising similar functions relating to
the use, occupancy or insurability of the premises.
F. Lessee agrees to pay for any labor, services, materials, supplies
and equipment which Lessee permits or causes to be furnished with respect to
the premises, and which may be secured by any lien against the premises. Any
such liens which may attach shall be promptly caused to be released by Lessee.
G. Lessor shall at any and all times have the rights, but not
obligation, to maintain, alter, repair or improve the premises or the building
in which the premises are located, or to add thereto and may for that purpose,
after giving at least thirty (30) days prior written notice, erect scaffolding
and all other necessary structures about and upon the premises and Lessor may
enter in or about the premises and with such material as Lessor may deem
necessary therefor. Lessee waives any claim to damages, including loss of
business or loss of quiet enjoyment resulting therefrom.
9. Indemnification, Non-Liability of Lessor and Insurance.
A. This Lease is made upon the express condition that Lessor is to
be free from all liability, expense and claim for damages by reason of any
injury or death to any person or persons, including Lessee, or property of any
kind whatsoever and to whomever belonging, including Lessee, from any cause or
causes whatsoever during the term of this Lease or any extension thereof, or any
occupancy or use hereunder. Lessee hereby covenants and agrees to indemnify and
save Lessor harmless from all liability, loss, cost and obligations on account
of or arising out of any such injuries or losses howsoever occurring.
B. During the lease term, Lessee shall, at his own expense,
maintain in full force a policy or policies of comprehensive liability
insurance, including property damage, written by one or more responsible
insurance companies licensed to do business in California, that will insure
Lessee and Lessor (and such other persons, firms or corporations that are
designated by Lessor) against liability for any injury to persons and property,
and for death of any person or persons occurring in or about the premises, or
occurring whether as a result of the business operations, including but not
limited to, delivery of merchandise, by Lessee. Each such policy shall be
subject to approval by Lessor as to form and as to insurance company. The
liability under such insurance shall be not less than $500,000.00 for any one or
more persons injured or killed in each occurrence and not less than $100,000.00
for property damage in each occurrence. If, in the considered opinion of
Lessor's insurance advisor, the amount of such coverage is not adequate or
becomes inadequate, Lessee shall increase the coverage to such amounts as
Lessor's advisor shall reasonably deem adequate. Lessee shall also maintain and
keep in force plate glass coverage insurance coverage on all exterior and
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interior plate glass in the premises, or in the alternative, by execution of
this Lease, be responsible for any damage and/or breakage to any plate glass on
the leased premises. Lessee shall provide Lessor with copies of certificates of
all policies, including in each instance, an endorsement providing that such
insurance shall not be cancelled, except after fifteen (15) days prior written
notice to Lessor. If Lessee does not keep such insurance in full force and
effect, Lessor may take out the necessary insurance and pay the premiums and the
repayment thereof shall be deemed to be part of the rental and payable as such
on the next day upon which rent becomes due.
C. Any insurance policy insuring Lessee against claims, expense or
liability for injury or death to person or property in, about or with respect
to the premises, for business interruption, or for all physical loss coverage,
shall provide that the insurer shall not acquire by subrogation any right of
recovery which Lessee has expressly waived in writing prior to occurrence of the
loss. Lessee hereby waives any right of recovery against Lessor for any such
claims, expenses, liability or business interruption.
D. Lessee will also maintain all physical loss coverage insurance
on its personal property, fixtures and leasehold improvements to the degree of
at least 80% of the insurable value thereof. Any proceeds payable during the
term of this Lease shall be used for the repair or replacement thereof.
10. Parking Spaces. Lessee shall have the exclusive use of the six (6)
parking spaces directly in front of the premises identified as 3534 "A"
Empleo, San Luis Obispo, California.
11. Assignment. Lessee shall not assign or hypothecate this Lease nor
any interest thereunder, nor permit or license the use of or sublet the promises
or any part thereof, without the prior written consent of Lessor. No consent to
any assignment or hypothecation or any permission to use, license or sublet,
shall constitute a waiver or discharge of the provisions of this paragraph,
except as to the specific instance covered thereby. Neither this Lease nor any
interest therein shall be assignable involuntarily, by action of law or
otherwise. Any violation of the terms of this paragraph shall, at the option of
the Lessor, be deemed a breach of this Lease entitling Lessor to terminate this
Lease.
12. Termination. The voluntary or other surrender of this Lease by
Lessee or a mutual cancellation thereof, shall not work a merger and shall, at
the option of Lessor, terminate all or any existing subleases or subtenancies,
or may, at the option of Lessor, operate as an assignment to it of any or all
such subleases or subtenancies. No termination of this Lease shall release
Lessee from any liability that may have attached or accrued, in whole or in
part, previous to or at the time of any termination.
