SUBLEASE
THIS SUBLEASE ("Sublease") dated as of September ,2001, is made
between, and Playboy Entertainment Group, Inc., a Delaware corporation
("Playboy") and Directrix, Inc., a Delaware corporation ("Directrix").
RECITALS
A. Playboy is the tenant under that certain Agreement of Lease
dated as of September , 2001 ("Master Lease"), pursuant to which Kingston
Andrita LLC, a Delaware limited liability company ("Master Landlord"), leased to
Playboy the real property located in the City of Los Angeles, County of Los
Angeles, State of California, described in attached Exhibit "A", and commonly
known as 0000 Xxxxxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx, and more particularly
described in the Master Lease ("Master Premises").
B. This Sublease is also made with reference to that certain
Master Services Agreement (the "Services Agreement") between Playboy and
Directrix, that certain Guarantee between Playboy Enterprises, Inc. ("PEI") and
Kingston (the "Guarantee"), that certain Equipment Lease Tri Party Agreement
("Equipment Lease Agreement") among Directrix, Playboy and CapitalSource
Finance, LLC, that certain Security Agreement made by Directrix in favor of
Playboy ("Security Agreement"), that certain Common Stock Purchase Warrant (the
"Warrant") issued by Directrix to Playboy and that that certain Registration
Rights Agreement (the "Registration Rights Agreement") between Directrix and
Playboy. The Master Lease shall be entered into concurrently with this
Sublease. The parties anticipate entering into one or more of the other
agreements referred to in this Recital B or may enter into other agreements in
lieu thereof. The Master Lease, Master Services Agreement, Guarantee, the
Equipment Lease Agreement and the Security Agreement and/or any agreements or
documents which supersede theses agreements and which are entered into by the
parties as part of the transactions associated with the Master Premises are
referred to collectively as the "Transaction Documents."
C. Capitalized words or terms not otherwise defined shall have the
meaning set forth in the Master Lease.
1. SUBLEASE. Playboy subleases to Directrix on the terms and conditions
in this Sublease that portion of the Master Premises described as approximately
62,207 square feet of office, technical, studio and basement space (the
"Directrix Premises") together with the right to use in common with Playboy and
other tenants of the Master Premises, the Common Area (as defined below). The
outline of the Directrix Premises is set forth in attached Exhibit "B".
2. SUBLEASE TERM. The term of this Sublease shall commence on the
earliest of (i) the Substantial Completion Date, (ii) the Studio Delivery Date,
(iii) the Master Control Room Start Date or (iv) the date on which Directrix
commences to occupy any material portion of the Directrix Premises ("Sublease
Commencement Date") and shall terminate on the Expiration Date unless sooner
terminated as provided for herein. Playboy shall furnish Directrix or cause the
Master Landlord to furnish to Directrix a copy of any notice delivered under
Master Lease Section 15.1(d) regarding substantial completion of Landlord's Work
or Studio A being in operational condition.
3. SUBLEASE RENT.
3.1 Sublease Base Rent.
(a) Directrix is obligated to pay to Playboy as minimum rent
an annual rent (the "Sublease Base Rent") as follows:
(i) for the period beginning on the earlier of the
Substantial Completion Date or the date on which Directrix commences to occupy
any material portion of the Directrix Premises ("Sublease Base Rent Commencment
Date") and ending on the day preceding the first anniversary thereof (such
period being the first "Sublease Year" and each successive twelve month period
thereafter also being referred to herein individually as a "Sublease Year" and
collectively as "Sublease Years", $1,193,308.49 per annum, payable in advance in
equal monthly installments of $99,442.37;
(ii) for the second Sublease Year, $1,229,107.74 per
annum, payable in advance in equal monthly installments of $102,425.65;
(iii) for the third Sublease Year, $1,265,980.98 per
annum, payable in advance in equal monthly installments of $105,498.41;
(iv) for the fourth Sublease Year, $1,303,960.41 per
annum, payable in advance in equal monthly installments of $108,663.37;
(v) for the fifth Sublease Year, $1,343,079.22 per
annum, payable in advance in equal monthly installments of $111,923.27;
(vi) for the sixth Sublease Year, $1,383,371.60 per
annum, payable in advance in equal monthly installments of $115,280.97;
(vii) for the seventh Sublease Year per annum,
$1,424,872.74 payable in advance in equal monthly installments of $118,739.40;
(viii)for the eighth Sublease Year $1,467,618.93 per
annum, payable in advance in equal monthly installments of $122,301.58;
(ix) for the ninth Sublease Year $1,511,647.49 per annum,
payable in advance in equal monthly installments of $125,970.62;
(x) for the tenth Sublease Year, $1,556,996.92 per
annum, payable in advance in equal monthly installments of $129,749.41; and
(xi) for the eleventh Sublease Year through the
Expiration Date, a rate per annum equal to $1,712,696.61 per annum, payable in
advance in equal monthly installments of $142,724.35.
(b) Directrix is obligated to pay Playboy Sublease Base Rent
for Studio A at the rate of $35,417.44 per month payable in advance together
with any Sublease Additional Rent related thereto commencing concurrently with
Playboy becoming obligated to pay Base Rent on Studio A as provided for in
Master Lease Section 2.2(a), after taking into account any applicable abatement
period.
(c) Directrix is obligated to pay Playboy Sublease Base Rent
for the Master Control Room at the rate of $25,000.00 per month payable in
advance together with any Sublease Additional Rent related thereto commencing
concurrently with Playboy becoming obligated to pay Base Rent on the Master
Control Room as provided for in Master Lease Section 2.2(c), after taking into
account any applicable abatement period.
(d) If the Base Rent payable by Playboy under the Master Lease
is increased under Master Lease Section 2.2(e), the Sublease Base Rent shall be
increased by multplying such increase by Directrix' Share (as that term is
defined in Section 3.3.3 below).
