1
EXHIBIT 10.13
INDUSTRIAL REAL ESTATE LEASE
BETWEEN
CYPRESS LAND COMPANY,
A CALIFORNIA LIMITED PARTNERSHIP
AND
NETCOM SYSTEMS, INC.,
A DELAWARE CORPORATION
for
00000 XXXXXX XXXX,
XXXXXXXXX, XXXXXXXXXX 00000
June 25, 1998
2
TABLE OF CONTENTS
Page
----
ARTICLE ONE: BASIC TERMS .................................................. 1
Section 1.1 Date of Lease ......................................... 1
Section 1.2 Landlord .............................................. 1
Section 1.3 Tenant ................................................ 1
Section 1.4 Property .............................................. 1
Section 1.5 Lease Term ............................................ 1
Section 1.6 Permitted Uses ........................................ 1
Section 1.7 Initial Security Deposit .............................. 1
Section 1.8 Rent and Other Charges Payable by Tenant .............. 2
Section 1.9 Riders ................................................ 2
ARTICLE TWO: LEASE TERMS .................................................. 2
Section 2.1 Lease of Property for Lease Term ...................... 2
Section 2.2 Holding Over .......................................... 2
Section 2.3 Option to Extend ...................................... 3
ARTICLE THREE: BASE RENT .................................................. 6
Section 3.1 Time and Manner of Payment ............................ 6
Section 3.2 Cost of Living Increases .............................. 6
Section 3.3 Security Deposit; Increases ........................... 7
Section 3.4 Termination; Advance Payments ......................... 7
ARTICLE FOUR: OTHER CHARGES PAYABLE BY TENANT ............................. 8
Section 4.1 Additional Rent ....................................... 8
Section 4.2 Property Taxes ........................................ 8
Section 4.3 Utilities ............................................. 10
Section 4.4 Insurance Policies..................................... 10
Section 4.5 Late Charges .......................................... 14
Section 4.6 Interest on Past Due Obligations ...................... 14
Section 4.7 Impounds for Insurance Premiums and Real
Property Taxes ........................................ 15
ARTICLE FIVE: USE OF PROPERTY ............................................. 15
Section 5.1 Permitted Uses ........................................ 15
Section 5.2 Manner of Use ......................................... 15
Section 5.3 Hazardous Materials ................................... 16
Section 5.4 Outside Storage ....................................... 22
Section 5.5 Signs and Auctions .................................... 22
Section 5.6 Indemnity ............................................. 22
Section 5.7 Landlord's Access ..................................... 22
Section 5.8 Quiet Possession ...................................... 23
Section 5.9 Future Easements and Governmental Requirements ........ 23
ARTICLE SIX: CONDITION OF PROPERTY; MAINTENANCE, REPAIRS
AND ALTERATIONS .............................................. 23
Section 6.1 Existing Conditions ................................... 23
Section 6.2 Exemption of Landlord from Liability .................. 23
3
Section 6.3 LANDLORD'S OBLIGATIONS....................... 24
Section 6.4 TENANT'S OBLIGATIONS......................... 24
Section 6.5 ALTERATIONS, ADDITIONS, AND
IMPROVEMENTS................................. 26
Section 6.6 CONDITION UPON TERMINATION................... 26
Section 6.7 COMMON AREAS................................. 27
ARTICLE SEVEN: DAMAGE OR DESTRUCTION............................. 27
Section 7.1 DAMAGE TO PROPERTY........................... 27
Section 7.2 TEMPORARY REDUCTION OF RENT.................. 29
Section 7.3 WAIVER....................................... 29
Section 7.4 LANDLORD'S FAILURE TO REPAIR WITHIN 12
MONTHS....................................... 29
Section 7.5 REPAIR OF SHELL TO SIMILAR CONDITION......... 30
ARTICLE EIGHT: CONDEMNATION...................................... 31
ARTICLE NINE: ASSIGNMENT AND SUBLETTING......................... 31
Section 9.1 LANDLORD'S CONSENT REQUIRED.................. 31
Section 9.2 TENANT AFFILIATE............................. 32
Section 9.3 NO RELEASE OF TENANT......................... 32
Section 9.4 OFFER TO TERMINATE........................... 32
Section 9.5 LANDLORD'S CONSENT........................... 32
Section 9.6 LANDLORD'S SHARE OF PREMIUM.................. 33
Section 9.7 NO MERGER.................................... 34
ARTICLE TEN: DEFAULTS; REMEDIES................................. 34
Section 10.1 COVENANTS AND CONDITIONS..................... 34
Section 10.2 DEFAULTS..................................... 34
Section 10.3 REMEDIES..................................... 35
Section 10.4 REPAYMENT OF "FREE" RENT..................... 36
Section 10.5 CUMULATIVE REMEDIES.......................... 37
ARTICLE ELEVEN: PROTECTION OF LENDERS........................... 37
Section 11.1 SUBORDINATION................................ 37
Section 11.2 ATTORNMENT................................... 38
Section 11.3 SIGNING OF DOCUMENTS......................... 38
Section 11.4 ESTOPPEL CERTIFICATES........................ 39
Section 11.5 TENANT'S FINANCIAL CONDITION................. 39
ARTICLE TWELVE: LEGAL COSTS..................................... 40
Section 12.1 LEGAL PROCEEDINGS............................ 40
Section 12.2 LANDLORD'S CONSENT........................... 40
ARTICLE THIRTEEN: MISCELLANEOUS PROVISIONS...................... 41
Section 13.1 NON-DISCRIMINATION........................... 41
Section 13.2 LANDLORD'S LIABILITY; CERTAIN DUTIES......... 41
Section 13.3 SEVERABILITY................................. 42
Section 13.4 INTERPRETATION............................... 42
Section 13.5 INCORPORATION OF PRIOR AGREEMENTS;
MODIFICATIONS................................ 42
Section 13.6 NOTICES...................................... 42
Section 13.7 WAIVERS...................................... 42
Section 13.8 RECORDATION.................................. 43
4
Section 13.9 BINDING EFFECT; CHOICE OF LAW................ 43
Section 13.10 CORPORATE AUTHORITY ......................... 43
Section 13.11 FORCE MAJEURE................................ 43
Section 13.12 EXECUTION OF LEASE........................... 43
Section 13.13 SURVIVAL..................................... 43
Section 13.14 DEFINITION OF CONTRACTOR..................... 43
ARTICLE FOURTEEN: BROKERS....................................... 44
Section 14.1 No Other Brokers............................. 44
Exhibit "A" - Legal Description of Property
Exhibit "B" - Shell Plans and Specifications
CONSTRUCTION RIDER
5
INDUSTRIAL REAL ESTATE LEASE
ARTICLE ONE: BASIC TERMS
This Article One contains the Basic Terms of this Lease between the
Landlord and Tenant named below. Other Articles, Sections and Paragraphs of the
Lease referred to in this Article One explain and define the Basic Terms and
are to be read in conjunction with the Basic Terms.
Section 1.1 DATE OF LEASE: June 25, 1998
Section 1.2 LANDLORD: Cypress Land Company, a California limited
partnership
Address of Landlord: 0000 Xxxx Xxxxxx Xxxxxx, Xxxxx X-0, Xxxx Xxxxx, Xxxxxxxxxx
00000
Section 1.3 TENANT: Netcom Systems, Inc., a Delaware corporation
Address of Tenant: 00000 Xxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxxxx. Tenant's
address shall be changed to the address of the Property upon the Commencement
Date of this Lease.
Section 1.4 PROPERTY: 00000 Xxxxxx Xxxx, Xxxxxxxxx, Xxxxxxxxxx,
consisting of the land described on Exhibit "A" which legal description is
attached hereto, and a building and improvements (the term "Property" includes
the Tenant Improvements defined in the Construction Rider) to be constructed
pursuant to the Construction Rider attached hereto.
Section 1.5 LEASE TERM: One hundred twenty-three (123) months beginning
on the Commencement Date (as defined in the Construction Rider). If the
Commencement Date is on a day other than the first day of a month, then such
partial first monthly period shall be added to the one hundred twenty-three
(123) month period, and the Lease Term shall be one hundred twenty-three (123)
months plus such additional first fractional month.
Section 1.6 PERMITTED USES: (See Article Five) Distribution,
manufacturing, general office, sales, warehousing, storage and related uses, as
permitted by governmental laws, rules and regulations affecting the Property.
Section 1.7 INITIAL SECURITY DEPOSIT: (See Section 3.3) Seventy-five
Thousand Eighteen Dollars and Thirty Cents ($75,018.30).
1
6
Section 1.8 RENT AND OTHER CHARGES PAYABLE BY TENANT:
(a) BASE RENT: Seventy-five Thousand Eighteen Dollars and Thirty Cents
($75,018.30) per month for the first thirty (30) months, as provided in Section
3.1. The initial Base Rent shall be adjusted as provided in paragraph 3.2 of the
Construction Rider. The Base Rent shall be increased on the first day of the
thirty-first (31st), sixty-first (61st), ninety-first (91st) and one hundred
twenty-first (121st) full month of the Lease Term (individually referred to as a
"Rental Adjustment Date" and collectively as "Rental Adjustment Dates") as
provided in Section 3.2 of this Lease. The Comparison Base Rent (as defined in
Paragraph 3.2(a)) shall be increased on each Rental Adjustment Date a minimum of
seven and sixty-eight one-hundredths percent (7.68%) and a maximum of eighteen
and one-half percent (18.5%).
(b) ABATED RENT: Provided that Tenant is not then in monetary default
under the terms of this Lease, the Base Rent for the first (1st), second (2nd)
and sixty-first (61st) full months of the initial Lease Term shall be forgiven.
Even though the Base Rent is forgiven under the immediate preceding sentence
for the 61st month, the Base Rent shall be increased for the 61st month as
calculated under Paragraph 1.8(a) above. Such forgiven rent shall be classified
as "Abated Rent" under Section 10.4 below.
(c) OTHER PERIODIC PAYMENTS: (i) Real Property Taxes (See Section 4.2);
(ii) Utilities (See Section 4.3); (iii) Insurance Premiums (See Section 4.4);
(iv) Impounds for Insurance Premiums and Property Taxes (See Section 4.7); (v)
Maintenance, Repairs and Alterations (See Article Six).
Section 1.9 RIDERS: The following Riders are attached to and made a part
of this Lease: Construction Rider
ARTICLE TWO: LEASE TERM
Section 2.1 LEASE OF PROPERTY FOR LEASE TERM. Landlord leases the
Property to Tenant and Tenant leases the Property from Landlord for the Lease
Term. The Lease Term is for the period stated in Section 1.5 above and shall
begin on the Commencement Date and end on the date specified in Section 1.5
above, unless the Lease Term terminates under any provision of this Lease.
Section 2.2 HOLDING OVER. Tenant shall vacate the Property upon the
expiration or earlier termination of this Lease. Tenant shall reimburse
Landlord for and indemnify Landlord against all damages which Landlord incurs
from Tenant's delay in vacating the Property. If Tenant does not vacate the
Property upon the expiration or earlier termination of this Lease and Landlord
2
7
thereafter accepts rent from Tenant, Tenant's occupancy of the Property shall
be a "month-to-month" tenancy, subject to all of the terms of this Lease
applicable to a month-to-month tenancy, except that the Base Rent then in
effect shall be increased by fifty percent (50%).
Section 2.3 OPTION TO EXTEND.
(a) Exercise. Landlord hereby grants to Tenant one (1) option
(referred to herein as the "Option") to renew and extend the term of this Lease
for a term of five (5) years (such five-year term for the Option is referred to
herein as the "Option Term"). The Option must be exercised by written notice
("Option Notice") received by Landlord no later than six (6) months prior to
the expiration of the then current Lease Term. Furthermore, the Option shall
not be deemed to be properly exercised if Tenant is prohibited from exercising
the Option pursuant to subparagraphs (i) or (ii), below. If the Option is not
properly exercised within the Option Notice period in the manner prescribed
herein, it shall expire and be of no further force and effect. Time is of the
essence. Tenant may not revoke an election of the Option once Tenant makes an
election to exercise the Option. Provided that Tenant has properly exercised
the Option, the term of the Lease shall be extended for the Option Term (and
references in this Lease to the Lease "term" shall then include the Option
Term), and all terms, covenants and conditions of the Lease shall remain
unmodified and in full force and effect, except that the Base Rent shall be
modified as set forth in Paragraphs 2.3(b), (c) and (d), below.
(i) If Tenant is in default under any provision of this Lease
and such default remains uncured, then Tenant may not exercise the Option. The
period of time within which the Option may be exercised shall not be extended
or enlarged by reason of Tenant's inability to exercise the Option because of
Tenant's default.
(ii) The Option granted to Tenant in this Lease is personal to
Tenant and may not be exercised or assigned, voluntarily or involuntarily, by
or to any person or entity other than Tenant and any person to whom the entire
Lease is assigned under Section 9.2 where Landlord's consent to such assignment
is not required under Section 9.2. The Option herein granted to Tenant is not
assignable to any person separate and apart from this Lease.
(b) Base Rent. The Base Rent payable for the first thirty (30) months
of each Option Term shall be the greater of: (i) the Fair Rental Value (as
determined under Paragraph 2.3(c)); or (ii) the Base Rent during the last month
immediately preceding the first
3
8
month of the Option Term as increased by the increase in the Index as if such
last month was a Rental Adjustment Date under Paragraph 1.8(a).
(c) Fair Rental Value. For purposes of this Section 2.3, the term
"Fair Rental Value" shall mean the Fair Rental Value based upon a per square
foot basis and shall be determined as follows: After Landlord's receipt of
Tenant's election to exercise the Option, but no sooner than six (6) months
prior to the expiration of the then current Lease term, Landlord shall determine
the Fair Rental Value and provide written notice of such amount to Tenant.
Tenant shall have fifteen (15) days (the "Tenant Review Period") after receipt
of Landlord's notice of the Fair Rental Value within which to accept such rental
or to reasonably object thereto in writing. In the event that Tenant objects in
writing to Landlord within the Tenant Review Period of Landlord's determination,
then Landlord and Tenant shall attempt to agree upon such Fair Rental Value. The
failure of Tenant to so notify Landlord in writing of Tenant's objection of the
Fair Rental Value within the Tenant Review Period shall conclusively be deemed
Tenant's rejection of the Fair Rental Value determined by Landlord. If Landlord
and Tenant fail to reach agreement of the Fair Rental Value within ten (10) days
of the end of Tenant's Review Period, then each party shall place in a separate
sealed envelope its final proposed determination as to the Fair Rental Value
(which determination may be different than such party's original determination),
and such determination shall be submitted to a Qualified Appraiser for
determination. Tenant shall deliver to Landlord within ten (10) days after the
end of Tenant's Review Period a list of four (4) Qualified Appraisers, and
Landlord shall choose one (1) of such Qualified Appraisers from such list within
five (5) days of Landlord's receipt of such list. If Tenant fails to deliver
such list to Landlord within such ten (10) day period, then Landlord may deliver
a list of four (4) Qualified Appraisers to Tenant, and Tenant shall choose one
(1) of such Qualified Appraisers, or if Tenant so fails to choose a Qualified
Appraiser within five (5) days of receipt of same, then Landlord may choose such
Qualified Appraiser from such list. The Qualified Appraiser's determination
shall be limited solely to this issue of whether Landlord's or Tenant's
submitted Fair Rental Value per square foot for the Property is closest to the
actual prevailing Fair Rental Value per square foot, using the criteria
described herein (in which case Landlord's or Tenant's determination of the Fair
Rental Value chosen by the Qualified Appraiser shall be the Fair Rental Value).
