1
Exhibit 10.16
EXECUTION COPY
OFFICE LEASE
between
MICRON CUSTOM MANUFACTURING SERVICES, INC.
(Landlord)
----------
and
MICRON ELECTRONICS, INC.
----------
(Tenant)
2
Page 2
TABLE OF CONTENTS
Section Page
----
1. Lease 1
2. Term 1
3. Rent 1
4. Use and Condition of Premises 2
5. Services 3
6. Alterations and Liens 3
7. Insurance 4
8. Fire or Casualty and Condemnation 4
9. Indemnification 5
10. Waiver 5
11. Assignment and Subletting 6
12. Rules and Regulations 6
13. Default and Remedies 6
14. Covenant of Quiet Enjoyment 6
15. Miscellaneous 7
EXHIBIT "A" DRAWING OF PREMISES A-1
3
Page 3
OFFICE LEASE
THIS OFFICE LEASE (this "Lease") is made as of this 1st day of November,
1996, between MICRON CUSTOM MANUFACTURING SERVICES, INC., an Idaho corporation
("Landlord"), and MICRON ELECTRONICS, INC., a Minnesota corporation ("Tenant").
RECITALS
A. Landlord owns the Premises (as hereinafter defined) for use in its
general corporation operations.
B. Landlord is willing to lease the Premises to Tenant, and Tenant is
willing to lease the Premises from Landlord, upon the terms and conditions set
forth in this Lease.
LEASE OF PREMISES
In exchange for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree
as follows:
1. Lease. Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, on the terms and conditions hereinafter set forth, those premises (the
"Premises") containing approximately 31,975 square feet of rentable area and
depicted on the floor plan attached hereto as Exhibit "A" of the building
located at 16399 Franklin Road, Nampa, Idaho 83687 (the "Building"). The
Building, the land upon which it is located, and all other improvements and
facilities located on such land, are hereinafter called the "Property."
2. Term The term of this Lease (the "Term") shall be for three (3) years,
commencing on November 1, 1996. Either party may elect to terminate this Lease,
in whole or in part, at any time after the first year for any reason by giving
the other party written notice of such election not less than ninety (90) days
before the date the termination is to become effective, or such notice as shall
be mutually agreeable to the parties.
3. Rent. Tenant shall pay Landlord, upon execution of this Lease, the sum
of $480,000.00 in payment of rent for the first year of the Term of this Lease.
During the second and third year of the Term, Tenant shall pay rent for the
Premises in the amount of $40,000.00 per month. Rent for the second and third
year of this Lease shall be payable on a monthly basis, in advance, and shall be
due on the first day of
4
Page 4
each month during the Term, without notice or demand.
4. Use and Condition of Premises. Tenant shall use and occupy the Premises
solely for administrative business purposes. Tenant hereby accepts the Premises
in their current physical condition (i.e., "AS-IS" condition). At the expiration
or other termination of this Lease, Tenant shall leave the Premises, and during
the Term will keep the same, in good order and condition, ordinary wear and tear
and damage by fire or other casualty excepted (other than fire or other casualty
occurring through the negligence or willful act or omission of Tenant or
Tenant's agents, employees, contractors or invitees); and for that purpose,
Tenant shall make all necessary repairs and replacements. At the expiration or
termination of this Lease, Tenant shall remove from the Premises all furniture,
trade fixtures, office equipment and all other items of personal property owned
and purchased by Tenant. All such items not removed from the Premises shall
conclusively be deemed to have been abandoned and may be appropriated, sold,
stored, destroyed or otherwise disposed of by Landlord without notice to Tenant
or any other party and without any obligation to account therefor. Tenant shall
pay Landlord all expenses incurred in connection with the disposition of such
property. Tenant shall comply with all laws, rules, orders, ordinances and
regulations applicable to Tenant or to the use or occupancy of the Premises.
