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EXHIBIT 10.51
LEASE
ADI ARROW PARTNERS, L.P.
a California limited partnership
LANDLORD
ARROWHEAD GENERAL INSURANCE AGENCY, INC.,
a Minnesota corporation
TENANT
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LEASE
This Lease ("Lease"), made this 10th day of April, 1996, by
and between ADI ARROW PARTNERS, L.P., a California limited partnership
("Landlord"), and ARROWHEAD GENERAL INSURANCE AGENCY, INC., a Minnesota
corporation ("Tenant").
WITNESSETH
"Land" means that approximately 6.10 acre-sized (266,000
square feet) parcel of land situated in San Diego County, California, together
with any appurtenant easements, described in said Exhibit "A" attached hereto
and made a part hereof.
"Building" means the commercial office building, which will be
used as Tenant's corporate headquarters, of approximately 93,000 square feet in
size, which will be constructed on the Land by Landlord in accordance with the
Final Plans and Specifications, as that term is defined in Section 2.2 below.
"Improvements" means the building and all Improvements,
machinery, equipment, fixtures and other property, real, personal or mixed
(except Tenant's trade fixtures, machinery and equipment) installed or
constructed on the Land or in the Building by Landlord, together with all
additions, alterations and replacements thereof.
"Demised Premises" means the Land and the Improvements.
Landlord, for and in consideration of the rents, covenants and
agreements hereinafter reserved, mentioned and contained on the part of Tenant,
its successors and assigns, to be paid, kept, observed and performed under this
Lease, hereby leases, rents, lets and demises to Tenant, and upon and subject to
the conditions and limitations expressed in this Lease, Tenant takes and hires
from Landlord, the Demised Premises.
ARTICLE I
TERM OF LEASE
SECTION 1.1. INITIAL TERM. This Lease shall be effective and
binding upon the parties hereto upon mutual execution hereof (the "Effective
Date"). The term of this Lease (the "Term" ) shall commence upon mutual
execution hereof and shall end ten (10) years (120 months) after the Substantial
Completion (as defined in Section 2.3, below) of the Improvements, which is
currently anticipated to be March 31, 1997 (the "Initial Term"). The date upon
which Substantial Completion occurs is sometimes referred to in this Lease as
the "Commencement Date." Assuming Substantial Completion of the Improvements by
the currently anticipated date of March 31, 1997 (the "Target Completion Date"),
the Term of this Lease will end on March 31, 2007. Under no circumstances shall
the Commencement Date occur or be deemed to occur prior to March 31, 1997.
SECTION 1.2. OPTION TO EXTEND. Tenant shall have two (2)
options to extend (the "Extension Option") the Term for periods of five (5)
years each (the foregoing option terms {or either of them) shall be referred to
hereinafter sometimes individually or collectively as the "Option Term"), by
delivering a binding written notice of exercise to Landlord ("Extension
Notice"), so that Landlord receives the Extension Notice with respect to the
first Option Term at least three hundred sixty (360) days prior to the
commencement of the first Option Term and so that Landlord receives the
Extension Notice with respect to the second Option Term at least one hundred
eighty (180) days prior to the commencement of the second Option Term. Tenant
may exercise the Extension Option only if this Lease is in full force and effect
and there is no uncured Event of Default, or any event the occurrence or
existence which, with the passage of time or the giving of notice, or both,
would constitute an Event of Default (an "Incipient Default"), at the time of
exercise of the right of renewal and at the time of the commencement of the
Option Term, but Landlord shall have the right at its sole discretion to waive
the nondefault conditions herein; provided, however, that if an Event of Default
or Incipient Default exists at the time Tenant exercises the Extension option
and Landlord does not elect to waive, Landlord shall provide written notice to
Tenant of the existence and nature of such Event of Default or Incipient Default
and Tenant shall be allowed an amount of time to cure such Event of Default or
Incipient Default as is otherwise provided for curing
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defaults of that type under this Lease, and, if timely cured, Tenant's exercise
of the Extension Option shall be reinstated effective as of the time of
exercise. The Initial Term, together with any Option Terms is referred to in
this Lease as the "Term".
ARTICLE II
CONSTRUCTION OF IMPROVEMENTS
SECTION 2.1. THE IMPROVEMENTS. Landlord agrees to furnish, at
Landlord's sole cost and expense, all of the material, labor and equipment for
the construction of the Improvements which are preliminarily described in the
site and floor plans and outline specifications (including certain specified
expense allowances) of the Building dated as of January 11, 1996 and revised as
of April 10, 1996, and which have been previously provided to and reviewed and
approved by Tenant prior to the Effective Date, and which are attached to this
Lease as Exhibit "B" (the "Preliminary Plans and Specifications"). The
Improvements shall be constructed by Landlord in a good and workmanlike manner
in conformance with the Final Plans and Specifications (as defined in, and
developed pursuant to, Section 2.2, below) and in compliance with all covenants,
conditions and restrictions to which the Land is subject and all applicable
building laws, ordinances, orders, rules, regulations and requirements of all
federal, state and municipal governments the jurisdiction or which the Land is
subject. A portion of the Improvements described in the Preliminary Plans and
Specifications includes relocation, repair and refurbishment of certain of
Tenant's existing trade fixtures (i.e. system furniture). To the extent Landlord
elects to do so, Tenant shall reasonably cooperate with Landlord in the creation
and perfection of a security interest in such Tenant trade fixtures to secure
Tenant's obligations to Landlord under this Lease (i.e. execution of a separate
security agreement and filing of UCC-1 financing statement).
SECTION 2.2. FINAL PLANS AND SPECIFICATIONS. The Final Plans
and Specifications shall be developed in substantial conformance with the
Preliminary Plans and Specifications as follows:
(a) As used in this Lease, the term "Final Plans and
Specifications" shall mean collectively the "Preliminary Plans and
Specifications," the "Schematic Design Drawings," "Design Development Drawings",
the "Construction Drawings" (all as defined herein), and all related plans,
drawings, specifications and notes. The Final Plans and Specifications shall be
prepared by Landlord in all related knowledge of and compliance with this Lease,
and all city, county, state and federal ordinances, rules and regulations
relating to the construction of the Improvements, including, without limitation,
the energy conservation and handicap access requirements of Title 24 of the
California Administrative Code ("Title 24"), and the Americans With Disabilities
Act and federal regulations promulgated thereunder.
(b) As soon as is reasonably possible following execution of
this Lease, Landlord shall submit to Tenant fully detailed and dimensioned 1/8
scale preliminary schematic design drawings ("Schematic Design Drawings") for
the Demised Premises consistent with the Preliminary Plans and Specifications.
This preliminary submittal shall include the following: three (3) sets of prints
and one (1) sepia which show fully developed floor plans. Within ten (10)
business days after Landlord delivers to Tenant the Schematic Design Drawings,
Tenant shall deliver to Landlord written notice of its approval or disapproval
of the Schematic Design Drawings. Tenant shall not be unreasonable in granting
or withholding its consent to the Schematic Design Drawings or use the approval
process as a vehicle for expanding the scope of the Improvements. If Tenant
disapproves any portion of the Schematic Design Drawings, then Tenant shall
specifically and in writing (a) approve those portions which are acceptable to
Tenant and (b) disapprove those portions which are not acceptable to Tenant,
specifying the reasons for such disapproval and describing in detail the change
Tenant requests for each item disapproved ("Requested Change"). Landlord shall
cause Requested Changes reasonably acceptable to Landlord to be made to the
Schematic Design Drawings. With respect to any item Tenant disapproves, Landlord
and Tenant shall meet and confer within three (3) business days after delivery
of Tenant's notice disapproving the Schematic Design Drawings and shall attempt
in good faith to reach agreement on the Schematic Design Drawings. In the event
the Schematic Design Drawings have not been fully approved by Tenant, and Tenant
and Landlord are unable to resolve the basis for Tenant's disapproval after good
faith efforts to do so over a period of ten (10) days after delivery of Tenant's
notice disapproving the Schematic Design Drawings, Landlord shall have the right
to terminate this Lease by giving Tenant written notice of its election to do
so.
(c) As soon as is reasonably possible following approval of
the Schematic Design Drawings, Landlord shall submit to Tenant three (3) sets of
the preliminary construction drawings for the Improvements for the Demised
Premises ("Design Development Drawings"). Within ten (10) business days after
Tenant receives the Design
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Development Drawings, Tenant shall deliver to Landlord written notice or
Tenant's approval or disapproval of the Design Development Drawings. Tenant
shall not be unreasonable in granting or withholding its consent to the Design
Development Drawings or use the approval process as a vehicle for expanding the
scope of the Improvements. If Tenant disapproves any portion of the Design
Development Drawings, then Tenant shall specifically and in writing (a) approve
those portions which are acceptable to Tenant and (b) disapprove those portions
which are not acceptable to Tenant, specifying the reasons for such disapproval
and describing in detail the Requested Change(s) for each item disapproved
Landlord shall cause Requested Changes reasonably acceptable to Landlord to be
made to the Design Development Drawings. With respect to any item Tenant
disapproves, Landlord and Tenant shall meet and confer within three (3) business
days after delivery of Tenant's notice disapproving the Design Development
Drawings and shall attempt in good faith to reach agreement on the Design
Development Drawings. In the event the Design Development Drawings have not been
fully approved by Tenant, and Tenant and Landlord are unable to resolve the
basis for Tenant's disapproval after good faith efforts to do so over a period
of ten (10) days after delivery of Tenant's notice disapproving the Design
Development Drawings. Landlord shall have the right to terminate this Lease by
giving Tenant written notice or its election to do so.
(d) As soon as is reasonably possible following approval of
the Design Development Drawings, Landlord shall submit to Tenant three sets of
prints and one (1) sepia of fully detailed and dimensioned 1/4 or 1/8 scale
construction drawings for the Demised Premises ("Construction Drawings"). These
Construction Drawings shall include all information reasonably necessary to
construct the Improvements, including, without limitation, the following: (a)
plan views of the entry and partitions, and along the longitudinal axis; door,
finish and color schedules; and final design drawings for the Building and entry
signs; (b) electrical drawings prepared by an electrical engineer, including
circuitry plans, panel schedules, riser diagrams, load calculations and all
Title 24 calculations and completed forms; (c) mechanical drawings prepared by a
mechanical engineer, including heating, ventilating and air conditioning design
calculations, equipment schedule and specifications, air distribution ductwork
system, plumbing fixtures and piping, and all required Title 24 calculations and
completed forms. As part of the Construction Drawings, Landlord shall submit a
schedule of specifications completed by mechanical and electrical engineers
including heating, ventilating and air conditioning requirements. Within ten
(10) business days after Tenant receives the Construction Drawings, Tenant shall
deliver to Landlord written notice of Tenant's approval or disapproval of the
Construction Drawings. Tenant shall not be unreasonable in granting or
withholding its consent to the Construction Drawings or use the approval process
as a vehicle for expanding the scope of the Improvements. If Tenant disapproves
any portion or the Construction Drawings, then Tenant shall specifically and in
writing (a) approve those portions which are acceptable to Tenant and (b)
disapprove those portions which are not acceptable to Tenant, specifying the
reasons for such disapproval and describing in detail the Requested Change(s)
for each item disapproved. Landlord shall cause Requested Changes reasonably
acceptable to Landlord to be made to the Construction Drawings. With respect to
any item Tenant disapproves, Landlord and Tenant shall meet and confer within
three (3) business days after delivery of Tenant's notice disapproving the
Construction Drawings and shall attempt in good faith to reach agreement on the
Construction Drawings. In the event the Construction Drawings have not been
fully approved by Tenant, and Tenant and Landlord are unable to resolve the
basis for Tenant's disapproval after good faith efforts to do so over a period
of ten (10) days after delivery of Tenant's notice disapproving the Construction
Drawings, Landlord shall have the right to terminate this Lease by giving Tenant
written notice of its election to do so.
(e) Upon approval of the Construction Drawings, the Final
Plans and Specifications shall be deemed approved by Landlord and Tenant and
shall, thereafter, be the Final Plans and Specifications for the construction of
the Improvements.
(f) Any subsequent changes, modifications or alterations to
the Final Plans and Specifications requested by Tenant after Landlord's and
Tenant's approval thereof and before completion of the Improvements shall be
processed as an alteration to the Demised Premises under Section 19(b) of this
Lease and subject to adjustments in Base Rent pursuant to Article III of this
Lease.
(g) If this Lease is ultimately terminated by Landlord as a
result of the failure of Landlord and Tenant to reach agreement on the Final
Plans and Specifications, as described above, then Tenant shall pay one-half of
all third-party expenses incurred by Landlord in connection with the preparation
of this Lease and the preparation of the Final Plans and Specifications,
including, without limitation, architectural, real estate and mortgage brokers'
and attorneys' fees; provided, however, that Tenant's liability under this
subsection (g) shall not exceed Two Hundred Thousand Dollars ($200,000.00).
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SECTION 2.3. SUBSTANTIAL COMPLETION OF THE IMPROVEMENTS.
(a) "SUBSTANTIAL COMPLETION" of the Improvements shall be
deemed to have occurred on the earlier to occur of when (i) Tenant can
physically and legally occupy the Demised Premises (e.g. a temporary or
permanent Certificate of Occupancy (or similar document) (the "Certificate of
Occupancy") has been issued for the Demised Premises by the City of San Diego
(the "City"), (ii) or Tenant's legal occupancy under a Certificate of Occupancy
would have been available but for delays caused by Tenant. Landlord shall
deliver to Tenant a copy of any Certificate of Occupancy issued by City for the
Demised Premises promptly upon receipt. Notwithstanding the foregoing, the
failure of Landlord to secure such certificate or action shall not be a
condition to payment of rent or commencement of the term if such failure is
caused by the act or neglect of Tenant.
(b) Tenant shall not be liable to Landlord for the payment of
Base Rent, Additional Rent (as hereinafter defined) or any other obligation to
be paid by Tenant under this Lease until the Commencement Date. The failure of
Tenant to take possession of or to occupy the Demised Premises on or after the
Commencement Date or following Substantial Completion of the Improvements shall
not serve to relieve Tenant of its obligations or delay payments by Tenant to
Landlord.
(c) Landlord and Tenant acknowledge the importance of
adherence to the schedule for the completion of the Improvements in order to
achieve Substantial Completion by the Target Completion Date. If Substantial
Completion of the Improvements is not achieved by the Target Completion Date, as
such Target Completion Date may be extended pursuant to Section 2.2 hereof),
except as provided in Section 2.4, below, Landlord shall not be liable for any
damages caused thereby and this Lease shall remain in full force.
SECTION 2.4. DELAYS IN SUBSTANTIAL COMPLETION.
(a) Excused Delay. Landlord shall diligently proceed with the
construction of the Improvements and complete the same and deliver possession
thereof to Tenant on or before March 31, 1997 (the "Target Commencement Date"),
provided, however, if delay is caused or contributed to by act or neglect of
Tenant or those acting for or under Tenant (excluding Landlord), labor disputes,
casualties, governmental embargo restrictions, shortages of fuel, labor, or
building materials, action or nonaction of public utilities, or of local, state
or federal governments affecting the Improvements, or other causes beyond
Landlord's reasonable control, then the Target Commencement Date shall be
extended for the additional time caused by such delay. Such a delay is
hereinafter referred to as an "Excused Delay." In addition, the Target
Commencement Date shall be extended by the number of days (i) after March 31,
1996 (the "Target Execution Date"), this Lease is fully executed by Tenant and
Landlord, or (ii) after June 30, 1996 (the "Target Permit Date"), Landlord
obtains all governmental approvals and permits necessary for the construction of
the Improvements, unless the delay in obtaining such governmental approvals and
permits is caused by Landlord.
(b) Delay Penalty. If the Commencement Date has not occurred
(or been deemed to have occur) on or before the Target Commencement Date, plus
up to an additional thirty (30) days for Excused Delays, as the Target
Commencement Date may have been extended for delays beyond the Target Execution
Date and the Target Permit Date, and provided such delay has not been caused by
Tenant, Landlord shall pay to Tenant, as liquidated damages, the sum of One
Thousand Dollars ($1,000) per day, until the Commencement Date, or until this
Lease is terminated pursuant to subsection (c) below, for each day the
Commencement Date is delayed beyond the Target Commencement Date
(c) Length of Delay: Tenant's Right to Terminate. In the event
the Commencement Date has not occurred (or been deemed to have occurred) on or
before the date six (6) months after the Target Commencement Date, plus up to an
additional thirty (30) days for Excused Delays, as the Target Commencement Date
may have been extended for delays beyond the Target Execution Date and the
Target Permit Date, and provided (i) such delay has not been caused by Tenant,
and (ii) no Event of Default then exists, Tenant may, at any time thereafter,
give Landlord written notice that it desires to terminate this Lease, in which
case this Lease shall terminate immediately without prejudice to Tenant or
Landlord; provided, however, if Substantial Completion occurs by the end of the
thirty (30) day period following notice to Landlord, and such additional delay
has been the result of Excused Delays, this Lease shall remain in full force and
effect. If Tenant does not terminate the Lease pursuant to this subsection (c)
at the end of such 6-month period, (i) Landlord's liability for such delay in
Substantial Completion shall be limited to the liquidated damages provided under
subsection (b), above, payable for such 6-month delay, (ii) Landlord shall not
be liable for any additional
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liquidated damage payments, and (iii) Landlord shall have no liability for
damages related to the additional delay to the extent such delay is due to
Excused Delays.
SECTION 2.5. BUILDING PERMIT FOR THE IMPROVEMENTS. Landlord
shall be responsible for obtaining from any governmental authority necessary
(generally the "Authority"), a building permit for the construction of the
improvements (the "Building Permit") and shall pursue obtaining such Building
Permit in good faith and with commercially reasonable diligence. If the Final
Plans and Specifications are rejected by the Authority, thereby preventing the
issuance of a Building Permit, Landlord shall immediately make all necessary
corrections required. If a change to the Final Plans and Specifications is
required by the Authority (an "Authority-Required Change"), the
Authority-Required Change shall be made to the Final Plans and Specifications by
Landlord. Any delay incurred as a result of such Authority-Required Change shall
be an Excused Delay and Tenant shall not unreasonably withhold its consent to
any Authority-Required Change.