Such Qualified Appraiser shall within thirty (30) days of appointment reach a
decision and shall notify Landlord and Tenant of such determination and such
determination shall be final.
(i) The term "Qualified Appraiser" for purposes of this
Paragraph 2.3(c) shall mean a professional real estate appraiser
4
9
who is a Member of the Appraisal Institute (sometimes known as an "MAI"
appraiser) who shall have been active over the five (5) preceding years ending
on the date of such appointment in the appraisal of similar properties within a
five (5) mile radius of the subject Property. The cost of the Qualified
Appraiser shall be paid equally by Landlord and Tenant. If at the time of the
appointment of a Qualified Appraiser, the designation "MAI" is no longer
utilized, then a qualification for appraisers most nearly equivalent to an MAI
appraiser shall be utilized.
(ii) The criteria by which the Qualified Appraiser, and the
Landlord's and Tenant's determination, of Fair Rental Value per month shall be
as follows:
(a) Only available comparable office/research and
development building rentals closest to the date that such Option term is to
commence of equal quality to the Property within the Lost Hills Business Center
shall be used. Comparable properties shall be compared on a rentable square
footage basis, considering the age of the comparable building to the age of the
Property.
(b) Only buildings in a planned business park of at
least the same quality as the business park in which the subject Property is
located shall be used.
(c) Fair Rental Value shall be based upon the Shell
portion of the Property (as defined in the Construction Rider) and shall not
include the rental value for those Tenant Improvements installed and paid for by
the Tenant under the Construction Rider (except for improvements or upgrades of
the Building Shell and permits and governmental entitlements which may have been
included in such Tenant Improvements).
(d) The Qualified Appraiser shall consider the fact that
the Base Rent payable during the Option Term will increase pursuant to Paragraph
2.3(d), below.
(e) No credit may be given for comparable property
rentals for tenant improvement allowances, if any, given to tenants of
comparable properties.
(d) Increase. The monthly Base Rent payable for the first (1st) month
through the thirtieth (30th) month of the Option Term shall be the new monthly
Base Rent for the Option Term as determined under Paragraphs 2.3(b) and (c),
above. Such Base Rent shall be increased on the thirty-first (31st) month of
the Option Term (a "Rental Adjustment Date") as provided in Section 3.2;
provided, however, that such rent increase on each Rental Adjustment Date shall
be a minimum of seven and sixty-eight one-
5
10
hundredths percent (7.68%) and a maximum of eighteen and one-half percent
(18.5%) from the Comparison Base Rent.
ARTICLE THREE: BASE RENT
Section 3.1 TIME AND MANNER OF PAYMENT. Upon execution of this Lease
(in addition to the payment of the Security Deposit under Section 3.3), Tenant
shall pay Landlord the Base Rent in the amount stated in Paragraph 1.8(a) above
which shall apply to the third full month of the Lease Term. On the first day
of the fourth full month of the Lease Term and each month thereafter, Tenant
shall pay Landlord the Base Rent, in advance, without offset, deduction or
prior demand. Additionally, on the Commencement Date the Tenant shall pay to
Landlord the initial Base Rent attributable to the first fractional month of
the Lease Term, if any. The Base Rent shall be payable at Landlord's address or
at such other place as Landlord may designate in writing.
Section 3.2 COST OF LIVING INCREASES. The Base Rent shall be increased
on each date (the "Rental Adjustment Date") stated in Paragraph 1.8(a) above
and under Paragraph 2.3(d) in accordance with the increase in the United States
Department of Labor, Bureau of Labor Statistics, Consumer Price Index for All
Urban Consumers (all items for the geographical Statistical Area in which the
Property is located which currently is the Los Angeles-Riverside-Orange County
statistical area on the basis of 1982-1984 = 100) (the "Index") as follows:
(a) The Base Rent (the "Comparison Base Rent") in effect immediately
before each Rental Adjustment Date shall be increased by the percentage that
the Index has increased from the date (the "Comparison Date") on which payment
of the Comparison Base Rent began through the month in which the applicable
Rental Adjustment Date occurs. The Base Rent shall not be reduced by reason of
such computation. Landlord shall notify Tenant of each increase by a written
statement which shall include the Index for the applicable Comparison Date, the
Index for the applicable Rental Adjustment Date, the percentage increase
between those two Indices, and the new Base Rent. Any increase in the Base Rent
provided for in this Section 3.2 shall be subject to any minimum or maximum
increase, as provided for in Paragraph 1.8(a).
(b) Tenant shall pay the new Base Rent from the applicable Rental
Adjustment Date until the next Rental Adjustment Date. Landlord's notice may be
given after the applicable Rental Adjustment Date of the increase, and Tenant
shall pay Landlord the accrued rental adjustment for the months elapsed between
the effective date of the increase and Landlord's notice of such increase
within ten (10) days after Landlord's written notice. If the
6
11
format or components of the Index are materially changed after the Commencement
Date, Landlord shall substitute an index which is published by the Bureau of
Labor Statistics or similar agency and which is most nearly equivalent to the
Index in effect on the Commencement Date. The substitute index shall be used to
calculate the increase in the Base Rent unless Tenant objects to such index in
writing within fifteen (15) days after receipt of Landlord's notice. If Tenant
objects, Landlord and Tenant shall submit the selection of the substitute index
for binding arbitration in accordance with the rules and regulations of the
American Arbitration Association at its office closest to the Property. The
costs of arbitration shall be borne equally by Landlord and Tenant.
Section 3.3 SECURITY DEPOSIT; INCREASES.
(a) Upon the execution of this Lease, Tenant shall deposit with Landlord
a cash Security Deposit in the amount set forth in Section 1.7 above. Landlord
may apply all or part of the Security Deposit to any unpaid rent or other
charges due from Tenant or to cure any other defaults of Tenant. If Landlord
uses any part of the Security Deposit, Tenant shall restore the Security
Deposit to its full amount within ten (10) days after Landlord's written
request. Tenant's failure to do so shall be a material default under this
Lease. If Landlord retains a portion of the Security Deposit upon the
expiration or sooner termination of this Lease, then Landlord shall apply such
retained portion of the Security Deposit to any unpaid rent or other charges
due from Tenant towards curing any defaults of Tenant or damages which Tenant
is required to pay under this Lease. No interest shall be paid on the Security
Deposit. Landlord shall not be required to keep the Security Deposit separate
from its other accounts and no trust relationship is created with respect to the
Security Deposit.
(b) If the Base Rent is increased under paragraph 3.2 of the Construction
Rider, Tenant shall deposit additional funds with Landlord sufficient to
increase the Security Deposit to an amount which equals the adjusted initial
Base Rent under paragraph 3.2 of the Construction Rider.
Section 3.4 TERMINATION; ADVANCE PAYMENTS. Upon termination of this Lease
under Article Seven (Damage or Destruction), Article Eight (Condemnation) or any
other termination not resulting from Tenant's default, and after Tenant has
vacated the Property in the manner required by this Lease, Landlord shall refund
or credit to Tenant (or Tenant's successor) the unused portion of the Security
Deposit, any advance rent or other advance payments made by Tenant to Landlord,
and any amounts paid for real property taxes and other reserves which apply to
any time periods after termination or expiration of this Lease.
7
12
ARTICLE FOUR: OTHER CHARGES PAYABLE BY TENANT
Section 4.1 ADDITIONAL RENT. All charges payable by Tenant other than
Base Rent are called "Additional Rent." Unless this Lease provides otherwise,
Tenant shall pay all Additional Rent then due with the next monthly installment
of Base Rent. The term "rent" shall mean Base Rent and Additional Rent.
Section 4.2 PROPERTY TAXES.
(a) REAL PROPERTY TAXES. Tenant shall pay real property taxes on the
Property (including any fees, taxes or assessments against, or as a result of,
any tenant improvement installed on the Property by or for the benefit of
Tenant) during the Lease Term. Subject to Paragraph 4.2(b) and Section 4.7
below: (i) Landlord shall provide to Tenant at least fifteen (15) days prior to
the delinquency date of such taxes a photocopy of the property tax xxxx; (ii)
provided that Tenant shall have received a copy of the property tax xxxx, such
payment shall be made by Tenant on or before the later of fifteen (15) days
after Tenant's receipt of the property tax xxxx or ten (10) days prior to the
delinquency date of the taxes; and (iii) prior to such date by which Tenant is
to pay such taxes, Tenant shall furnish Landlord with satisfactory evidence
that the real property taxes have been paid by Tenant. Landlord shall promptly
reimburse Tenant for any real property taxes paid by Tenant covering any period
of time prior to or after the Lease Term. If Tenant fails to pay the real
property taxes when due, Landlord may pay the taxes and Tenant shall reimburse
Landlord for the amount of such tax payment as Additional Rent.
(b) LANDLORD MAY PAY TAXES. Landlord may elect, at Landlord's sole and
absolute discretion, to pay the real property taxes (due under this Section
4.2) to the appropriate governmental authority and have Tenant pay such amount
to Landlord, by Landlord delivering evidence of such tax amount(s) (including
the tax xxxx from the governmental agency) to Tenant. Tenant shall pay over any
such tax amount(s) to Landlord within thirty (30) days of Landlord's delivery
of request for payment to Tenant, but not sooner than ten (10) days prior to
the date on which such taxes are due to the applicable governmental agency. If
Tenant fails to timely pay such tax amount(s) to Landlord, then such amount(s)
shall be treated as a failure of Tenant to pay Landlord a monetary amount due
under the terms of this Lease, and Tenant shall be deemed to be in default
under this Lease and shall owe Landlord such taxes plus any interest and
penalties provided for in this Lease. If Landlord elects for Tenant to
reimburse Landlord for such real property taxes under this paragraph (b) for
the first year or the last year of the Lease Term, then Tenant shall only be
obligated to reimburse Landlord for that amount of the real
8
13
property taxes allocable to the Lease Term portion (including any applicable
Option periods).
(c) DEFINITION OF "REAL PROPERTY TAX." "Real property tax" or "real
property taxes" means (i) any fee, license fee, license tax, business license
fee, commercial rental tax, levy, charge, assessment, penalty or tax imposed by
any taxing authority against the Property; (ii) any tax on the Landlord's right
to receive, or the receipt of, rent or income from the Property or against
Landlord's business of leasing the Property; (iii) any tax, assessment or
charge for fire protection, streets, sidewalks, road maintenance, landscaping,
refuse or other services provided to the Property by any governmental agency;
(iv) any tax imposed upon this transaction or based upon a reassessment of the
Property due to a change in law, a change of ownership, as defined by
applicable law, or other transfer of all or part of Landlord's interest in the
Property; and (v) change in the property tax laws and any charge or fee
replacing any tax previously included within the definition of real property
tax. "Real property tax" does not, however, include Landlord's federal or
state income, franchise, inheritance or estate taxes. If after the Commencement
Date there is an assessment against the Property and Landlord is given the
option of paying such assessment in installments or a lump sum, then if
Landlord elects to pay such assessment in a lump sum, Tenant shall only be
obligated to pay such assessment each year in the amount as if Landlord had
made the election to pay such assessment in installments.
(d) JOINT ASSESSMENT. If the Property is not separately assessed,
Landlord shall reasonably determine Tenant's share of the real property tax
payable by Tenant under Paragraph 4.2(a) from the assessor's worksheets or
other reasonably available information. Tenant shall pay such share to Landlord
within fifteen (15) days after receipt of Landlord's written consent.
(e) PERSONAL PROPERTY TAXES.
(i) Tenant shall pay all taxes charged against trade fixtures,
furnishings, equipment or any other personal property belonging to Tenant.
Tenant shall try to have personal property taxed separately from the Property.
(ii) If any of Tenant's personal property is taxed with the Property,
Tenant shall pay Landlord the taxes for the personal property within fifteen
(15) days after Tenant receives a written statement from Landlord for such
personal property taxes.
(f) APPLICATION FOR REDUCTION IN TAXES. The Tenant, at Tenant's sole cost
and expense, may protest the real property tax valuation of the Property or any
real property tax increases for
INITIALS___
___
9
14
the Property which affects Tenant's obligation hereunder before the assessment
appeals board or by judicial proceedings. Landlord agrees, at no cost or expense
to Landlord, to cooperate with Tenant in effectuating such protest or legal
proceeding. Tenant shall pay any of Landlord's legal fees in such proceeding or
preparation therefor. Tenant shall pay all such taxes or assessments claimed to
be due even if Tenant files a protest, appeal or legal proceeding relating to
such taxes, assessments or valuation. The Tenant shall pay all of the attorneys'
fees, appraisal fees and judicial proceedings and agrees to defend, indemnify
and hold the Landlord harmless regarding same.
Section 4.3 UTILITIES. Tenant shall pay, directly to the appropriate
supplier, the cost of all natural gas, heat, light, power, sewer service,
telephone, water, refuse disposal, and other utilities and services supplied to
the Property. However, if any services or utilities are jointly metered with
other property, Landlord shall make a reasonable determination of Tenant's
proportionate share of the cost of such utilities and services and Tenant shall
pay such share to Landlord within fifteen (15) days after receipt of Landlord's
written consent
Section 4.4 LIABILITY POLICIES.
(a) LIABILITY INSURANCE. During the Lease Term, Tenant shall maintain a
policy of commercial general liability insurance (sometimes known as broad form
comprehensive general insurance) insuring Tenant against liability for bodily
injury, property damage (including loss of use of property) and personal injury
arising out of the operation, use or occupancy of the Property. Tenant shall
name Landlord as an additional insured under such policy, and Tenant shall be
responsible for the deductible, if any, under such policy. The initial amount of
such insurance shall be Two Million Dollars ($2,000,000) per occurrence and
shall be subject to periodic increase based upon inflation, increased liability
awards, recommendation of Landlord's professional insurance advisers and other
commercially reasonable relevant factors. The liability insurance obtained by
Tenant under this Paragraph 4.4(a) shall: (i) be primary and non-contributing;
(ii) contain cross-liability endorsements; and (iii) insure Landlord against
Tenant's performance under Section 5.6, if the matters giving rise to the
indemnity under Section 5.6 result from the acts or negligence of Tenant. The
amount and coverage of such insurance shall not limit Tenant's liability nor
relieve Tenant of any other obligation under this Lease. Landlord may also
obtain, at Landlord's cost, additional comprehensive public liability insurance
in an amount and with coverage determined by Landlord insuring Landlord against
liability arising out of the ownership, operation, use or occupancy of the
Property. The policy obtained
INITIALS___
___
10
15
by Landlord shall not be contributory and shall not provide primary insurance.