During its occupation of the Premises under this Lease, Tenant's employees
working on the Premises shall also be entitled to use of the parking lot,
cafeteria, conference rooms adjacent to the Premises and all other common areas.
Tenant shall not bring or permit to remain in the Premises any Hazardous
Substances, except ordinary office supply products used and stored in usual
quantities and manner. As used in the preceding sentence, the term "Hazardous
Substances" means any hazardous or toxic substances, materials or wastes,
including, but not limited to, those substances, materials, and wastes listed in
the United States Department of Transportation Hazardous Materials Table (49 CFR
ss. 172.101) or by the Environmental Protection Agency as hazardous substances
(40 CFR Part 302) and amendments thereto, or such substances, materials and
wastes which are or become regulated under any applicable local, state or
federal law including, without limitation, any material, waste or substance
which is (i) designated as a "hazardous substance" pursuant to Section 311 of
the Clean Water Act, 33 U.S.C. ss. 1251, et seq. (33 U.S.C. ss. 1321) or listed
pursuant to Section 307 of the Clean Water Act (33 U.S.C. ss. 1317), (ii)
defined as a "hazardous waste" pursuant to Section 1004 of the Resource
Conservation and Recovery Act, 42 U.S.C. ss. 6901, et seq. (42 U.S.C. ss. 6903)
or (iii) defined as a "hazardous substance" pursuant to Section 101 of the
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
ss. 9601).
Tenant shall, upon demand, pay to Landlord all costs incurred by Landlord
to
5
Page 5
repair damage to the Property caused by Tenant, its agents, employees,
contractors or invitees. Tenant shall not do or commit, or suffer or permit to
be done or committed, any act or thing as a result of which any policy of
insurance of any kind on or in connection with the Property shall become void or
suspended, or any insurance risk on or in connection with the Building or any
other portion of the Property shall (in the opinion of the insurer or any
insurance organization) be rendered more hazardous or require payment of a
greater premium. Without limiting other rights and remedies of Landlord, Tenant
shall pay as additional rent the amount of any increase of premiums for such
insurance resulting from any breach of this provision.
5. Services. So long as Tenant is not in default hereunder, Landlord
shall, subject to the terms and conditions hereinafter set forth, furnish or
provide to the Premises (i) air conditioning, heat, and lighting twenty-four
(24) hours per day, seven days per week, in such quantity and of such quality as
Landlord determines is reasonably necessary for Tenant's comfortable use and
enjoyment of the Premises for its purposes; (ii) water for lavatory and drinking
purposes at all times when the Premises are occupied; (iii) routine janitorial
services, (iv) maintenance of the common areas of the Building and (v) security
services similar to those provided to other parts of the Building.
Electricity service and costs, real property taxes and real property
insurance relating to the Premises are the obligations and expense of Landlord.
Tenant's phone charges, supply costs and taxes (other than real property taxes)
relating to the Premises are the obligations and expense of Tenant.
Landlord shall not be liable for damages (by abatement of rent or
otherwise) for failure to furnish or delay in furnishing any utility or service,
or for any diminution in the quality or quantity thereof, where such failure or
delay or diminution is occasioned, in whole or in part, by repairs or
improvements; by any strike, lockout or other labor trouble; by inability to
secure fuel; by governmental laws, regulations or orders; by Landlord's
compliance, in whole or in part, with any government promulgated mandatory
program for conservation of energy; by act or default of Tenant or other
parties; or by any cause beyond Landlord's reasonable control; and such failures
or delays or diminution shall not be deemed to constitute an eviction or
disturbance of Tenant's use and possession of the Premises or excuse Tenant from
paying rent or performing any of its obligations under this Lease. Landlord's
obligation to furnish services shall also be further conditioned upon the
availability of adequate energy and other utility sources from the public
utility companies then servicing the area.