(e) Playboy hereby authorizes and directs Directrix to pay the
Sublease Rent (which includes the Sublease Base Rent and Sublease Additional
Rent as defined below) to Playboy at 0000 Xxxxxxx Xxxxxxxxx, Xxxxxxx Xxxxx,
Xxxxxxxxxx 000000, or at such other address as Playboy designates by written
notice to Directrix.
3.2 Operating Expenses. In addition to paying the Sublease
Base Rent specified in Section 3.1 above, Directrix shall pay "Directrix' Share"
of the annual "Operating Expenses," as the quoted terms are defined below.
Directrix' Share of the Operating Expenses and any other charges hereunder
shall be referred to as the "Sublease Additional Rent." The obligation of
Directrix to pay the Sublease Additional Rent shall survive the expiration of
the Term. The Sublease Base Rent and the Sublease Additional Rent are herein
collectively referred to as the "Sublease Rent."
3.3 Definitions of Key Terms Relating to Sublease Additional
Rent. As used in this Sublease, the following terms shall have the meanings set
forth below:
3.3.1 "Expense Year" shall mean each calendar year in
which any portion of the Term falls, through and including the calendar year in
which the Expiration Date falls.
3.3.2 "Operating Expenses" shall mean all necessary and
reasonable expenses, costs and amounts of every kind and nature which Playboy
pays or accrues during any Expense Year because of or in connection with the
management, maintenance, security, repair, replacement, restoration or operation
of the Master Premises, or any portion thereof, except as excluded below.
Without limiting the generality of the foregoing, Operating Expenses shall
specifically include any and all of the following:
(1) The operation, repair, replacement and
maintenance, in neat, clean, good order and condition of (i) the Master
Premises, including parking areas, loading and unloading areas, trash areas,
roadways, parkways, walkways, driveways, landscaped areas, bumpers, irrigation
systems; (ii) Common Area lighting facilities, fences and gates, and to the
extent not repaired or maintained by Master Landlord, the roofs and roof
rainage systems; (iii) Landlord's Work, to the extent not required to be
repaired or maintained by Master Landlord, and any leasehold improvements
constructed or installed by Playboy pursuant to this Sublease, but excluding
costs or expenses associated with maintaining any Alteration made by Playboy or
any other tenant of the Master Premises (which shall be the sole obligation of
the party who made or for whom such Alteration or improvement were made); (iv)
exterior signs (excluding signs devoted to the exclusive use of a tenant of the
Building) and any tenant directories; (v) any fire detection and/or sprinkler
systems; (vi) heating, ventilation and air conditioning systems and utility
systems; and (vii) any other equipment and components of the Common Areas;
(2) The cost of water and gas to the Master Premises,
and telephone and electricity to service the Common Areas;
(3) Trash disposal, janitorial, pest control
services, security services, and the costs of any environmental inspections
(subject to subsection (p) below and excluding any such inspections necessitated
by the existing condition of the Master Premises);
(4) The cost of licenses, certificates, permits and
inspections and the cost of contesting any governmental enactments or exactions
which may affect Operating Expenses, and the costs incurred in connection with
any governmentally-mandated transportation system management program or similar
program;
(5) The cost of all insurance carried by Playboy in
connection with the Master Premises, to the extent required in the Master Lease;
(6) Fees and other costs, including reasonable
management fees, consulting fees, legal fees and accounting fees, of all
contractors and consultants in connection with the management, operation,
maintenance and repair of the Master Premises;
(7) The fair and reasonable allocation of the fair
rental value of any management office space;
(8) Amortization (including interest at the published
prime interest rate upon unsecured loans charged by the Chase Manhattan Bank on
the unamortized cost) over the useful life, in accordance with GAAP, of the cost
of acquiring personal property used in the maintenance, operation and repair of
the Master Premises (excluding any trade fixtures and equipment thereon), or any
portion thereof; and payments under any equipment rental agreements on equipment
used in the maintenance and operation of the Master Premises;
(9) Amortization (including interest at the published
prime interest rate upon unsecured loans charged by the Chase Manhattan Bank on
the unamortized cost) over the useful life, in accordance with GAAP, of the cost
of capital improvements or other costs incurred in connection with the Master
Premises that are required by the Master Lease, if any, or which are
replacements or modifications of nonstructural items located in the Common Areas
required to keep the Common Areas in good order or condition, or are required
under any Law, except capital repairs, replacements or other improvements
required to be paid or remedied by Master Landlord under the Master Lease;
(10) Impositions (as defined in the Master Lease);
(11) Costs, fees, charges or assessments imposed by,
or resulting from any mandate imposed on Playboy by, any federal, state or local
government for fire and police protection, trash removal, community services, or
other services relating to the Master Premises (and not merely Playboy or its
business) which do not constitute Impositions.
(12) Any amounts paid or incurred by Playboy under
Master Lease Section 13.3(ii) and (iii) and not Section 13.3(i), which amounts
shall be payable solely by Directrix, and Sublease Section 8.1.