(b) PROPERTY AND RENTAL INCOME INSURANCE. During the Lease Term, Landlord
shall maintain at Tenant's cost policies of insurance covering loss of or
damage to the Property in the full amount of its replacement value. The
deductible amounts under such policies shall not exceed Twenty Thousand Dollars
($20,000) per occurrence (except such limitation shall not apply in the case of
earthquake insurance if same is required to be carried by Landlord's lender).
Such policy shall contain an Inflation Guard Endorsement and shall provide
protection against all perils included within the classification of fire,
extended coverage, vandalism, malicious mischief, special extended perils (all
risk), sprinkler leakage and any other perils which Landlord deems reasonably
necessary. Landlord shall have the right to obtain (and require Tenant to pay
for same) flood and earthquake insurance if required by any lender holding a
security interest in the Property. During the Lease Term, Landlord shall also
maintain a rental income insurance policy, with loss payable to Landlord, in an
amount equal to twelve (12) months' Base Rent, plus estimated real property
taxes and insurance premiums. Tenant shall be liable for the Payment of any
deductible amount under Landlord's or Tenant's insurance policies maintained
pursuant to this Paragraph 4.4(b), (except with respect to any deductible for
earthquake insurance required to be obtained by Landlord's lender under this
Paragraph 4.4(b), which Landlord and Tenant shall each pay fifty percent (50%)
of the deductible amount of such earthquake insurance). If this Lease is
terminated by Landlord under the provisions of Article Seven (and this Lease is
not terminated by Tenant) due to damage from an earthquake, then as to the
earthquake insurance described in the immediate preceding sentence for which
Tenant is responsible for fifty percent (50%) of the deductible amount, Tenant
shall not be responsible for fifty percent (50%) of such earthquake insurance
deductible amount upon the termination of this Lease (provided, however, if
Tenant elects to terminate this Lease as permitted under the terms of Article
Seven, then Tenant shall remain obligated to pay such 50% deductible amount).
Tenant shall not do or permit anything to be done which invalidates any such
insurance policies. All property insurance and rental income insurance obtained
by Landlord under this Paragraph 4.4(b) shall provide for all payments of
proceeds to be made to Landlord (and/or lender(s) designated by Landlord).
(c) PAYMENT OF PREMIUMS. Subject to Section 4.7, Tenant shall pay all
premiums (and reimburse Landlord for Landlord's payments of such premiums) for
the insurance policies described in Paragraphs 4.4(a) and (b) (whether such
insurance is obtained by Landlord or Tenant) within thirty (30) days after
billing by Landlord or where Tenant is to pay the insurance company directly
INITIALS___
___
11
16
within thirty (30) days after Tenant's receipt of a copy of the premium
statement or other evidence of the amount due. Before the Commencement Date,
Tenant shall deliver to Landlord a copy of any policy of insurance which Tenant
is required to maintain under this Section 4.4. At least thirty (30) days prior
to the expiration of any such policy, Tenant shall deliver to Landlord a
renewal of such policy. As an alternative to providing a policy of insurance,
Tenant shall have the right to provide Landlord a certificate of insurance,
executed by an authorized officer of the insurance company, showing that the
insurance which Tenant is required to maintain under this Section 4.4 is in full
force and effect and containing such other information which Landlord
reasonably requires.
(d) GENERAL INSURANCE PROVISIONS.
(i) Any insurance which Tenant is required to maintain under this
Lease shall include a provision which requires the insurance carrier to give
Landlord not less than thirty (30) days' written notice prior to any
cancellation or modification of such coverage.
(ii) If Tenant fails to deliver any policy, certificate or renewal to
Landlord required under this Lease within the prescribed time period or if any
such policy is canceled or materially modified during the Lease Term without
Landlord's consent, or if Tenant fails to pay premiums for any insurance
policy, Landlord may obtain such insurance (or pay premiums on an existing
insurance policy), in which case Tenant shall reimburse Landlord for the cost
of such insurance and premiums within fifteen (15) days after receipt of a
statement that indicates the cost of such insurance and premiums.
(iii) Tenant may at its sole option obtain, at Tenant's sole cost and
expense, from any insurance company chosen by Tenant, a separate policy of
earthquake insurance ("Tenant's Earthquake Insurance") or other insurance
("Tenant's Special Property Insurance") in addition to the insurance required
under Paragraphs 4.4(a) and 4.4(b) which insures the Tenant Improvements and
Tenant's trade fixtures, equipment and other personal property, and Tenant may
be designated as the sole loss payee of such Tenant's earthquake Insurance and
Tenant's Special Property Insurance. The phrase "Tenant's Special Property
Insurance" specifically excludes any insurance which is required to be
maintained under Paragraphs 4.4(a) and 4.4(b). Tenant may receive such Tenant's
Earthquake Insurance and Tenant's Special Property Insurance proceeds (and
Tenant shall be required to pay all premiums and the entire deductible amount
for such Tenant's Earthquake Insurance and Tenant's Special Property Insurance
policies). As to such Tenant's Earthquake Insurance and Tenant's
INITIALS___
___
12
17
Special Property Insurance of which Tenant is the loss payee under the
immediately preceding sentence (and which is not required to be obtained by
Landlord's lender), if this Lease is terminated under the provisions of Article
Seven (as permitted thereunder) and this Lease in fact terminates, then Tenant
may keep such insurance proceeds from Tenant's Earthquake Insurance and
Tenant's Special Property Insurance. However, if Landlord is required to obtain
earthquake insurance insuring the Property by a lender holding a security
interest in the Property under Paragraph 4.4(b), above, then Tenant shall be
required to pay all of the premiums for such earthquake insurance (for the
entire Property) as required by such lender, and Landlord (or the lender as the
lender shall require) shall be designated as the loss payee of such insurance
policy, and Landlord and Tenant shall each be responsible for the payment of
fifty percent (50%) of the deductible amount of such earthquake insurance (and
such insurance shall not be classified as "Tenant's Earthquake Insurance"). If
Tenant as a loss payee or otherwise receives or is entitled to receive any
earthquake insurance proceeds on the Property including the Tenant Improvements
(whether or not such insurance is Tenant's Earthquake Insurance or is required
by Landlord's lender), then Tenant agrees to utilize such insurance proceeds to
repair and reconstruct any damage to the Property; provided, however, if this
Lease is terminated under the provisions of Article Seven, Tenant may retain
such insurance proceeds from Tenant's Earthquake Insurance and Tenant's Special
Property Insurance policies, if any, (but not any other insurance policy
required under Paragraph 4.4(a) or 4.4(b)) insuring the Tenant Improvements.
(iv) Tenant shall maintain all insurance required to be maintained
by Tenant under this Lease with companies holding a "General Policy Rating" of
A-12 or better, as set forth in the most current issue of "Best Key Rating
Guide." Tenant acknowledges that the insurance described in Paragraph 4.4(b) is
for the primary benefit of Landlord. Landlord makes no representation as to the
adequacy of such insurance to protect Landlord's or Tenant's interests.
Therefore, Tenant shall obtain any such additional property or liability
insurance which Tenant deems necessary to protect Landlord and Tenant.
(v) Notwithstanding any other provision of this Lease, unless
prohibited under any applicable insurance policies maintained, Landlord and
Tenant each hereby waive any and all rights of recovery against the other, or
against the officers, employees, agents or representatives of the other, for
loss of or damage to its property or the property of others under its control,
to the extent such loss or damage is actually reimbursed from any proceeds from
an insurance policy in force (whether or not described in this Lease) at the
time of such loss or damage. Upon obtaining the required policies of insurance,
Landlord and Tenant
INITIALS___
___
13
18
shall give notice to the insurance carriers of this mutual waiver of
subrogation.
(vi) Additionally, Tenant shall obtain at Tenant's cost casualty
insurance for Tenant's fixtures or equipment installed by Tenant on the
Property.
(vii) If Landlord obtains a blanket insurance policy covering more
than one (1) property owned by Landlord, then Landlord agrees to have the
insurance company for such blanket insurance policy allocate any insurance
deductible amount on a per property basis in order that the Property has a
separate stated deductible amount under such blanket insurance policy.
Section 4.5 LATE CHARGES. Tenant's failure to pay rent promptly may
cause Landlord to incur unanticipated costs. The exact amount of such costs are
impractical or extremely difficult to ascertain. Such costs may include, but
are not limited to, processing and accounting charges and late charges which
may be imposed on Landlord by any ground lease, mortgage or trust deed
encumbering the Property. Therefore, if Landlord does not receive any rent
payment within five (5) days after Landlord's written notice to Tenant that
such rent payment is due, Tenant shall immediately pay Landlord a late charge
equal to ten percent (10%) of the overdue amount. After Landlord has given to
Tenant at any time during this Lease term two (2) written notices that rent
payments are past due, Landlord shall no longer have to give Tenant such
written notice under the immediately preceding sentence, and thereafter if
Landlord does not receive any rent payment within five (5) days after such rent
payment becomes due, Tenant shall immediately pay Landlord a late charge equal
to ten percent (10%) of the overdue amount. The parties agree that such late
charge represents a fair and reasonable estimate of the costs Landlord will
incur by reason of such late payment. If such late charge is not paid when due
hereunder, such failure shall be deemed a default by Tenant, and Tenant shall
(in addition to Landlord's other remedies) pay to Landlord interest (at the
rate specified in Section 4.6, but not greater than the maximum rate permitted
by law on such late charge) on such late charge from the date such late charge
is to be paid to Landlord.
Section 4.6 INTEREST ON PAST DUE OBLIGATIONS. Any amount owed by Tenant
to Landlord which is not paid when due shall bear interest at the rate of
fifteen percent (15%) per annum from the due date of such amount. However,
interest shall not be payable on late charges to be paid by Tenant under this
Lease. The payment of interest on such amounts shall not excuse or cure any
default by Tenant under this Lease. If the interest rate specified in this
Lease is higher than the rate permitted by law, the interest rate
14
19
is hereby decreased to the maximum legal interest rate permitted by law.
Section 4.7 IMPOUNDS FOR INSURANCE PREMIUMS AND REAL PROPERTY TAXES. If
requested by any ground lessor or lender to whom Landlord has granted a
security interest in the Property, or if Tenant is more than ten (10) days late
in the payment of rent more than once in any consecutive twelve (12) month
period, Tenant shall pay Landlord a sum equal to one-twelfth (1/12) of the
annual real property taxes and insurance premiums payable by Tenant under this
Lease, together with each payment of Base Rent. Landlord shall hold such
payments in a non-interest bearing impound account. If unknown, Landlord shall
reasonably estimate the amount of real property taxes and insurance premiums
when due. Tenant shall pay any deficiency of funds in the impound account to
Landlord upon written request. If Tenant defaults under this Lease, Landlord
may apply any funds in the impound account to any obligation then due under
this Lease. Upon the first to occur of the termination of such impound account
or the termination of this Lease, Landlord and Tenant shall reconcile the
amounts held in such impound account and shall pay such amount due to Tenant or
to Landlord (or ground lessor or lender), as the case may be.
ARTICLE FIVE: USE OF PROPERTY
Section 5.1 PERMITTED USES. Tenant may use the Property only for the
Permitted Uses set forth in Section 1.6 above.
Section 5.2 MANNER OF USE. Tenant shall not cause or permit the Property
to be used in any way which constitutes a violation of any law, ordinance, or
governmental regulation or order, which annoys or interferes with the rights of
any other tenants of Landlord, or which constitutes a nuisance or waste.
Subject to Landlord's duties to obtain certain permits under the Construction
Rider, Tenant shall obtain and pay for all permits required for Tenant's
occupancy of the Property. Tenant shall promptly take all actions necessary to
comply with all applicable statutes, ordinances, rules, covenants, conditions
and restrictions, regulations, orders and requirements regulating the use by
Tenant of the Property, including the Occupational Safety and Health Act.
Tenant acknowledges that this Lease and Tenant's leasehold interest under this
Lease are subordinate to any covenants, conditions and restrictions ("CC&Rs")
presently or in the future promulgated or recorded in connection with the
Property and as a requirement of any parcel map, and any amendments or
modifications thereto. Tenant agrees to comply with any such CC&Rs and to pay
any costs, assessments or charges under such CC&Rs which are charged or
assessed against the Property. Tenant agrees to execute and acknowledge any
document evidencing the subordination
15
20
described in this paragraph, as requested by Landlord from time to time. Tenant
agrees to comply with all of the provisions of such, including but not limited
to use and maintenance of the Property, requirements of any governmental body,
including but not limited to use and maintenance of the Property, provisions
for earth berms, landscaping, parking, storage and waste removal, trucking and
load, drainage care, maintenance and repair of signs. Tenant shall be
responsible for all costs of maintenance, and any assessments or charges as
related to Tenant's Property under any CC&Rs. Notwithstanding the above
provisions of this Section 5.2, if the Shell portion of the Building (as such
capitalized terms are defined in the Construction Rider) including the parking
lot are required to be modified by the validly-organized industrial park
association formed under the CC&Rs or by another landowner in the industrial
park enforcing the CC&Rs by a judgment of a court of competent jurisdiction,
because same were not constructed in compliance with the CC&Rs as such CC&Rs
lawfully existed on the Commencement Date, then Landlord agrees to pay for any
such required modifications.
Section 5.3 HAZARDOUS MATERIALS.
(a) DEFINITIONS. As used in this Section 5.3, the following
definitions shall apply:
(i) "Environmental Laws" shall mean all federal, state and
local laws, ordinances, rules and regulations now or hereafter in force, as
amended from time to time, in any way relating to or regulating human health or
safety, or industrial hygiene or environmental conditions, or protection of the
environment, or pollution, or contamination of the air, soil, surface water or
ground water, including but not limited to the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Resource Conservation and
Recovery Act, the Clean Water Act, the Hazardous Substance Account Act,
California Health and Safety Code provisions, the California Hazardous Waste
Control Law, the California Medical Waste Management Act, and the California
Xxxxxx-Cologne Water Quality Control Act.
(ii) "Hazardous Material" shall mean any substance or material
that is described as a toxic or hazardous substance, waste or material, or a
pollutant or contaminant, or words of similar import, in any of the
Environmental Laws, and includes asbestos, petroleum (including crude oil or
any fraction thereof, natural gas, natural gas liquids, liquified natural gas,
or synthetic gas useable for fuel, or any mixture thereof), petroleum products,
polychlorinated biphenyls, urea formaldehyde, radon gas, radioactive matter,
medical waste, and chemicals which may cause cancer or reproductive toxicity.
16
21
(iii) "Release" shall mean any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
dumping or disposing into the environment.
(iv) For purposes of this Section 5.3, the activities, acts,
use, production, processing, manufacturing, generation, treatment, handling,
storage and Release by "Tenant" shall mean those of Tenant, Tenant's employees,
contractors, sublessees, customers, licensees, guests, contractors, invitees
and/or agents.