6. Alterations and Liens. Tenant shall not, without the prior written
consent of Landlord, which consent shall not be unreasonably withheld, make any
material alterations, improvements or additions to the Premises. If Landlord
consents to any material alterations, improvements or additions, it may impose
such conditions with respect thereto as Landlord reasonably deems appropriate,
including, without
6
Page 6
limitation, Landlord's approval of plans and specifications and insurance and
use of Landlord's approved contractors. All alterations, additions or
improvements made by Tenant and all fixtures attached to the Premises shall
become the property of Landlord and remain at the Premises or, at Landlord's
option, any or all of the foregoing shall be removed at the cost of Tenant
before the expiration or sooner termination of this Lease and in such event
Tenant shall repair all damage to the Premises caused by the installation and/or
removal thereof. Tenant shall not cause or permit any signs, advertisements or
notices to be displayed, inscribed upon or affixed on any part of the outside or
inside of the Building, other than on the Premises, if the Landlord reasonably
disapproves such signs, advertisements or notices. Landlord shall have the right
to remove disapproved signs, advertisements or notices at Tenant's expense.
Tenant hereby agrees to keep the Property free from any liens arising out
of any work performed, materials furnished or obligations incurred by or on
behalf of Tenant and to promptly notify Landlord if it learns of any such liens.
7. Insurance. Tenant shall carry and maintain, at its sole cost and
expense, a broad form comprehensive coverage policy of public liability
insurance covering the Premises in an amount of not less than $1,000,000.00 per
occurrence. Such policy shall be with an insurance company reasonably
satisfactory and acceptable to Landlord. Upon request, Tenant shall provide
Landlord with a certificate of insurance issued by the insurance company issuing
such policy. Tenant may satisfy its insurance obligations hereunder by carrying
such insurance under a so-called blanket policy or policies of insurance.
8. Fire or Casualty and Condemnation. If the Premises, the Property or the
Building shall be damaged by fire or other casualty and if neither party
terminates this Lease, Landlord shall restore the same with reasonable
promptness, subject to reasonable delays for insurance adjustments and delays
caused by matters beyond Landlord's reasonable control. Landlord shall have no
liability to Tenant as a result of such damage or the inability of Tenant to
occupy or use the portions of the Premises so damaged. Rent, however, shall
abate on those portions of the Premises as are, from time to time, untenantable
as a result of such damage; provided, rent shall not abate if such damage was
caused, in whole or in part, by the negligence or willful act or omission of
Tenant or Tenant's agents, employees, contractors or invitees. Landlord shall
have no duty to repair or restore any alterations, additions, improvements,
decorations, furnishings or fixtures, except to the extent, if any, the same
were provided by Landlord at the beginning of the Term.
If the entire Premises is condemned or taken for a public or quasi-public
use, this Lease shall terminate as of the date possession is to be surrendered
to the condemnor. In the event of any taking or condemnation of all or any part
of the Premises or the Property, Tenant shall not have any right to any portion
of the amount that may be awarded as damages or paid as a result of such taking
or condemnation;
7
Page 7
and all rights of Tenant to damages therefor are hereby assigned by Tenant to
Landlord and Tenant shall have no claim against Landlord or the condemnor for
the value of the unexpired Term of this Lease.
9. Indemnification. Tenant shall indemnify and hold Landlord, the Premises
and the Property harmless from and against any and all claims, losses, damages,
expenses and costs (including attorneys' fees) arising from Tenant's use of the
Premises or the conduct of its business or from any activity, work or thing
done, permitted or suffered by Tenant in or about the Premises or the Building,
and shall further indemnify and hold Landlord, the Property and the Premises
harmless from and against any and all claims, losses, damages, expenses and
costs (including attorneys' fees) arising from any breach or default in the
performance of any obligation of Tenant hereunder, or arising from any
negligence, act or omission of Tenant, or any of its agents, employees, invitees
or licensees. In case any action or proceeding is brought against Landlord or
the Premises by reason of any such claim, Tenant shall have the option to defend
same at Tenant's expense with counsel reasonably satisfactory to Landlord.