SECTION 2.6. CONSTRUCTION WARRANTIES. Landlord shall assign to
Tenant (or, should Tenant not be legally capable of doing so itself, at Tenant's
expense, prosecute on Tenant's behalf) all statutory and contractual warranties
to which Landlord is entitled in connection with the Improvements, express or
implied, including, without limitation any warranties arising under any
construction contract between Landlord and Landlord's contractors. Other than
the assignment to Tenant of such warranties, or as otherwise specifically
provided in this Lease, Landlord shall have no obligation or responsibility to
Tenant, or its successors, with respect to any condition of the Improvements.
Landlord, at no cost or expense to Landlord, shall cooperate with Tenant in the
enforcement by Tenant, at Tenant's sole cost and expense, of any such warranties
or guaranties.
SECTION 2.7. REPAIR AND MAINTENANCE.
(a) Tenant's Obligations. Except to the extent specifically
identified as Landlord's responsibility in subsection (b), below, Tenant shall,
at its own expense, keep the Demised Premises, and every part thereof,
including, but not by way of limitation, the grounds, landscaped areas, truck
parking and loading and dock areas, the roof and roof membrane, drainage xxxxxx,
gutters, downspouts, glass, interior and exterior portions of the Building, and
the plumbing, heating, air-conditioning, wiring, elevators and other mechanical
systems therein, the facilities thereof and ail sidewalks, parking areas,
driveways, passageways and alleys adjacent thereto and other appurtenances
thereunto belonging, in good order, appearance, condition and repair (reasonable
wear and tear excepted), free of obstructions, dirt, and rubbish, and so as so
comply fully and at all times with all Applicable Laws consistent with other
first-class business and industrial parks in the northern portions of San Diego
County. Tenant agrees to make all replacements and repairs to the Demised
Premises necessary to maintain the Demised Premises in the condition described
in the preceding sentence. Tenant, at its own expense, shall also seal (paint)
the exterior of the Building periodically during the Term (including the Option
Terms) of this Lease in accordance with the recommendations of the manufacturer
of the material used for the exterior of said Building. All repairs,
replacements and renewals shall be at least equal in quality and class to the
original work. Any and all warranties to which Landlord is entitled in
connection with the development and construction of the Demised Premises, shall
be assigned to Tenant when and where appropriate, on a non-exclusive basis, for
the Term of this Lease. Because Tenant is undertaking the responsibility for
most aspects of the ongoing maintenance of the Demised Premises, Tenant waives
the provisions of California Civil Code Sections 1941 and 1942 with respect to
Landlord's obligations for tenantability of the Demised Premises and Tenant's
right to make repairs and deduct the expenses of such repairs from Rent.
(b) Landlord's Obligations. Landlord shall, at its own
expense, keep the structural elements of all exterior walls (except for painting
of the exterior walls, which shall be Tenant's responsibility), the Building
foundation and all underground utilities, in good order, condition and repair.
(c) Condition of Demised Premises: Limited Warranty. Landlord
makes no warranties or representations with regard to any portion of the Demised
Premises, and Tenant shall accept the Demised Premises in the condition they are
in on the Commencement Date (subject to the completion of minor "punch-list"
items that may still need to be corrected), except that (i) the Demised Premises
shall be constructed in substantial compliance with the Improvement Plans, and
(ii) for the Term of this Lease, the Improvements shall be free of latent
defects in construction, workmanship and materials, and Landlord shall be
responsible, at Landlord's sole cost and expense, or the prompt and diligent
repair of any such latent defects which manifest themselves during the Term.
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(d) Sharing of Certain Long-Term Expenses. Notwithstanding the
foregoing, Landlord and Tenant shall share the expenses associated with certain
items of repair and maintenance which, although considered normal maintenance or
operating expenses would, under generally acceptable accounting principles
consistently applied, be considered related to capital improvements, the
reasonable useful (i.e. depreciable) life of which would extend beyond the end
of the Term (a "Long-Term Item"), as follows:
i) Tenant shall pay all expenses related to Long-Term
Items.
ii) At any time Tenant intends to incur an expense
related to a Long-Term Item, Tenant shall notify Landlord, in writing, and
Landlord shall approve such expenditure, which approval shall not be
unreasonably withheld or delayed. Landlord shall not be required to approve any
expenditure which is not required under this Section 2.7 for the maintenance and
operation of the Demised Premises.
iii) At that time, Landlord and Tenant shall also
agree on the "useful" (i.e. depreciable) life of the Long-Term Item and shall
determine a per-year useful life allocation (the "Useful Life Allocation") of
financial responsibility for that Long-Term Item. By way of example only,
financial responsibility for a Long-Term Item which requires the expenditure of
$50,000 and which has a five-year "useful" life would be assigned a $10,000 per
year Useful Life Allocation.
iv) The Useful Life Allocation will be applied to the
item of expense related to the Long-Term Item, until the full amount of such
expense has been amortized.
v) If, at the end of the Term, there remains any
unamortized Useful Life Allocation(s), Landlord shall, within thirty (30) days
after the end of the Term, refund to Tenant, such unamortized Useful Life
Allocations, in cash.
ARTICLE III
RENT
SECTION 3.1. BASE RENT. In consideration of the lease of the
Demised Premises evidenced by this Lease, Tenant covenants to pay Landlord,
without previous demand therefor and without any right of setoff or deduction
whatsoever, at the office of Landlord at:
The Xxxxx Group
0000 Xx Xxxxx Xxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000-0000
Attention: Xx. Xxxxxx X. Xxxxx
or at such other place as Landlord may from time to time designate in writing, a
rental for the Initial Term of this Lease as hereinafter set forth, subject to
Section 3.1 (b) hereof, payable monthly, in advance, in equal installments as
hereinafter set forth, commencing on the Commencement Date, and continuing on
the first day of each month thereafter for the succeeding months during the
balance of the Term, the amount of Eighty Eight Thousand Two Hundred Twenty
Eight Dollars and Thirty-Three Cents ($88,228.33) (the "Base Rent"), subject to
the provisions of Sections 3.1(c) and (d), below.
SECTION 3.2. CHANGES IN BASE RENT DUE TO CHANGES IN SCOPE. The
Base Rent is based on the assumption that the scope of the Improvements will be
as described in the Preliminary Plans and Specifications (the "Initial Scope").
Changes in the Initial Scope of the Improvements shall result in adjustments to
the Base Rent as follows:
(a) "EXPANDED SCOPE COSTS" means the direct and indirect costs
incurred by Landlord in connection with the construction of the Improvements as
a result of any expansion in the scope of the Improvements beyond the Initial
Scope as a result of either (i) changes requested by Tenant, or (ii) Excused
Delays, provided, however, that costs which are the result of Excused Delays
which are not in the control of either Tenant or Landlord (i.e. resulting from
"force majeure") shall first be applied against the Contingency described in
subsection (e), below, and to
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the extent such Contingency is insufficient in amount, when taken together with
all other items applied to such Contingency, to fully cover such additional
costs, only fifty percent (50%) of such costs shall be considered Expanded Scope
Costs.
(b) "REDUCED SCOPE SAVINGS" means the reduction, if any, in
the direct and indirect costs incurred by Landlord in connection with the
construction of the Improvements resulting from reductions which are requested
by Tenant in the scope of the interior portion of the Improvements below the
Initial Scope. A reduction in the Initial Scope shall include any savings
experienced in the cost of a particular item for which an allowance is provided
in the Preliminary Plans and Specifications (e.g. floor coverings) from the
allowance amount provided.
(c) Base Rent, effective as of the Commencement Date, shall be
increased by an amount determined by the following formula:
(Expanded Scope Costs x .12) / 12 = Increase in Base Rent
In determining Expanded Scope Costs for the purposes of the foregoing
calculation, Reduced Scope Savings shall be credited against Expanded Scope
Costs to the extent such Expanded Scope Costs have been incurred in connection
with Improvements to the interior of the building which are permanent or affixed
in character (i.e. not Tenant's trade fixtures) and which have been approved in
advance by Landlord. Any Reduced Scope Savings which are not applied to Expanded
Scope Costs shall be added to the Contingency described in subsection (e),
below.
By way of example only, if Expanded Scope Costs of $100,000 are incurred
($50,000 of which are for permanent Improvements), and Reduced Scope Savings of
$60,000 obtained, then the Base Rent shall increase by $500 ([($100,000 -
$50,000) x .12] / 12) and the Contingency shall be increased by $10,000. Base
Rent shall not be decreased as a result of Reduced Scope Savings, except as
provided in subsection (e) below.
(d) Landlord shall deliver written notice to Tenant when and
if it is determined that Expanded Scope Costs have been incurred or Reduced
Scope Savings have been obtained and, as a result, the Base Rent shall increase
pursuant to this Section 3.2. Should Tenant dispute Landlord's calculation of
Expanded Scope Costs, Landlord and Tenant shall meet and endeavor, in good
faith, to resolve their differences. If, after fifteen (15) days following
delivery to Tenant of Landlord's calculation, Landlord and Tenant have not
resolved their differences, they shall immediately submit their differences to
binding arbitration in accordance with the Construction Industry Arbitration
Rules of the American Arbitration Association, and judgment upon the
determination of the arbitrator may be entered in any court having jurisdiction
thereof. At the commencement of such an arbitration, Landlord and Tenant shall
each submit to the arbitrator a written statement of what they contend is the
proper calculation of Expanded Scope Costs and Reduced Scope Savings. The
arbitrator's sole responsibility shall be to determine which of the two
calculations is most accurate and may select only Landlord's calculation or
Tenant's calculation. Whichever party's calculation is accepted shall be
considered the prevailing party and the losing party shall bear all costs
associated with such arbitration, including the other party's reasonable legal
expenses and reasonable expenses of other appropriate third party professional
advisors not affiliated with either party (e.g. accountants, auditors). Since
Expanded Scope Costs and Reduced Scope Savings may not be finally determined
until after Substantial Completion, if after such determination, the Base Rent
increases pursuant to this Section 3.2, Tenant shall, together with the next
regularly scheduled payment of the adjusted Base Rent, remit to Landlord an
equal to the product of (i) the amount of the increase in the Base Rent, and
(ii) the number of payments of the original Base Rent made by Tenant since the
Commencement Date. Notwithstanding the foregoing, if Expanded Scope Costs (as
may be reduced by Reduced Scope Savings which are applicable against Expanded
Scope Costs) are incurred in an amount which exceed Ninety Three Thousand
Dollars ($93,000), such Expanded Scope Costs shall be paid to Landlord by Tenant
in full (i) upon the commencement of construction, if they have been identified
prior to that time, (ii) when such Expanded Scope Costs are identified (e.g.
when a change is requested by Tenant or when an Excused Delay occurs), if
identified after the commencement of construction, or (iii) when Landlord's
construction lender requires, whichever is sooner.
(e) Landlord has allocated One Hundred Eighty Seven Thousand
Three Hundred Eighty Seven Dollars ($187,387) of its budget for the construction
of the Improvements to "Contingency." To the extent Landlord reasonably
determines that there are savings in other elements of its costs associated with
the construction of the Improvements, these savings will, during the course of
construction of the Improvements, be transferred to
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"Contingency." To the extent Landlord reasonably determines that any portion of
the allocated "Contingency" was not needed to complete construction of the
Improvements, the Base Rent shall decrease by an amount equal to the product of
(i) the unexpended portion of the "Contingency and (ii) .0048 (.115 / 2 / 12).
Landlord shall make that determination and notify Tenant of its conclusion
within seventy-five (75) days following Substantial Completion of the
Improvements. Any reduction in Base Rent which would have been applicable to
Base Rent already paid by Tenant shall be credited by Landlord against the next
payment of Base Rent due.
(f) Prior to the Commencement Date, Landlord shall make its
books and records regarding the costs of completing the Improvements available
for review by Tenant during normal business hours at Landlord's principal place
of business.
SECTION 3.3. INCREASE IN BASE RENT DURING TERM. On each of the
31st, 61st and 91st month of the Term, the Base Rent, as adjusted pursuant to
this Section 3.2, shall be increased to an amount equal to 106.5% of the then
applicable Base Rent, as may have been previously adjusted.
SECTION 3.4. BASE RENT DURING OPTION TERM. The Base Rent
during each Option Term (the "Option Term Base Rent") shall be an amount equal
to the greater of (i) ninety-five percent (95%) of the then fair market rental
value of the Demised Premises as then configured (the "Fair Market Rental
Value"), as stated on a monthly basis and determined pursuant to subsection (i),
below, or (ii) the Base Rent during the last year of the Initial Term (or the
prior Option Term, if applicable), multiplied by 1.065. On the 31st month of
each Option Term, the Option Term Base Rent shall be increased to an amount
equal to the then applicable Option Term Base Rent, multiplied by 1.065.
(a) Upon receipt by Landlord of Tenant's Extension Notice
under Section 1.2, above, Landlord and Tenant shall meet in an effort to
negotiate, in good faith, the Option Term Base Rent which will become effective
as of the first day of the ensuing Option Term (the "Option Term Commencement
Date"). If Landlord and Tenant have not agreed upon the Option Term Base Rent
within fifteen (15) days after the delivery of Tenant's Extension Notice, the
Option Term Base Rent shall be determined as follows:
(1) Landlord and Tenant shall attempt to agree in
good faith upon a single appraiser not later than one (1) month after delivery
or Tenant's Extension Notice. If Landlord and Tenant are unable to agree upon a
single appraiser within such time period, then Landlord and Tenant shall each
appoint one appraiser not later than fifteen (15) days after the deadline for
selecting a single appraiser. Landlord and Tenant shall each give written notice
to the other as to the name of the appraiser it has selected, as soon as the
selection is made. Within ten (10) days thereafter, the two appointed appraisers
shall appoint a third appraiser. All appraisers shall be independent from, and
disinterested in, both Landlord and Tenant.
(2) The only task which the appraisers will perform
will be forming and reporting to Landlord and Tenant an opinion of the Fair
Market Rental Value of the Demised Premises for use in determining the Option
Term Base Rent.
(3) If either Landlord or Tenant fails to appoint its
appraiser within the prescribed time period, the single appraiser appointed
shall determine the Fair Market Rental Value of the Demised Premises. If both
parties fail to appoint appraisers within the prescribed time periods, then the
first appraiser thereafter selected by a party shall determine the Fair Market
Rental Value of the Demised Premises.
(4) Each party shall bear the cost of its own
appraiser and the parties shall share equally the cost of any single or third
appraiser, if applicable. All appraisers so designated herein shall have at
least five (5) years' experience in the appraisal of commercial office
properties in the San Diego County, California and shall be members of
professional organizations such as MAI or its equivalent.
(5) For the purpose of such appraisal and this
subsection (d), the term "Fair Market Rental Value" shall mean the price that a
ready and willing single tenant would pay, as of the Option Term Commencement
Date, as annual rent to a ready and willing landlord of a comparable property to
the Demised Premises on the terms of this Lease, if such property were exposed
for lease on the open market for a reasonable period of time, and taking into
account all of the purposes for which such property may be legally used. A
"comparable property" shall mean a first-
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class corporate headquarters office building located in the northern half of San
Diego County, California (collectively the Market Area"), with improvements
similar in age and character to the Demised Premises, which has been improved
with the tenant improvements comparable to those constructed in the Demised
Premises; provided, however, that the appraisal shall disregard the value of the
equipment which Tenant is entitled to remove at the expiration or termination of
the Term of this Lease. The appraiser shall give appropriate consideration to
all relevant factors, including, without limitation, (i) the fact that this
Lease is a "triple net" lease, (ii) rental concessions and tenant improvement
allowances generally being offered by landlords of comparable properties, (iii)
the age of the Improvements, (iv) the condition of the Demised Premises on the
assumption that Tenant has complied with its obligations to maintain and repair
the Demised Premises, (v) current rental market conditions and the alternative
uses and users for the Demised Premises, (vi) whether Landlord will or will not
be required to pay a real estate brokerage commission in connection with
Tenant's exercise of the Extension Option, and (vii) the fact that the Tenant
will be accepting the Demised Premises in an "As-Is" conditions.
(6) If a single appraiser is chosen, then such
appraiser shall determine the Fair Market Rental Value of the Demised Premises.
Otherwise, the Fair Market Rental Value of the Demised Premises shall be the
arithmetic average of the two (2) appraisals which are closest in amount, and
the third appraisal shall be disregarded.
(7) Landlord and Tenant shall instruct the
appraiser(s), in writing, to complete their written determination of the Fair
Market Rental Value not later than nine (9) months prior to the Option Term
Commencement Date. If the Fair Market Rental Value is not determined prior to
the Option Term Commencement Date, then Tenant shall continue to pay Landlord
monthly installments of Annual Rent in the amount applicable to the Demised
Premises immediately prior to the Option Term Commencement Date until the Fair
Market Rental Value is determined. When the Fair Market Rental Value of the
Demised Premises is determined, Landlord shall deliver notice thereof to Tenant,
and Tenant shall pay to Landlord, within ten (10) days after receipt of such
notice, the difference between the monthly installments of Base Rent actually
paid by Tenant to Landlord subsequent to the Option Term Commencement Date and
the new monthly installments of Base Rent which are determined to have been
actually owing during such period in accordance with this Section 3.1.
SECTION 3.5. BASE RENT ADJUSTMENT. If the term of this Lease
does not commence on the first day of a calendar month or end on the last day of
a calendar month, the installment of Monthly Rent for the partial calendar month
at the commencement or the termination of the term shall be prorated on the
basis of the number of days of the term within such calendar month.
SECTION 3.6. ADDITIONAL RENT. Subject to the provisions of
Section 2.7 of this Lease, the Base Rent shall be absolutely net to Landlord so
that this Lease shall yield, net to Landlord, the Base Rent specified in Section
3.1 in each year of the term of this Lease and that all impositions, insurance
premiums, utility charges, maintenance, repair and replacement expenses, all
expenses relating to compliance with laws, and all other costs, fees, charges,
expenses, reimbursements and obligations of every kind and nature whatsoever
relating to the Demised Premises which may arise or become due during the term
or by reason of events occurring during the term of this Lease shall be paid or
discharged by Tenant. In the event Tenant fails to pay or discharge any
imposition, insurance premium, utility charge, maintenance, repair or
replacement expense which it is obligated to pay or discharge, Landlord may, but
shall not be obligated to, pay the same, and in that event Tenant shall
immediately reimburse Landlord therefor and pay the same as additional rent (all
such items being sometimes hereinafter collectively referred to as "Additional
Rent"), and Tenant hereby agrees to indemnify, defend and save Landlord harmless
from and against such impositions, insurance premiums, utility charges,
maintenance, repair and replacement expenses, all expenses relating to
compliance with laws, and all other costs, fees, charges, expenses,
reimbursements and obligations referred to above.