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13. Unlawful Detainer and Receiver. If a receiver be appointed at the
instance of Lessor and an action against Lessee to take possession of the
premises, and/or to collect the rents or profits derived therefrom, the receiver
may, if it becomes necessary or convenient in order to collect such rents and
profits, conduct the business of Lessee then being carried on in the premise,
and may take possession of any personal property or trade fixtures or both
belonging to Lessee and used in the conduct of such business on the premisses
without compensation to Lessee for such use. Neither the application for the
appointment of a receiver, nor the appointment of such a receiver, shall be
construed as an election on Lessor's part to terminate this Lease, unless a
written notice of such intention is given to Lessee.
14. Waivers and Consents. The consent or approval by Lessor of any act
by Lessee requiring Lessor's consent or approval, shall not waive or render
unnecessary Lessor's consent or approval to any subsequent act by Lessee. One or
more waivers by Lessor of the Lessee's breach of any term, covenant or
conditions shall not be construed as a waiver of a subsequent breach of the same
or of any other term, covenant or condition.
15. Condemnation. In the event the premises or any substantial portion
thereof shall be condemned or threatened with condemnation by any public
authority or body, individual or corporate, authorized under any law, with the
power of eminent domain, and by reason thereof the premises or any substantial
part thereof are taken by, sold, exchanged or otherwise transferred to such
governmental or other duly constituted authority pursuant to such condemnation
or threat thereof, this Lease shall thereupon terminate, and all further rights
and/or obligations of either party under this Lease shall thereupon ceases;
however, this shall not release either party from any breach of this Lease which
theretofore may have occurred or accrued. Lessee shall have no right to receive
any part of any condemnation proceeds.
16. Notices. Any notices, demand or communication under or in
connection with this Lease may be served upon Lessor by personal service upon
Lessor, or by mailing the notices by registered mail with return receipt
requested, with postage thereupon fully prepaid in the United States mail,
directed to Lessor at 60 Zaca Way, San Luis Obispo, CA 93401. Notices may
likewise be served on Lessee by personal service or by mailing the notices as
set forth above, addressed to Lessee at 3534 Empleo, "A", San Luis Obispo, CA
93401. Either Lessor or Lessee may change such address by giving notice to the
other party in writing of such different address as the notifying party desires
to be used, and the different address shall continue as the address to which
notices are to be sent until further written notice.
17. Bankruptcy and Insolvency. Each of the following shall be deemed
a default by the Lessee and a breach of this Lease:
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A. (1) The filing of a petition by or against Lessee for
adjudication as a bankrupt under the Bankruptcy Act of the United States as now
or hereafter amended or supplemented, or for reorganization within the meaning
of Chapter X of said Bankruptcy Act, or for arrangement within the meaning of
Chapter XI of said Bankruptcy Act, or the filing of any petition by or against
Lessee under any future bankruptcy act for the same or similar release;
(2) The dissolution or commencement of any action or proceeding
for the dissolution or liquidation of Lessee, whether instituted by or against
the Lessee, or for the appointment of a receiver or trustee of the property of
Lessee;
(3) The taking possession of the property of Lessee by any
governmental officer or agency pursuant to statutory authority for the
dissolution or liquidation of Lessee; and
(4) The making by Lessee of any assignment for the benefit of
creditors.
B. (1) A default in the payment of the rent herein reserved or any
part thereof, for a period of five 95) days; and
(2) A default in the performance of any other covenant or
condition of this Lease on the part of Lessee for a period of ten (10) days
after service of notice thereof by Lessor on Lessee.
18. Breach by Lessee.
A. In the event of a breach of this Lease by Lessee, if such
breach is not cured by Lessee within ten (10) days following written notice from
Lessor specifying such breach, Lessor may at any time thereafter cure such
breach for the account and at the expense of Lessee without further notice. Any
amount Lessor is compelled to, or elects to, pay and any expenses incurred by
Lessor, including reasonable attorneys fees, with respect to any such breach,
shall be deemed to be additional rent and shall be due from Lessee to Lessor on
the first day of the month following notice to Lessee that Lessor has incurred
such costs and expenses, and the amount thereof.