Landlord shall indemnify and hold Tenant harmless from and against any and
all claims, losses, damages, expenses and costs (including attorneys' fees)
arising from Landlord's use of the Premises or the conduct of its business or
from any activity, work or thing done, permitted or suffered by Landlord in or
about the Premises or the Building, and shall further indemnify and hold Tenant
harmless from and against any and all claims, losses, damages, expenses and
costs (including attorneys' fees) arising from any breach or default in the
performance of any obligation of Landlord hereunder, or arising from any
negligence, act or omission of Landlord, or any of its agents, employees,
invitees or licensees. In case any action or proceeding is brought against
Tenant or the Premises by reason of any such claim, Landlord shall have the
option to defend same at Landlord's expense with counsel reasonably satisfactory
to Tenant.
10. Waiver. No waiver by Landlord of any provision of this Lease shall be
deemed to be a waiver of any other provision hereof or of any subsequent breach
by Tenant of the same or any other provision. No delay on the part of Landlord
in exercising any of its rights hereunder shall operate as a waiver of such
rights or of any other right of Landlord, nor shall any delay, omission or
waiver on any one occasion be deemed a waiver of the same or any other right on
any other occasion, nor shall Landlord's receipt from Tenant of any sum with
knowledge of any breach by Tenant of any of its covenants hereunder be deemed to
be a waiver of such breach. Neither Landlord's failure to bill Tenant for any
rent or other sum payable hereunder as it becomes due hereunder, nor its error
in such billing or failure to provide any other documentation in connection
therewith, shall operate as a waiver of Landlord's right to collect any such
rent or other sum payable hereunder which may have at any time become due
hereunder in the full amount to which Landlord is entitled pursuant to the
8
Page 8
terms and provisions hereof. Landlord's consent to or approval of any act by
Tenant requiring Landlord's consent or approval shall not be deemed to render
unnecessary the obtaining of Landlord's consent to or approval of any subsequent
act of Tenant whether or not similar to the act so consented to or approved.
11. Assignment and Subletting. Tenant shall not assign or convey this
Lease or any interest hereunder or sublet the Premises or any part thereof
without the prior written consent of Landlord, which consent shall not be
unreasonably withheld. Any such action shall be void and of no effect.
12. Rules and Regulations. Tenant shall observe and comply with the then
current rules and regulations of Landlord relating to the Property and Premises.
Such rules and regulations may be deleted, amended or supplemented by Landlord
from time to time with such other rules and regulations as Landlord may
reasonably adopt for the safety, care, and cleanliness of the Building and the
Property and the facilities thereof, or the preservation of good order therein.
13. Default and Remedies. If Tenant fails to pay when due any rent or
other sum payable by Tenant under this Lease, or if Tenant fails to observe or
perform any of the other covenants or conditions in this Lease and such failure
continues for more than thirty (30) days after Landlord provides written notice
to Tenant thereof, or if the interest of Tenant in this Lease shall be levied on
under execution or other legal process, Landlord may treat the same as a breach
of this Lease, and thereupon at its option may, without notice or demand of any
kind to Tenant or any other person, have any one or more of the following
described remedies in addition to all other rights and remedies provided at law
or in equity or elsewhere herein: (a) Landlord may terminate this Lease and the
Term, in which event Landlord may immediately repossess the Premises by legal
proceedings and Landlord shall be entitled to recover from Tenant all rent and
other sums payable hereunder, all costs incurred by Landlord to recover the
Premises and all other costs, expenses and damages suffered or incurred by
Landlord by reason of Tenant's default together with interest on all of the
foregoing amounts at the rate of 15 percent per annum from the date such amounts
first became due until paid; or (b) Landlord may (but shall not be obligated to)
cure such default on behalf of Tenant, and Tenant shall reimburse Landlord upon
demand for any sums paid or costs incurred by Landlord in curing such default,
including reasonable attorneys' fees and court costs, together with interest at
15 percent per annum from the dates of Landlord's incurring of such costs or
expenses until paid.