SECTION 3.7. DELINQUENT RENTAL PAYMENTS. All payments of Base
Rent and Additional Rent shall be payable without previous demand therefor and
without any right of setoff or deduction whatsoever, and in case of nonpayment
of any item of Additional Rent by Tenant when the same is due, Landlord shall
have, in addition to all its other rights and remedies, all of the rights and
remedies available to Landlord under the provisions of this Lease or by law in
the case of nonpayment of Base Rent. The performance and observance by Tenant of
all the terms, covenants, conditions and agreements to be performed or observed
by Tenant hereunder shall be performed and observed by Tenant at Tenant's sole
cost and expense. Any installment of Base Rent or Additional Rent or any other
charges payable by Tenant under the provisions hereof which shall not be paid
when due or within ten (10) days thereafter shall bear interest at an annual
rate of eighteen percent (18%) from the date when the same is due hereunder
until the same
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shall be paid, but in no event in excess of the maximum lawful rate permitted to
be charged by Landlord against Tenant. Said rate of interest is sometimes
hereinafter referred to as the "Maximum Rate of Interest."
SECTION 3.8. SECURITY DEPOSIT. As security for Tenant's
faithful performance of Tenant's obligations under this Lease, on the
Commencement Date, Tenant shall deliver to Landlord (i) an irrevocable letter of
credit drawn on a financial institution reasonably acceptable to Landlord and
with an expiry date of no sooner than then end of the Initial Term, or (ii) a
certificate of deposit, pledged to Landlord and endorsed in blank, with interest
accruing and added to the balance of the certificate of deposit, with a maturity
date no sooner than the end of the Initial Term, in the amount of Eighty Eight
Thousand Two Hundred Twenty Eight Dollars and Thirty Three Cents ($88,228.33).
If Tenant fails to pay Base Rent or other rent or charges due hereunder, or an
Event of Default (as defined in Section 12 of this Lease) occurs, Landlord may
draw on such letter of credit or negotiate such certificate of deposit in full,
or any portion thereof, for the payment of any amount due Landlord or to
reimburse or compensate Landlord for any liability, cost, expense, loss or
damage (including attorneys' fees) which Landlord may suffer or incur by reason
thereof. If Landlord uses or applies all or any portion of said letter of credit
or certificate of deposit, Tenant shall, within ten (10) days after written
request therefor, restore such letter of credit or certificate of deposit to the
full amount required by this Lease. Landlord shall, at the expiration or earlier
termination of the term hereof and after Tenant has vacated the Demised
Premises, return to Tenant (or, at Landlord's option, to the last assignee, if
any, of Tenant's interest herein), that portion of the Security Deposit not used
or applied by Landlord, or, as applicable, the letter of credit or the
certificate of deposit.
ARTICLE IV
USE OF DEMISED PREMISES
SECTION 4.1. PERMITTED USE. Tenant primarily intends to use
the Demised Premises for Tenant's corporate headquarters and related office
uses; and shall be used for no other purpose without first securing the prior
written consent of Landlord, which consent shall not be unreasonably withheld.
Tenant shall not use or occupy the same, or knowingly permit them to be used or
occupied, contrary to any statute, rule, order, ordinance, requirement or
regulation applicable thereto, or in any manner which would violate any
certificate of occupancy affecting the same, or which would make void or
voidable any insurance then in force with respect thereto or which would make it
impossible to obtain fire or other insurance thereon required to be furnished
hereunder by Tenant, or which would cause structural injury to the improvements
or cause the value or usefulness of the Demised Premises, or any portion
thereof, substantially to diminish (reasonable wear and tear excepted), or which
would constitute a public or private nuisance or waste, and Tenant agrees that
it will promptly, upon discovery of any such use, take all necessary steps to
compel the discontinuance of such use.
SECTION 4.2. PRESERVATION OF DEMISED PREMISES. Tenant shall
not use, suffer or permit the Demised Premises, or any portion thereof, to be
used by Tenant, any third party or the public in such manner as might reasonably
tend to impair Landlord's title to the Demised Premises, or any portion thereof,
or in such manner as might reasonably make possible a claim or claims of adverse
usage or adverse possession by the public, as such, or third persons, or of
implied dedication of the Demised Premises, or any portion thereof. Nothing in
this Lease contained and no action or inaction by Landlord shall be deemed or
construed to mean that Landlord has granted to Tenant any right, power or
permission to do any act or make any agreement that may create, or give rise to
or be the foundation for any such right, title, interest, lien, charge or other
encumbrance upon the estate of Landlord in the Demised Premises.
SECTION 4.3. HAZARDOUS SUBSTANCES.
(a) Subject to Section 4.3(f), Tenant shall at all times and
in all respects comply with all federal, state and local laws, ordinances and
regulations ("Hazardous Materials Laws") relating to the industrial hygiene,
environmental protection or the use, analysis, generation, manufacture, storage,
presence, disposal or transportation of any oil, flammable explosives, asbestos,
urea formaldehyde, polychlorinated biphenyls, radioactive materials or waste, or
other hazardous, toxic, contaminated or polluting materials, substances or
wastes, including without limitation any "hazardous substances," "hazardous
wastes," "hazardous materials" or toxic substances" under any such laws,
ordinances or regulations (collectively, "Hazardous Materials").
(b) Subject to Section 4.3(f), Tenant shall at its own expense
procure, maintain in effect and comply with all conditions of any and all
permits, licenses and other governmental and regulatory approvals required or
Tenant's use of the Demised Premises, including, without limitation, discharge
of (appropriately treated) materials or waste into or
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through any sanitary sewer system serving the Demised Premises. Except as
discharged into the sanitary sewer in strict accordance and conformity with all
applicable Hazardous Materials Laws and subject to Section 4 3(f). if Tenant
shall cause any and all Hazardous Materials to be removed from the Demised
Premises. Tenant shall cause the same to be transported solely by duly licensed
haulers to duly licensed facilities for final disposal of such Hazardous
Materials and wastes. Tenant shall in all respects handle, treat, deal with and
manage any and all Hazardous Materials in, on, under or about the Demised
Premises in complete conformity with all applicable Hazardous Materials Laws and
prudent industry practices regarding the management of such Hazardous Materials.
Subject to Section 4.3(f), all reporting obligations imposed by Hazardous
Materials Laws are solely the responsibility of Tenant. Upon expiration or
earlier termination of this Lease and subject to Section 4 3(f), Tenant shall
cause all Hazardous Materials to be removed from the Demised Premises and
transported for use, storage or disposal in accordance with and in complete
compliance with all applicable Hazardous Materials Laws. Tenant shall not take
any remedial action in response to the presence of any Hazardous Materials in,
on, about or under the Demised Premises or in any Improvements situated on the
Land other than in the normal course of Tenant's business operations as now
contemplated in accordance with all Hazardous Materials Laws or as necessitated
by emergency considerations in accordance with all applicable Hazardous
Materials Laws, nor enter into any settlement agreement, consent decree or other
compromise in respect to any claims relating to any Hazardous Materials in any
way connected with the Demised Premises or the Improvements on the Land without
first notifying Landlord of Tenant's intention to do so and affording Landlord
ample opportunity to appear, intervene or otherwise appropriately assert and
protect Landlord's interest with respect thereto In addition, at Landlord's
request, at the expiration of the term of this Lease, Tenant shall remove all
tanks or fixtures which were placed on the Demised Premises during the term of
this Lease and which contain, have contained or are contaminated with Hazardous
Materials.
(c) Tenant shall immediately notify Landlord in writing of (i)
any enforcement, cleanup, removal or other governmental or regulatory action
instituted, completed or threatened pursuant to any Hazardous Materials Laws;
(ii) any claim made or threatened by any person against Landlord or the Demised
Premises relating to damage, contribution, cost recovery, compensation, loss or
injury resulting from or claimed to result from any Hazardous Materials; and
(iii) any reports made to any environmental agency arising out of or in
connection with any Hazardous Materials in, on or about the Demised Premises or
with respect to any Hazardous Materials removed from the Demised Premises,
including any complaints, notices, warnings, reports or asserted violations in
connection therewith. Tenant shall also provide to Landlord, as promptly as
possible, and in any event within five (5) business days after Tenant first
receives or sends the same, copies of ail claims, reports, complaints, notices,
warnings or asserted violations of any Hazardous Materials Laws relating in any
way to the Demised Premises or Tenant's use thereof. Upon written request of
Landlord (to enable Landlord to defend itself from any claim or charge related
to any Hazardous Materials Laws), Tenant shall promptly deliver to Landlord
notices of hazardous waste manifests reflecting the legal and proper disposal of
ail such Hazardous Materials removed from the Demised Premises. Subject to
Section 4.3(f), all such manifests shall list the Tenant or its agent as a
responsible party and in no way shall attribute responsibility for any such
Hazardous Materials to Landlord.
(d) Subject to Section 4.3(f), Tenant shall indemnify, defend
(with counsel reasonably acceptable to Landlord), protect and hold Landlord and
each of Landlord's officers, directors, partners, employees, agents, attorneys,
successors and assigns free and harmless from and against any and all claims,
liabilities, damages, costs, penalties, forfeitures, losses or expenses
(including attorneys' fees) for death or injury to any person or damage to any
property whatsoever (including water tables and atmosphere) arising or resulting
in whole or in part, directly or indirectly, from the presence or discharge of
Hazardous Materials in, on, under, upon or from the Demised Premises or the
Improvements located thereon or from the transportation or disposal of Hazardous
Materials to or from the Demised Premises to the extent caused by Tenant whether
knowingly or unknowingly. Subject to Section 4.3(f), Tenant's obligations
hereunder shall include, without limitation, and whether foreseeable or
unforeseeable, all costs of any required or necessary repairs, clean-up or
detoxification or decontamination of the Demised Premises or the Improvements,
and the presence and implementation of any closure, remedial action or other
required plans in connection therewith, and shall survive the expiration of or
early termination of the term of this Lease. For purposes of the indemnity
provided herein, any acts or omissions of Tenant or its employees, agents,
customers, sublessees, assignees, contractors or subcontractors (whether or not
they are negligent, intentional, willful or unlawful) shall be strictly
attributable to Tenant.
(e) Landlord may, at its expense, commission an environmental
audit of the Demised Premises at any time after prior written novice thereof to
Tenant; provided that such environmental audit does not unreasonably interfere
with Tenant's use of the Demised Premises, or any portion thereof, and provided
further that Landlord
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indemnifies, defends and holds harmless Tenant and its officers, agents,
employees and customers from and against any loss or damages to Tenant's
machinery, equipment, fixtures and personal property, and all liability, loss or
damage arising from an injury to the property of Tenant, or its officers,
agents, employees or customers, and any death or personal injury to any person
or persons to the extent arising out of such environmental audit except for
liability, loss or damage caused by Tenant s gross negligence or willful
misconduct However, should Tenant breach any of its obligations set forth in
this Section 4.3, then Landlord shall have the right to require Tenant to
undertake and submit to Landlord an environmental audit from an environmental
company reasonably acceptable to Landlord, which audit shall evidence Tenant's
compliance with this Section 4.3.
(f) The obligations of Tenant under this Section 4.3 shall
survive the expiration or earlier termination of this Lease.
ARTICLE V
PAYMENT OF TAXES, ASSESSMENTS, ETC.
SECTION 5.1. PAYMENT OF IMPOSITIONS.
(a) Tenant covenants and agrees to pay during the term of this
Lease, as Additional Rent, and before any fine, penalty, interest or cost may be
added thereto for the nonpayment thereof, all real estate taxes, special
assessments, water rates and charges, sewer rates and charges, including any sum
or sums payable for present or future sewer or water capacity, charges for
public utilities, street lighting, excise levies, licenses, permits, inspection
fees, other governmental charges and all other charges or burdens of whatsoever
kind and nature (including costs, fees and expenses of complying with any
restrictive covenants listed on Exhibit "A" and amendments thereto recorded
subsequent to the date of this Lease or similar agreements to which the Demised
Premises are subject) incurred in the use, occupancy, ownership, operation,
leasing or possession of the Demised Premises, without particularizing by any
known name or by whatever name hereafter called, and whether any of the
foregoing be general or special, ordinary or extraordinary, foreseen or
unforeseen (all of which are sometimes herein referred to as "Impositions"),
which at any time during the term may have been or may be assessed, levied,
confirmed, imposed upon or become a lien on he Demised Premises or any portion
thereof or any appurtenance thereto, rents or income therefrom, and such
easements or rights as may now or hereafter be appurtenant or appertain to the
use of the Demised Premises. Tenant shall pay the current portions of all
special (or similar) assessments which during the term of this Lease shall be
laid, assessed, levied or imposed upon or become payable or become a lien upon
the Demised Premises or any portion thereof; provided, however, that if by law
any special assessment is payable (without default) or, at the option of the
owner, may be paid (without default) in installments (whether or not interest
shall accrue on the unpaid balance of such special assessment), Tenant may pay
the same, together with any interest accrued on the unpaid balance of such
special assessment, in installments as the same respectively become payable and
before any fine, penalty, interest or cost may be added thereto for the
nonpayment of any such installment and the interest thereon.
(b) Landlord shall pay all installments of special assessments
(including interest accrued on the unpaid balance) which are payable for periods
prior to the Commencement Date and after the termination date of the term of
this Lease. Tenant shall pay ail real estate taxes, whether heretofore or
hereafter levied or assessed upon the Demised Premises or any portion thereof,
which are due and payable for periods during the term of this Lease. Landlord
shall pay all real estate taxes which are payable for periods prior to the
Commencement Date and after the termination date of the term of this Lease.
Provisions herein to the contrary notwithstanding, Landlord shall pay that
portion of the real estate taxes and installments of special assessments due and
payable in respect to the Demised Premises during the year in which the term
commences and the year in which the term ends which the number of days in said
year not within the term of this Lease bears to 365, and Tenant shall pay the
balance of said current real estate taxes and current installments of special
assessments during said years.
SECTION 5.2. TENANT'S RIGHT TO CONTEST IMPOSITIONS. Tenant
shall have the right at its own expense to contest the amount or validity, in
whole or in part, of any Imposition by appropriate proceedings diligently
conducted in good faith; provided, however, if the payment of such Imposition is
necessary to properly appeal such Imposition, Tenant shall pay such imposition
before delinquency; and, provided further, if Tenant is then in default
hereunder, Tenant shall have first deposited with Landlord cash or a certificate
of deposit payable to Landlord issued by a national bank or federal savings and
loan association in the amount of the Imposition so contested and unpaid,
together with all interest and penalties which may accrue in Landlord's
reasonable judgment in connection therewith,
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and all charges that may or might be assessed against or become a charge on the
Demised Premises or any portion thereof during the pendency of such proceedings.
If Tenant is then in default hereunder and if during the continuance of such
proceedings, Landlord shall, from time to time, reasonably deem the amount
deposited, as aforesaid, insufficient, Tenant shall, upon demand of Landlord,
make additional deposits of such additional sums of money or such additional
certificates of deposit as Landlord may reasonably request. If Tenant is
required to make such additional deposits hereunder and Tenant fails to make
same, the amount theretofore deposited may be applied by Landlord to the
payment, removal and discharge of such imposition, and the interest, fines and
penalties in connection therewith, and any costs, fees (including attorneys
fees) and other liability (including costs incurred by Landlord) accruing in any
such proceedings. Upon the termination of any such proceedings, Tenant shall pay
the amount of such Imposition or part thereof, if any, as finally determined in
such proceedings, the payment of which may have been deferred during the
prosecution of such proceedings, together with any costs, fees, including
attorneys' fees, interest, penalties, fines and other liability in connection
therewith, and upon such payment, if Landlord had previously received any
amounts or certificates as a deposit, Landlord shall return all amounts or
certificates deposited with it with respect to the contest of such Imposition,
as aforesaid, or, at the written direction of Tenant, Landlord shall make such
payment out of the funds on deposit with Landlord and the balance, if any, shall
be returned to Tenant. Tenant shall be entitled to the refund of any Imposition,
penalty, fine and interest thereon received by Landlord which has been paid by
Tenant or which has been paid by Landlord but for which Landlord has been
previously reimbursed in full by Tenant. Landlord shall not be required to join
in any proceedings referred to in this Section 5.2 unless the provisions of any
law, rule or regulation at the time in effect shall require that such
proceedings be brought by or in the name of Landlord, in which event Landlord
shall join in such proceedings or permit the same to be brought in Landlord's
name upon compliance with such conditions as Landlord may reasonably require.
Landlord shall not ultimately be subject to any liability for the payment of any
fees, including attorneys' fees, costs and expenses in connection with such
proceedings. Tenant agrees to pay all such fees (including reasonable attorneys'
fees), costs and expenses or, on demand, to make reimbursement to Landlord for
such payment. During the time when any such certificate of deposit is on deposit
with Landlord, and prior to the time when the same is returned to Tenant or
applied against the payment, removal or discharge of Impositions, as above
provided, Tenant shall be entitled to receive all interest paid thereon. Cash
deposits shall not bear interest.
SECTION 5.3. LEVIES AND OTHER TAXES. If, at any time during
the term of this Lease, any method of taxation shall be such that there shall be
levied, assessed or imposed on Landlord, or on the Base Rent or Additional Rent,
or on the Demised Premises, or any portion thereof, a capital levy, gross
receipts tax, transaction privilege tax or other tax on the rents received
therefrom or a franchise tax, or an assessment, levy or charge measured by or
based in whole or in part upon such rents. Tenant covenants to pay and discharge
the same, it being the intention of the parties hereto that the rent to be paid
hereunder, shall be paid to Landlord absolutely net, without deduction or charge
of any nature whatsoever, foreseeable or unforeseeable, ordinary or
extraordinary, or of any nature, kind or description, except as in this Lease
otherwise expressly provided. Nothing in this Lease contained shall require
Tenant to pay any municipal, state or federal net income or excess profits taxes
assessed against Landlord, or any municipal, state or federal capital levy,
estate, succession, inheritance or transfer taxes of Landlord, or corporation
franchise taxes imposed upon any corporate owner of the fee of the Demised
Premises nor shall anything in this Lease require Tenant to pay any income tax
of Landlord or any tax in the nature of income tax or in lieu of income tax.