(b) COVENANT ON USE OF PROPERTY. Tenant shall not use, produce,
process, manufacture, generate, treat, handle, store or dispose of any
Hazardous Material in, on or under the Property, or use the Property for any
such purposes, or Release any Hazardous Material into any air, soil, surface
water or ground water at, on or about the Property, or permit any person using
or occupying the Property or any part thereof to do any of the foregoing, which
are in violation of any Environmental Laws. Tenant assumes the risk that
Environmental Laws may change in the future. Subject to Landlord's obligations
pursuant to Paragraph 5.3(f) below, Tenant shall comply, and shall cause all
persons using the Property or any part thereof to comply with all Environmental
Laws applicable to the Property, or the use or occupancy thereof, or any
operations or activities therein or thereon. Tenant shall obtain all permits,
licenses and approvals required by all applicable Environmental Laws for the
use and occupancy of, and all operations and activities in the Property, comply
fully with all such permits, licenses and approvals, and keep all such permits,
licenses and approvals in full force and effect. Landlord's consent in allowing
Tenant to permit or engage in any activity relating to Hazardous Material shall
not be construed to mean Landlord in any way approves of the manner in which
the Tenant is engaging in such activities, or that Landlord has determined that
such activity or manner of activity is safe.
(c) NO STORAGE TANKS. Tenant shall not install or use any storage
tanks on the Property below ground without Landlord's prior written permission.
In no event, however, shall Landlord be required to consent to the installation
or use of any storage tanks on the Property, and Landlord may refuse to allow
the installation thereof for or not for any reason.
(d) NOTICE TO LANDLORD OF PRESENCE OF HAZARDOUS MATERIAL ON PROPERTY.
In the event that any Hazardous Material is present or Released, or there is a
threatened Release of Hazardous Material on or under the Property which has
violated or which may violate an Environmental Law (or any nearby property
which can migrate into or onto the Property), or that any violation of any
Environmental Laws may have occurred at the Property, Tenant shall immediately
give notice to Landlord thereof if Tenant has knowledge thereof.
17
22
Additionally, Tenant shall immediately furnish to Landlord copies of all
written communications received by Tenant from any person or given by Tenant to
any person concerning any past or present Release or threatened Release of
Hazardous Material in, on or under the Property (or any nearby property which
could migrate to the Property), or any past or present violation of any
Environmental Laws which may affect the Property. Landlord shall have the
right, but not the obligation, to obtain from Tenant, at any time, any
additional information reasonably requested by Landlord and available to Tenant
regarding Hazardous Material generated, produced, brought onto, used, stored,
treated or disposed of by Tenant or any other person on or above the Property,
and/or activities relating thereto, on or about the Property. Tenant shall
immediately comply with Landlord's requests.
(e) ENVIRONMENTAL REPORT AND LANDLORD'S RIGHT TO INSPECT AND AUDIT.
Landlord shall have the right, but not the obligation, to enter the Property to
investigate at any time the presence of Hazardous Material, and the compliance
with Environmental Laws, and to take all actions reasonably necessary to
remediate any threat or breach of any Environmental Laws or from any Release of
Hazardous Material on or about the Property. If Landlord has reasonable cause
to believe there has been a Release of Hazardous Materials on the Property or
by Tenant, then Tenant, at Tenant's sole expense, shall have an environmental
audit (which may, in Landlord's determination, include a Phase I and/or a Phase
II environmental report) or other appropriate investigation of the Property
conducted by a third party satisfactory to Landlord and approved by Landlord
regarding the presence of Hazardous Material and compliance with Environmental
Laws. Tenant acknowledges that any such inspections or reports undertaken by
Tenant and Landlord are solely for the protection of Landlord, and agrees that
Landlord has no duty to tenant with respect to Hazardous Material or
Environmental Laws as a result of any such inspections or reports. Landlord, at
Landlord's expense, has obtained a Phase I environmental report for the
Property dated June 5, 1998 prepared by Xxxxxxx and Associates, Inc., has
delivered a copy of such Phase I environmental report to Tenant, and Tenant has
reviewed such Phase I environmental report. Tenant shall obtain on the
termination or expiration of this Lease a Phase I environmental report at
Tenant's expense and deliver a copy of same to Landlord.
(f) REMEDIATION WORK. If any Release of Hazardous Material in, on or
under the Property occurs by any person during the term of this Lease (other
than underground migration of Hazardous Materials under the Property which
originates outside of the Property through no fault of Tenant) or by Tenant at
any time, Tenant shall immediately give notice of the condition to Landlord,
and Tenant shall promptly clean up and remove all Hazardous Material so
released and restore the Property to be in compliance
18
23
with all Environmental Laws (the "Remediation Work"). Tenant shall comply with
the orders and directives of all persons having jurisdiction over the Property
or the Remediation Work. Landlord may review any plans and specifications for
the Remediation Work before such Remediation Work is performed. Any such plans
or specifications shall be prepared by a qualified, licensed engineer or
contractor, which Landlord shall have the right to approve (which approval
shall not be unreasonably withheld or delayed), and shall comply with all
applicable Environmental Laws, and all other laws, ordinances, rules and
regulations. Tenant shall be responsible at Tenant's sole expense to obtain all
permits, licenses and approvals for the Remediation Work and to complete the
Remediation Work diligently and in a timely manner. Tenant shall pay for all
Remediation Work, including the cost of plans, utilities, permits, fees, taxes
and insurance premiums in connection therewith. Tenant shall furnish to
Landlord promptly upon receipt, copies of all reports, studies, analysis,
investigations, contracts, correspondence, claims, complaints, pleadings and
other information and communications received or prepared by Tenant at any time
in connection with any Remediation Work. If there is underground migration of
Hazardous Materials under the Property in violation of Environmental laws which
originate outside of the Property through no fault of Tenant, and an authorized
governmental agency requires Landlord to investigate, remediate or remove such
Hazardous Materials, the Landlord, at Landlord's sole cost, agrees to comply
with such governmental order. Additionally, if Hazardous Materials (other than
Hazardous Materials contained in the building materials of the Property) exist
on the Property prior to the Commencement Date through no fault of Tenant or
Tenant's contractors which are not part of the Tenant Improvements, and an
applicable governmental agency orders that Landlord investigate, remediate or
remove such Hazardous Materials, then Landlord at Landlord's sole cost agrees
to comply with such governmental order.
(g) RIGHT TO PARTICIPATE BY LANDLORD. Landlord shall have the right, but
not the obligation, to participate in any action or proceeding relating to any
past or present Release or threatened Release of any Hazardous Material in, on
or under the Property, or any past or present violation of any Environmental
Laws at the Property, or the necessity for or adequacy of any Remediation Work.
Tenant shall provide immediate notice upon receipt to Landlord and allow
Landlord to participate in any negotiations or discussions with any federal,
state or local governmental agency, including environmental, occupational or
public health and safety agencies with regard to Hazardous Material or any
Environmental Laws, including all settlement or discussions regarding abatement
or Remediation Work.
19
24
(h) BURDEN OF PROOF. The burden of proof under this Section regarding
establishment of a date upon which a Hazardous Material was or was not placed
or appeared or did not appear in, on or under the Property shall be upon the
Tenant.
(i) REQUIRED INSURANCE. In the event that Tenant is required to obtain a
permit or other governmental authorization to use Hazardous Materials, and
Tenant shall permit Hazardous Material upon the Property or engage in
activities relating to Hazardous Material on, about or above the Property, then
unless such insurance is not available at commercially reasonable rates as a
result of Hazardous Materials existing on the Property as of the Commencement
Date through no fault of Tenant or Tenant's contractor, Tenant shall, at
Tenant's expense, procure and maintain insurance coverage insuring Tenant and
Landlord against any and all liability arising from such Hazardous Material or
activities relating thereto. Tenant shall duly provide Landlord with a
certificate of such insurance coverage, in such amounts and from such carriers
as Landlord shall require.
(j) INDEMNIFICATION BY TENANT. Tenant shall indemnify, reimburse, defend
and hold harmless Landlord (and its employees, partners, agents, affiliates,
successors, lenders and representatives) against all claims, demands,
liabilities, losses, damages, costs and expenses in any way arising from,
relating to, or connected with: (i) the use, generation, manufacture, storage,
disposal, handling, or Release or threatened Release of any Hazardous Material
in, on or under the Property by any person during the term of this Lease or by
Tenant at any time; (ii) any violation of Environmental Laws at the Property by
any person during the term of this Lease or by Tenant at any time; (iii) any
breach of any duty to perform Remediation Work required of Tenant under this
Section 5.3; and/or (iv) any breach of any covenant, representation or warranty
made by Tenant hereunder, or any failure of Tenant to perform any of Tenant's
covenant's or obligation in accordance with this Section. Tenant's duties to
indemnify Landlord under this Paragraph 5.3(j) shall not apply to any
underground migration of Hazardous Materials under the Property which originate
outside of the Property through no fault of Tenant. The indemnification
hereunder shall include all expenses of investigation and monitoring, costs of
containment, abatement, removal, repair, clean up, restoration and remedial
work, penalties and fines, reasonable attorneys' fees and disbursements and
other response costs. The indemnification hereunder shall also include any lost
rental amounts and other damages because of the release of Hazardous Material,
violation of Environmental Laws, or because such Hazardous Material must be
remediated from the Property. If Tenant fails to perform any obligation of
Tenant in accordance with this Section, Landlord shall have the right, but not
the obligation, to perform such obligation on behalf of Tenant. Tenant
20
25
shall, on demand, pay to Landlord all sums expended by Landlord in the
performance of any such obligations of Tenant, together with interest thereon
after such demand at the maximum rate of interest then provided by law. The
term "attorneys' fees" under this Section shall mean reasonable fees charged
by the attorneys in question based upon such attorneys' then prevailing hourly
rates as opposed to any statutory presumption specified by any statute then in
effect in the State of California.
(k) LANDLORD'S REPRESENTATIONS AND WARRANTIES. Landlord represents and
warrants to the best of Landlord's actual knowledge on the date hereof that:
(i) on the Commencement Date there are no Hazardous Materials present on the
Property or in the soil or ground water which are in violation of Environmental
Laws existing on the Commencement Date for which Landlord is required to
remediate same; (ii) on the Commencement Date there are no underground storage
tanks or asbestos-containing building materials present on the Property in
violation of Environmental Laws existing on the Commencement Date which require
Landlord's remediation of same; and (iii) on the date hereof Landlord has
received no written notice of any action, proceeding or claim which is pending
or threatened against Landlord concerning the Property's violation of any
Environmental Laws. If Landlord should violate any of the representations or
warranties of Landlord under this paragraph (k), then Tenant's sole remedy
shall be to require Landlord to correct such violation of Environmental Laws if
such correction is required by a governmental agency, and Landlord shall not be
liable for any consequential damage to any person, property or business. The
above representations and warranties of Landlord under this paragraph (k) shall
not apply to any of the Tenant Improvements installed by Tenant or Tenant's
contractors, any Hazardous Material brought onto the Property by Tenant or
Tenant's contractors, or any violation of any Environmental Laws caused by
Tenant or Tenant's contractors.
(l) SURVIVABILITY. All representations, warranties and indemnifications
under this Section shall survive the termination of the Lease. Tenant waives
the right to assert any statute of limitations as a bar to the enforcement of
this Section or to any action brought to enforce the provisions of this Section.
(m) REMEDIES CUMULATIVE. This Section shall not affect, impair or waive
any rights or remedies of Landlord or any obligations of Tenant with respect to
Hazardous Materials imposed or created by Environmental Laws (including
Landlord's rights of reimbursement or contribution under Environmental Laws).
The remedies in this Section are cumulative and in addition to all remedies
provided by law.
21
26
Section 5.4. OUTSIDE STORAGE. In addition to any other provision specified
in this Lease or as required by any law, rule or regulation, Tenant agrees to
not have any outside storage of inventory or materials (other than for
designated trash areas in compliance with all laws) and to keep the exterior of
the Property free from debris.
Section 5.5. SIGNS AND AUCTIONS. Tenant may place signs on the Property
subject to Landlord's prior written consent, which consent shall not be
unreasonably withheld. All signs shall comply with all federal, state and local
laws, rules and regulations. Landlord reserves the right to approve the size,
type and appearance of any sign. Landlord may require that any sign be
installed only by companies approved by Landlord, and such approval shall not
be unreasonably withheld or delayed. Tenant shall pay all costs for the
construction and maintenance of any signs. Tenant shall not conduct or permit
any auctions or sheriff's sales at the Property. Landlord agrees during the
Lease Term to not place any "For Sale" signs on the Property.
Section 5.6. INDEMNITY. Tenant shall indemnify Landlord against and hold
Landlord harmless from any and all costs, claims or liability arising from:
(a) Tenant's use of the Property; (b) the conduct of Tenant's business or
anything else done or permitted by Tenant to be done in or about the Property;
(c) any breach or default in the performance of Tenant's obligations under this
Lease; (d) any misrepresentation or breach of warranty by Tenant under this
Lease; or (e) other acts or omissions of Tenant. Tenant shall defend Landlord
against any such cost, claim or liability at Tenant's expense with counsel
reasonably acceptable to Landlord or, at Landlord's election, Tenant shall
reimburse Landlord for any reasonable legal fees or costs incurred by Landlord
in connection with any such claim. As a material part of the consideration to
Landlord, Tenant assumes all risk of damage to property or injury to persons in
or about the Property arising from any cause, and Tenant hereby waives all
claims in respect thereof against Landlord, except for claims for Landlord's or
Landlord's employees' or contractors' willful misconduct or negligence prior to
the Commencement Date which occur during the construction of the Building. As
used in this Section, the term "Tenant" shall include Tenant's employees,
agents, contractors and invitees, if applicable.
Section 5.7. LANDLORD'S ACCESS. Landlord or its agents may enter the
Property at all reasonable times to show the Property to potential buyers,
investors or during the last twelve (12) months of the Lease Term (and at any
time if Tenant should then be in default) tenants or other parties; to do any
other act or to inspect and conduct tests in order to monitor Tenant's
compliance with all applicable Environmental Laws and all laws governing the
22
27
presence and use of Hazardous Material; or for any other purpose Landlord
reasonably deems necessary. Landlord shall give Tenant at least twenty-four
(24) hours prior notice to such entry, except in the case of an emergency.
Tenant shall have the right to accompany Landlord at all times during
Landlord's entry onto the Property (except in the case of an emergency).
Landlord may place customary "For Lease" signs (but not "For Sale" signs) on
the Property during the last twelve (12) months of the Lease Term (and at any
time should the Tenant then be in default).
Section 5.8 QUIET POSSESSION. If Tenant pays the rent and complies with
all other terms of this Lease, Tenant may occupy and enjoy the Property for the
full Lease Term, subject to the provisions of this Lease.
Section 5.9 FUTURE EASEMENTS AND GOVERNMENTAL REQUIREMENTS. Tenant
agrees that Tenant shall cooperate with Landlord in granting any easements and
executing any covenants, conditions or restrictions which may be required by
any governmental agency or utility for the Property, or which Landlord may
otherwise require, provided that such easement, condition or restriction does
not materially interfere with Tenant's use of the Property.