All remedies available to Landlord hereunder and otherwise available at
law or in equity shall be cumulative and concurrent. The failure of Landlord to
insist upon strict performance of the covenants and conditions of this Lease
shall not be construed as a waiver of Landlord's right to thereafter enforce the
same strictly according to the tenor thereof in the event of a continuing or
subsequent default. In the event of any
9
Page 9
litigation between Landlord or Tenant arising out of or in connection with this
Lease, the prevailing party shall be entitled to recover its reasonable
attorneys' fees and costs from the other party.
14. Covenant of Quiet Enjoyment. Upon Tenant paying the rent and
performing all of Tenant's obligations under this Lease, Tenant may peacefully
and quietly enjoy the Premises during the Term as against all persons or
entities lawfully claiming by or through Landlord, subject, however, to the
provisions of this Lease and to any mortgages encumbering the Property.
15. Miscellaneous.
(a) Headings and Definitions. The Section headings contained in this
Lease are for convenience of reference only and do not in any way govern the
construction thereof. The terms "Landlord" and "Tenant" as used herein shall
include the plural as well as the singular, and the neuter shall include the
masculine and feminine genders. The words "person" and "persons" whenever used
shall include individuals, firms, associations and corporations.
(b) Covenants and Agreements - Time of the Essence. Each of Tenant's
covenants and agreements herein contained are independent and not dependent on
Landlord's performance of its obligations hereunder, and the time of the
performance of each is of the essence of this Lease.
(c) Entire Agreement: Amendments. This Lease and the exhibits
attached hereto constitute the entire agreement between the parties hereto with
respect to the subject matter hereof, and no prior agreement or understanding
pertaining to any such matter shall be effective for any purpose. No provision
of this Lease may be amended or supplemented except by an agreement in writing
signed by the party or parties to be bound thereby.
(d) Governing Law; Partial Invalidity. This Lease shall be governed
and construed in accordance with the laws of the State of Idaho, without regard
to its conflict of laws provisions. If any term, provision or condition
contained in this Lease shall, to any extent, be invalid or unenforceable, the
remainder of this Lease (or the application of such term, provision or condition
to persons or circumstances other than those in respect of which it is invalid
or unenforceable) shall not be affected thereby, and each and every other term,
provision and condition of this Lease shall be valid and enforceable to the
fullest extent possible permitted by law.
(e) Notices. All notices to be given under this Lease shall be in
writing and delivered personally or deposited in the United States mail,
certified or registered mail with return receipt requested, postage prepaid,
addressed as follows, or to such other address as the party to whom such notice
is to be given has specified to the
10
Page 10
other party by notice given in the manner provided for in this subsection (e):
If to Landlord:
MICRON CUSTOM MANUFACTURING SERVICES, INC.
16399 Franklin Road
Nampa, Idaho 83687
Attn: Chief Financial Officer
If to Tenant:
MICRON ELECTRONICS, INC.
900 East Karcher Road
Nampa, Idaho 83687
Attn: General Counsel
A notice required or permitted to be given pursuant to this subsection (e) shall
be deemed effective either upon personal delivery, or receipt thereof when
deposited in the United States mail. A copy of all notices to be given to
Landlord hereunder shall be concurrently transmitted by Tenant to any additional
party hereafter designated by a notice from Landlord to Tenant. Notwithstanding
the foregoing, if either party refuses to accept or sign the return receipt for
any notice tendered to it pursuant to this subsection (e), such notice shall be
deemed effective when tendered for delivery.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as
of the date first above written.
LANDLORD: TENANT:
11
EXECUTION COPY
AMENDMENT TO OFFICE LEASE
between
MCMS, INC.
(Landlord)
and
MICRON ELECTRONICS, INC.