SECTION 5.4. EVIDENCE OF PAYMENT. Tenant covenants to furnish
Landlord, within thirty (30) days after the date upon which any Imposition or
other tax, assessment, levy or charge is payable by Tenant, official receipts of
the appropriate taxing authority, or other appropriate proof satisfactory to
Landlord, evidencing the payment of the same. The certificate, advice or xxxx of
the appropriate official designated by law to make or issue the same or to
receive payment of any Imposition or other tax, assessment, levy or charge may
be relied upon by Landlord as sufficient evidence that such imposition or other
tax, assessment, levy or charge is due and unpaid at the time of the making or
issuance of such certificate, advice or xxxx.
SECTION 5.5. ESCROW FOR TAXES AND ASSESSMENTS. At Landlord's
written demand after any Event of Default (as hereinafter defined) and for as
long as such Event of Default is uncured, Tenant shall pay to Landlord the known
or estimated yearly real estate taxes and assessments payable with respect to
the Demised Premises in monthly payments equal to one-twelfth (1/12) of the
known or estimated yearly real estate taxes and assessments next payable with
respect to the Demised Premises. From time to time, Landlord may reestimate the
amount of real estate taxes and assessments, and in such event Landlord shall
notify Tenant, in writing, of such reestimate and fix future monthly
installments for the remaining period prior to the next tax and assessment due
date in an amount sufficient to pay the reestimated amount over the balance of
such period after giving credit for payments made by Tenant on the previous
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estimate. If the total monthly payments made by Tenant pursuant to this Section
5.5 shall exceed the amount of payments necessary for said taxes and
assessments, such excess shall be credited on subsequent monthly payments of the
same nature; but if the total of such monthly payments so made under this
paragraph shall be insufficient to pay such taxes and assessments when due, then
Tenant shall pay to Landlord such amount as may be necessary to make up the
deficiency. Payment by Tenant of real estate taxes and assessments under this
Section 5.5 shall be considered as performance of such obligation under the
provisions of Section 5.1 hereof.
SECTION 5.6. LANDLORD'S RIGHT TO CONTEST IMPOSITIONS. In
addition to the right of Tenant under Section 5.2 to contest the amount or
validity of Impositions, Landlord shall also have the right, but not the
obligation, to contest the amount or validity, in whole or in part, of any
Impositions not contested by Tenant, by appropriate proceedings conducted in the
name of Landlord or in the name of Landlord and Tenant. If Landlord elects to
contest the amount or validity, in whole or in part, of any Impositions, such
contests by Landlord shall be at Landlord's expense; provided, however, that if
the amounts payable by Tenant for Impositions are reduced (or if a proposed
increase in such amounts is avoided or reduced) by reason of Landlord's contest
of Impositions, Tenant shall reimburse Landlord for costs reasonably incurred by
Landlord in contesting Impositions, but such reimbursements shall not be in
excess of the amount saved by Tenant by reason of Landlord's actions in
contesting such Impositions.
ARTICLE VI
INSURANCE
SECTION 6.1. TENANT'S INSURANCE OBLIGATIONS. Tenant, at Its
sole cost and expense, shall obtain and continuously maintain in full force and
effect during the term of this Lease, commencing with the date that rental (full
or partial) commences, policies of insurance covering the Improvements
constructed, installed or located on the Demised Premises naming the Landlord,
as an additional insured, against (a) loss or damage by fire; (b) loss or damage
from such other risks or hazards now or hereafter embraced by an "Extended
Coverage Endorsement," including, but not limited to, windstorm, hail,
explosion, vandalism, riot and civil commotion, damage from vehicles, smoke
damage, water damage and debris removal: (c) loss for flood if the Demised
Premises are in a designated flood or flood insurance area and required by
Landlord's lender(s), (d) loss from so-called explosion, collapse and
underground hazards; (e) loss or damage caused by earthquake if required by
Landlord's lender(s) (provided, however, that Landlord shall reimburse Tenant
for any earthquake-related premium which exceed $20,000 per year, which amount
shall be adjusted annually to reflect increases in the Consumer Price Index);
and (f) loss or damage from such other risks or hazards of a similar or
dissimilar nature which are now or may hereafter be customarily insured against
with respect to improvements similar in construction, design, general location,
use and occupancy to the Improvements as may be required by Landlord or
Landlord's lender(s), subject to sixty (60) days prior written novice to Tenant.
At all times, such insurance coverage shall be in an amount equal to one hundred
percent (100%) of the then "Full Replacement Cost" of the Improvements. "Full
Replacement Cost" shall be interpreted to mean the cost of replacing the
Improvements, without deduction for depreciation or wear and tear, including
costs attributable to improvements or upgrades in the Improvements required by
changes in laws and regulations governing zoning, public access and
accommodation, workplace conditions, public health or safety or similar matter,
and it shall include to the extent reasonably obtainable a reasonable sum for
architectural, engineering, legal, administrative and supervisory fees connected
with the restoration or replacement of the Improvements in the event of damage
thereto or destruction thereof. If Tenant desires to obtain such casualty
insurance with a deductible or self-insured retention or similar limitation on
coverage, such arrangement shall be submitted to Landlord for its approval,
which may be granted or withheld in Landlord's complete discretion.
SECTION 6.2. INSURANCE COVERAGE
(a) From and after the Commencement Date, Tenant, at its sole
cost and expense, shall obtain and continuously maintain in full force and
effect comprehensive general liability insurance against any loss, liability or
damage on, about or relating to the Demised Premises, or any portion thereof,
with limits of not less than Five Million Dollars ($5,000,000) combined single
limit, per occurrence and aggregate, coverage on an occurrence basis. Any such
insurance obtained and maintained by Tenant shall name Landlord as an additional
insured therein and shall be obtained and maintained from and with a reputable
and financially sound insurance company authorized to issue such insurance in
the state in which the Demised Premises are located. Such insurance shall to the
extent reasonably obtainable specifically insure (by contractual liability
endorsement) Tenant's obligations under Section 20.3 of this Lease.
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(b) During the term of this Lease, commencing with the
Commencement Date, Tenant, at its sole cost and expense, shall obtain and
continuously maintain in full force and effect boiler and pressure vessel
(including, but not limited to, pressure pipes, steam pipes and condensation
return pipes) insurance, provided the Building contains a boiler or other
pressure vessel or pressure pipes. Landlord shall be named as an additional
insured in such policy or policies of insurance.
(c) During the term of this Lease commencing with the
Commencement Date, Tenant, at its sole cost and expense, shall obtain and
continuously maintain in full force and effect such other insurance in such
amounts against other insurable hazards which at the time are commonly insured
against in the case of premises and/or buildings or improvements similar in
construction, design, general location, use and occupancy to those on or
appurtenant to the Demised Premises as may be reasonably required by Landlord or
Landlord's lender(s), subject to sixty (60) days prior written notice to Tenant.
(d) The insurance set forth in this Section 6.2 shall be
maintained by Tenant at not less than the limits set forth herein until
reasonably required to be changed from time to time by Landlord, with written
notice of not less than sixty (60) days, whereupon Tenant covenants to obtain
and maintain thereafter such protection in the amount or amounts so reasonably
required by Landlord.
SECTION 6.3. INSURANCE PROVISIONS. All policies of insurance
required by Section 6.1 shall provide that the proceeds thereof shall be payable
to Landlord or as otherwise may be required by Landlord's lender(s) and, if
Landlord so requests, shall also be payable to any contract purchaser of the
Demised Premises or the holder of any mortgage(s) now or hereafter becoming a
lien on the fee of the Demised Premises, or any portion thereof, as the interest
of such purchaser or holder appears pursuant to a standard named insured or
mortgagee clause. Tenant shall not, on Tenant's own initiative or pursuant to
request or requirement of any third parts, take out separate insurance
concurrent in form or contributing in the event of loss with that required in
this Article Vl, unless Landlord is named therein as an additional insured with
loss payable as provided in Section 6.1. Tenant shall immediately notify
Landlord whenever any such separate insurance is taken out and shall deliver to
Landlord original certificates evidencing the same. Any insurance proceeds to be
paid to Landlord following a casualty event and which are to be used for the
restoration of the Demised Premises pursuant to this Lease shall be deemed paid
to Landlord to be held in trust for that purpose, subject to the requirements of
Landlord's lender(s).
Each policy required under this Article VI shall have attached
thereto (a) an endorsement that such policy shall not be cancelled or materially
changed without at least thirty (30) days prior written notice to Landlord, and
(b) to the extent reasonably obtainable an endorsement to the effect that the
insurance as to the interest of Landlord shall not be invalidated by any act or
neglect of Landlord or Tenant. All policies of insurance shall be written with
companies reasonably satisfactory to Landlord and licensed in the state in which
the Demised Premises are located. Such certificates of insurance shall be in a
form reasonably acceptable to Landlord and shall be delivered to Landlord upon
the Commencement Date and, prior to expiration of such policy, new certificates
of insurance shall be delivered to Landlord not less than ten (10) days prior to
the expiration of the then current policy term.
Insurance required hereunder shall be obtained from companies
duly licensed to transact business in the state of California, and maintaining
during the policy term a "General Policyholders Rating" of at least "A" and
financial category rating of "Class Vll" in "Best's Insurance Guide."
SECTION 6.4. WAIVER OF SUBROGATION. Tenant shall cause to be
inserted in the policy or policies of insurance required by this Article Vl
hereof a complete so-called "Waiver of Subrogation Clause" as to Landlord.
Tenant hereby waives, releases and discharges Landlord, its agents and employees
from all claims whatsoever arising out of loss, claim, expense or damage to or
destruction covered or coverable by insurance required under this Article Vl,
unless such loss, claim, expense or damage may have been caused by Landlord, its
agents or employees, and Tenant agrees to look to the insurance coverage only in
the event of such loss.
SECTION 6.5. TENANT'S INDEMNIFICATION OF LANDLORD. Tenant
shall maintain insurance coverage upon Tenant's business and upon all personal
property of Tenant or the personal property of others kept, stored or maintained
on the Demised Premises against loss or damage by fire, windstorm or other
casualties or causes for such amount as Tenant may desire, and Tenant agrees
that such policies shall contain a waiver of subrogation clause as to
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Landlord. Such insurance shall include, without limitation, loss of use and
business interruption coverage which will include coverage for the payment of
the Basic and Additional Rent provided under this Lease.
SECTION 6.6. UNEARNED PREMIUMS. Upon expiration of the term of
this Lease, the unearned premiums upon any insurance policies or certificates
thereof lodged with Landlord by Tenant shall, subject to the provisions of
Article XIII hereof, be payable to Tenant, provided that Tenant shall not then
be in default in keeping, observing or performing the terms and conditions of
this Lease.
SECTION 6.7. BLANKET INSURANCE COVERAGE. Nothing in this
Article VI shall prevent Tenant from taking out insurance of the kind and in the
amount provided for under the preceding paragraphs of this Article VI under a
blanket insurance policy or policies (and certificates thereof reasonably
satisfactory to Landlord shall be delivered to Landlord) which may cover other
properties owned or operated by Tenant as well as the Demised Premises;
provided, however, that any such policy of blanket insurance of the kind
provided for shall (a) specify therein the amounts thereof exclusively allocated
to the Demised Premises (or Tenant shall furnish Landlord and the holder of any
fee mortgage with a written statement from the insurers under such policies
specifying the amounts of the total insurance exclusively allocated to the
Demised Premises), and (b) not contain any clause which would result in the
insured thereunder being required to carry any insurance with respect to the
property covered thereby in an amount not less than any specific percentage of
the Full Replacement Cost of such property in order to prevent the insured
therein named from becoming a co-insurer of any loss with the insurer under such
policy; and further provided, however, that such policies of blanket insurance
shall, as respects the Demised Premises, contain the various provisions required
of such an insurance policy by the foregoing provisions of this Article VI.
ARTICLE VII
UTILITIES
SECTION 7.1. PAYMENT OF UTILITIES. During the term of this
Lease, Tenant shall pay, when due, all charges of every nature, kind or
description for utilities furnished to the Demised Premises or chargeable
against the Demised Premises, including all charges for water, sewage, heat,
gas, light, garbage, electricity, telephone, steam, power, or other public or
private utility services. Prior to the Commencement Date, Tenant shall pay for
all utilities or services at the Demised Premises used by it or its agents,
employees or contractors (other than Landlord).
SECTION 7.2. ADDITIONAL CHARGES. In the event that any charge
or fee is required after the Commencement Date by the state in which the Demised
Premises are located, or by any agency, subdivision or instrumentality thereof,
or by any utility company furnishing services or utilities to the Demised
Premises, as a condition precedent to furnishing or continuing to furnish
utilities or services to the Demised Premises, such charge or fee shall be
deemed to be a utility charge payable by Tenant. The provisions of this Section
7.2 shall include, but not be limited to, any charges or fees for present or
future water or sewer capacity to serve the Demised Premises, any charges for
the underground installation of gas or other utilities or services, and other
charges relating to the extension of or change in the facilities necessary to
provide the Demised Premises with adequate utility services. In the event that
Landlord has paid any such charge or fee after the Commencement Date, Tenant
shall reimburse Landlord for such utility charge. Nothing contained in this
Section 7.2 shall be construed to relieve Landlord of the obligation to furnish
the Improvements described In Exhibit "B."
SECTION 7.3. LANDLORD'S RESPONSIBILITY FOR UTILITY HOOK-UP
CHARGES AND FEES. Notwithstanding anything contained in this Article VII to the
contrary, (a) as of the Commencement Date, all utilities contemplated by the
Improvements shall be hooked-up and fully operational and functional to the
Demised Premises at no charge to Tenant; and (b) if any utility or service
charge or fee related to capital improvements made by Landlord whose tax
depreciable life extends beyond the termination date of this Lease, Tenant shall
only pay the pro rata portion of such charge or fee to the extent that such tax
depreciable life is within the term of this Lease.
ARTICLE VIII
REPAIRS
SECTION 8.1. TENANT'S REPAIRS. Tenant, at its sole cost and
expense, throughout the term of this Lease, shall take good care of the Demised
Premises (including any improvements hereafter erected or installed on the
Land), shall keep the same in good order and condition, commensurate with other
first-class office or corporate
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headquarters buildings located in the northern portion of San Diego County of
size and construction quality similar to the Demised Premises and, shall make
and perform all maintenance thereof (including the roof) and all necessary
repairs thereto, interior and exterior, ordinary and extraordinary, foreseen and
unforeseen, of every nature, kind and description. When used in this Article
VIII, "repairs" shall include ail necessary replacements, renewals, alterations,
additions and betterments. All repairs made by Tenant shall be at least equal in
quality and cost to the original work and shall be made by Tenant in accordance
with all laws, ordinances and regulations whether heretofore or hereafter
enacted. The necessity for or adequacy of maintenance and repairs shall be
measured by the standards which are appropriate for improvements of similar
construction, class and age.
SECTION 8.2. MAINTENANCE. Tenant, at its sole cost and
expense, shall take good care of, repair and maintain all driveways, pathways,
roadways, sidewalks, curbs, spur tracks, parking areas, loading areas,
landscaped areas, entrances and passageways in good order and repair and shall
promptly remove all accumulated debris from any and all driveways, pathways,
roadways, sidewalks, curbs, parking areas, loading areas, entrances and
passageways and keep all portions of the Demised Premises, including areas
appurtenant thereto, in a clean and orderly condition free of dirt, rubbish,
debris and unlawful obstructions. Further, Tenant shall keep the Demised
Premises safe for human occupancy and use.
SECTION 8.3. TENANT'S WAIVER OF CLAIMS AGAINST LANDLORD.
Landlord shall not be required to furnish any services or facilities or to make
any repairs or alterations in, about or to the Demised Premises or any
improvements hereafter erected thereon. Tenant hereby assumes the full and sole
responsibility for the condition, operation, repair, replacement, maintenance
and management of the Demised Premises and all improvements hereafter erected
thereon, and Tenant hereby waives any rights created by any law now or hereafter
in force to make repairs to the Demised Premises or improvements hereafter
erected thereon at Landlord's expense.
SECTION 8.4. PROHIBITION AGAINST WASTE. Tenant shall not do or
suffer any waste, damage, disfigurement or injury to the Demised Premises, or
any improvements hereafter erected thereon, or to the fixtures or equipment
therein, or permit or suffer any overloading of the floors or other use of the
Improvements that would place an undue stress on the same or any portion thereof
beyond that for which the same was designed.
ARTICLE IX
COMPLIANCE WITH LAWS AND ORDINANCES
SECTION 9.1. COMPLIANCE WITH LAWS AND ORDINANCES. Tenant
shall, throughout the term of this Lease, and at Tenant's sole cost and expense,
promptly comply or cause compliance with or remove or cure any violation of any
and all present and future laws, ordinances, orders, rules, regulations and
requirements of all federal, state, municipal and other governmental bodies
having jurisdiction over the Demised Premises and the appropriate departments,
commissions, boards and officers thereof, and the orders, rules and regulations
of the Board of Fire Underwriters where the Demised Premises are situated, or
any other body now or hereafter constituted exercising lawful or valid authority
over the Demised Premises, or any portion thereof, or the sidewalks, curbs,
roadways, alleys, entrances or railroad track facilities (if any) adjacent or
appurtenant thereto, or exercising authority with respect to the use or manner
of use of the Demised Premises, or such adjacent or appurtenant facilities,
whether or not the compliance, curing or removal of any such violation and the
costs and expenses necessitated thereby shall have been foreseen or unforeseen,
ordinary or extraordinary, and whether or not the same shall be presently within
the contemplation of Landlord or Tenant or shall involve any change of
governmental policy or require structural or extraordinary repairs, alterations
or additions by Tenant and irrespective of the costs thereof.
SECTION 9.2. COMPLIANCE WITH TITLE RESTRICTIONS. Subject only
to Landlord's obligations under Section 2.7(b) of this Lease, Tenant, at its
sole cost and expense, shall comply with all agreements, contracts, easements,
restrictions, reservations or covenants to which the Demised Premises are
subject as of the Commencement Date, or hereafter created by Tenant or consented
to, in writing, by Tenant or requested, in writing, by Tenant and which are
related to the use or maintenance of the Demised Premises by Tenant or Landlord,
including, without limitation, that certain non-exclusive easement over a
portion of the Land for ingress and egress to Ramada Hotel Operating Company, a
Delaware corporation, recorded January 6, 1988, and that certain non-exclusive
easement over the same portion of the Land for ingress and egress to
Xxxxx/Xxxxxx Partnership, a California general partnership, recorded February 1,
1995, and those certain Maintenance Agreements by and between Xxxx/Mira Mesa and
Ramada Hotel Operating Company, a Delaware corporation, recorded May 2, 1988,
and May 16, 1988, copies of which have
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been previously provided to, and approved by, Tenant. Tenant shall also comply
with, observe and perform all provisions and requirements of all policies of
insurance at any time in force with respect to the Demised Premises and required
to be obtained and maintained under the terms of Article VI hereof, and Tenant
shall comply with all development permits issued by governmental authorities
issued in connection with development Office Demised Premises, copies of which
shall be supplied to Tenant by Landlord promptly after issuance.