Notwithstanding anything to the contrary contained in the
above definition, Operating Expenses shall not include:
(a) Depreciation, amortization, interest, principal
and other payments on mortgages, on any other form of monetary encumbrance or on
any form of financing for Playboy relating to the Master Premises, or Playboy's
equipment or personal property, if any, except as otherwise provided for in
clauses (8) and (9) above;
(b) Any marketing costs, legal fees, space planners'
fees, advertising and promotional expenses, tenant improvement costs, brokerage
fees and other costs and expenses incurred in connection with future leasing,
or in connection with any assignment, sublease, or similar transactions in the
Master Premises;
(c) Any costs which are actually reimbursed by any
tenant or occupant of the Project, or any third party (including Master
Landlord), or by insurance carried by Playboy, by any tenant or by anyone else
and is actually paid to Playboy;
(d) Expenses in connection with services or other
benefits which are not provided to Directrix but which are provided to other
tenants or occupants, if any;
(e) Any costs associated with the operation of the
business of the corporation or entity which constitutes Playboy (or of which
Playboy is a direct or indirect subsidiary, parent or affiliate) (as the same
are distinguished from the costs of operation of the Master Premises);
(f) Late fees, penalties, and interest on past due
amounts, unless Directrix is late in making payment of Sublease Additional Rent
hereunder;
(g) Any payments paid to Playboy or to subsidiaries
or affiliates of Playboy or any partner thereof for goods or services in the
Master Premises to the extent the same exceeds the cost of such goods or
services if rendered by qualified, first-class unaffiliated third parties in the
same general area on a competitive basis; provided Playboy shall have no
obligation to obtain competitive bids;
(h) Any charitable or political contributions;
(i) Any repairs or replacements actually covered by
warranties or guaranties (but only to the extent of such actual recovery under
such warranty or guaranties) and damage and repairs actually paid for or
reimbursed from any insurance policy carried by Playboy in connection with the
Master Premises (but only to the extent of such actual payment or reimbursement)
or which are necessitated because of Playboy's misuse or willful misconduct;
(j) Insurance on and any other costs related to
Playboy's trade fixtures, furniture, equipment and other personal property;
(k) Electricity relating to the Master Premises other
than the Common Areas as well as the cost of any utilities separately metered
and paid by Directrix for the Directrix Premises;
(l) Any costs or expenses incurred by Playboy
attributable to a default by Playboy under the Master Lease unless Playboy's
default under the Master Lease is precipitated by Directrix' default under the
Transaction Documents;
(n) Any fees paid to Playboy attributable to
property management services performed by Playboy for the Master Premises to the
extent the such fees exceed the cost of such services if rendered by qualified,
first-class unaffiliated third parties in the same general area on a competitive
basis provided Playboy shall have no obligation to obtain competitive bids;
(o) Any Playboy employee expense above the level of
building manager; and
(p) Subject to the provisions of Master Lease Section
6.9 as incorporated herein by reference, any cost or expenses to the extent not
covered by insurance incurred as a result of the negligent acts or omissions or
willful misconduct of Playboy, Directrix or other tenant or occupant of the
Master Premises which shall be the responsibility of the party which caused such
cost or expense to be incurred.
3.3.3 "Directrix' Share" shall mean 55.3%.
3.3.4 "Common Area" shall mean all areas and
facilities which are not leased or held for lease to tenants or occupied by
Playboy and which are within the exterior boundary line of the land described in
Exhibit "A" and the interior utility raceways and installations within the
Master Premises that are typically considered common area in office buildings in
Los Angeles County and are designated by Playboy from time to time for the
general non-exclusive use of Playboy, Directrix or other tenants of the Master
Premises and their respective employees, suppliers, shippers, customers,
contractors and invitees, including parking areas, loading and unloading areas,
trash areas, roadways, walkways, driveways and landscaped areas.
3.4 Statement of Estimated Operating Expenses. Playboy will
deliver to Directrix within 30 days of the date hereof, an expense estimate
statement (the "Estimate Statement") which shall set forth Playboy's reasonable
estimate (the "Estimate") of the total amount of Operating Expenses for the
first Expense Year, which Estimate Statement identifies the Estimate for
Directrix' Share of the Operating Expenses. Playboy shall endeavor to provide a
new Estimate Statement on or before the anniversary of each Expense Year. The
failure of Playboy to timely furnish the Estimate Statement for any Expense Year
shall not preclude Playboy from enforcing its rights to collect Directrix' Share
of the Operating Expenses. Directrix shall pay monthly an amount equal to
one-twelfth (1/12) of Directrix' Share of the Estimate Statement, as such amount
may increase or decrease each Expense Year. Playboy shall maintain books and
records with respect to the Operating Expenses in accordance with GAAP.
3.5 Statement of Actual Operating Expenses and Payment by
Directrix. As soon as reasonably possible after the end of each Expense Year,
but in no event later than three months following the end of any Expense Year,
Playboy shall deliver to Directrix a statement (the "Statement") which shall
state the Operating Expenses incurred or accrued for such preceding Expense
Year, and which shall indicate the amount of the difference, if any, between the
Estimate Statement and the Statement. If the Operating Expenses described in
the Statement exceed the Estimate Statement, Directrix shall pay the full amount
of the deficiency for such Expense Year with in thirty (30) days, and if
Directrix paid more Operating Expenses as set forth in the Estimated Statement
than the actual Operating Expenses set forth in the Statement, then Directrix
shall receive a credit in the amount of Directrix' overpayment against the
Sublease Rent next due under this Sublease. The failure of Playboy to timely
furnish the Statement for any Expense Year shall not prejudice Playboy or
Directrix from enforcing its rights under this Section provided Playboy delivers
the Statement to Directrix within twelve (12) months of the year to which it
relates. Even though the Term has expired and Directrix has vacated the
Sublease Premises, when the final determination is made of Directrix' Share of
Operating Expenses for the Expense Year in which this Lease and Sublease
terminates, if a deficiency is present, Directrix shall immediately pay to
Playboy such amount, and if Directrix paid more as estimated Operating Expenses
than the actual Operating Expenses, Playboy shall promptly pay the deficiency to
Directrix.