(Tenant)
12
AMENDMENT TO OFFICE LEASE
THIS AMENDMENT TO OFFICE LEASE (this "Amendment") is made as of this 26
day of February, 1998, between MCMS, INC., an Idaho corporation ("Landlord"),
and MICRON ELECTRONICS, INC., a Minnesota corporation ("Tenant").
RECITALS
A. Landlord and Tenant are parties to that certain Office Lease dated as
of November 1, 1996 (the "Lease") covering the Premises.
B. Landlord and Tenant desire to amend, pursuant to this Amendment,
certain terms and conditions set forth in the Lease.
C. All of the capitalized terms used herein but not defined shall have the
meaning ascribed to them in the Lease.
In exchange for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree
to amend the Lease as follows:
1. Term. The Term of the Lease, originally scheduled to expire on October
31, 1999, shall hereafter be amended such that Tenant shall have the right to
remain in possession of the Premises until December 31, 1998, subject to
paragraph 2 hereof.
2. Early Termination. Tenant shall have the right, upon thirty (30) days'
written notice to the Landlord, to terminate the Lease prior to the scheduled
termination date of December 31, 1998.
3. Bullpen Area. Upon ninety (90) days' written notice by the Landlord,
Tenant agrees to vacate the space it currently occupies in the bullpen area of
Landlord's accounting area (approximately 3,625 square feet noted on Exhibit A
to the Lease as cross-hatched areas marked "520 sq. ft." and "3105 sq. ft.") in
the Premises.
4. Rent. During the Term, Tenant shall continue to pay rent for the
Premises in the amount of $40,000.00 per month. Rent shall be payable on a
monthly basis, in advance, and shall be due on the first day of each month
during the Term, without notice or demand.
5. Shilo Property.
a. At any time after March 31, 1998, and upon sixty (60) days'
written notice to Tenant, Landlord shall be entitled to occupy (upon the
execution of a sublease agreement between Tenant and Landlord (the "Sublease")
with customary terms and conditions consistent with the terms and conditions of
the Office/Warehouse Lease between Tenant and Ronald W. Van Auker, dated as of
May 1, 1996, covering certain real property located at 1400 Shilo Drive, Nampa,
Idaho (the "Shilo Property")) approximately 24,000 square feet of space
currently leased by Tenant at the Shilo Property,
13
with respect to which Tenant warrants its ability to sublease to Landlord.
b. Landlord must give Tenant thirty (30) days' written notice of its
intent to terminate the Sublease.
c. Landlord shall pay all fees, expenses and rent associated with
its occupancy of the Shilo Property (which fees, expenses and rent shall be no
greater than the amounts Tenant, as of February 1, 1998, was obligated to pay
under its lease of the Shilo Property).
d. Tenant shall be obligated to pay up to $35,000.00 in
start-up/upfit and relocation expenses (whether to or from the Shilo Property)
associated with the Landlord's occupancy of the Shilo Property.
6. Additional Space.
a. After receiving a written request from Landlord and prior to
Tenant vacating the Premises, Tenant will use its reasonable best efforts to
assist the Landlord in locating up to 12,000 additional square feet (at
Landlord's discretion) of space in Nampa, Idaho (the "Additional Space").
b. Landlord shall pay all fees, expenses and rent of any kind
associated with its occupancy of the Additional Space.
7. Full Force and Effect. All other terms and conditions of the Lease
shall remain in full force and effect.
(remainder of page left intentionally blank)
-2-
14
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
as of the date first written above.
LANDLORD: TENANT:
MCMS, Inc. Micron Electronics, Inc.
By: /s/ Robert F. Subia By:
----------------------------- --------------------------
Name: Robert F. Subia Name:
Title: President & CEO Title:
-3-
15
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
as of the date first written above.
LANDLORD: TENANT:
Micron Custom Manufacturing Services, Inc. Micron Electronics, Inc.
By: By: /s/ [Illegible]
----------------------------- --------------------------
Name: Name:
Title: Title:
-3-