SECTION 9.3. TENANT' S OBLIGATIONS. Notwithstanding that it
may be usual and customary for Landlord to assume responsibility and performance
of any or all of the obligations set forth in this Article IX, and
notwithstanding any order, rule or regulation directed to Landlord to perform,
Tenant hereby assumes such obligations because, by nature of this Lease, the
rents and income derived from this Lease by Landlord are net rentals not to be
diminished by any expense incident to the ownership, occupancy, use, leasing or
possession of the Demised Premises or any portion thereof.
SECTION 9.4. TENANT'S RIGHT TO CONTEST LAWS AND ORDINANCES.
After prior written notice to Landlord, Tenant, at its sole cost and expense and
without cost or expense to Landlord, shall have the right to contest the
validity or application of any law or ordinance referred to in this Article IX
in the name of Tenant or Landlord, or both, by appropriate legal proceedings
diligently conducted but only if compliance with the terms of any such law or
ordinance pending the prosecution of any such proceeding, may legally be delayed
without incurring of any lien, charge or liability of any kind against the
Demised Premises, or any portion thereof, and without subjecting Landlord or
Tenant to any liability, civil or criminal, for failure so to comply therewith
until the final determination of such proceeding; provided, however, if any
lien, charge or civil liability would be incurred by reason of any such delay,
Tenant nevertheless, on the prior written consent or Landlord, which consent
shall not be unreasonably withheld, may contest as aforesaid and delay as
aforesaid, provided that such delay would not subject Tenant or Landlord to
criminal liability and Tenant (a) furnishes Landlord security, reasonably
satisfactory to Landlord, against any loss or injury by reason of any such
contest or delay, (b) prosecutes the contest with due diligence and in good
faith, and (c) agrees to indemnify, defend and hold harmless Landlord and the
Demised Premises from any charge, liability or expense whatsoever. The security
furnished to Landlord by Tenant shall be in the form of a cash deposit or a
Certificate of Deposit issued by a national bank or federal savings and loan
association payable to Landlord. Said deposit shall be held, administered and
distributed in accordance with the provisions of Section 5.2 hereof relating to
the contest of the amount or validity of any Imposition.
If necessary or proper to permit Tenant so to contest the
validity or application of any such law or ordinance, Landlord shall, at
Tenant's sole cost and expense, including reasonable attorneys' fees incurred by
Landlord, execute and deliver any appropriate papers or other documents;
provided, however, that Landlord shall not be required to execute any document
or consent to any proceeding which would result in the imposition of any cost,
charge, expense or penalty on Landlord or the Demised Premises.
ARTICLE X
MECHANIC'S LIENS AND OTHER LIENS
SECTION 10.1. FREEDOM FROM LIENS. Tenant shall not suffer or
permit any mechanic's lien or other lien to be filed against the Demised
Premises, or any portion thereof, by reason of work, labor, skill, services,
equipment or materials supplied or claimed to have been supplied to the Demised
Premises at the request of Tenant, or anyone holding the Demised Premises, or
any portion thereof, through or under Tenant. If any such mechanic's lien or
other lien shall at any time be filed against the Demised Premises, or any
portion thereof, Tenant shall cause the same to be discharged of record within
thirty (30) days after the date of filing the same. If Tenant shall fail to
discharge such mechanic's lien or liens or owner lien within such period, then,
in addition to any other right or remedy of Landlord, after five (5) days prior
written notice to Tenant, Landlord may, but shall not be obligated to, discharge
the same by paying to the claimant the amount claimed to be due or by procuring
the discharge of such lien as to the Demised Premises by deposit in the court
having jurisdiction of such lien, the foreclosure thereof or other proceedings
with respect thereto, of a cash sum sufficient to secure the discharge of the
same, or by the deposit of a bond or other security with such court sufficient
in form, content and amount to procure the discharge of such lien, or in such
other manner as is now or may in the future be provided by present or future law
for the discharge of such lien as a lien against the Demised Premises. Any
amount paid by Landlord, or the value of any deposit so made by Landlord,
together with all costs, fees and expenses in connection therewith (including
reasonable attorneys' fees of Landlord), together with interest thereon at the
Maximum Rate of Interest set forth in Section 3.4 hereof, shall be repaid by
Tenant to Landlord on demand by Landlord and if unpaid may be treated as
Additional Rent. Tenant shall indemnify and defend Landlord against, and save
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Landlord and the Demised Premises and any portion thereof harmless from, all
losses, costs, damages, expenses, liabilities, suits, penalties, claims, demands
and obligations, including, without limitation, reasonable attorneys fees
resulting from the assertion, filing, foreclosure or other legal proceedings
with respect to any such mechanic's lien or other lien.
All materialmen, contractors, artisans, mechanics, laborers
and any other person now or hereafter furnishing any labor, services, materials,
supplies or equipment to Tenant with respect to the Demised Premises or any
portion thereof, are hereby charged with notice that they must look exclusively
to Tenant to obtain payment for the same. Notice is hereby given that Landlord
shall not be liable for any labor, services, materials, supplies, skill,
machinery, fixtures or equipment furnished or to be furnished to Tenant upon
credit, and that no mechanics lien or other lien for any such labor, services,
materials, supplies, machinery, fixtures or equipment shall attach to or affect
the estate or interest of Landlord in and to the Demised Premises or any portion
thereof.
SECTION 10.2. LANDLORD'S INDEMNIFICATION. The provisions of
Section 10.1 above shall not apply to any mechanic's lien or other lien for
labor, services, materials, supplies, machinery, fixtures or equipment furnished
to the Demised Premises in the performance of Landlord's obligations to
construct the Improvements required by the provisions of Article 11 hereof or in
the performance of Landlord's other obligations under this Lease, and Landlord
does hereby agree to indemnify and defend Tenant against and save Tenant and the
Demised Premises and any portion thereof harmless from all losses, costs,
damages, expenses, liabilities and obligations, including, without limitation,
reasonable attorneys' fees resulting from the assertion, filing, foreclosure or
other legal proceedings with respect to any such mechanic's lien or other lien.
SECTION 10.3. REMOVAL OF LIENS. Except as otherwise provided
for in this Article X, Tenant shall not create, permit or suffer, and shall
promptly discharge and satisfy of record, any other lien, encumbrance, charge,
security interest or other right or interest which shall be or become a lien,
encumbrance, charge or security interest upon the Demised Premises, or any
portion thereof, or the income therefrom, or on the interest of Landlord or
Tenant in the Demised Premises, or any portion thereof, if such lien,
encumbrance, charge, security interest or other right or interest shall result
from the actions of Tenant or others acting on the behalf of or for Tenant
(other than Landlord).
ARTICLE XI
INTENT OF PARTIES
SECTION 11.1. NET LEASE. Landlord and Tenant each state and
represent that it is their respective intention that this Lease be interpreted
and construed as an absolute net lease, and all Base Rent and Additional Rent
shall be paid by Tenant to Landlord without abatement, deduction, diminution,
deferment, suspension, reduction or setoff, and the obligations of Tenant shall
not be affected by reason of damage to or destruction of the Demised Premises
from whatever cause (except as provided for in Section 13.6 hereof); nor shall
the obligations of Tenant be affected by reason of any condemnation, eminent
domain or like proceedings (except as provided in Article XIV hereof), nor shall
the obligations of Tenant be affected by reason of any other cause whether
similar or dissimilar to the foregoing or by any laws or customs to the
contrary. It is the further express intent of Landlord and Tenant that, (a) the
obligations of Landlord and Tenant hereunder) shall be separate and independent
covenants and agreements and that the Base Rent and Additional Rent and all
other charges and sums payable by Tenant hereunder shall commence at the times
provided herein and shall continue to be payable in all events unless the
obligations to pay the same shall be terminated pursuant to an express provision
in this Lease; (b) all costs or expenses of whatsoever character or kind,
general or special, ordinary or extraordinary, foreseen or unforeseen, and of
every kind and nature whatsoever that may be necessary or required in and about
the Demised Premises or any portion thereof, and Tenant's possession or
authorized use thereof during the term of this Lease, shall be paid by Tenant,
and all provisions of this Lease are to be interpreted and construed in light of
the intention expressed in this Section 11.1; (c) the Base Rent specified in
Section 3.1 shall be absolutely net to Landlord so that this Lease shall yield
net to Landlord the Base Rent specified in Section 3.1 in each year during the
term of this Lease (unless extended or renewed at a different Base Rent); (d)
all Impositions, insurance premiums, utility expense, repair and maintenance
expense, and all other costs, fees, interest, charges, expenses, reimbursements
and obligations of every kind and nature whatsoever relating to the Demised
Premises or any portion thereof which may arise or become due during the term of
this Lease or any extension or renewal thereof shall be paid or discharged by
Tenant as Additional Rent; and (e) Tenant hereby agrees to indemnify, defend and
save Landlord harmless from and against any and all costs, fees, charges,
expenses, reimbursements and obligations, and any interest thereon which are
Tenant's responsibility or obligation hereunder.
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SECTION 11.2. ENTRY BY LANDLORD. If Tenant shall commit an
Event of Default, then Landlord, after prior written notice to Tenant as
provided in Section 12.1 (or without notice in case of emergency), and without
waiving or releasing Tenant from any obligation of Tenant contained in this
Lease, may, but shall be under no obligation to do so, (a) pay any Imposition
payable by Tenant pursuant to the provisions of Article V; (b) take out for and
maintain any of the insurance policies provided for in this Lease; or (c) make
any other payment or perform any other act on Tenant's part to be paid or
performed as in this Lease provided, and Landlord may enter upon the Demised
Premises upon at least twenty-four (24) hours advance notice during regular
business hours for any such purpose and take all such action therein or thereon
as may be necessary therefor. Nothing herein contained shall be deemed as a
waiver or release of Tenant from any obligation of Tenant contained in this
Lease.
SECTION 11.3. INTEREST ON UNPAID AMOUNTS. If Tenant shall
commit an Event of Default, Landlord may cure the same, but shall not be
required to do so, in such manner and to such extent as Landlord may deem
necessary or desirable, and in exercising any such right, may employ counsel and
pay necessary and incidental costs and expenses, including reasonable attorneys'
fees. All sums so paid by Landlord, and all necessary and incidental costs and
expenses, including reasonable attorneys' fees, in connection with the
performance of any such act by Landlord, together with interest hereon at the
Maximum Rate of interest provided for in Section 3.4 hereof from the date of
making such expenditure by Landlord, shall be deemed Additional Rent hereunder
and, except as is otherwise expressly provided herein, shall be payable to
Landlord on demand or, at the option of Landlord, may be added to any monthly
rental then due or thereafter becoming due under this Lease, and Tenant
covenants to pay any such sum or sums, with interest as aforesaid, and Landlord
shall have, in addition to any other right or remedy of Landlord, the same
rights and remedies in the event of nonpayment thereof by Tenant as in the case
of default by Tenant in the payment of monthly Base Rent. Landlord shall not be
limited in the proof of any damages which Landlord may claim against Tenant
arising out of or by reason of Tenant's failure to provide and keep in force
insurance as aforesaid, to the amount of the insurance premium or premiums not
paid or not incurred by Tenant, and which would have been payable upon such
insurance, but Landlord shall also be entitled to recover as damages for such
breach the uninsured amount of any loss (to the extent of any deficiency between
the dollar limits of insurance required by the provisions of this Lease and the
dollar limits of the insurance actually carried by Tenant) and reasonable costs
and expenses, including reasonable attorneys' fees, suffered or incurred by
reason thereof occurring during any period when Tenant shall have failed or
neglected to provide insurance as aforesaid.
ARTICLE XII
DEFAULTS OF TENANT
SECTION 12.1. EVENTS OF DEFAULT. Any one or more of the
following events shall be an event of default by Tenant ("Event of Default")
under this Lease:
(a) Tenant fails to pay any Base Rent or Additional Rent or
any other sum required by this Lease to be paid by Tenant within five (5)
business days after the same becomes due and payable; provided, however, that
Landlord shall be required to provide Tenant five (5) days' prior written notice
of any such Event of Default up to one (1) time during each twelve (12) month
period during the Term of this Lease; or
(b) Tenant fails to perform or comply with any other term
hereof, and such failure shall continue for more than thirty (30) days after
notice thereof from Landlord, and Tenant shall not within such period commence
with due diligence and dispatch the curing of such default, or, having so
commenced, shall thereafter fail or neglect to prosecute or complete with due
diligence and dispatch the curing of such default; or
(c) Tenant fails to keep, observe or perform any of the terms
contained in this Lease, other than those referred to in Subparagraphs (a) and
(b) of this Section 12.1, which does not expose Landlord to criminal liability,
and such failure continues for a period of thirty (30) days after written notice
thereof given by Landlord to Tenant, or in the case of such a failure which
cannot, with due diligence and in good faith be cured within thirty (30) days,
and Tenant fails to proceed promptly and with due diligence and in good faith to
cure the same and thereafter to prosecute the curing of such failure with due
diligence and in good faith, it being intended that in connection with a failure
which does not expose Landlord to criminal liability and which is not
susceptible of being cured with due diligence and in good faith within thirty
(30) days, that the time allowed Tenant within which to cure the same shall be
extended for such period as may be necessary for the curing thereof promptly
with due diligence and in good faith; or
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(d) Tenant fails to keep, observe or perform any of the terms
contained in this Lease, other than those referred to in Subparagraphs (a), (b)
and (c) of this Section 12.1, and which exposes Landlord to criminal liability,
and such failure shall continue after written notice thereof given by Landlord
to Tenant, and Tenant fails to proceed timely and promptly with all due
diligence and in good faith to cure the same and thereafter to prosecute the
curing of such failure with all due diligence, it being intended that in
connection with a failure which exposes Landlord to criminal liability that
Tenant shall proceed immediately to cure or correct such condition and
continually and with all due diligence and in good faith; or
(e) Tenant makes a general assignment for the benefit of
creditors or shall admit in writing its inability to pay its debts, as they
become due or shall file a petition in bankruptcy, or shall be adjudicated a
bankrupt or insolvent, or shall file a petition seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any present or future statute, law, or regulation, or shall file an
answer admitting or shall fail reasonably to contest the material allegations of
a petition filed against it in any such proceeding, or shall seek or consent to
or acquiesce in the appointment of any trustee, receiver or liquidator of Tenant
or any material part of its properties; or
(f) Within ninety (90) days after the commencement of any
proceeding against Tenant seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, such proceeding shall not have been
dismissed, or if, within ninety (90) days after the appointment without the
consent or acquiescence of Tenant, of any trustee, receiver or liquidator of
Tenant or of any material part of its properties, such appointment shall not
have been vacated; or
(g) A final judgment for the payment of money shall be
rendered against Tenant and, within sixty (60) days after the entry thereof,
such judgment shall not have been discharged or execution thereof stayed pending
appeal, or if, within sixty (60) days after the expiration of any such stay,
such judgment shall not have been discharged; or
(h) Tenant shall permit the abandonment or non-occupancy of
the Demised Premises except for temporary vacancies or portions thereof, or to
the extent caused by damage, destruction or condemnation; or
(i) Tenant sublets, assigns, mortgages, pledges, transfers or
otherwise encumbers or disposes of its interest in the Demised Premises or this
Lease, in whole or in part, in violation of Section 15.1 hereof.
SECTION 12.2. LANDLORD'S REMEDIES. Upon the occurrence of an
Event of Default, Landlord, at its option, without further notice or demand to
Tenant, shall have, in addition to all other rights and remedies provided in
this Lease, at law or in equity, the option to pursue any one or more of the
following remedies, each and all of which shall be cumulative and nonexclusive,
without any notice or demand whatsoever:
(a) Terminate this Lease, in which event Tenant shall
immediately surrender the Demised Premises to Landlord, and if Tenant fails to
do so, Landlord may, without prejudice to any other remedy which it may have for
possession or arrearages in Base Rent or Additional Rent, enter upon and take
possession of the Demised Premises and expel or remove Tenant and any other
person who may be occupying the Demised Premises or any part thereof, without
being liable for prosecution or any claim or damages therefor; and Landlord may
recover from Tenant the following:
i) The worth at the time of award of any unpaid Base
Rent and Additional Rent which has been earned at the time of such termination;
plus
ii) The worth at the time of award of the amount by
which the unpaid Base Rent and Additional Rent which would have been earned
after termination until the time of award exceeds the amount of such rental loss
that Tenant proves could have been reasonably avoided; plus
iii) The worth at the time of award of the amount by
which the unpaid Base Rent and Additional Rent for the balance of the Lease Term
after the time of award exceeds the amount of such rental loss that Tenant
proves could have been reasonably avoided; plus
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iv) Any other amount reasonably necessary to
compensate Landlord for all the detriment proximately caused by Tenant's failure
to perform its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom; and
v) Such other amounts in addition to or in lieu of
the foregoing as may be permitted from time to time by applicable law.
The term "Rent" as used in this Section 12.2 shall be deemed to be and to mean
all sums of every nature required to be paid by Tenant pursuant to the terms of
this Lease, whether to Landlord or to others. As used in subsections (i) and
(ii), above, the "worth at the time of award" shall be computed at the maximum
amount of such interest permitted by law. As used in subsection (iii), above,
the "worth at the time of award" shall be computed by discounting such amount at
the discount rate of the Federal Reserve Bank of San Francisco at the time of
award plus one percent (1%);
SECTION 12.3. RIGHT TO COLLECT RENT AS DUE. Landlord shall
have the remedy described in California Civil Code Section 1951.4 (Landlord may
continue lease in effect after Tenant's breach and abandonment and recover rent
as it becomes due, if Tenant has the right to sublet or assign, subject only to
reasonable limitations). Accordingly, if Landlord does not elect to terminate
this Lease on account of any default by Tenant, Landlord may, from time to time,
without terminating this Lease, enforce all of its rights and remedies under
this Lease, including the right to recover all Base Rent and Additional Rent as
they become due.