3.6 Audit Rights. Upon Directrix' written request given not more
than one (1) year after Directrix' receipt of an Estimate Statement or Statement
for a particular Expense Year, and provided that Directrix is not in default of
its obligation to pay Sublease Rent after the giving of notice and expiration of
any applicable cure period and has paid all amounts required to be paid under
the Estimate Statement or Statement, as the case may be, Directrix shall have
the right (but not the obligation), directly and through its agents, to inspect,
copy and audit the Statements and such books and records with respect to
Operating Expenses for the calendar year to which the Statement relates. Any
objection to a Statement, or to any information reported therein, shall be
deemed waived if not raised by written notice to Playboy within thirteen (13)
months following delivery of such Statement. If Directrix discovers an error,
an appropriate adjustment shall be made and either Playboy or Directrix shall
reimburse the other for any amounts due within fifteen (15) days, together with
interest at the Late Charge Rate. Directrix' right to inspect, copy and audit
shall be exercisable upon reasonable prior written notice not more than once
during any 365-day period and shall be conducted during business hours at
Playboy's office at the Master Premises. Directrix shall keep any information
gained from its review of Playboy's records confidential and shall not disclose
it to any other party, except as required by law. If the audit discloses an
overcharge of more than three percent (3%), Playboy shall pay the cost of such
audit.
3.7 Late Payment. If any payment of Sublease Rent is not received
by Playboy under this Sublease within ten (10) days of the day on which it first
becomes due, a late charge on the sums so overdue, calculated at the Late Charge
Rate from the due date thereof to the date on which actual payment of the
overdue sums is received by Playboy, shall become due and payable to Playboy
because of Directrix' failure to make prompt payment. If Playboy owes Directrix
any other amounts under this Sublease which are not paid within ten (10) days
after written notice thereof, a late charge on the sums so overdue, calculated
at the Late Charge Rate from the due date thereof to the date on which actual
payment of the overdue sum is received by Directrix, shall become due and
payable to Directrix.
3.8 Shared Excess. If Directrix owes any Shared Excess under
Master Lease Article 15, Directrix shall be obligated to pay the first $50,000
of such Shared Excess directly to Kingston (or, if Playboy has paid Directrix'
share of the Shared Excess to Kingston, to Playboy as reimbursement therefore).
If Directrix owes Shared Excess in excess of $50,000, Playboy shall pay such
excess on Directrix' behalf and Playboy shall recover such excess by offsetting
up to 10% of the Service Fees (as such term is defined under the Services
Agreement) owed in any month by Playboy to Directrix until Playboy has recouped
the amount of the Shared Excess paid by Playboy on Directrix' behalf. If
Directrix fails to pay its share of the Shared Excess as provided for in the
preceding two sentences, such failure may be treated by Playboy as an event of
default under this Sublease and the Services Agreement and Playboy will have all
of its rights and remedies as provided for under this Sublease and the Services
Agreement.
4. INCORPORATION OF MASTER LEASE PROVISIONS INTO THIS SUBLEASE.
4.1 Except as specifically provided below, or otherwise superseded
or modified by the provisions of this Sublease and except where the Master Lease
includes specific provisions with respect to Directrix' rights and obligations,
all terms, covenants and conditions of the Master Lease are incorporated into
and made a part of this Sublease by reference with the same force and effect as
if such terms, covenants and conditions were completely set forth in this
Sublease except that the words Landlord and Tenant in the Master Lease shall be
construed to mean, respectively, Playboy and Directrix in this Sublease, and the
words Premises in the Master Lease shall be construed to mean Directrix Premises
in this Sublease, and the word Lease in the Master Lease shall be construed to
mean this Sublease. For all time limits contained in the Master Lease for
Playboy to give notices, make demands or for Directrix' performance of any act
(such periods are referred to as "Notice Periods") that have a duration of at
least six (6) days, such Notice Periods shall be modified in this Sublease by
shortening the Notice Periods by three (3) days, so that in each instance,
Directrix' Notice Periods shall be three (3) days shorter under this Sublease
than Playboy's Notice Periods under the Master Lease. For all Notice Periods in
the Master Lease that have a duration of less than six (6) days, Directrix'
Notice Period shall be half of the number of days in such Notice Period that
Playboy has, rounded down to the nearest whole integer, except as relating to
payment of Sublease Base Rent, in which case Directrix shall have three (3) days
to observe or perform. The following Articles and Sections of the Master Lease
shall not be deemed incorporated into this Sublease: Section 2.2(a) and (b)
(Base Rent); Section 3.1(a) and (b) (Payment of Impositions), Section 3.3
(Evidence of Payment), Section 3.4(b) (Proration of Impositions)Section 6.1(a)
(Basic Insurance Coverage); Section 9.2(b) (Permitted Assignment and
Subletting); Section 9.7 (Landlord's Sale or Conveyance); Article 10
(Mortgages); Section 11.1(b) (Maintenance of Premises); Section 11.2 (Free of
Dirt, Etc.); Section 11.3 (No Obligation to Supply Utilities);; Section 15.1(f)
(Studio Operational Condition); Article 22 (Notices); and Article 36 (Right of
First Offer).
4.2 For the purpose of incorporating Article 15 of the Master Lease
into this Sublease and construing its meaning, the word Landlord shall mean
Master Landlord, the word Tenant shall mean Directrix, the word Premises shall
mean Directrix Premises, and the word Lease shall mean this Sublease.
Therefore, all obligations of Master Landlord to complete Landlord's Work
contained in Master Lease Article 15 or the Work Letter, shall run directly
between Directrix and Master Landlord with respect to Directrix Premises.