ARTICLE SIX: CONDITION OF PROPERTY; MAINTENANCE, REPAIRS AND ALTERATIONS
Section 6.1 EXISTING CONDITIONS. Subject to the Construction Rider,
Tenant accepts the Property in its current condition, subject to all recorded
matters, laws, ordinances, and governmental regulations and orders. Except as
provided in the Construction Rider, Tenant acknowledges that neither Landlord
nor any agent of Landlord has made any representation as to the condition of
the Property or the suitability of the Property for Tenant's intended use.
Tenant agrees that Tenant assumes responsibility for the adequacy and capacity
of the Property's mechanical and electrical systems; use of the Property for
Tenant's proposed purposes; and the laws, rules and regulations of federal,
state and local governmental bodies affecting the Property, including parking
requirements for any of Tenant's present or proposed uses of the Property.
Tenant is relying upon Tenant's own investigation, and neither Landlord nor any
agent of Landlord has made any representations or warranties to Tenant
regarding the items stated in the preceding sentence.
Section 6.2 EXEMPTION OF LANDLORD FROM LIABILITY. Landlord shall not be
liable for any damage or injury to the person, business (or any loss of income
therefrom), goods, wares, merchandise or other property of Tenant, Tenant's
employees, invitees, customers or any other person in or about the Property,
23
28
whether such damage or injury is caused by or results from: (a) fire, steam,
electricity, water, gas or rain; (b) the breakage, leakage, obstruction or
other defects of pipes, sprinklers, wires, appliances, plumbing, air
conditioning or lighting fixtures or any other cause; (c) conditions arising in
or about the Property or from other sources or places; or (d) any act or
omission of any other tenant of Landlord. Landlord shall not be liable for any
such damage or injury even though the cause of or the means of repairing such
damage or injury are not accessible to Tenant.
Section 6.3 LANDLORD'S OBLIGATIONS. This Section 6.3 is subject to the
provisions of Article Seven (Damage or Destruction), Article Eight
(Condemnation), and paragraph 4 of the Construction Rider (Landlord's
Warranty). Landlord has absolutely no responsibility to repair, maintain or
replace any portion of the Property at any time, except as follows. Landlord
agrees to repair, maintain and as required replace the structural elements of
the Building walls, the structural elements of the roof (specifically excluding
the roof membrane and any other parts of the roof), the foundation of the
Building, any interior structural support columns, and the structural portion
of the mezzanine deck. If any of the structural elements of the Building walls,
the structural elements of the roof (specifically excluding the roof membrane
and any other parts of the roof), the foundation of the Building, any interior
structural support columns, or any structural portion of the mezzanine deck is
required to be modified because of changes to governmental laws, rules or
regulations after the Commencement Date (and such foundation or structural
items are not allowed by the applicable governmental agency to remain
unmodified), then Landlord agrees to pay the cost of such changes. Landlord's
obligation under this Section 6.3 shall solely be to repair or replace same as
may be required, and Landlord shall not be liable for any consequential damages
to any person, property or business of Tenant. Landlord shall not be
responsible (and tenant shall be responsible) for any damage to the structural
portion of the building, roof or columns caused by Tenant's acts or negligence
or those of Tenant's employees, contractors, customers or invitees. Tenant
waives the benefit of any present or future law which might give Tenant the
right to repair the Property at Landlord's expense.
Section 6.4 TENANT'S OBLIGATIONS.
(a) TENANT. Except as provided in Section 6.3 (Landlord's Obligations),
Article Seven (Damage or Destruction), Article Eight (Condemnation), and
paragraph 4 of the Construction Rider (Landlord's Warranty), Tenant shall keep
all portions of the Property (including but not limited to nonstructural, roof
membrane and nonstructural portions of the roof, interior, systems, Tenant
Improvements and equipment) in good order, condition and repair and maintain
same (including interior repainting and refinishing, as
24
29
needed and any changes or repairs required by changes to governmental laws,
rules or regulations effective after the Commencement Date). If any portion of
the Property or any system or equipment in the Property which Tenant is
obligated to repair cannot be fully repaired or restored, Tenant shall promptly
replace such portion of the Property or system or equipment in the Property,
regardless of whether the benefit of such replacement extends beyond the Lease
Term. Tenant shall maintain a preventive maintenance contract providing for the
regular inspection and maintenance of the heating and air conditioning system by
a licensed heating and air conditioning contractor. In carrying out Tenant's
obligations under this Paragraph 6.4(a), Tenant may utilize any insurance
proceeds paid under an insurance policy under Section 4.4 to Landlord or Tenant
which is then available for the repair of such portion of the Property and,
additionally, Landlord shall cooperate with Tenant in enforcing any warranties
regarding the Property as described in paragraph 4.1 of the Construction Rider.
If any part of the Property is damaged by any act or omission of Tenant, Tenant
shall either repair the damaged part of the Property or pay Landlord the cost of
repairing or replacing such damaged property, even if Landlord would otherwise
be obligated to pay the cost of maintaining or repairing such property. Landlord
shall have the right, in Landlord's discretion, to require Tenant to utilize
maintenance and landscape companies and contractors approved by Landlord to keep
in good order, condition and repair the Property, including, but not limited to,
the painting of the exterior and interior of any improvements on the Property,
the repair and maintenance of the parking areas, landscaping of the Property,
and the maintenance of the roof, all at periodic intervals. Specifically, under
the immediate preceding sentence, Landlord may require Tenant to utilize
Landlord's chosen landscapers (provided the cost of same is competitive for the
area for the same quality) in order to keep the landscaping in first-class
condition and may have such landscapers xxxx Tenant directly or Landlord may
xxxx Tenant for such landscapers. Any such costs and expenses done or paid for
by Landlord shall be paid and reimbursed by Tenant to Landlord directly or upon
billing by the Landlord, and shall be treated as monetary amounts due under the
terms of the Lease. It is the intention of Landlord and Tenant that at all times
Tenant shall maintain the portions of the Property which Tenant is obligated to
maintain in an attractive, first-class, and fully operative condition.
(b) TENANT'S FAILURE. Tenant shall fulfill all of Tenant's obligations
under this Section 6.4 at Tenant's sole expense. If Tenant fails to maintain,
repair or replace the Property as required by this Section 6.4, Landlord may,
upon ten (10) days' prior notice to Tenant (except that no notice shall be
required in the case of any emergency), enter the Property and perform such
maintenance or repair (including replacement, as needed) on behalf
25
30
of Tenant. In such case, Tenant shall reimburse Landlord for all costs incurred
in performing such maintenance or repair immediately upon demand.
Section 6.5 ALTERATIONS, ADDITIONS, AND IMPROVEMENTS.
(a) NO ALTERATIONS WITHOUT LANDLORD'S CONSENT. Tenant shall not make any
alterations, additions, or improvements to the Property without Landlord's
prior written consent, except for non-structural alterations which do not
exceed Twenty-Five Thousand Dollars ($25,000) per calendar year and which are
not visible from the outside of any building of which the Property is part.
Landlord shall not unreasonably withhold or delay Landlord's consent under the
immediately preceding sentence. Landlord may require Tenant to provide
demolition and/or lien and completion bonds in forms and amounts satisfactory
to Landlord. Tenant shall promptly remove any alterations, additions, or
improvements constructed in violation of this Paragraph 6.5(a) upon Landlord's
written request. All alterations, additions, and improvements shall be done in
a good and workmanlike manner, in conformity with all applicable laws and
regulations, and by a contractor approved by Landlord. Upon completion of any
such work, Tenant shall provide Landlord with "as built" plans, copies of all
construction contracts, and proof of payment for all labor and materials.
(b) PAYMENT REQUIRED. Tenant shall pay when due all claims for labor and
material furnished to the Property. Tenant shall give Landlord at least twenty
(20) days' prior written notice of the commencement of any work on the Property,
regardless of whether Landlord's consent to such work is required. Landlord may
elect to record and post notices of non-responsibility on the Property.
Section 6.6 CONDITION UPON TERMINATION. Upon the termination of this
Lease, Tenant shall surrender the Property (including the Tenant Improvements)
to Landlord, broom clean and in the same condition as received except for
ordinary wear and tear which Tenant was not otherwise obligated to remedy under
any provision of this Lease. However, Tenant shall not be obligated to repair
any damage which Landlord is required to repair under Article Seven (Damage or
Destruction), and this Section 6.6 is subject to Article Seven. In addition,
Landlord may require Tenant to remove any alterations, additions or improvements
made without Landlord's written consent, except for the Tenant Improvements
constructed pursuant to the Construction Rider and alterations made in
compliance with the first sentence of Section 6.5, prior to the expiration of
this Lease and to restore the Property to its prior condition, all at Tenant's
expense. All alterations, additions, Tenant Improvements, and other improvements
which Landlord has not required Tenant to remove shall become Landlord's
property and shall be surrendered to Landlord upon the expiration or earlier
26
31
termination of this Lease, except that Tenant may remove any of Tenant's
machinery or equipment (which are not Tenant Improvements) which can be removed
without material damage to the Property. Tenant shall repair, at Tenant's
expense, any damage to the Property caused by the removal of any such machinery
or equipment. In no event, however, shall Tenant remove any of the following
materials or equipment (which shall be deemed Landlord's property) without
Landlord's prior written consent: the Tenant Improvements (as defined in the
Construction Rider); any power wiring or power panels; lighting or lighting
fixtures; wall coverings; drapes, blinds or other window coverings; carpets or
other floor coverings; heaters, air conditioners or any other heating or air
conditioning equipment; fencing or security gates; or other similar building
operating equipment and decorations. Notwithstanding the above, upon the
termination of this Lease, Tenant shall remove Tenant's signs from the
Property, at Tenant's expense, and repair any damage caused by such removal.
Section 6.7 COMMON AREAS. Subject to Section 5.2, Tenant shall pay
monthly, in advance, any common area maintenance and repair costs, assessments
and charges for the Property under any CC&Rs (defined in Section 5.2). Tenant
shall also comply with any CC&Rs respecting the management, care and safety of
the common areas of the industrial park and grounds of which the Property is a
part, including parking areas, landscape areas, walkways and other areas
provided for the common use and convenience of other occupants of the
industrial park of which the Property is a part.
ARTICLE SEVEN: DAMAGE OR DESTRUCTION
Section 7.1 DAMAGE TO PROPERTY.
(a) INSURED LOSS. Tenant shall notify Landlord in writing immediately
upon the occurrence of any damage to the Property. If there is damage to the
Property caused by a casualty and the proceeds received by Landlord from the
insurance policies maintained under Paragraph 4.4(b) (where Landlord or
Landlord's lender is the loss payee) plus any deductible amount required to be
paid by Landlord and/or Tenant are sufficient to pay for the necessary repairs
to the Property, this Lease shall remain in effect and Landlord shall repair
the damage to the Property within twelve (12) months of the occurrence of same,
and Tenant shall pay to Landlord any deductible amounts under any insurance
policies (subject to subparagraph 4.4(d)(iii)).
(b) INSURANCE PROCEEDS ARE NOT SUFFICIENT. If there is damage to the
Property caused by a casualty, and if the insurance proceeds received by
Landlord plus any deductible amount required to be paid by Landlord and/or
Tenant are not sufficient to pay the
27
32
entire cost of repair, or if the cause of the damage is not covered by the
insurance policies which are maintained under Paragraph 4.4(b) where Landlord or
Landlord's lender is the loss payee, then Landlord may elect either to: (i)
repair the damage to the Shell (but not the Tenant Improvements) as soon as
reasonably possible, in which case this Lease shall remain in full force and
effect, and Tenant shall repair at Tenant's cost the Tenant Improvements; or
(ii) terminate this Lease as of the date the damage occurred. If Landlord elects
to repair the damage to the Shell under the immediately preceding sentence, then
Landlord shall make available to Tenant (or Landlord shall utilize same or
establish a construction draw account) all insurance proceeds which Landlord
receives which are designated by the insurance company for the construction of
the Tenant Improvements (and not the Shell) and which are not subject to
Landlord's lender's other requirements. If under the immediately preceding
sentence Landlord's lender should require that the insurance proceeds otherwise
designated for the Tenant Improvements (and not the Shell) be used to pay
amounts of Landlord's debt to such lender secured by the Property, then Landlord
agrees to make available to Tenant for repairing the Tenant Improvements (or
establish a construction draw account) an amount equal to such insurance proceed
which Landlord's lender has so utilized to make payments on such loan. Landlord
shall notify Tenant within thirty (30) days after receipt of notice of the
occurrence of the damage whether Landlord elects to repair the damage to the
Shell or terminate the Lease. If Landlord elects to repair the damage to the
Shell, Landlord shall repair such damage to the Shell within twelve (12) months
of Landlord's receipt of notice of such damage, and Tenant shall pay Landlord
the "deductible amount" (if any) under any insurance policies (subject to
Paragraph 4.4(b)) and, if damage was due to an act, omission or negligence of
Tenant, or Tenant's customers, licensees, visitors, employees, agents,
contractors or invitees, the difference between the actual cost of repair and
any insurance proceeds received by Landlord (and this Lease may not be
terminated by Tenant under Section 7.4). If Landlord elects to terminate this
Lease, Tenant may elect by written notice to continue this Lease in full force
and effect, in which case Tenant shall repair any damage to the entire Property
and any building in which the Property is located (including both the Shell and
the Tenant Improvements), and Tenant shall pay the cost of such repairs (if
there is earthquake insurance required by landlord's lender on the Shell and the
Tenant Improvements, then Landlord and Tenant shall each pay 50% of any
deductible amount under such earthquake insurance policy), Landlord shall
deliver to Tenant any insurance proceeds (or establish an account for
construction draws) received by Landlord for the damage repaired by Tenant.
Tenant shall give Landlord written notice of such election within ten (10) days
after receiving Landlord's termination notice. If under this Paragraph 7.1(b)
Landlord elects to terminate this Lease and Tenant does not elect to continue
this
28
33
Lease, and if Landlord's lender is not a loss payee on such insurance, then any
Tenant's Earthquake Insurance proceeds (for policies under subparagraph
4.4(b)(iii) solely obtained by Tenant for the Tenant Improvements and not the
Shell), as specifically stated on the policy allocable to the Tenant
Improvements and which proceeds are received by Tenant, may be retained by
Tenant.
(c) SUBSTANTIAL DAMAGE DURING LAST TWELVE MONTHS. If the damage by a
casualty to the Shell portion of the Property is substantial (i.e., greater than
50% of the area of the Building is damaged) and occurs during the last twelve
(12) months of the Lease Term (including any options to extend the Lease Term
which are then exercised) and such damage will require more than ninety (90)
days to repair, either Landlord or Tenant may elect to terminate this Lease as
of the date the damage occurred. Either party shall give written notification to
the non-terminating party of such election within thirty (30) days after the
terminating party's actual receipt of written notice of the occurrence of the
damage. In the event of any termination of this Lease under this paragraph (c),
Landlord (or Landlord's lender, as the case may be) shall have the right to
retain all of the insurance proceeds for insurance policies obtained under
Paragraph 4.4(b).