SECTION 12.4. NEW LEASE FOLLOWING TERMINATION. In the event
Landlord elects to terminate this Lease and relet the Premises, it may execute
any new lease in its own name. Tenant hereunder shall have no right or authority
whatsoever to collect any Base Rent, Additional Rent or other sums from such
tenant. The proceeds of any such reletting shall be applied as follows:
(a) First, to the payment of any indebtedness other than Base
Rent or Additional Rent due hereunder from Tenant to Landlord, including but not
limited to storage charges or brokerage commissions owing from Tenant to
Landlord as the result of such reletting;
(b) Second, to the payment of the costs and expenses of
reletting the Premises, including alterations and repairs which Landlord deems
reasonably necessary and advisable, and reasonable attorneys' fees incurred by
Landlord in connection with the retaking of the Demised Premises and such
reletting;.
(c) Third, to the payment of Base Rent, Additional Rent and
other charges due and unpaid hereunder; and
(d) Fourth, to the payment of future Base Rent, Additional
Charges and other damages payable by Tenant under this Lease.
SECTION 12.5. CUMULATIVE RIGHTS; NO WAIVER. All rights,
options and remedies of Landlord contained in this Lease shall be construed and
held to be non-exclusive and cumulative. Landlord shall have the right to pursue
any or all of such remedies or any other remedy or relief which may be provided
by law, whether or not stated in this Lease. No waiver of any Event of Default
of Tenant hereunder shall be implied from the acceptance by Landlord of any Rent
or other payments due hereunder (except with respect to the amount so collected)
or any omission by Landlord to take any action on account of such Event of
Default if such Event of Default persists or is repeated, and no express waiver
shall affect Defaults other than as specified in said waiver.
SECTION 12.6. TENANT NOT RELEASED FROM LIABILITY. No
expiration or termination of the Initial Term pursuant to this Article Xll or by
operation of law, or otherwise (except as expressly provided herein), and no
repossession of the Demised Premises or any part thereof pursuant to this
Article Xll, or otherwise, shall relieve Tenant of its liabilities and
obligations hereunder, all of which shall survive such expiration, termination
or repossession.
SECTION 12.7. SURRENDER OF DEMISED PREMISES. Upon any
expiration or termination of this Lease, Tenant shall quit and peaceably
surrender the Demised Premises and all portions thereof to Landlord, and
Landlord may, upon or at any time after any such expiration or termination and
without further notice, enter upon and reenter the
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Demised Premises and all portions thereof and possess and repossess itself
thereof by force, summary proceeding, ejectment or otherwise, and may dispossess
Tenant and remove Tenant and all other persons and property from the Demised
Premises and all portions thereof and may have, hold and enjoy the Demised
Premises and the right to receive all rental and other income of and from the
same.
ARTICLE XIII
DESTRUCTION AND RESTORATION
SECTION 13.1. DESTRUCTION AND RESTORATION. Tenant covenants
and agrees that in case of damage to or destruction of the Improvements after
the Commencement Date of the term of this Lease, by fire or otherwise, Tenant,
at its sole cost and expense, shall promptly restore, repair, replace and
rebuild the same as nearly as possible to the condition that the same were in
immediately prior to such damage or destruction with such changes or alterations
(made in conformity with Article XIX hereof) as may be reasonably acceptable to
Landlord or required by law. Tenant shall forthwith give Landlord written notice
of such damage or destruction upon the occurrence thereof and specify in such
notice, in reasonable detail, the extent thereof. Such restorations, repairs,
replacements, rebuilding, changes and alterations, including the cost of
temporary repairs for the protection of the Demised Premises, or any portion
thereof, pending completion thereof are sometimes hereinafter referred to as the
"Restoration." The Restoration shall be carried on and completed in accordance
with the provisions and conditions of Section 13.2 and Article XIX hereof.
Landlord and Tenant shall make appropriate, reasonable and customary
arrangements at such time for Tenant's use of the insurance proceeds recovered
by Landlord in connection with such Restoration. If the net amount of the
insurance proceeds (after deduction of all costs, expenses and fees related to
recovery of the insurance proceeds) recovered and held by Landlord, but made
available to Tenant for the Restoration, is reasonably deemed insufficient by
Landlord to complete the Restoration of such Improvements (exclusive of Tenant's
personal property and trade fixtures which shall be restored, repaired or
rebuilt out of Tenant's separate funds), Tenant shall, upon request to Landlord,
deposit with Landlord a cash deposit equal to the reasonable estimate of the
amount necessary to complete the Restoration of such Improvements less the
amount of such insurance proceeds available.
SECTION 13.2. APPLICATION OF INSURANCE PROCEEDS. All Insurance
moneys recovered by Landlord and held by Landlord on account of such damage or
destruction, less the reasonable costs, if any, to Landlord of such recovery,
shall be made available by Landlord for Tenant's use and shall be applied to the
payment of the costs of the Restoration and shall be paid out from time to time
as the Restoration progresses upon the written request of Tenant, accompanied by
a certificate of the architect or a qualified professional engineer in charge of
the Restoration stating that as of the date of such certificate (a) the sum
requested is justly due to the contractors, subcontractors, materialmen,
laborers, engineers, architects, or persons, firms or corporations furnishing or
supplying work, labor, services or materials for such Restoration, or is justly
required to reimburse Tenant for any expenditures made by Tenant in connection
with such Restoration, and when added to all sums previously paid out by
Landlord does not exceed the value of the Restoration performed to the date of
such certificate by all of said parties; (b) except for the amount, if any,
stated in such certificates to be due for work, labor, services or materials,
there is no outstanding indebtedness known to the person signing such
certificate, after due inquiry, which is then due for work, labor, services or
materials in connection with such Restoration, which, if unpaid, might become
the basis of a mechanic's lien or similar lien with respect to the Restoration
or a lien upon the Demised Premises, or any portion thereof; and (c) the costs,
as estimated by the person signing such certificate, of the completion of the
Restoration required to be done subsequent to the date of such certificate in
order to complete the Restoration do not exceed the sum of the remaining
insurance moneys, plus the amount deposited by Tenant, if any, remaining in the
hands of Landlord after payment of the sum requested in such certificate.
Tenant shall furnish Landlord at the time or any such payment
with evidence reasonably satisfactory to Landlord that there are no unpaid bills
in respect to any work, labor, services or materials performed, furnished or
supplied in connection with such Restoration. Landlord shall not be required to
pay out any insurance moneys where Tenant fails to supply satisfactory evidence
of the payment of work, labor, services or materials performed, furnished or
supplied, as aforesaid. If the insurance moneys in the hands of Landlord, and
such other sums, if any, deposited with Landlord pursuant to Section 13.1
hereof, shall be insufficient to pay the entire costs of the Restoration, Tenant
agrees to pay any deficiency promptly upon demand. Upon completion of the
Restoration and payment in full thereof by Tenant, Landlord shall, within a
reasonable period of time thereafter, turn over to Tenant all insurance moneys
or other moneys then remaining upon submission of proof reasonably satisfactory
to Landlord that the Restoration has been paid for in full and the damaged or
destroyed Building and other Improvements repaired, restored or rebuilt as
nearly as possible to
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the condition they were in immediately prior to such damage or destruction or
with such changes or alterations as may be made in conformity with Section 13.1
and Article XIX hereof.
SECTION 13.3. CONTINUANCE OF TENANT'S OBLIGATIONS. Except as
provided for in Section 13.6, no destruction of or damage to the Demised
Premises, or any portion thereof, by fire, casualty or otherwise shall permit
Tenant to surrender this Lease or shall relieve Tenant from its liability to pay
to Landlord the Base Rent and Additional Rent payable under this Lease or from
any of its other obligations under this Lease, and Tenant waives any rights now
or hereafter conferred upon Tenant by present or future law or otherwise to quit
or surrender this Lease or the Demised Premises, or any portion thereof, to
Landlord or to any suspension, diminution, abatement or reduction of rent on
account of any such damage or destruction.
SECTION 13.4. AVAILABILITY OF INSURANCE PROCEEDS. To the
extent that any insurance moneys which would otherwise be payable to Landlord
and used in the Restoration of the damaged or destroyed improvements are paid to
any mortgagee of Landlord and applied in payment of or reduction of the sum or
sums secured by any such mortgage or mortgages made by Landlord on the Demised
Premises, Landlord shall make available, for the purpose of Restoration of such
Improvements, an amount equal to the amount payable to its mortgagee out of such
proceeds, and such sum shall be applied in the manner provided in Section 13.2
hereof.
SECTION 13.5. COMPLETION OF RESTORATION. The foregoing
provisions of this Article XIII apply only to damage or destruction of the
Improvements by fire, casualty or other cause occurring after the Commencement
Date. Any such damage or destruction occurring prior to such time shall be
restored, repaired, replaced and rebuilt by Landlord.
SECTION 13.6. TERMINATION OF LEASE. If, within six (6) months
prior to the expiration of the term of this Lease, the Improvements shall be
destroyed or damaged to such an extent that the Restoration thereof will cost an
amount in excess of Five Hundred Thousand Dollars ($500,000), Tenant shall
compute the amount of the net proceeds of the insurance resulting therefrom (to
be collected and held by Landlord) and the amount, if any, over and above the
net proceeds of such insurance necessary for such Restoration (which latter
amount is hereinafter referred to as the "Excess Funds"), and if Tenant shall be
unable or unwilling to restore such damage or destruction or occupancy by
Tenant, Tenant shall, with reasonable promptness, notify Landlord, in writing,
of such fact, which notice shall be accompanied by a detailed statement of the
nature and extent of such damage or destruction, detailed estimates of the total
cost of Restoration, and a statement of the net proceeds from insurance and the
amount of any Excess Funds which may be required to restore the damage or
destruction. Tenant shall have the option, within fifteen (15) days after
Tenant's notice to Landlord, to terminate this Lease and surrender the Demised
Premises to Landlord by a notice, in writing, addressed to Landlord, specifying
such election accompanied by Tenant's payment of the balance of the Base Rent
and Additional Rent due for the remainder of the term of this Lease and other
charges hereafter specified in this Section 13.6. Upon the giving of such notice
and the payment of such amounts, the term of this Lease shall cease and come to
an end on a day to be specified in Tenant's notice, which date shall not be more
than thirty (30) days after the date of delivery of such notice by Tenant to
Landlord. Tenant shall accompany such notice with its payment of all Base Rent
and Additional Rent due for the remainder of the term of this Lease and other
charges payable by Tenant hereunder, together with the dollar amount of
Landlord's reasonable estimate of the Excess Funds necessary, if any. In such
event Landlord shall be entitled to the proceeds of all insurance required to be
carried by Tenant hereunder and Tenant shall execute all documents reasonably
requested by Landlord to allow such proceeds to be paid to Landlord.
SECTION 13.7. LIMITATION ON TENANT'S RESPONSIBILITY IN EVENT
OF INSURER'S INABILITY TO FUND EARTHQUAKE-RELATED CLAIM. Notwithstanding the
provisions of Section 8.1 and 13.1 of this Lease in the case of damage to or
destruction of the Improvements caused by an earthquake, should the net amount
of the insurance proceeds recovered by Landlord not be sufficient to complete
the Restoration due to the financial incapacity of Tenant's insurer and its
inability to honor its obligations under the insurance policy required to be
maintained by Tenant hereunder, then Tenant's financial liability for
Restoration of the Improvements shall be limited to the amount of the
deductible, self-insured retention or similar arrangement for which Tenant would
have otherwise been responsible under such policy and in such an event and
Landlord shall thereafter, within thirty (30) days, determine whether to fund
any balance needed to complete such Restoration, which if it elects not to do
so, shall result in a termination of this Lease with neither party having any
further rights or responsibilities thereunder, other than any accruing prior to
such termination.
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ARTICLE XIV
CONDEMNATION
SECTION 14.1. CONDEMNATION OF ENTIRE DEMISED PREMISES. If,
during the Initial Term of this Lease any extension or renewal thereof, the
entire Demised Premises shall be taken as the result of the exercise of the
power of eminent domain (hereinafter referred to as the "Proceedings"), this
Lease and all right, title and interest of Tenant hereunder shall cease and come
to an end on the date of vesting of title pursuant to such Proceedings, and
Landlord shall be entitled to and shall receive the total award made in such
Proceedings. Tenant hereby assigning any interest in such award, damages,
consequential damages and compensation to Landlord and Tenant hereby waiving any
right Tenant now has or may have under present or future law to receive any
separate award of damages for its interest in the Demised Premises or any
portion thereof or its interest in this Lease.
In any taking of the Demised Premises, or any portion thereof,
whether or not this Lease is terminated as provided in this Article, Tenant
shall not be entitled to any portion of the award for the taking of the Demised
Premises or damage to the Improvements, except as otherwise provided in Section
14.3 with respect to the restoration of the Improvements, or for the estate or
interest of Tenant therein, all such award, damages, consequential damages and
compensation being hereby assigned by Tenant to Landlord, and Tenant hereby
waives any right it now has or may have under present or future law to receive
any separate award of damages for its interest in the Demised Premises or any
portion thereof or its interest in this Lease, except that Tenant shall have,
nevertheless, the limited right to prove in the Proceedings and to receive any
award which may be made for damages to or condemnation of Tenant's movable trade
fixtures and equipment, and for Tenant's relocation costs in connection
therewith.
SECTION 14.2. PARTIAL CONDEMNATION/TERMINATION OF LEASE. If,
during the Initial Term of this Lease, or any extension or renewal thereof, less
than the entire Demised Premises, but more than fifteen percent (15%) of the
floor area of the Building, or more than twenty-five percent (25%) of the land
area of the Demised Premises, shall be taken in any such Proceedings, this Lease
shall, upon vesting of title in the Proceedings, terminate as to the portion of
the Demised Premises so taken, and Tenant may, at its option, terminate this
Lease as to the remainder of the Demised Premises. Tenant shall not have the
right to terminate this Lease pursuant to the preceding sentence unless (a) the
business of Tenant conducted in the portion of the Demised Premises taken cannot
reasonably be carried on with substantially the same utility and efficiency in
the remainder of the Demised Premises (or any substitute space securable by
Tenant pursuant to clause [b] hereof), and (b) Tenant cannot construct or secure
on the Demised Premises substantially similar space to the space so taken. Such
termination as to the remainder of the Demised Premises shall be effected by
notice in writing given not more than sixty (60) days after the date of vesting
of title in such Proceedings, and shall specify a date no more than sixty (60)
days after the giving of such notice as the date for such termination. Upon the
date specified in such notice, the term of this Lease, and all right, title and
interest of Tenant hereunder, shall cease and come to an end. If this Lease is
terminated as provided in this Section 14.2, Landlord shall be entitled to and
shall receive the total award made in such Proceedings, Tenant hereby assigning
any interest in such award, damages, consequential damages and compensation to
Landlord, and Tenant hereby waiving any right Tenant now has or may have under
present or future law to receive any separate award of damages for its interest
in the Demised Premises or any portion thereof or its interest in this Lease
except as otherwise provided in Section 14.1. The right of Tenant to terminate
this Lease as provided in this Section 14.2, shall be exercisable only upon the
condition that Tenant is not then in default in the performance of any of the
terms, covenants or conditions of this Lease on its part to be performed, and
such termination upon Tenant's part shall become effective only upon compliance
by Tenant with all such terms, covenants and conditions to the date of such
termination. In the event that Tenant elects not to terminate this Lease as to
the remainder of the Demised Premises, the rights and obligations of Landlord
and Tenant shall be governed by the provisions of Section 14.3 hereof.
SECTION 14.3. PARTIAL CONDEMNATION/CONTINUATION OF LEASE. If
fifteen percent (15%), or less, of the floor area of the Building, or
twenty-five percent (25%), or less, of the land area of the Demised Premises,
shall be taken in such Proceedings, or if more than fifteen percent (15%) of the
floor area of the Building or more than twenty-five percent (25%) of the land
area of the Demised Premises is taken (but less than the entire Demised
Premises), and this Lease is not terminated as provided in Section 14.2 hereof,
this Lease shall, upon vesting of title in the Proceedings, terminate as to the
parts so taken, and Tenant shall have no claim or interest in the award,
damages, consequential damages and compensation, or any part thereof except as
otherwise provided in Section 14.1 and except that Tenant shall have the right
to apply to Landlord for reimbursement as hereinafter provided from such funds
as specified in this Section 14.3 and such funds will be deemed to be held in
trust by Landlord for such purpose. Landlord shall be entitled
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to and shall receive the total award made in such Proceedings, Tenant hereby
assigning any interest in such award, damages, consequential damages and
compensation to Landlord, and Tenant hereby waiving any right Tenant now has or
may have under present or future law to receive any separate award of damages
for its interest in the Demised Premises or any portion thereof or its interest
in this Lease, except as otherwise provided in Section 14.1 and except that
Tenant shall have the right to apply to Landlord for reimbursement as
hereinafter provided from such funds as specified in this Section 14.3. The net
amount of the award (after deduction of all costs and expenses, including
attorneys' fees) shall be held by Landlord and applied as hereinafter provided.