B. In the event of a breach of this Lease by Lessee, Lessor in
addition to any other rights or remedies they way have, shall have the
immediate right to re-entry if such breach is not cured within ten (10) days
after written notice by Lessor specifying the breach. Lessor may then remove all
persons and property from the premises. Such property may be stored in any
public warehouse or elsewhere at the cost and risk of and for the account of
Lessee. Should Lessor elect to re-enter as herein provided or should it retake
possession pursuant to legal proceedings, or pursuant to any notice provided
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of by law, it may either terminate this Lease and recover from Lessee all
damages it may incur by reason of such breach, including recovery of possession
and reasonable attorney's fees, or may from time to time without terminating
this Lease relet the premises or any part thereof for all or any portion of the
lease term to a tenant or tenants satisfactory to Lessor at such rentals or
rental as Lessor may with reasonable diligence secure with the right to make
alterations and repairs. Should any such rental or rents actually received
during any month be less than agreed to be paid during that month by Lessee
hereunder, Lessee shall pay such deficiency to Lessor and shall pay to Lessor,
as soon as ascertained, the costs and expenses incurred by Lessor in such
re-letting. Such deficiency shall be calculated and paid at least monthly. No
such re-entry or taking of possession of the promises by Lessor shall be
construed as an election on its part to terminate this Lease, unless a written
notice of such intention is given to Lessee, or unless the termination thereof
be decreed by a court of competent jurisdiction. Notwithstanding any such
re-letting without termination, Lessor may at any time thereafter elect to
terminate this Lease for such previous breach.
19. Damage or Destruction of Premises and Building. If the premises are
damaged or destroyed, Lessee shall give immediate notice thereof to Lessor, who
shall forthwith repair the same, provided such repairs can be made within
fifteen (15) days by working in the usual and ordinary manner and under the laws
and regulations of applicable governmental authorities. However, such
destruction or damage shall in no way annul or void this Lease, except that
Lessee shall be entitled to a proportionate deduction of rent from the time such
damage or destruction occurs until the repairs are substantially complete, said
proportionate deduction to be based upon the extent to which the making of
repairs shall interfere with the business carried on by Lessee in the premises.
20. Taxes, Fees and Charges. Lessee will pay, before delinquency, any
and all license fees and public charges which become payable during the lease
term and arising out of or relating to Lessee's activities in the premises.
Lessee shall pay all taxes charged against personal property, inventory, trade
fixtures and leasehold improvements placed by Lessee or its predecessors in, on
or about the promises, including without limitation, shelves, counters, wall
safes, fixture, machinery and equipment. If any such taxes are levied against
Lessor or Lessor's property, and if Lessor pays the same, or if the assessed
value of the Lessor's premises is increased by the inclusion thereof of a value
placed on such property and if Lessor pays the taxes based on such increased
assessment, Lessee, upon demand, shall either repay to Lessor the tax so levied,
or the proportion of such taxes resulting from such increase in the assessment,
on a percentage basis of what the within leased premises bears to the entire
premises.
21. Successors, Time. The terms, covenants and conditions herein
contained shall, subject to the provisions as to assignment, apply to and bind
the heirs, successors, executors, administrators and assigns of all of the
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parties hereto. From and after the date of any transfer by Lessor of its
interest in the premises, Lessor shall be released and discharged from any and
all obligations and responsibilities. Time is of the essence in this Lease.
22. Miscellaneous.
A. Various terms have been used in this Lease without limitation
as to number or gender.
B. This Lease contains the entire agreement of the parties and may
be modified only in writing signed by all parties or their authorized
representatives.
C. Each provision and each term of this Lease performable by
Lessee shall be construed as both a condition and a covenant.
D. Lessee warrants that he has incurred no obligation to any
realtor, broker or agent with respect to this Lease which may affect the
premises, and agrees to hold Lessor harmless from any cost, expense, or
liability in connection with their procurement of this Lease.
E. In the event suit is brought for unlawful detention of the
premises, for recovery of any rent or other sum due under the provisions of this
Lease, for the breach of any of the terms, covenants or condition herein
contained, or for any other violation of this Lease the prevailing party is
entitled to reasonable attorney's fees.
THIS LEASE has been executed in triplicate originals this 4th day of
December, 1995.
LESSOR: LESSEE:
Knecht's Plumbing & Heating, Virtual Reality Laboratories, Inc.
a General Partnership, a California Corporation
composed of Jack H. Knecht
and Gerald L. Knecht
____________________________________ ___________________________________
Jack H. Knecht Lance H. Woeltjen, President
____________________________________
Gerald L. Knecht
____________________________________
Blaine Enninga
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GUARANTEE OF LEASE PAYMENTS
The undersigned, Lance M. Woeltjen, hereby endorses, guaranties, and
promises to pay the lease payments, and any charges incident thereto, as set
forth in the Lease agreement between Lessor Knecht's Plumbing & Heating a
General partnership composed of Jack H. Knecht, Gerald L. Knecht, and Blaine
Enninga, and Virtual Reality Laboratories, Inc., a California corporation, in
the event of a breach for any reason in the terms and conditions of the Lease.
Dated: December 12, 1995
___________________________________
Lance H. Woeltjen
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