Notwithstanding the provisions of Section 4.1 above, the time limits contained
in Article 15 of the Master Lease for the giving of notices, making of demands
or performing of any act shall NOT be deemed shortened. Playboy will exercise
due diligence in attempting to cause Master Landlord to perform its obligations
under Article 15 of the Master Lease for the benefit of Directrix and the
Directrix Premises, but Playboy shall have no responsibility to Directrix for
Master Landlord's failure to so perform. Directrix shall pay one half of the
Shared Excess which is solely attributable to the Other Office Work Allowance
(other than increases in the cost of Other Work Allowance which results from
Above-Standard Work requested by Directrix which shall be payable solely by
Directrix) if any, directly to Master Landlord in accordance with the
requirements of the Master Lease. Directrix shall pay one third of the Shared
Excess which is solely attributable to the Base Building Work (other than
increases in the cost of Base Building Work which results from Above-Standard
Work, which if requested by Playboy shall be payable solely by Playboy and if
requested by Directrix, shall be payable solely by Directrix) in accordance with
the requirements of the Master Lease. Directrix shall have no responsibility
for Playboy's share of the Shared Excess attributable to the Playboy Office
Work. Anything contained herein to the contrary notwithstanding, except for the
cost of any special services requested by Playboy or Directrix (which shall be
paid by the requesting party), Directrix shall pay or there shall be charged
against the Landlord Work Allowance attributable to the Directrix Premises any
portion of the design fees which are not the Master Landlord's responsibility.
Each of Directrix and Playboy shall pay any additional costs of Landlord's Work
for Above-Standard Work they request and shall bear all costs occasioned by any
delay in the completion of Landlord's Work as a result of such Above-Standard
Work.
4.3 Any obligation of Playboy which is contained in this Sublease
by the incorporation by reference of the provisions of the Master Lease, may be
observed or performed by Playboy using diligent efforts to cause the Master
Landlord under the Master Lease to observe and/or perform the same, and Playboy
shall have a reasonable time to enforce its rights to cause such observance or
performance and to diligently pursue enforcement and Playboy shall have no
liability to Directrix if Master Landlord fails to observe or perform its
obligations provided Playboy has used commercially reasonable efforts to enforce
its rights under the Master Lease.
4.4 If Playboy accepts possession of the Master Premises subject to
the continued occupancy of FX and the FX Lease is assigned to and assumed by
Playboy as provided for in Master Lease Section 1.3, Playboy shall assign the
FX Lease to Directrix and Directrix shall assume the FX Lease pursuant to an
assignment and assumption agreement substantially in the form of Master Lease
Exhibit K except that Playboy shall be substituted for Kingston and Directrix
shall be substituted for Playboy in each place such terms appear in the form
assignment and assumption agreement.
5. MASTER LEASE OBLIGATIONS OF DIRECTRIX AND OF PLAYBOY.
5.1 Directrix shall hold Playboy free and harmless from all
liability, judgments, costs, damages, claims or demands, including reasonable
attorneys' fees, arising out of Directrix' failure to comply with or perform
Directrix' obligations hereunder. Playboy shall hold Directrix free and
harmless from all liability, judgments, costs, damages, claims or demands
arising out of Playboy's failure to comply with or perform Playboy's obligations
hereunder.
5.2 If Directrix shall breach any of Directrix' obligations
hereunder then Playboy shall have the right, but not the obligation, after the
lesser of five (5) business days notice to Directrix or the time within which
Master Landlord may act on Playboy's behalf under the Master Lease, or without
notice to Directrix in the case of an emergency, and without waiving or
releasing Directrix from any obligations of Directrix hereunder, to cure such
default of Directrix' obligations, in such manner and to such extent as Playboy
shall deem necessary, and in exercising any such right to pay any incidental
costs and expenses, employ attorneys, and incur and pay reasonable attorney's
fees. Directrix shall pay to Playboy, within thirty (30) days upon written
demand, all sums so paid by Playboy together with interest thereon at the Late
Charge Rate.
5.3 If Playboy shall breach any of Playboy's obligations hereunder,
then Directrix shall have the right, but not the obligation, after five (5)
business days notice to Playboy or without notice to Playboy in the case of an
emergency, and without waiving or releasing Playboy from any obligations of
Playboy hereunder, to cure such default of Playboy's obligations, in such manner
and to such extent as Directrix shall deem necessary, and in exercising any such
right, to pay any incidental costs and expenses, employ attorneys, and incur and
pay reasonable attorney's fees. Playboy shall pay to Directrix, upon thirty
(30) days of written demand, all sums so paid by Directrix together with
interest thereon at the Late Charge Rate. If not paid, Directrix shall have the
right of reimbursement and offset from and against Playboy of any amounts owed
by Directrix to Playboy under Section 25.3 of the Services Agreement or this
Sublease, in Directrix' discretion .
5.4 If the Master Lease terminates as a result of a default or
breach by Playboy or Directrix under this Sublease or the Master Lease, the
defaulting party will be liable to the nondefaulting party for the damage
suffered as a result of the termination.
5.5 Playboy shall give Directrix notice of its intention to
exercise its right to terminate the Master Lease pursuant to 7.3(ii) thereof
at least ten (10) business days before Playboy gives Master Landlord such
notice of termination as required under Section 7.3(ii) of the Master Lease. If
Playboy does plan on exercising its termination right, Directrix shall have the
right within such ten (10) business day period to cause Playboy to assign the
Master Lease to Directrix provided the Master Landlord shall agree to release
Playboy from further liability under the Master Lease arising from and after the
date of the assignment. Notwithstanding anything contained herein but subject
to the provisions of the immediately preceding sentence, if the Master Lease
gives Playboy any right to terminate the Master Lease in the event of the
partial or total damage, destruction or condemnation of the Master Premises, the
exercise of this right by Playboy will not constitute a default or breach.
6. EVENTS OF DEFAULT.
6.1 Directrix Cross Defaults. In addition to any other defaults
specified herein and incorporated herein by reference to the Master Lease, the
following events shall constitute a default under this Sublease:
6.1.1 If Directrix fails to observe or perform one or more of the
terms, conditions, covenants or agreements of the Services Agreement and the
Services Agreement is actually terminated by Playboy by reason of said default;
6.1.2 If under the Security Agreement, an Event of Default (as that
term is defined in the Security Agreement) occurs and Playboy exercises any
rights or remedies it may have as the secured party under the Security
Agreement; or
6.1.3 If Playboy leases the Equipment (as that term is defined in
the Services Agreement) to Directrix under Services Agreement Section 25.3 and
Directrix defaults under the equipment lease agreement executed in connection
therewith and such equipment lease agreement is actually terminated by Playboy
by reason of said default.