Tenant, in such case, covenants and agrees, at Tenant's sole cost and expense
(subject to reimbursement to the extent hereinafter provided), promptly to
restore that portion of the Improvements on the Demised Premises not so taken to
a complete architectural and mechanical unit for the use and occupancy of Tenant
as provided in this Lease. The provisions and conditions in Article XIX
applicable to changes and alterations shall apply to Tenant's obligations to
restore that portion of the Improvements to a complete architectural and
mechanical unit. Landlord agrees in connection with such restoration work to
apply so much of the net amount of any award (after deduction of all costs and
expenses, including attorneys' fees) that may be received by Landlord and held
by Landlord in any such Proceedings for physical damage to the Improvements as a
result of such taking, to the costs of such restoration work thereof, and the
said net award for physical damage to the Improvements as a result of such
taking shall be paid out from time to time to Tenant, or on behalf of Tenant, as
such restoration work progresses upon the written request of Tenant, which shall
be accompanied by a certificate of the architect or the registered professional
engineer in charge of the restoration work stating that (a) the sum requested is
justly due to the contractors, subcontractors, materialmen, laborers, engineers,
architects or other persons, firms or corporations furnishing or supplying work,
labor, services or materials for such restoration work or as is justly required
to reimburse Tenant for expenditures made by Tenant in connection with such
restoration work, and when added to ail sums previously paid out by Landlord
does not exceed the value of the restoration work performed to the date of such
certificate; and (b) the net amount of any such award for physical damage to the
Improvements as a result of such taking remaining in the hands of Landlord,
together with the sums, if any, deposited by Tenant with Landlord pursuant to
the provisions hereof, will be sufficient upon the completion of such
restoration work to pay for the same in full. Tenant shall also furnish Landlord
with each certificate hereinabove referred to, together with evidence reasonably
satisfactory to Landlord that there are no unpaid bills in respect to any work,
labor, services or materials performed, furnished or supplied, or claimed to
have been performed, furnished or supplied, in connection with such restoration
work, and that no liens have been filed against the Demised Premises or any
portion thereof. Landlord shall not be required to pay out any funds when there
are unpaid bills for work, labor, services or materials performed, furnished or
supplied in connection with such restoration work, or where a lien for work,
labor, services or materials performed, furnished or supplied has been placed
against the Demised Premises or any portion thereof. Upon completion of the
restoration work and payment in full therefor by Tenant, and upon submission of
proof reasonably satisfactory to Landlord that the restoration work has been
paid in full and that the Improvements have been restored or rebuilt to a
complete architectural and mechanical unit for the use and occupancy of Tenant
as provided in this Lease, Landlord shall pay over to Tenant any portion of the
cash deposit furnished by Tenant then remaining. To the extent that any award,
damages or compensation which would otherwise be payable to Landlord and applied
to the payment of the cost of restoration of the Improvements is paid to any
mortgagee of Landlord and applied in payment or reduction of the sum or sums
secured by any such mortgage or mortgages made by Landlord on the Demised
Premises, Landlord shall make available for the use of Tenant, in connection
with the payment of the cost of restoring the Improvements, an amount equal to
the amount of such net award payable to the mortgagee from and after the date of
delivery of possession to the condemning authority pursuant to the Proceedings,
a just and proportionate part of the Base Rent, according to the extent and
nature of such taking, shall xxxxx for the remainder of the term of this Lease.
SECTION 14.4. CONTINUANCE OF OBLIGATIONS. In the event of any
termination of this Lease or any part thereof as a result of any such
Proceedings, Tenant shall pay to Landlord all Base Rent, all Additional Rent and
other charges payable hereunder with respect to that portion of the Demised
Premises so taken in such Proceedings with respect to which this Lease shall
have terminated justly apportioned to the date of such termination. From and
after the date of vesting of title in such Proceedings, Tenant shall continue to
pay the Base Rent, Additional Rent and other charges payable hereunder as in
this Lease provided to be paid by Tenant, subject to an abatement of a just and
proportionate part of the Base Rent according to the extent and nature of such
taking as provided for in Sections 14.3 and 14.5 hereof in respect to the
Demised Premises remaining after such taking.
SECTION 14.5. ADJUSTMENT OF RENT. In the event of a partial
taking of the Demised Premises under Section 14.3 hereof, or a partial taking of
the Demised Premises under Section 14.2 hereof, followed by Tenant's election
not to terminate this Lease, the fixed Base Rent payable hereunder during the
period from and after date of
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vesting of title in such Proceedings to the termination of this Lease shall be
reduced to a sum equal to the product of the Base Rent provided for herein
multiplied by a fraction, the numerator of which is the value of the Demised
Premises after such taking and after the same shall have been restored to a
complete architectural unit, and the denominator of which is the value of the
Demised Premises prior to such taking.
ARTICLE XV
ASSIGNMENT, SUBLETTING, ETC.
SECTION 15.1. RESTRICTION ON TRANSFER. Subject to Section
15.2, below, Tenant shall not sublet the Demised Premises or any portion
thereof, nor assign, mortgage, pledge, transfer or otherwise encumber or dispose
of this Lease or any interest therein, or in any manner assign, mortgage,
pledge, transfer or otherwise encumber or dispose of its interest or estate in
the Demised Premises or any portion thereof without obtaining Landlord's prior
written consent in each and every instance, which consent shall not be
unreasonably withheld or delayed, provided the following conditions are complied
with:
(a) Any assignment of this Lease shall transfer
to the assignee all of Tenant's right, title
and interest in this Lease and all of
Tenant's estate or interest in the Demised
Premises.
(b) At the time of any assignment or subletting
and at the time Tenant requests Landlord's
written consent thereto, this Lease must be
in full force and effect without any breach
or default thereunder on the part of Tenant.
(c) Any such assignee shall assume, by written,
recordable instrument, in form and content
satisfactory to Landlord, the due
performance of all of Tenant's obligations
under this Lease, including any accrued
obligations at the time of the effective
date of the assignment, and such assumption
agreement shall state that the same is made
by the assignee for the express benefit of
Landlord as a third party beneficiary
thereof. A copy of the assignment and
assumption agreement, both in form and
content satisfactory to Landlord, fully
executed and acknowledged by assignee,
together with a certified copy of a properly
executed corporate resolution (if the
assignee be a corporation) authorizing the
execution and delivery of such assumption
agreement, shall be sent to Landlord ten
(10) days prior to the effective date of
such assignment.
(d) In the case of a subletting, a copy of any
sublease fully executed and acknowledged by
Tenant and the sublessee shall be mailed to
Landlord ten (10) days prior to the
effective date of such subletting, which
sublease shall be in form and content
acceptable to Landlord.
(e) Such assignment or subletting shall be
subject to all provisions, terms, covenants
and conditions of this Lease, and
Tenant-assignor (and the guarantor or
guarantors of this Lease, if any) and the
assignee or assignees shall continue to be
and remain liable under the Lease.
(f) Each sublease permitted under this Section
15.1 shall contain provisions to the effect
that (i) such sublease is only for actual
use and occupancy by the sublessee; (ii)
such sublease is subject and subordinate to
all of the terms, covenants and conditions
of this Lease and to all of the rights of
Landlord thereunder; and (iii) in the event
this Lease shall terminate before the
expiration of such sublease, the sublessee
thereunder will, at Landlord's option,
attorn to Landlord and waive any rights the
sublessee may have to terminate the sublease
or to surrender possession thereunder as a
result of the termination of this Lease.
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(g) Tenant agrees to pay on behalf of Landlord
any and all reasonable costs of Landlord
including reasonable attorneys fees paid or
payable to outside counsel, occasioned by
such assignment or subletting.
SECTION 15.2. TRANSFER TO AFFILIATE. Notwithstanding Section
15.1, above, Tenant shall be permitted to assign or sublet the Demised Premises
or Tenant's rights under this Lease to (i) a corporation in which Tenant owns or
beneficially controls more than fifty percent (50%) of the outstanding voting
securities, (ii) a corporation, the Majority of the outstanding voting
securities of which are owned by the same persons or entities which own or
beneficially control the outstanding voting securities of Tenant (a "Sister
Corporation"), or (iii) a corporation in which a Sister Corporation owns or
beneficially controls more than fifty percent (50%) of the outstanding voting
securities, provided, however, that all other requirements and restrictions of
Section 15.1, above, shall apply to such assignment or subletting and further
provided that Tenant shall give Landlord no less than thirty (30) days prior
written notice of such assignment of subletting, including written evidence of
the identity of the assignee or sublessee and its affiliation with Tenant.
SECTION 15.3. RESTRICTION FROM FURTHER ASSIGNMENT.
Notwithstanding anything contained in this Lease to the contrary and
notwithstanding any consent by Landlord to any sublease of the Demised Premises
or any portion thereof or to any assignment of this Lease or of Tenant's
interest or estate in the Demised Premises, no sublessee shall assign its
sublease nor further sublease the Demised Premises or any portion thereof, and
no assignee shall further assign its interest in this Lease or its interest or
estate in the Demised Premises or any portion thereof, nor sublease the Demised
Premises or any portion thereof, without Landlord's prior written consent in
each and every instance, which consent shall not be unreasonably withheld or
unduly delayed. No such assignment or subleasing shall relieve Tenant from any
of Tenant's obligations contained in this Lease.
SECTION 15.4. TENANT'S FAILURE TO COMPLY. Tenant's failure to
comply with all of the foregoing provisions and conditions of this Article XV
shall (whether or not Landlord's consent is required under this Article), at
Landlord's option, render any purported assignment or subletting null and void
and of no force and effect.
ARTICLE XVI
SUBORDINATION, NONDISTURBANCE,
NOTICE TO MORTGAGEE AND ATTORNMENT
SECTION 16.1. SUBORDINATION BY TENANT. This Lease and all
rights of Tenant therein and all interest or estate of Tenant in the Demised
Premises or any portion thereof shall be subject and subordinate to the lien of
any mortgage, deed of trust, security instrument or other document of like
nature (collectively, "Mortgage"), which at any time may be placed upon the
Demised Premises or any portion thereof, and to each and every advance made
under any Mortgage. Tenant agrees at any time hereafter, and from time to time
on demand of Landlord, to execute and deliver to Landlord any instruments,
releases or other documents that may be reasonably required for the purpose of
subjecting and subordinating this Lease to the lien of any such Mortgage. It is
agreed, nevertheless, that so long as Tenant be not in default in the payment of
Base Rent and Additional Rent and the performance and observance of all
covenants, conditions, provisions, terms and agreements to be performed and
observed by Tenant under this Lease, that such subordination agreement or other
instrument, release or document shall not interfere with, hinder or molest
Tenant's right to quiet enjoyment under this Lease, nor the right of Tenant to
continue to occupy the Demised Premises and all portions thereof, and to conduct
its business thereon in accordance with the covenants, conditions, provisions,
terms and agreements of this Lease. The lien of any such Mortgage shall not
cover Tenant's trade fixtures or other personal property located in or on the
Demised Premises.
SECTION 16.2. LANDLORD'S DEFAULT. In the event of any act or
omission of Landlord constituting a default by Landlord, other than Landlord's
failure to have the Improvements substantially completed as provided in Section
2.3 and to make the same fully available to Tenant as therein provided, Tenant
shall not exercise any remedy until Tenant has given Landlord and its mortgagee
prior written notice of such act or omission and until a 30-day period of time
to allow Landlord or the mortgagee to remedy such act or omission shall have
elapsed following the giving of such notice; provided, however, if such act or
omission cannot with due diligence and in good faith be remedied within such
30-day period, Landlord and/or mortgagee shall be allowed such further period of
time as may be reasonably necessary provided that it shall have commenced
remedying the same with due diligence and in good faith within said 30-day
period. In the event any act or omission of Landlord which constitutes a
Landlord's default hereunder results in an immediate threat of bodily harm to
Tenant's employees, agents or invitees or damage to Tenant's property, Tenant
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may proceed to cure the default without prior notice to Landlord or its
mortgagee; provided, however, in that event Tenant shall give written notice to
Landlord and its mortgagee as soon as possible after commencement of such cure.
Nothing herein contained shall be construed or interpreted as requiring any
mortgagee to remedy such act or omission. No Landlord Default shall entitle
Tenant terminate this Lease or to deduct, offset or withhold Base Rent or
Additional Rent.
SECTION 16.3. ATTORNMENT. If any mortgagee shall succeed to
the rights of Landlord under this Lease or to ownership of the Demised Premises,
whether through possession or foreclosure or the delivery of a deed to the
Demised Premises, then, upon the written request of such mortgagee so succeeding
to Landlord's rights hereunder, Tenant shall attorn to and recognize such
mortgagee as Tenant's landlord under this Lease, and shall promptly execute and
deliver any instrument that such mortgagee may reasonably request to evidence
such attornment (whether before or after making of the mortgage). In the event
of any other transfer of Landlord's interest hereunder, upon the written request
of the transferee and Landlord, Tenant shall attorn to and recognize such
transferee as Tenant's landlord under this Lease and shall promptly execute and
deliver any instrument that such transferee and Landlord may reasonably request
to evidence such attornment.
ARTICLE XVII
SIGNS
Tenant may erect signs on the exterior or interior of the
Building or on the landscaped area adjacent thereto, provided that such sign or
signs (a) do not cause any structural damage or other material damage to the
Building; (b) do not violate applicable governmental laws, ordinances, rules or
regulations; (c) do not violate any existing restrictions affecting the Demised
Premises; and (d) are compatible with the architecture of the Building and the
landscaped area adjacent thereto.
ARTICLE XVIII
FINANCIAL STATEMENTS OF TENANT AND GUARANTOR
Tenant, from time to time, at Landlord's request, shall
provide Landlord with Tenant's most recent financial statements (a balance
sheet, a statement of operations, and a statement of cash flows or, if Tenant is
an entity which files periodic financial disclosures to securities regulatory
authorities, those which are periodically filed with those authorities).
Landlord shall hold such financial statements in confidence, provided that
Landlord may, as reasonably necessary, provide copies of those financial
statements to current and prospective lenders, investors and buyers, identified
in writing to Tenant, for examination and review. Unless Tenant is in default
under this Lease, Tenant shall not be obligated to provide such financial
statements more frequently than one (1) time per year.
ARTICLE XIX
CHANGES AND ALTERATIONS
Tenant shall have the right at any time, and from time to time
during the term of this Lease, to make such changes and alterations, structural
or otherwise, to the Building, improvements and fixtures hereafter erected on
the Demised Premises as Tenant shall deem necessary or desirable in connection
with the requirements of its business, which such changes and alterations (other
than changes or alterations of Tenant's movable trade fixtures and equipment)
shall be made in all cases subject to the following conditions, which Tenant
covenants to observe and perform:
(a) PERMITS. No change or alteration shall be
undertaken until Tenant shall have procured
and paid for, so far as the same may be
required from time to time, all municipal,
state and federal permits and authorizations
of the various governmental bodies and
departments having jurisdiction thereof, and
Landlord agrees to join in the application
for such permits or authorizations whenever
such action is necessary, ail at Tenants
sole cost and expense, provided such
applications do not cause Landlord to become
liable for any cost, fees or expenses.
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(b) COMPLIANCE WITH PLANS AND SPECIFICATIONS.
Before commencement of any change,
alteration, restoration or construction
(hereinafter sometimes referred to as
"Work") involving in the aggregate
an-estimated cost of more than Twenty-Five
Thousand and No/100ths Dollars ($25,000.00)
or which in Landlord's reasonable judgment
would materially alter the mechanical,
structural or electrical systems of the
Improvements, Tenant shall (i) furnish
Landlord with detailed plans and
specifications of the proposed change or
alteration; (ii) obtain Landlord's prior
written consent, which consent shall not be
unreasonably withheld but such consent may
be withheld if the change or alteration
would, in the reasonable judgment of
Landlord, impair the value or usefulness of
the Land or Improvements or any substantial
part thereof to Landlord); (iii) obtain
Landlord's prior written approval of a
licensed architect or licensed professional
engineer selected and paid for by Tenant who
shall supervise any such work (hereinafter
referred to as "Alterations Architect or
Engineer"); (iv) obtain Landlord's prior
written approval of detailed plans and
specifications prepared and approved in
writing by said Alterations Architect or
Engineer and of each amendment and change
thereto; and (v) furnish to Landlord a
surety company performance bond issued by a
surety company licensed to do business in
the state in which the Demised Premises are
located and reasonably acceptable to
Landlord in an amount equal to the estimated
cost of such work guaranteeing the
completion thereof within a reasonable time
thereafter (1) free and clear of all
mechanic's liens or other liens,
encumbrances, security interests and
charges, and (2) in accordance with the
plans and specifications approved by
Landlord.
(c) VALUE MAINTAINED. Any change or alteration
shall, when completed, be of such character
so as not to reduce the value of the Demised
Premises or the Building to which such
change or alteration is made below its value
or utility to Landlord immediately before
such change or alteration, nor shall such
change or alteration reduce the area or
cubic content of the Building, nor change
the character of the Demised Premises or the
Building as to use without Landlord's
express written consent.
(d) COMPLIANCE WITH LAWS. All work done in
connection with any change or alteration
shall be done promptly and in a good and
workmanlike manner and in compliance with
all building and zoning laws of the place in
which the Demised Premises are situated, and
in compliance with all laws, ordinances,
orders, rules, regulations and requirements
of all federal, state and municipal
governments and appropriate departments,
commissions, boards and officers thereof,
and in accordance with the orders, rules and
regulations of the Board of Fire
Underwriters where the Demised Premises are
located or any other body exercising similar
functions. The cost of any such change or
alteration shall be paid in cash so that the
Demised Premises and all portions thereof
shall at all times be free of liens for
labor and materials supplied to the Demised
Premises or any portion thereof. The Work or
any change or alteration shall be prosecuted
with reasonable dispatch, delays due to
strikes, lockouts, inability to obtain labor
or materials, governmental restrictions or
similar causes beyond the control of Tenant
excepted. Tenant or Tenant's contractor or
subcontractor shall obtain and maintain at
its sole cost and expense during the
performance of the Work workers'
compensation insurance covering all persons
employed in connection with the Work and
with respect to which death or injury claims
could be asserted against Landlord or Tenant
or against the Demised Premises or any
interest therein, together with
comprehensive general liability insurance
for the mutual benefit of Landlord and
Tenant with limits of not less than One
Million Dollars ($1,000,000.00) in the event
of injury to one person, Three Million
Dollars ($3,000,000.00) in respect to any
one accident or occurrence, and Five Hundred
Thousand Dollars ($500,000.00) for property
damage, and the fire insurance with
"extended coverage" endorsement required by
Section 6.1 hereof shall be supplemented
with "builder's risk" insurance on a
completed value form or other comparable
coverage on the Work. All such insurance
shall be in a company or companies
authorized to do business in the state in
which the Demised Premises are
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located and reasonably satisfactory to
Landlord, and all such policies of insurance
or certificates of insurance shall be
delivered to Landlord endorsed "Premium
Paid" by the company or agency issuing the
same, or with other evidence of payment of
the premium satisfactory to Landlord.
(e) Property of Landlord. All improvements and
alterations (other than Tenant's movable
trade fixtures and equipment) made or
installed by Tenant shall immediately upon
completion or installation thereof become
the property of Landlord without payment
therefor by Landlord and shall be
surrendered by Landlord on the expiration of
the term of this Lease.
(f) Location of Improvements. No change,
alteration, restoration or new construction
shall be in, or connect the Improvements
with, any property, building or other
improvement located outside the boundaries
of the parcel of land described in Exhibit
"A" attached hereto, nor shall the same
obstruct or interfere with any existing
easement.