Section 7.2 TEMPORARY REDUCTION OF RENT. If the Property is destroyed or
damaged and Landlord or Tenant repairs or restores the Property pursuant to the
provisions of this Article Seven, any rent payable during the period of such
damage, repair and/or restoration shall be reduced, but in an amount not to
exceed the amount of the proceeds of rental continuation insurance received by
Landlord covering such period of time. Except for such possible reduction in
Base Rent, insurance premiums and real property taxes, Tenant shall not be
entitled to any compensation, reduction, or reimbursement from Landlord as a
result of any damage, destruction, repair, or restoration of or to the Property.
Section 7.3 WAIVER. Tenant waives the protection of any statute, code or
judicial decision which grants a tenant the right to terminate a lease in the
event of the substantial or total destruction of the leased property. Tenant
agrees that the provisions of Sections 7.1, 7.2, 7.4 and 7.5 shall govern the
rights and obligations of Landlord and Tenant in the event of any casualty
damage to the Property.
Section 7.4 LANDLORD'S FAILURE TO REPAIR WITHIN 12 MONTHS. If under
Paragraphs 7.1(a) or 7.1(b) Landlord fails to fulfill Landlord's obligations to
repair the Shell portion of the Building (specifically excluding the Tenant
Improvements) as required thereunder within twelve (12) months of the date that
Landlord receives written notice of such damage, then Tenant's sole remedy
against Landlord for such failure shall be to elect by written
29
34
notice to Landlord within thirty (30) days of the termination of the twelve (12)
month period to terminate this Lease. Tenant shall also have the right to
terminate the Lease if Landlord's then designated architect states in writing
that it will take Landlord more than twelve (12) months from the date that
Landlord receives written notice of such damage to fulfill Landlord's
obligations to repair the Shell portion of the Building. In the event of such
written election by Tenant to terminate under this Section 7.4, Landlord shall
pay to Tenant an amount equal to the Tenant's cost of the Tenant Improvements
(which cost shall be agreed to by Landlord and Tenant under paragraph 3.3 of the
Construction Rider) multiplied times a fraction of which the numerator is the
number (if any) of remaining months in the initial Lease Term, and the
denominator is one hundred twenty-three (123). Tenant's right to terminate the
Lease under this Article Seven for Landlord's failure to repair the Property
within twelve (12) months shall only apply to Landlord's failure to repair the
Shell, and shall not apply to Landlord's failure to repair the Tenant
Improvements within such twelve (12) month period. Any duty of Landlord to
construct or repair the Tenant Improvements as part of the Property under this
Article Seven shall only require Landlord to use Landlord's reasonable efforts
to complete such repairs within such specified period of time, and Tenant shall
not have any right to terminate this Lease regarding any such failure.
Section 7.5 REPAIR OF SHELL TO SIMILAR CONDITION. If, pursuant to
Paragraphs 7.1(a) or (b), Landlord because of a casualty is obligated or elects
to repair and restore the Shell and/or the Tenant Improvements, Landlord shall
repair and restore the Shell and/or Tenant Improvements, as required under such
paragraphs to the extent of available insurance proceeds, to substantially the
same condition (or better condition) which the Shell and/or Tenant Improvements
existed immediately prior to the casualty damage, subject to any changes that
might be required to the design, repair or restoration of the Shell and/or
Tenant Improvements under any laws, rules or regulations, including but not
limited to any zoning or similar laws. Similarly, if, pursuant to Paragraphs
7.1(a) or (b), Tenant because of a casualty is obligated or elects to repair and
restore the Tenant Improvements and/or the Shell, Tenant shall repair and
restore the Tenant Improvements and/or the Shell to substantially the same
condition (or better condition) which the Tenant Improvements and/or the Shell
existed immediately prior to the damage, subject to any changes that might be
required to the design, repair or restoration of the Tenant Improvements and/or
the Shell under any laws, rules or regulations, including but not limited to any
zoning or similar laws.
30
35
ARTICLE EIGHT: CONDEMNATION
If all or any portion of the building portion of the Property (but not the
land) is taken under the power of eminent domain or sold under the threat of
that power (all of which are called "Condemnation"), this Lease shall terminate
as to the part taken or sold on the date the condemning authority takes title
or possession, whichever occurs first. If more than sixty percent (60%) of the
floor area of the building which is located on the Property, is taken, either
Landlord or Tenant may terminate this Lease as of the date the condemning
authority takes title or possession, by delivering written notice to the other
within ten (10) days after receipt of written notice of such taking (or in the
absence of such notice, within ten (10) days after the condemning authority
takes title or possession). If neither Landlord nor Tenant terminates this
Lease, this Lease shall remain in effect as to the portion of the Property not
taken, except that the Base Rent shall be reduced in proportion to the reduction
in the floor area of the Property. Any Condemnation award or payment shall be
distributed to Landlord for compensation for reduction in the value of the
leasehold, the taking of the fee, or otherwise. Any Condemnation award or
payment shall be paid to Landlord (with the exception that any Condemnation
award which is specifically designated by the governmental agency for the taking
of the Tenant Improvements, Tenant's moving expenses and trade fixtures shall be
paid to Tenant as long as such award does not diminish any award that would
otherwise have been paid to Landlord). If this Lease is not terminated, Landlord
shall repair any damage to the Property caused by the Condemnation, except that
Landlord shall not be obligated to repair any damage for which Tenant has been
reimbursed by the condemning authority (and Tenant shall use any Condemnation
award paid to Tenant for the repair of the Tenant Improvements). If the
severance damages received by Landlord are not sufficient to pay for such
repair, Landlord shall have the right to either terminate this Lease or make
such repair at Landlord's expense.
ARTICLE NINE: ASSIGNMENT AND SUBLETTING
Section 9.1 LANDLORD'S CONSENT REQUIRED. No portion of the Property or of
Tenant's interest in this Lease may be acquired by any other person or entity,
whether by sale, assignment, mortgage, sublease, transfer, operation of law, or
act of Tenant, without Landlord's prior written consent, except as provided in
Section 9.2 below. Landlord has the right to grant or withhold its consent as
provided in Section 9.5 below. Any attempted transfer without consent shall be
void and shall constitute a non-curable breach of this Lease.
31
36
Section 9.2 TENANT AFFILIATE. Tenant may assign this Lease or sublease the
Property, without Landlord's consent, to any corporation which controls, is
controlled by, or is under common control with Tenant ("Tenant's Affiliate").
In such case, any Tenant's Affiliate shall assume in writing all of Tenant's
obligations under this Lease. Tenant may merge its entire business into another
corporation or sell all of its assets to another corporation without Landlord's
consent under this Article Nine provided that Tenant provides Landlord written
notice of the name of such acquiring corporation and the description of such
transfer prior to closing such transaction. Nothing under this Section 9.2
shall release Tenant from having continuing liability under the terms of this
Lease or waive any other required Landlord's consent to any other future
transfers of the Tenant's leasehold interest under this Lease.
Section 9.3 NO RELEASE OF TENANT. No transfer permitted by this Article
Nine (even if to Tenant's Affiliate), whether with or without Landlord's
consent, shall release Tenant or change Tenant's primary liability to pay the
rent and to perform all other obligations of Tenant under this Lease.
Landlord's acceptance of rent from any other person is not a waiver of any
provision of this Article Nine. Consent to one transfer is not a consent to any
subsequent transfer. If Tenant's transferee defaults under this Lease, Landlord
may proceed directly against Tenant without pursuing remedies against the
transferee. Landlord may consent to subsequent assignments or modifications of
this Lease by Tenant's transferee, without notifying Tenant or obtaining its
consent. Such action shall not relieve Tenant's liability under this Lease.
Section 9.4 OFFER TO TERMINATE. Subject to Section 9.2, if Tenant desires
to assign the Lease or sublease the Property, Tenant shall have the right, at
Tenant's sole option, to offer, in writing, to terminate the Lease as of a date
specified in the offer. If Landlord elects in writing to accept the offer to
terminate within twenty (20) days after notice of the offer the Lease shall
terminate as of the date specified and all the terms and provisions of the
Lease governing termination shall apply. If Landlord does not so elect in
writing, the Lease shall continue in effect until otherwise terminated under
this Lease and the provisions of Section 9.5 with respect to any proposed
transfer shall continue to apply.
Section 9.5 LANDLORD'S CONSENT. Tenant's request for consent to any
transfer described in Section 9.1 shall set forth in writing the details of the
proposed transfer, including the name, business and financial condition of the
prospective transferee, type of the prospective transferee including, but not
limited to, the use of Hazardous Material, financial details of the proposed
transfer (e.g., the term of and the rent and security deposit
32
37
payable under any proposed assignment or sublease), and any other information
Landlord reasonably deems relevant. Landlord shall have the right to withhold
consent, if reasonable, or to grant consent, based on the following factors:
(1) the business of the proposed assignee or subtenant and the proposed use of
the Property including, but not limited to, the use of any Hazardous Material;
(ii) the net worth and financial reputation of the proposed assignee or
subtenant; and (iii) the prospective assignee's or sublessee's compliance with
all of the obligations under the Lease.
Section 9.6 LANDLORD'S SHARE OF PREMIUM. If Tenant assigns or subleases
the Property or any portion thereof (except in the case of transfers to a
Tenant Affiliate or a merger or sale of Tenant's entire business as described in
Section 9.2), the following provisions shall apply:
(i) Tenant shall pay to Landlord as additional rent under the Lease
the Applicable Percentage of the Profit (defined below) on such transaction as
and when received by Tenant (or to Landlord directly if Landlord gives written
notice that Landlord's share of such Profit shall be paid by the assignee or
subtenant to Landlord directly). The "Profit" means all amounts paid to Tenant
for such assignment or sublease, including "key" money, monthly rent in excess
of the monthly rent payable under the Lease and all fees and other
consideration paid for the assignment or sublease, including fees under any
collateral agreements less: (a) brokerage commissions paid for such sublease or
assignment paid to third-party licensed brokers; (b) attorneys' fees paid by
Tenant in connection with such sublease or assignment up to a Three Thousand
Dollar ($3,000) maximum amount; and (c) after considering any free rent
amortized without interest over the sublease or assignment term. The Profit in
the case of a sublease of less than all the Property is the rent allocable to
the subleased space as a percentage on a square footage basis. The "Profit"
shall not include amounts paid to Tenant by the assignee or sublessee for the
Tenant's out-of-pocket costs incurred by Tenant (and then actually reimbursed
by Tenant to Landlord or paid by Tenant directly to the governmental authority,
insurance company or repair contractor, as the case may be) for the normal and
regular maintenance, repair and replacement of the Property and real estate
taxes and insurance premiums which are paid directly by Tenant. The "Applicable
Percentage" of Profits paid for the first sixty (60) months of the Lease Term
shall be twenty percent (20%), and for any period of the Lease thereafter
(including option terms) shall be forty percent (40%). If the Profit is in the
form of increased rent, then the amount of the Applicable Percentage for each
portion of the Profit shall be based upon when each such portion of the Profit
is to be paid under the sublease or assignment; with the exception that if a
lump sum amount or "key" money is paid covering a period more than one month,
such amount shall be spread pro rata (without
33
38
interest) over the term of the sublease or remaining term of the assigned
Lease, as the case may be, to determine when each portion of the Profit is to
be received for purposes of determining the Applicable Percentage.
(ii) Tenant shall provide Landlord a written statement certifying all
amounts to be paid from any assignment or sublease of the Property within
thirty (30) days after the transaction documentation is signed, and Landlord
may inspect from time to time Tenant's books and records to verify the accuracy
of such statement. On written request, Tenant shall promptly furnish to
Landlord copies of all the transaction documentation, all of which shall be
certified by Tenant to be complete, true and correct. Landlord's receipt of
landlord's share of the Profit shall not be a consent to any further assignment
or subletting. The breach of Tenant's obligation under this Section 9.6 shall
be a material default of the Lease.
Section 9.7 NO MERGER. No merger shall result from Tenant's sublease of
the Property under this Article Nine, Tenant's surrender of this Lease, or the
termination of this Lease in any other manner. In any event, Landlord may
terminate any or all subtenancies or succeed to the interest of Tenant as
sublandlord under any or all subtenancies.
ARTICLE TEN: DEFAULTS; REMEDIES
Section 10.1 COVENANTS AND CONDITIONS. Tenant's performance of each of
Tenant's obligations under this Lease is a condition as well as a covenant.
Tenant's right to continue in possession of the Property is conditioned upon
such performance. Time is of the essence in the performance of all covenants
and conditions.
Section 10.2 DEFAULTS. Tenant shall be in default under this Lease:
(a) VACATION. If Tenant's vacation of the Property results or will result
in the cancellation of any insurance described in Section 4.4 and Tenant fails
to have such insurance corrected within five (5) days after Tenant receives
notice from Landlord or any insurance company of such cancellation or intention
to cancel (Tenant's vacation of the Property shall also be a default unless
Tenant continues to provide a regular security service in order to protect the
Property);
(b) FAILURE TO PAY. If Tenant fails to pay rent or any other charge or
amount when due;
34
39
(c) NONPERFORMANCE. If Tenant fails to perform any of Tenant's
non-monetary obligations under this Lease for a period of thirty (30) days
after written notice from Landlord; provided that if more than thirty (30) days
are required to complete such performance, Tenant shall not be in default if
Tenant commences such performance within the thirty (30) day period and
thereafter diligently pursues its completion. The notice required by this
paragraph is intended to satisfy any and all notice requirements imposed by law
on Landlord and is not in addition to any such requirement.
(d) GENERAL ASSIGNMENT AND BANKRUPTCY. (i) If Tenant makes a general
assignment or general arrangement for the benefit of creditors; (ii) if a
petition for adjudication of bankruptcy or for reorganization or rearrangement
is filed by or against Tenant and is not dismissed within thirty (30) days;
(iii) if a trustee or receiver is appointed to take possession of substantially
all of Tenant's assets located at the Property or of Tenant's interest in this
Lease and possession is not restored to Tenant within thirty (30) days; or (iv)
if substantially all of Tenant's assets located at the Property or of tenant's
interest in this Lease is subjected to attachment, execution or other judicial
seizure which is not discharged within thirty (30) days. If a court of
competent jurisdiction determines that any of the acts described in this
paragraph (d) is not a default under this Lease, and a trustee is appointed to
take possession (or if Tenant remains a debtor in possession) and such trustee
or Tenant transfers Tenant's interest hereunder, then Landlord shall receive,
as Additional Rent, the excess, if any, of the rent (or any other
consideration) paid in connection with such assignment or sublease over the
rent payable by Tenant under this Lease.