6.2 Playboy Cross Defaults. In addition to any other defaults
specified herein and incorporated herein by reference to the Master Lease, the
following events shall constitute a default under this Sublease:
6.2.1 If Playboy fails to observe or perform one or more of the
terms, conditions, covenants or agreements of the Services Agreement and the
Services Agreement is actually terminated by reason of said default; or
6.2.2 If Playboy leases the Equipment (as that term is defined in
the Services Agreement) to Directrix under Services Agreement Section 25.3 and
in connection with such equipment lease, Playboy grants a security interest in
the Equipment to Directrix and Directrix exercises any rights or remedies it may
have as the secured party under such security agreement following a default by
Playboy under such security agreement.
6.3 If Playboy or Directrix defaults hereunder, the nondefaulting
party shall have such rights and remedies as are provided herein, in the Master
Lease (as incorporated herein) or at law or equity all of which rights shall be
cumulative.
6.4 If Directrix fails to make any payment owed to Playboy
hereunder, Playboy shall have the right to offset the same against amounts owed
to Directrix under the Services Agreement.
7. UTILITIES. Directrix shall obtain and pay for Directrix' entire
separate supply of electric current used at the Directrix Premises by direct
application to and arrangement with the public utility company servicing the
Master Premises. Directrix shall install an electric meter and related
equipment to measure Directrix' consumption of electric at its cost and expense
or by direction of the Directrix Work Allowance for that purpose. Directrix
agrees that at all times its use of electric current shall never exceed the
capacity of the then existing feeder allocated to the Directrix Premises or the
risers or wiring installation. In the event Directrix shall require additional
feeders, risers or wiring to service the Directrix Premises, same shall be
installed by Directrix at Directrix' sole cost and expense. Playboy shall in no
way be liable or responsible to Directrix for any loss or damage or expense
which Directrix may sustain or incur if either the quantity or character of
electric service is changed or is no longer available or suitable for Directrix'
requirements. Notwithstanding any provision to the contrary, Directrix shall be
solely responsible for all utilities used in connection with the studios and
related technical areas.
8. SERVICES TO BE PROVIDED BY PLAYBOY; DIRECTRIX' OBLIGATION TO MAINTAIN
DIRECTRIX PREMISES.
8.1 Playboy shall provide the following services: Maintenance and
cleaning of the Master Premises, including the alleys and curbs in front of or
adjacent to the Master Premises, pipes, mains and other utility systems within
the Master Premises, maintenance and repair of the fire alarm system and all
other equipment and components which are used in connection with the Master
Premises; maintenance and repair of Landlord's Work (but not Alterations which
shall be the responsibility of the tenant who made or for whom such Alterations
were made); adequate lighting of parking lot and sidewalks during dusk to xxxx
hours; maintenance of plants and exterior landscaping in the Common Areas;
janitorial and clean-up service for the Master Premises, including rubbish
removal. Subject to limitations imposed by all governmental rules, regulations
and guidelines applicable thereto, Playboy shall provide heating, ventilation
and air conditioning (HVAC) to the Directrix Premises when necessary for normal
comfort, for normal office use in the Directrix Premises from 8:00 A.M. to 6:00
P.M. Monday through Friday, and on Saturdays from 9:00 A.M. to 12:00 P.M.
(collectively, the "Office Hours"), for the date of observation of New Years
Day, President's Day, Independence Day, Labor Day, Memorial Day, Thanksgiving
Day, Christmas Day and, at Playboy's discretion, other locally or nationally
recognized holidays which are observed by other comparable buildings in the
vicinity of the Master Premises (collectively, "Holidays") and on a seven days
per week, 24 hours per day, 365 days per year basis for Master Control Room,
core room, production control rooms, telephone room and similar technical areas
and rooms. Playboy shall provide city water from the regular outlets for
drinking, lavatory and toilet purposes in the Common Areas and to the designated
outlets of Landlord's Work. Playboy shall provide janitorial services to the
Directrix Premises five (5) days per week, except on the date of observation of
the Holidays. Subject to factors outside Playboy's control, Directrix shall
have access to the Directrix Premises and the parking facilities 24 hours per
day, 7 days per week, 52 weeks per year.
8.2 If by reason of an Unavoidably Delay, Playboy shall be unable
to fulfill its obligations under this Sublease or shall be unable to supply any
service which Playboy is obligated to supply and except for any abatement rights
contained n the Master Lease, this Sublease and Directrix' obligation to pay
Sublease Rent hereunder shall in no way be affected, impaired or excused and
Playboy shall have no liability to Directrix on account thereof.
8.3 Directrix shall take good care of the Directrix Premises, and
all Alterations within the Directrix Premises and shall keep and maintain the
Directrix Premises (including all of the foregoing) in good and safe order and
condition, and shall make all nonstructural repairs therein and thereon,
ordinary and extraordinary, foreseen and unforeseen, necessary to keep the
Directrix Premises in good and safe order and condition, howsoever the necessity
or desirability therefore may occur, except to the extent any such maintenance,
repair or replacement is Master Landlord's responsibility pursuant to the Master
Lease or is Playboy's obligation pursuant to this Sublease. Directrix shall
cooperate fully with Playboy at all times and abide by all regulations and
requirements that Playboy may reasonably prescribe for the proper functioning
and protection of the HVAC, electrical, mechanical and plumbing systems.