(g) Removal of improvements. As a condition to
granting approval for any changes or
alterations, Landlord may require Tenant, by
written notice to Tenant given at or prior
to the time of granting such approval, to
remove any improvements, additions or
installations installed by Tenant in the
Demised Premises at Tenant's sole cost and
expense at the end of the term of this Lease
and repair and restore any damage caused by
the installation and removal of such
improvements, additions, or installations;
provided, however, the only improvements,
additions or installations which Tenant
shall remove shall be those specified in
such notice. All improvements, additions or
installations installed by Tenant which did
not require Landlord's prior approval shall
be removed by Tenant as provided for in this
Section 19.1(g), unless Tenant has obtained
a written waiver of such condition from
Landlord.
(h) Reasonable Consent. All consents required of
Landlord under this Article XIX shall not be
unreasonably withheld by Landlord.
ARTICLE XX
MISCELLANEOUS PROVISIONS
SECTION 20.1. ENTRY BY LANDLORD. Tenant agrees to permit
Landlord and authorized representatives of Landlord to enter upon the Demised
Premises at all reasonable times during ordinary business hours upon at least
twenty-four (24) hours advance notice to Tenant for the purpose of inspecting
the same and making any repairs required to be made thereto by Landlord under
the terms of this Lease, or as required to be made thereto by Tenant under the
terms of this Lease provided that Landlord shall have first given written notice
to Tenant to make such repairs and Tenant shall have failed to make such repairs
within thirty (30) days after notice; provided, however, Tenant shall be allowed
such further period of time as may be provided in Section 12.1 (c); and,
provided further, that Landlord shall be allowed to enter upon the Demised
Premises during an emergency. Nothing herein contained shall imply any duty upon
the part of Landlord to do any such work which, under any provision of this
Lease, Tenant may be required to perform, and the performance thereof by
Landlord shall not constitute a waiver of Tenant's default in failing to perform
the same. Landlord may, during the progress of any work, keep and store upon the
Demised Premises all necessary materials, tools and equipment. Landlord shall
not in any event be liable for inconvenience, annoyance, disturbance, loss of
business or other damage to Tenant by reason of making such repairs or the
performance of any such work in or about the Demised Premises or on account of
bringing material, supplies and equipment into, upon or through the Demised
Premises during the course thereof, and the obligations of Tenant under this
Lease shall not be thereby affected in any manner whatsoever; except that
Landlord shall use reasonable efforts to not unreasonably interfere with
Tenant's use of the Demised Premises, or any portion thereof, by reason of
Landlord's making such repairs or the performance of any such work in or about
the Demised Premises or on account of bringing materials, supplies and equipment
into, upon or through the Demised Premises during the course thereof.
SECTION 20.2. EXHIBITION OF DEMISED PREMISES. Landlord is
hereby given the right during usual business hours upon at least forty-eight
(48) hours advance notice to Tenant at any time during the term of this Lease to
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enter upon the Demised Premises and to exhibit the same for the purpose of
mortgaging or selling the same. During the final year of the term, Landlord
shall be entitled to display on the Demised Premises, in such manner as to not
unreasonably interfere with Tenant's business, signs indicating that the Demised
Premises are for rent and/or sale and suitably identifying Landlord or its
agent. Tenant agrees that such signs shall remain unmolested upon the Demised
Premises and that Landlord during ordinary business hours upon at least
forty-eight (48) hours advance notice to Tenant may exhibit the Demised Premises
to prospective tenants or buyers during said period.
SECTION 20.3. INDEMNIFICATION BY TENANT. To the fullest extent
allowed by law, Tenant shall at all times indemnify, defend and hold Landlord
harmless against and from any and all claims by or on behalf of any person or
persons, firm or firms, corporation or corporations, arising from the conduct or
management, or from any work or things whatsoever done in or about the Demised
Premises during the term of this Lease, other than as a result of the gross
negligence or willful misconduct of Landlord or its officers, employees,
contractors or subcontractors or as a result of Landlord's breach of its
obligations under this Lease, and Tenant shall further indemnify, defend and
hold Landlord harmless against and from any and all claims arising during the
term of this Lease from any condition of the Improvements or any street, curb or
sidewalk adjoining the Demised Premises, or of any passageways or space therein
or appurtenant thereto, other than as a result of the gross negligence or
willful misconduct of Landlord or its officers, employees, contractors or
subcontractors or as a result of Landlord's breach of its obligations under this
Lease, or arising from any breach or default on the part of Tenant in the
performance of any covenant or agreement on the part of Tenant to be performed
pursuant to the terms of this Lease, or arising from any act or negligence of
Tenant, its agents, servants, employees or licenses, or arising from any
accident, injury or damage whatsoever caused to any person, firm or corporation
occurring during the term of this Lease in or about the Demised Premises, or
upon the sidewalk and the land adjacent thereto, other than as a result of the
gross negligence or willful misconduct of Landlord or its officers, employees,
contractors or subcontractors or as a result of Landlord's breach of its
obligations under this Lease, and from and against all costs, attorneys' fees,
expenses and liabilities incurred in or about any such claim or action or
proceeding brought thereon; and in case any action or proceeding be brought
against Landlord by reason of any such claim, Tenant, upon notice from Landlord,
covenants to defend such action or proceeding by counsel reasonably satisfactory
to Landlord. Tenant's obligations under this Section 20.3 shall be insured by
contractual liability endorsement on Tenant's policies of insurance required
under the provisions of Section 6.2 hereof to the extent reasonably obtainable.
SECTION 20.4. NOTICES. All notices, demands and requests which
may be or are required to be given, demanded or requested by either party to the
other shall be in writing, and shall be sent by United States registered or
certified mail, postage prepaid, by an independent overnight courier service, or
by telephonic facsimile transmission with automatic written time and date
confirmation of delivery transmitted between the hours of 9:00 a.m. and 5:00
p.m. (time zone of recipient), and addressed as follows:
To Landlord: The Xxxxx Group
0000 Xx Xxxxx Xxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000-0000
Attention: Xx. Xxxxxx X. Xxxxx
Facsimile: 000-000-0000
To Tenant: Arrowhead General Insurance Agency, Inc.
0000 Xxxx Xxxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxxxxxx X. Xxxxxxxx
Facsimile: 000-000-0000
or at such other place as a party hereto may from time to time designate by
written notice thereof to the other. Notices, demands and requests which shall
be served upon Landlord by Tenant, or upon Tenant by Landlord, in the manner
aforesaid, shall be deemed to be sufficiently served or given for all purposes
hereunder at the time such notice, demand or request shall be mailed or
delivered to a courier.
SECTION 20.5. QUIET ENJOYMENT. Landlord covenants and agrees
that Tenant, upon paying the Base Rent and Additional Rent and upon observing
and keeping the covenants, agreements and conditions of this Lease on its part
to be kept, observed and performed, shall lawfully and quietly hold, occupy and
enjoy the Demised Premises
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(subject to the provisions of this Lease) during the term of this Lease without
hindrance or molestation by Landlord or by any Person or Persons claiming under
Landlord.
SECTION 20.6. LANDLORD'S CONTINUING OBLIGATIONS. The term
"Landlord," as used in this Lease, so far as covenants or obligations on the
part of Landlord are concerned, shall be limited to mean and include only the
owner or owners at the time in question of the fee of the Demised Premises, and
in the event of any transfer or transfers or conveyance, the then grantor shall
be automatically freed and relieved from and after the date of such transfer or
conveyance of all liability as respects the performance of any covenants or
obligations on the part of Landlord contained in this Lease thereafter to be
performed, provided that any funds in the hands of such landlord or the then
grantor at the time of such transfer, in which Tenant has an interest, shall be
turned over to the Guarantee, and any amount then due and payable to Tenant by
Landlord or the then grantor under any provision of this Lease, shall be paid to
Tenant. The covenants and obligations contained in this Lease on the part of
Landlord shall, subject to the aforesaid, be binding on Landlord's successors
and assigns during and in respect of their respective successive periods of
ownership. Nothing herein contained shall be construed as relieving Landlord of
its obligations under Article 11 of this Lease or releasing Landlord from any
obligation to complete the cure of any breach by Landlord during the period of
its ownership of the Demised Premises. However, Tenant agrees to look solely to
Landlord's interest in the Land, the Building and the Improvements for the
recovery of any judgment from Landlord, it being agreed that Landlord, or if
Landlord is a partnership, its partners whether general or limited, or if
Landlord is a corporation, its directors, officers and shareholders, shall never
be Personally liable for any such judgment.
SECTION 20.7. ESTOPPEL. Tenant shall, without charge at any
time and from time to time, within ten (10) days after written request by
Landlord, certify by written instrument, duly executed, acknowledged and
delivered to any mortgagee, assignee of a mortgagee, proposed mortgagee,
purchaser or proposed purchaser, or any other person dealing with Landlord or
the Demised Premises.
(a) That this Lease (and all guaranties, if any)
is unmodified and in full force and effect
(or, if there have been modifications, that
the same is in full force and effect, as
modified and stating the modifications);
(b) The dates to which the Base Rent or
Additional Rent have been paid in advance.
(c) Whether or not there are then existing any
breaches or defaults by such party or the
other party known by such party under any of
the covenants, conditions, provisions, terms
or agreements of this Lease, and specifying
such breach or default, if any, or any
setoffs or defenses against the enforcement
of any covenant, condition, provision, term
or agreement of this Lease (or of any
guaranties) upon the part of Landlord or
Tenant (or any guarantor), as the case may
be, to be performed or complied with (and,
if so, specifying the same and the steps
being taken to remedy the same); and
(d) Such other statements or certificates as
Landlord or any mortgagee may reasonably
request.
It is the intention of the parties hereto that any statement delivered pursuant
to this Section 20.7 may be relied upon by any of such parties dealing with
Landlord or the Demised Premises.
SECTION 20.8. DELIVERY OF CORPORATE DOCUMENTS. In the event
that Tenant is a corporation, Tenant shall, without charge to Landlord, at any
time and from time to time within ten (10) days after written request by
Landlord, deliver to Landlord, in connection with any proposed sale or mortgage
of the Demised Premises, the following instruments and documents:
(a) Certificate of Good Standing in the state of
incorporation of Tenant and in the state in
which the Demised Premises are located
issued by the appropriate state authority
and bearing a current date;
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(b) A copy of Tenant's articles of incorporation
and by-laws and any amendments or
modifications thereof certified by the
secretary or assistant secretary of Tenant;
(c) An opinion of Tenant's counsel that (i) this
Lease has been duly authorized by all
necessary corporate action; and (ii) Tenant
is a duly organized and validly existing
corporation under the laws of its state of
incorporation, is duly authorized to carry
on its business, and is in good standing
under the laws of the state in which the
Demised Premises are located, if different
from the state of incorporation.
SECTION 20.9. MEMORANDUM OF LEASE. Within three (3) days
following a request from either party to this Lease, both parties shall execute,
deliver and Landlord shall record in San Diego County a Memorandum of Lease,
setting forth the following:
(a) The date of this Lease;
(b) The parties to this Lease;
(c) The term of this Lease;
(d) The legal description of the Demised Premises; and
(e) Such other matters reasonably requested by Landlord
or Tenant to be stated therein.
SECTION 20.10. SEVERABILITY. If any covenant, condition,
provision, term or agreement of this Lease shall, to any extent, be held invalid
or unenforceable, the remaining covenants, conditions, provisions, terms and
agreements of this Lease shall not be affected thereby, but each covenant,
condition, provisions, term or agreement of this Lease shall be valid and in
force to the fullest extent permitted by law. This Lease shall be construed and
be enforceable in accordance with the laws of the stare in which the Demised
Premises are located.
SECTION 20.11. SUCCESSORS AND ASSIGNS. The covenants and
agreements herein contained shall bind and inure to the benefit of Landlord, its
successors and assigns, and Tenant and its permitted successors and assigns.
SECTION 20.12. CAPTIONS. The caption of each article of this
Lease is for convenience and reference only, and in no way defines, limits or
describes the scope or intent of such article or of this Lease.
SECTION 20.13. RELATIONSHIP OF PARTIES. This Lease does not
create the relationship of principal and agent, partnership, joint venture, or
any association or relationship between Landlord and Tenant, the sole
relationship between Landlord and Tenant being that of landlord and tenant.
SECTION 20.14. ENTIRE AGREEMENT. All preliminary and
contemporaneous negotiations are merged into and incorporated in this Lease.
This Lease, together with the exhibits attached hereto, contains the entire
agreement between the parties and shall not be modified or amended in any manner
except by any instrument in writing executed by the parties hereto.
SECTION 20.15. NO MERGER. There shall no merger of this Lease
or of the leasehold estate created by this Lease with any other estate or
interest in the Demised Premises by reason of the fact that the same person,
firm, corporation or other entity may acquire, hold or own, directly or
indirectly, (a) this Lease or the leasehold interest created by this Lease or
any interest therein, and (b) any such other estate or interest in the Demised
Premises, or any portion thereof. No such merger shall occur unless and until
all persons, firms, corporations or other entities having an interest (including
a security interest) in (a) this Lease or the leasehold estate created thereby,
and (2) any such other estate or interest in the Demised Premises, or any
portion thereof, shall join in a written instrument expressly affecting such
merger and shall duly record the same.
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SECTION 20.16. POSSESSION AND USE. Tenant acknowledges that
the Demised Premises are the property of Landlord and that Tenant has only the
right to possession and use thereof upon the covenants, conditions, provisions,
terms and agreements set forth in this Lease.
SECTION 20.17. SURRENDER OF DEMISED PREMISES. At the
expiration of the term of this Lease, Tenant shall surrender the Demised
Premises in the same condition as they were in upon delivery of possession
thereto at the Commencement Date, reasonable wear and tear excepted, and shall
surrender all keys to the Demised Premises to Landlord at the place then fixed
for the payment of Base Rent, and shall inform Landlord of all combinations on
locks, safes and vaults, if any. Tenant shall at such time remove all of its
property therefrom and all alterations and improvements placed thereon by Tenant
if so requested by Landlord, subject to Section 19.1(g). Tenant shall repair any
damage to the Demised Premises caused by such removal, and any and all such
property not so removed within ten (10) days after the end of the term of this
Lease shall, at Landlord's option, become the exclusive property of Landlord or
be disposed of by Landlord, at Tenant's cost and expense, without further notice
to or demand upon Tenant, subject to Section 19.1(g). If the Demised Premises be
not surrendered as above set forth, Tenant shall indemnify, defend and hold
Landlord harmless against loss or liability resulting from the delay by Tenant
in so surrendering the Demised Premises, including without limitation any claim
made by any succeeding occupant founded on such delay. Tenant's obligation to
observe or perform this covenant shall survive the expiration or other
termination of this Lease.
All property of Tenant not removed on or before the last day
of the term of this Lease shall be deemed abandoned. Tenant hereby appoints
Landlord its agent to remove all property of Tenant from the Demised Premises
upon termination of this Lease and to cause its transportation and storage for
Tenant's benefit, all at the sole cost and risk of Tenant, and Landlord shall
not be liable in any manner in respect thereto. Tenant shall pay all costs and
expenses of such removal, transportation and storage Tenant shall reimburse
Landlord upon demand for any expenses reasonably incurred by Landlord with
respect to removal or storage of abandoned property and with respect to
restoring said Demised Premises to good order, condition and repair.
SECTION 20.18. HOLDING OVER. In the event Tenant remains in
possession of the Demised Premises after expiration of this Lease and without
the execution of a new lease, it shall be deemed to be occupying the Demised
Premises as a tenant from month-to-month, subject to all the provisions,
conditions and obligations of this Lease insofar as the same can be applicable
to a month-to-month tenancy, except that the Base Rent shall be escalated to one
hundred twenty-five percent (125%) of the then current Base Rent for the Demised
Premises for a period of up to three (3) months, and to one hundred fifty
percent (150%) of then current Base Rent for the Demised Premises thereafter.
SECTION 20.19. SURVIVAL. All obligations of Tenant (together
with interest or money obligations at the Maximum Rate of Interest) accruing
prior to expiration of the term of this Lease shall survive the expiration or
other termination of this Lease.
SECTION 20.20. BROKER'S COMMISSION. Tenant represents that
Tenant has dealt directly with and only with Xxxx Xxxxxxx Real Estate Services,
Inc., as broker, and its agent, Xx. Xxxxx Xxxxxxxx, in connection with this
Lease and that insofar as Tenant knows, no other broker negotiated or
participated in negotiations of this Lease has submitted or showed the Demised
Premises or is entitled to any commission in connection therewith. Tenant shall
indemnify, defend and hold Landlord harmless from and against any loss, cost or
expense, including, but not limited to, reasonable attorneys' fees and court
costs, resulting from any claim for a fee or commission by any broker or finder
(other than Xxxx Xxxxxxx Real Estate Services, Inc.) in connection with the
Lease resulting from Tenant's actions.
SECTION 20.21. APPLICABLE LAW. This Lease shall be governed
and interpreted in accordance with the laws of the State of California.
SECTION 20.22. COUNTERPARTS. This Lease may be executed in one
or more counterparts, each of which shall be deemed an original and all of
which, when taken together, shall constitute buy a single instrument.
SECTION 20.23. ATTORNEYS' FEES. In the event of any litigation
involving the parties to this Agreement to enforce any provision of this Lease,
to enforce any remedy available upon default under this Agreement, or seeking a
declaration of the rights of a party under this Agreement, the prevailing party
shall be entitled to recover in such litigation such attorneys' fees and costs
as may be reasonably incurred, including the costs of reasonable investigation,
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preparation and professional or expert consultation incurred by reason of such
litigation. All other attorneys' fees and cost relating to this Agreement and
the transactions described herein shall be borne by the party incurring the
same.
IN WITNESS WHEREOF, each of the parties hereto have caused
this Lease to be duly executed as of the day and year first above written.
LANDLORD:
ADI ARROW PARTNERS, L.P., A CALIFORNIA LIMITED PARTNERSHIP
By: Xxxxx Development, Inc.,
a California corporation
By:
---------------------------------------------
Its:
----------------------------------------
TENANT:
ARROWHEAD GENERAL INSURANCE AGENCY, INC.,
A MINNESOTA CORPORATION
By:
---------------------------------------------
Its:
----------------------------------------
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EXHIBIT A
LEGAL DESCRIPTION OF PROPERTY
Parcel 4 of Parcel Map No. 15064, in the City of San Diego, County of San Diego,
State of California, filed in the Office of the County Recorder of San Diego
County, December 17, 1987, as File No. 87-694386 of Official Records.
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EXHIBIT B
PRELIMINARY PLANS AND SPECIFICATIONS
[FLOOR PLANS]
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