Section 10.3 REMEDIES. On the occurrence of any default by Tenant,
Landlord may, at any time thereafter, with or without notice or demand and
without limiting Landlord in the exercise of any right or remedy which Landlord
may have:
(a) TYPES OF REMEDIES. Terminate Tenant's right to possession of the
Property by any lawful means, in which case this Lease shall terminate and
Tenant shall immediately surrender possession of the Property to Landlord. In
such event, Landlord shall be entitled to recover from Tenant all damages
incurred by Landlord by reason of Tenant's default, including: (i) the worth at
the time of the award of the unpaid Base Rent, Additional Rent and other
charges which Landlord had earned at the time of the termination; (ii) the
worth at the time of the award of the amount by which the unpaid Base Rent,
Additional Rent and other charges which Landlord would have earned after
termination until the time of the award exceeds the amount of such rental loss
that Tenant proves Landlord could have reasonably avoided; (iii) the worth at
the time
35
40
of the award of the amount by which the unpaid Base Rent, Additional Rent and
other charges which Tenant would have paid for the balance of the Lease Term
after the time of the award exceeds the amount of such rental loss that Tenant
proves Landlord could have reasonably avoided; and (iv) any other amount
necessary to compensate Landlord for all the detriment proximately caused by
Tenant's failure to perform its obligations under the Lease or which in the
ordinary course of things would be likely to result therefrom, including, but
not limited to, any costs or expenses Landlord incurs in maintaining or
preserving the Property after such default, the cost of recovering possession of
the Property, expenses of reletting, including necessary renovation or
alteration of the Property, Landlord's reasonable attorneys' fees incurred in
connection therewith, and any real estate commission paid or payable. As used in
subparts (i) and (ii) above, the "worth at the time of the award" is computed by
allowing interest on unpaid amounts at the rate of fifteen percent (15%) per
annum, or such lesser amount as may then be the maximum lawful rate. AS used in
subpart (iii) above, the "worth at the time of the award" is computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of the award, plus one percent (1%). If Tenant has
abandoned the Property, Landlord shall have the option of (i) retaking
possession of the Property and recovering from Tenant the amount specified in
this Paragraph 10.3(a), or (ii) proceeding under Paragraph 10.3(b).
(b) MAINTAIN TENANT'S RIGHT OF POSSESSION. Maintain Tenant's right to
possession (in California under California Civil Code Section 1951.4, as
amended, or its successor provision), in which case this Lease shall continue in
effect whether or not Tenant has abandoned the Property. In such event, Landlord
shall be entitled to enforce all of Landlord's rights and remedies under this
Lease, including the right to recover the rent as it becomes due. Landlord and
Tenant agree that the limitations on assignment and subletting contained in
Article Nine of this Lease are reasonable. Landlord and Tenant specifically
agree that Landlord's acts, if any, of maintenance or preservation, and
Landlord's efforts to relet Property, or the appointment of a receiver to
protect Landlord's interest under this Lease, shall not constitute a termination
of Tenant's right to possession.
(c) OTHER REMEDIES. Pursue any other remedy now or hereafter
available to Landlord under the laws or judicial decisions of the state in
which the Property is located.
Section 10.4 REPAYMENT OF "FREE" RENT. If this Lease provides for a
postponement of any monthly rental payments, a period of "free" rent,
"forgiven" rent or other rent concession, such postponed or "free" rent is
called the "Abated Rent". Tenant shall be credited with having paid all of the
Abated Rent on
36
41
the expiration of the Lease Term only if Tenant has fully, faithfully, and
punctually performed all of Tenant's obligations hereunder, including the
payment of all rent (other than the Abated Rent) and all other monetary
obligations and the surrender of the Property in the physical condition
required by this Lease. Tenant acknowledges that its right to receive credit
for the Abated Rent is absolutely conditioned upon Tenant's full, faithful and
punctual performance of its obligations under this Lease. If Tenant defaults
and does not cure within any applicable grace period, the Abated Rent shall
immediately become due and payable in full, and this Lease shall be enforced as
if there were no such rent abatement or other rent concession; and in such case
the Abated Rent shall be calculated based on the full initial rent payable
under this Lease increased as if there had never been such Abated Rent.
Section 10.5 CUMULATIVE REMEDIES. Landlord's exercise of any right or
remedy shall not prevent it from exercising any other right or remedy.
ARTICLE ELEVEN: PROTECTION OF LENDERS
Section 11.1 SUBORDINATION. Landlord shall have the right to
subordinate this Lease to any ground lease, deed of trust or mortgage
encumbering the Property, any advances made on the security thereof and any
renewals, modifications, consolidations, replacements or extensions thereof,
whenever made or recorded, provided that Tenant's right of quiet enjoyment under
this Lease shall not be disturbed if Tenant is not in default. Tenant shall
cooperate with Landlord and any lender which is acquiring a security interest in
the Property or the Lease provided that Tenant's obligations under this Lease
shall not be increased in any material way or Tenant's rights under this Lease
diminished in any material way. Provided that such lender executes in favor of
Tenant an agreement not to disturb Tenant's right of quiet enjoyment under this
Lease so long as Tenant is not in default and performs Tenant's obligations
under this Lease, and provided that Tenant's obligations under this Lease shall
not be increased in any material way or rights diminished in any material way
(the performance of ministerial acts by Tenant such as the required giving of
notices or giving Landlord's lender the right to cure a Landlord default within
a reasonable period of time shall not be deemed material), Tenant shall execute
such further documents and assurances as such lender may require including, but
not limited to, subordination and attornment agreements. Tenant's right to quiet
possession of the Property during the Lease Term and rights under this Lease
shall not be disturbed if Tenant pays the rent and performs all of Tenant's
obligations under this Lease and is not otherwise in default. If any ground
lessor, beneficiary or
37
42
mortgagee elects to have this Lease prior to the lien of its ground lease, deed
of trust or mortgage and gives written notice thereof to Tenant, this Lease
shall be deemed prior to such ground lease, deed of trust or mortgage whether
this Lease is dated prior or subsequent to the date of said ground Lease, deed
of trust or mortgage or the date of recording thereof. Landlord represents to
Tenant (but to no other person) that as of the date of this Lease there are no
mortgages, deeds of trust or ground leases which are currently recorded against
the Property. Nothing herein is intended to or shall prevent Landlord from
encumbering the Property or placing a mortgage, deed of trust or ground lease
on the Property after the date of this Lease. Notwithstanding anything to the
contrary in this Section 11.1, Tenant's obligation to subordinate this Lease to
a ground lease, mortgage or deed of trust, or to sign any document(s) so
subordinating this Lease, shall be conditioned upon Tenant's receipt of a
nondisturbance agreement from the ground lessor, mortgagee or deed of trust
beneficiary which provides that in the event of a foreclosure or a deed in lieu
of foreclosure such ground lessor, mortgagee or beneficiary, as the case may
be, will recognize all of Tenant's rights under this Lease and that this Lease
will not be terminated (except under the terms of this Lease) so long as Tenant
is not in default under the terms of this Lease and performs all of Tenant's
obligations and duties under the terms of this Lease. Any nondisturbance
agreement under the immediately preceding sentence may provide that this Lease
is subordinated and that Tenant attorns to such ground lessor, mortgagee or
beneficiary and may require Tenant to perform such acts as giving notices to
Landlord's lender and give Landlord's lender the right to cure a Landlord
default within a reasonable period of time, plus additional items that are
commercially reasonable.
Section 11.2 ATTORNMENT. If Landlord's interest in the Property is
acquired by any ground lessor, beneficiary under a deed of trust, mortgagee, or
purchaser at a foreclosure sale, Tenant shall attorn to the transferee of or
successor to Landlord's interest in the Property and recognize such transferee
or successor as Landlord under this Lease. Tenant waives the protection of any
statute or rule of law which gives or purports to give Tenant any right to
terminate this Lease or surrender possession of the Property upon the transfer
of Landlord's interest.
Section 11.3 SIGNING OF DOCUMENTS. Tenant shall sign and deliver any
instrument or documents necessary or appropriate to evidence any such
attornment or subordination or agreement to do so, provided that Tenant's
obligations under this Lease shall not be increased in any material way or
Tenant's rights under this Lease diminished in any material way.
38
43
Section 11.4 Estoppel Certificates.
(a) REQUIREMENTS. Upon Landlord's written request, Tenant shall execute,
acknowledge and deliver to Landlord a written statement certifying: (i) that
none of the terms or provisions of this Lease have been changed (or if they have
been changed, stating how they have been changed); (ii) that this Lease has not
been canceled or terminated; (iii) the last date of payment of the Base Rent and
other charges and the time period covered by such payment; (iv) that Landlord is
not in default under this Lease (or, if Landlord is claimed to be in default,
stating why); and (v) such other representations or information with respect to
Tenant or the Lease as Landlord may reasonably request or which any prospective
purchaser or encumbrancer of the Property may reasonably require. Tenant shall
deliver such statement to Landlord within ten (10) days after Landlord's
request. Landlord may give any such statement by Tenant to any prospective
purchaser or encumbrancer of the Property. Such purchaser or encumbrancer may
rely conclusively upon such statement as true and correct.
(b) TENANT'S NONDELIVERY. If Tenant does not deliver such statement to
Landlord within such ten (10) day period, Landlord, and any prospective
purchaser or encumbrancer, may conclusively presume and rely upon the following
facts: (i) that the terms and provisions of this Lease have not been changed
except as otherwise represented by Landlord; (ii) that this Lease has not been
canceled or terminated except as otherwise represented by Landlord; (iii) that
not more than one month's Base Rent or other charges have been paid in advance;
and (iv) that Landlord is not in default under the Lease. In such event, Tenant
shall be estopped from denying the truth or such facts.
Section 11.5 TENANT'S FINANCIAL CONDITION. Within ten (10) days
after written request from Landlord in connection with Landlord's sale or
financing of the Property, Tenant shall deliver to Landlord such financial
statements as Landlord reasonably requires to verify the net worth of Tenant or
any assignee, subtenant, or guarantor of Tenant. In addition, Tenant shall
deliver to any lender designated by Landlord any financial statements required
by such lender to facilitate the financing or refinancing of the Property. If
Tenant is a company whose stock is registered and traded on a national exchange
so that Tenant's financial statements are publicly available on at least a
quarterly basis, then if Tenant delivers such annual and quarterly financial
statements to Landlord as Landlord shall request, same shall be deemed to
satisfy Tenant's obligations to deliver financial statements under this Section
11.5. Tenant represents and warrants to Landlord that each such financial
statement is a true and accurate statement as of the date of such statement. If
Tenant is not a company whose stock is registered and traded on a national
39
44
exchange, all financial statements shall be deemed confidential and shall be
used only for the purposes set forth in this Lease.
ARTICLE TWELVE: LEGAL COSTS
Section 12.1 LEGAL PROCEEDINGS. If Tenant or Landlord shall be in breach
or default under this Lease, such party (the "Defaulting Party") shall reimburse
the other party (the "Nondefaulting Party") upon demand for any legal fees and
costs that the Nondefaulting Party incurs in connection with any breach or
default of the Defaulting Party under this Lease, whether or not suit is
commenced or judgment entered. Such costs shall include legal fees and costs
incurred for the negotiation of a settlement, enforcement of rights or
otherwise. Furthermore, if any action for breach of or to enforce the provisions
of this Lease is commenced, the court in such action shall award to the party in
whose favor a judgment is entered, a reasonable sum as attorneys' fees and
costs. The losing party in such action shall pay such attorneys' fees and costs.
Tenant shall also indemnify Landlord against and hold Landlord harmless from all
costs, expenses, demands and liability Landlord may incur if Landlord becomes or
is made a party to any claim or action (a) instituted by Tenant against any
third party, or by any third party against Tenant, or by or against any person
holding any interest under or using the Property by license of or agreement with
Tenant; (b) for foreclosure of any lien for labor or material furnished to or
for Tenant or such other person; (c) otherwise arising out of or resulting from
any act or transaction of Tenant or such other person; or (d) necessary to
protect Landlord's interest under this Lease in a bankruptcy proceeding, or
other proceeding under Title 11 of the United States Code, as amended. Tenant
shall defend Landlord against any such claim or action at Tenant's expense with
counsel reasonably acceptable to Landlord or, at Landlord's election, Tenant
shall reimburse Landlord for any legal fees or costs Landlord incurs in any such
claim or action.
Section 12.2 LANDLORD'S CONSENT. Tenant shall pay Landlord's reasonable
attorneys' fees incurred in connection with Tenant's request for Landlord's
consent under Article Nine (Assignment and Subletting), or in connection with
any other act which Tenant proposes to do and which requires Landlord's consent.
Tenant's obligation under this Section 12.2 shall be limited to Two Thousand
Dollars ($2,000) per transaction. The $2,000 amount under the immediately
preceding sentence shall be increased each year in proportion to the increase in
the Index as described in Section 3.2.
40
45
ARTICLE THIRTEEN: MISCELLANEOUS PROVISIONS
Section 13.1 NON-DISCRIMINATION. Tenant promises, and it is a condition
to the continuance of this Lease, that there will be no discrimination against,
or segregation of, any person or group of persons on the basis of race, color,
sex, creed, national origin or ancestry in the leasing, subleasing,
transferring, occupancy, tenure or use of the Property or any portion thereof.
Section 13.2 LANDLORD'S LIABILITY; CERTAIN DUTIES.
(a) "LANDLORD". As used in this Lease, the term "Landlord" means only the
current owner or owners of the fee title to the Property or the leasehold
estate under a ground lease of the Property at the time of question. Each
Landlord is obligated to perform the obligations of Landlord under this Lease
only during the time such Landlord has title to the fee interest in the
Property. Any Landlord who transfers its title or interest in the Property is
relieved of all liability with respect to the obligations of Landlord under
this Lease to be performed on or after the date of transfer. However, each
Landlord shall deliver to its transferee all funds that Tenant previously paid
if such funds have not yet been applied under the terms of this Lease.
Notwithstanding the above provisions of this Paragraph 13.2(a) and Paragraph
13.2(c), if Cypress Land Company transfers its interest in the Property,
Cypress Land Company shall remain obligated (if Cypress Land Company's
transferee fails to perform): (i) to construct the Shell portion of the
Building as described in the Construction Rider; (ii) to perform Landlord's
warranty (if such warranty period has not then expired) under paragraph 4.2 of
the Construction Rider; and (iii) to repair the Shell under Article Seven if
there has been a casualty loss and the required repairs under such Article
Seven by Cypress Land Company have not yet been completed at the time of such
transfer.
(b) NOTICE. Tenant shall give written notice of any failure by Landlord
to perform any of its obligations under this Lease to Landlord and to any
ground lessor, mortgagee or beneficiary under any deed of trust encumbering the
Property whose name and address have been furnished to Tenant in writing.
Landlord shall not be in default under this Lease unless Landlord (or such
ground lessor, mortgagee or beneficiary) fails to cure such non-performance
within thirty (30) days after receipt of Tenant's notice. However, if such
non-performance reasonably requires more than thirty (30) days to cure,
Landlord shall not be in default if such cure is commenced within such thirty
(30) day period and thereafter diligently pursued to completion.
(c) LIABILITY. Notwithstanding any term or provision herein to the
contrary but subject to Paragraph 13.2(a), the liability of
41
46
Landlord for the performance of its duties and obligations under this Lease is
limited to Landlord's interest in the Property, and neither the Landlord nor its
partners, shareholders, officers or other principals shall have any personal
liability under this Lease.