9. PARKING. Directrix shall be entitled to use without charge 30
unreserved parking spaces on those portions of the Common Areas to be agreed to
by Playboy and Directrix. Directrix shall not use more parking spaces than the
amount specified. Playboy may regulate the loading and unloading of vehicles by
adopting reasonable rules and regulations for the management, safety, care and
cleanliness of the grounds and the parking areas. Directrix shall not permit or
allow any vehicles that belong to or are controlled by Directrix or Directrix'
employees, suppliers, shippers, customers, contractors or invitees to be loaded,
unloaded, or parked in areas other than those designated by Playboy for such
activities. Directrix shall not service or store any vehicles in the Common
Areas.
10. PLAYBOY'S RIGHT TO PERFORM MASTER LANDLORD'S OBLIGATIONS. If Playboy
seeks to cure default of Master Landlord and exercise the offset remedies
available to it pursuant to Section 19.8 of the Master Lease, Playboy shall,
concurrently with the notices required to be sent to Master Landlord, send
Directrix copies of such notices. If Master Landlord shall not have commenced
to cure such default within the time periods provided in the Master Lease, then
Playboy may, at its option, undertake to cure such default and Directrix shall
pay Directrix' Share of Playboy's cost to cure within ten (10) days of written
notice from Playboy, together with statements or invoices evidencing the cost
thereof. If Master Landlord disputes Playboy's entitlement to reimbursement of
such cost for any reason, then Directrix and Playboy shall join together and
share the costs of arbitration as provided in Master Lease Section 19.8. If
Playboy's position is sustained in such arbitration, and Playboy is thereby
entitled to offset Rent as provided in Section 19.8 of the Master Lease, then
Directrix shall be entitled to offset Directrix' Share of such offset amount
against ensuing installments of Sublease Base Rent under this Sublease.
11. ASSIGNMENT AND SUBLETTING. Playboy's rights to assign the Master
Lease are set forth in the Master Lease Article 9. Directrix' rights to assign
this Sublease or sublease all or any portion of the Directrix Premises are also
set forth in the Master Lease Article 9 as incorporated herein as provided for
in Section 4.1 with the following modifications: (i) Directrix may not assign
this Sublease on a change in control as contemplated by the first sentence of
Master Lease Section 9.2(a) without Playboy's consent, which consent shall not
be unreasonably withheld or delayed, unless Directrix is permitted to assign the
Services Agreement to the proposed assignee without Playboy's consent under
Services Agreement Section 27, (ii) if Playboy consents to the assignment of the
Services Agreement under Services Agreement Section 27 and Directrix requests
assignment of this Sublease to the same assignee, Playboy shall be deemed to
have consented to the assignment of this Sublease to such assignee, (iii) with
regard to a proposed subletting by Directrix, if Directrix complies with the
provisions of Master Lease Section 9.2(b)(x) and Kingston consents to such
sublet, Playboy shall also have the right to approve such sublet, such approval
not to be unreasonably withheld or delayed, and (iv) Directrix may not assign or
sublet to, or otherwise permit occupancy of any portion of the Directrix
Premises by, a Competing Adult Business, as that term is defined in Services
Agreement Section 14.5.
12. CONTINGENT RIGHT OF FIRST OFFER. If Directrix shall have the right
to purchase the Master Premises pursuant to Article 36 of the Master Lease and
provided Directrix is not then in default, beyond applicable notice and cure
periods under this Agreement or any of the other Transaction Documents,
Directrix shall have the first option to exercise the right to purchase the
Premises set forth in the Offer Notice. Notwithstanding the provisions of
Section 4.1, if Directrix, in its sole discretion elects to acquire the
Premises, it shall send the Election Notice contemplated by Master Lease Section
36 to Master Landlord, with a copy to Playboy within twenty (20) days of its
receipt of the Offer Notice. If Directrix does not send the Election Notice
within such twenty (20) day period, Directrix will be deemed to have waived its
rights under Master Lease Article 36 and the Offer Notice and to have assigned
such rights to Playboy. If Directrix does send the Election Notice within such
twenty (20) day period, Directrix shall offer to Playboy the opportunity to
participate with Directrix in the acquisition of the Property in such manner
that Directrix and Playboy shall become equal co-owners of the Property and
shall each be responsible for half of the purchase price for the Master
Premises.
13. COVENANT NOT TO CONDUCT BUSINESS PRIOR TO SUBSTANTIAL COMPLETION
DATE. Each of the parties covenants and agrees that it will not commence
occupancy of any portion of the Master Premises for the conduct of business
prior to the Substantial Completion Date other than (i) Studio A and the
technical areas associated with Studio A and (ii) the Master Control Room
and the technical areas associated with the Master Control Room. If a party,
in violation of the foregoing covenant, causes the Premises Base Rent
Commencement Date to occur prior to the Substantial Completion Date, such party
shall be responsible for all of the Base Rent payable until such time as, but
for such action by such party, the other party would have been obligated to
begin paying Base Rent or Sublease Base Rent, as the case may be.
14. ATTORNEY FEES. If either party commences an action against the other
in connection with this Sublease, the prevailing party will be entitled to
recover costs of suit and reasonable attorney fees.
15. CONSENTS AND APPROVALS. If the Master Landlord fails to acknowledge
any request for approval or consent from Directrix, Playboy shall immediately
make such request on Directrix' behalf. In any such instance, if the Master
Landlord refuses to grant its consent or approval, Playboy shall also be deemed
to have refused to grant its consent or approval and such refusal shall be
deemed reasonable, provided, however, that at Directrix' request and at
Directrix' cost, Playboy shall take such steps as may be reasonably requested by
Directrix, including, without limitation, commencing legal action against Master
Landlord, in order to contest and/or seek such remedies as may be available on
account of Master Landlord's refusal to consent to the matter in question. If,
as a result of Master Landlord's refusal to grant its consent or approval,
Directrix contests or seeks other remedies as provided for in the preceding
sentence, Directrix shall (i) advance to Playboy any cost incurred by Playboy in
connection therewith and (ii) indemnify Playboy from and against any costs,
losses, liabilities, claims or other damages (including reasonable attorney's
fees) incurred by Playboy as result thereof. Notwithstanding any other
provision of this Sublease or the Master Lease to the contrary, neither party
will require any changes to Landlord's Work or the Construction Drawings or
request Above-Standard Work or otherwise take any action which could result in
an increase in Landlord's Work if the other party would be obligated to pay all
or any portion of such increased cost without the prior written consent of the
other party.
16. ASBESTOS REALTED CALIMS. With respect to any claims, losses, damages
and costs (including reasonable attorney's fees) related to the presence of
asbestos in the Property incurred by Playboy ("Asbestos Related Claims"),
Playboy shall first seek indemnification for such Asbestos Related Claims from
Kingston as provided for in the Master Lease. If Kingston fails to provide
Playboy indemnification from any Asbestos Related Claims, Directrix shall
indemnify Playboy for, and hold Playboy harmless from and against, any and all
Asbestos Related Claims.
17. NOTICES.
17.1 Whenever it is provided that notice, demand, request, consent,
approval or other communication shall or may be given to, or served upon, either
of the parties by the other or whenever either of the parties desires to give or
serve upon the other any notice, demand, request, consent, approval or other
communication with respect to the Sublease Premises or to the Master Premises,
each such notice, demand, request, consent, approval or other communication
shall be in writing and shall be effective for any purpose if given or served by
a nationally recognized overnight courier service, by hand delivery or mailing
by certified mail, postage prepaid, return receipt requested to the following
addresses:
To Playboy: Playboy Entertainment Group, Inc.
0000 Xxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: President
With a copy to: Playboy Enterprises International, Inc.
000 Xxxxx Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: General Counsel
And to: Xxxxxx X. Xxxxxx, Esq.
Xxxxxxxxx Xxxxxxx Fields Claman
Machtinger & Xxxxxxxx LLP
1900 Avenue of the Stars
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
To Directrix: Directrix, Inc.
000 Xxxx 00xx Xxxxxx, Xxxx 00X
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. XxXxxxxx, Xx.
With a copy to: Xxxxx Xxxxx, Esq.
Wolf, Xxxxxx & Xxxxxxx, LLP
00000 Xxxx Xxxxxxx Xxxxxxxxx, 0xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Notices shall be deemed given or effective as provided for in Master Lease
Section 22.2.
17.2 If either party hereto sends a notice to or receives a notice
from the Master Landlord and such notice does not indicate that a copy thereof
has been sent to the other party, such party shall forthwith furnish a copy of
such notice to the other party.
18. SUCCESSORS AND ASSIGNS. The agreements, terms, covenants and
conditions herein are binding upon Playboy and Directrix and, except as
otherwise provided herein, their respective successors and assigns.
19. SUBORDINATION AND ATTORNMENT. Subject to the Directrix SNDA, this
Sublease is and shall be at all times subject and subordinate to the Master
Lease and if the Master Lease shall terminate this Sublease shall also
terminate. Playboy covenants and agrees not to modify, amend or, except in the
event of a default by the Master Landlord, terminate the Master Lease without
Directrix' prior written consent, such consent not to be unreasonably withheld
or delayed provided Directrix' rights and obligations hereunder or under any of
the Transaction Documents are not materially altered. If Playboy shall cause an
Event of Default under the Master Lease, then Master Landlord, at its option,
and without being obligated to do so, may require Directrix to attorn to Master
Landlord in which event Master Landlord shall undertake the obligations of
Playboy under this Sublease from the time of the exercise of said option of
termination of this Sublease, but Master Landlord shall not be liable for any
defaults of Playboy under this Sublease.
20. ENTRY. Playboy reserves the right to enter the Directrix Premises on
reasonable notice to Directrix to inspect the Directrix Premises, confirm
performance by Directrix of the terms and conditions of this Sublease and to
maintain and repair the Directrix Premises or the Master Premises. Playboy and
its representatives shall not materially interfere with the operation of the
Directrix Premises or the conduct of Directrix' business within the Directrix
Premises except in the event of an emergency.
21. ENTIRE AGREEMENT. This Sublease sets forth all the agreements
between Playboy and Directrix concerning the Directrix Premises, and except for
the Transaction Documents, there are no other agreements either oralor written
other than as set forth in this Sublease. Playboy and Directrix agree NOT to
amend or modify the provisions of this Sublease without the written consent of
Master Landlord, which consent shall not be unreasonably withheld; provided such
limited modification will not increase Directrix' obligations under the
Transaction Documents or reduce its rights under said agreements.
22. NO BROKER. Playboy and Directrix each warrant that they have
not dealt with any real estate broker in connection with this transaction.
Playboy and Directrix each agree to indemnify, defend, and hold the other
harmless against any damages incurred as a result of the breach of the warranty
contained in this Sublease.
23. GOVERNING LAW. This Sublease will be governed by and construed in
accordance with California law.
24. SIGNING AUTHORITY. Each individual executing this Sublease on behalf
of the corporate Directrix and Playboy entities represent and warrant that he or
she is duly authorized to execute and deliver this Sublease on behalf of said
entity in accordance with a duly adopted resolution of the Board of Directors of
said corporation or in accordance with the bylaws of said corporation.
IN WITNESS WHEREOF, the parties have executed this Sublease as of the
date first above written.
"Playboy"
PLAYBOY ENTERTAINMENT GROUP, INC, a Delaware
corporation
By: ___________________________________
Its: ___________________________________
"Directrix"
DIRECTRIX, INC., a Delaware corporation
By: ___________________________________
Its: ___________________________________