Section 13.3 SEVERABILITY. A determination by a court of competent
jurisdiction that any provision of this Lease or any part thereof is illegal or
unenforceable shall not cancel or invalidate the remainder of such provision or
this Lease, which shall remain in full force and effect.
Section 13.4 INTERPRETATION. The captions of the Articles or Sections of
this Lease are to assist the parties in reading this Lease and are not a part of
the terms or provisions of this Lease. Whenever required by the context of this
Lease, the singular shall include the plural and the plural shall include the
singular. The masculine, feminine and neuter genders shall each include the
other. In any provision relating to the conduct, acts or omissions of Tenant,
the term "Tenant" shall include Tenant's agents, employees, contractors,
invitees, successors or others using the Property with Tenant's expressed or
implied permission.
Section 13.5 INCORPORATION OF PRIOR AGREEMENTS; MODIFICATIONS. This
Lease is the only agreement between the parties pertaining to the lease of the
Property and no other agreements are effective. All amendments to this Lease
shall be in writing and signed by all parties. Any other attempted amendment
shall be void.
Section 13.6 NOTICES. All notices required or permitted under this Lease
shall be in writing and shall be personally delivered, delivered by next day
delivery by a recognized overnight mail delivery service, or sent by certified
mail, return receipt requested, postage prepaid. Notices to Tenant shall be
delivered to the address specified in Section 1.3 above, except that upon
Tenant's taking possession of the Property, the Property shall be Tenant's
address for notice purposes. Notices to Landlord shall be delivered to the
address specified in Section 1.2 above. All notices shall be effective upon
delivery. It shall be presumed that a notice has been delivered if the
delivering party receives a receipt or written acknowledgement from the delivery
service that such notice was delivered. Either party may change its notice
address upon written notice to the other party.
Section 13.7 WAIVERS. All waivers must be in writing and signed by the
waiving party. Landlord's failure to enforce any provision of this Lease or its
acceptance of rent shall not be a waiver and shall not prevent Landlord from
enforcing that provision or any other provision of this Lease in the future. No
statement
42
47
on a payment check from Tenant or in a letter accompanying a payment check shall
be binding on Landlord. Landlord may, with or without notice to Tenant,
negotiate such check without being bound to the conditions of such statement.
Section 13.8 RECORDATION. Tenant shall not record this Lease without
prior written consent from Landlord. Landlord may require that a "Short Form"
memorandum of this Lease be executed by both parties and be recorded.
Section 13.9 BINDING EFFECT; CHOICE OF LAW. This Lease binds any party
who legally acquires any rights or interest in this Lease from Landlord or
Tenant. However, Landlord shall have no obligation to Tenant's successor unless
the rights or interests of Tenant's successor are acquired in accordance with
the terms of this Lease. The laws of the state of California shall govern this
Lease.
Section 13.10 CORPORATE AUTHORITY. Each person signing this Lease on
behalf of Tenant represents and warrants that he has full authority to do so and
that this Lease binds the corporation. On the date this Lease is signed, Tenant
shall deliver to Landlord a certified copy of a resolution of Tenant's Board of
Directors authorizing the execution of this Lease or other evidence of such
authority reasonably acceptable to Landlord.
Section 13.11 FORCE MAJEURE. If Landlord cannot perform any of its
obligations due to events beyond Landlord's control, the time provided for
performing such obligations shall be extended by a period of time equal to the
duration of such events. Events beyond Landlord's control include, but are not
limited to, acts of God, war, civil commotion, labor disputes, strikes, fire,
flood or other casualty, shortages of labor or material, government regulation
or restriction and weather conditions.
Section 13.12 EXECUTION OF LEASE. This Lease may be executed in
counterparts and, when all counterpart documents are executed, the counterparts
shall constitute a single binding instrument. Landlord's delivery of this Lease
to Tenant shall not be deemed an offer to lease and shall not be binding upon
either party until executed and delivered by both parties.
Section 13.13 SURVIVAL. All representations and warranties of Landlord and
Tenant shall survive the termination of this Lease.
Section 13.14 DEFINITION OF CONTRACTOR. If Tenant utilizes the same
contractor to construct the Tenant Improvements (as defined in the Construction
Rider) that Landlord has utilized to construct the Shell, then any reference to
Tenant's "contractor" under this Lease shall include such contractor, and any
acts or
43
48
negligence of such contractor in constructing the Tenant Improvements shall not
be attributed to the Landlord.
ARTICLE FOURTEEN: BROKERS
Section 14.1 NO OTHER BROKERS. Tenant represents and warrants to
Landlord that the only agents, brokers, finders or other parties with whom
Tenant has dealt who are or may be entitled to any commission or fee with
respect to this Lease or the Property are The Xxxxxx Company and Delphi
Business Properties.
Landlord and Tenant have signed this Lease at the place and on the dates
specified adjacent to their signatures below and have initialled all Riders
which are attached to or incorporated by reference in this Lease.
"LANDLORD"
Signed on June 30th, 1998 Cypress Land Company, a
at 0000 X. Xxxxxx Xx., Xxx X-0 Xxxxxxxxxx limited partnership
Xxxx Xxxxx, XX 00000
By: Harvico, Inc., a California
Corporation, General
Partner
By: /s/ XXXXX X. XXXXXX
-------------------------
Xxxxx X. Xxxxxx,
President
"TENANT"
Signed on 6/25, 1998 Netcom Systems, Inc.
at 00000 Xxxxxxxx Xx. a Delaware Corporation
Xxxxxxxxxx, XX 00000
By: /s/ XXXXXX X. XXXXXX
-----------------------------
Xxxxxx X. Xxxxxx, President
By: /s/ XXXXXX XXXXX
-----------------------------
Xxxxxx Xxxxx, Vice President
44
49
EXHIBIT "A"
LEGAL DESCRIPTION OF PROPERTY
XXX 0 XX XXXXX 00000, IN THE CITY OF CALABASAS, COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA, AS PER MAP RECORDED IN BOOK 1081 PAGES 30 TO 34, INCLUSIVE, OF
MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
50
EXHIBIT "B"
SHELL PLANS AND SPECIFICATIONS
1. Building is to be constructed to Landlord's normal construction standards
and quality of materials.
2. The electrical service shall be supplied by a 2400 amp single panel.
3. At least two dock doors.
4. Elevator pit for mezzanine area (Tenant shall be responsible for the
construction of the elevator and elevator shaft as part of the Tenant
Improvements).
5. Plans pages: Architectural A1.0, A1.1, A1.2, A1.3, A2.1, A2.2, A2.3, A3.1,
A4.1, A4.2, A4.3, A4.4, A4.5, A4.6, A5.1, A5.2, A5.3, A5.4, A6.1, A8.1;
Structural: S1.1, S2.1, S2.2, S2.3, S2.4, S2.5, S2.6, S3.3, S3.2, S3.3, S3.4,
S4.1, S5.1, S5.2, S5.3, S5.4, S5.5, S5.6, S5.7, S5.8; Plumbing: P1.0, P1.1,
P2.1, P2.2, P2.3, P3.0; and Electrical: E1.0, E1.1, E2.1, E2.2, E2.3, E3.1,
E4.1, E4.2, prepared by Xxxxx Architects dated June 23, 1998 and specifications
prepared by Xxxxx Architects dated December 1997. These plans and specifications
may be modified after the date of the Lease in order to change the Building
elevations (including adding additional windows), changing the mezzanine area,
and changing the loading dock doors.
6. The mezzanine area of the Shell shall be constructed to a rectangular
design.
51
CONSTRUCTION RIDER
TO INDUSTRIAL REAL ESTATE LEASE
DATED JUNE 25, 1998 BY AND BETWEEN
CYPRESS LAND COMPANY, A CALIFORNIA LIMITED PARTNERSHIP,
AND
NETCOM SYSTEMS, INC., A DELAWARE CORPORATION
--------------------------------------------------------------------------------
1. DESIGN AND CONSTRUCTION OF THE BUILDING SHELL: Landlord shall construct
upon the land constituting the Property the shell ("Shell") portion of the
building ("Building") of approximately one hundred seven thousand one hundred
sixty-nine (107,169) square feet, which Shell portion of the Building includes
a second-story mezzanine area of approximately thirty-four thousand two hundred
fifty-seven (34,257) square feet, parking areas, site improvements,
landscaping, exterior drainage, landscape irrigation, gutters, exterior
lighting, walkways and driveways. The square footages under the immediately
preceding sentence are only approximate and it is anticipated that they may
change upon completion of the final modified Shell plans. Landlord shall design
and construct the Shell based upon the specifications stated on Exhibit "B",
attached hereto and incorporated herein by this reference. References to the
term "Property" in this Construction Rider shall mean both the Shell and the
Tenant Improvements (as such term is defined in Paragraph 2, below).
1.1 Plans and Specifications of Shell. Landlord and Tenant have agreed
to the plans and specifications for the construction of the Shell ("Shell Plans
and Specifications"), as described on Exhibit "B". Landlord may make changes in
the Shell Plans and Specifications as Landlord deems necessary for the
construction of the Building Shell provided such modification does not
materially interfere with the design of the Tenant Improvements or Tenant's use
of the Property (subject to subparagraph 1.1(a) below). Landlord shall submit
the Shell Plans and Specifications to the City of Calabasas for the issuance of
a building permit by the City of Calabasas for the Building Shell. If the City
of Calabasas requires changes in the Shell Plans and Specifications, then
Landlord and Tenant agree that Landlord may make the changes required by the
City of Calabasas, provided such modification does not materially interfere
with the design of the Tenant Improvements or Tenant's use of the Property
(subject to subparagraph 1.1(a) below).
(a) Modifications By the City of Calabasas. The current conditional use
permit for the Property is for ninety-eight thousand nine hundred thirty-seven
(98,937) square feet. Tenant and Landlord agree that they will use their
reasonable
-1-
52
efforts to have the City of Calabasas approve the Building to be approximately
one hundred seven thousand one hundred sixty-nine (107,169) square feet.
However, if the City of Calabasas does not permit the construction of the
Building to be increased from 98,937 square feet to approximately 107,169 square
feet, then neither Landlord nor Tenant may terminate this Lease, and Landlord
may redesign the Building in order to reflect such lesser square footage amount
(which shall be at least 98,937 square feet). Additionally, Landlord may make
modifications without Tenant's consent to the design of the Shell to comply
with the conditional use permit and modifications thereof issued by the City of
Calabasas; provided that the shape of the mezzanine shall be as described in
item 6 of Exhibit "B". If Landlord modifies the design of the Shell Plans and
Specifications due to a change requested by the City of Calabasas in the
current conditional use permit governing the Property, and such modification in
the Shell Plans and Specifications results in delays in Tenant's design or
construction of the Tenant Improvements, then such delay caused by Landlord's
change to the Shell shall not be deemed a "Tenant Delay" under subparagraphs
1.3(a) or 3.1(b). Landlord shall promptly notify Tenant of any such reduction
in the square footage of the Building or modifications to the Shell required by
the City of Calabasas to comply with the conditional use permit or
modifications thereof.
1.2 Construction of the Shell. Upon obtaining the necessary permits, Landlord
shall construct at Landlord's cost the Shell in accordance with the Shell Plans
and Specifications. Subject to subparagraph 2.5(a)(i) below, Landlord shall pay
the permit fees for construction of the Shell and the utility connection
charges for the "stub in" for the electrical, sewer, water and gas to the Shell
(but not for the Tenant Improvements nor utility connection charges for the
Tenant Improvements which are in addition to the basic "stub in" costs of such
utility connections) which are required to be paid to the City of Calabasas
prior to the City of Calabasas issuing a building permit for the construction
of the Shell.
1.3 Completion Defined. This Paragraph 1.3 is subject to subparagraph 3.1(b)
below. The term "Completion" is defined as the date that the City of Calabasas
shall have approved that the Shell is substantially complete (such as by the
city issuing the final inspection or approval for the Shell, or a certificate
of occupancy for the Shell) or otherwise gives permission for the occupancy of
the Shell portion of the Building. If the City of Calabasas will not certify
that the Shell is substantially complete or fails to issue a final inspection
approval for the Shell because either: (i) the non-completeness of the Tenant
Improvements due to a Tenant Delay,
-2-
53
or (ii) the non-completeness of the Shell due to the non-completeness of the
Tenant Improvements due to a Tenant Delay (such as if there is a hole in the
Building's roof for installation of the Tenant Improvements and there has been
a Tenant Delay), then it shall be deemed that there has in fact been
"Completion" of the Shell for purposes of the Lease. The date of Completion of
the Shell is referred to herein as the "Completion Date." The term "Tenant
Delay" is defined in subparagraph 1.3(a) below, subject to subparagraph 3.1(b)
below.
(a) Target Date to Complete Shell. Landlord shall use its reasonable
efforts to have the Completion of the Shell occur on or before February 1,
1999, subject to any delays caused by a Tenant Delay or by Force Majeure events
(defined in Section 13.12 of the Lease). A "Tenant Delay" shall mean any of the
following items which cause a delay in the construction of the Shell: (i)
Tenant's failure to timely comply with the time limitations or dates under
Paragraph 2.1 or 2.2, or those items and dates described in Paragraph 2.3; (ii)
Tenant requests a change order under Paragraph 2.4; (iii) there is an
installation of any Special Improvements under Paragraph 2.7; (iv) Tenant fails
to timely perform or deliver information under Paragraph 2.1 or 2.2; or (v) if
Tenant or Tenant's contractor interferes with or delays Landlord's construction
of the Shell.
(b) Landlord To Make Shell Available to Construct Tenant Improvements.
Landlord shall make available to Tenant the Shell portion of the Property on or
before October 15, 1998 (the "Tenant Improvements Start Date") in order that
Tenant or its contractors may commence construction of the Tenant Improvements
by such date. Tenant and Landlord understand that the shell may not be
completed by such Tenant Improvements Start Date. If Landlord fails to so make
available the Shell for Tenant to commence construction of the Tenant
Improvements by the Tenant Improvements Start Date, then Tenant's sole remedy
for such delay shall be as follows: for each day that Landlord delivers the
Shell to Tenant or Tenant's contractor after the Tenant Improvements Start
Date, the number of days (if any) which Tenant is being charged as a Tenant
Delay under either Paragraph 1.3 or subparagraph 3.1(b)(i) shall be reduced by
one (1) day, but not reduced more than the total number of days for which
Tenant is being charged as a Tenant Delay. Landlord's delinquency, if any, in
delivering the Property for construction of the Tenant Improvements under this
subparagraph 1.3(b) shall not offset any days under subparagraphs 3.1(b)(ii) or
(iii).
-3-
54
2. DESIGN AND CONSTRUCTION OF THE TENANT IMPROVEMENTS: Tenant shall be
responsible for and shall pay all of the costs for the design and construction
of the tenant improvements ("Tenant Improvements") as described below,
including the office areas, air conditioning and heating of the warehouse and
office areas, all restrooms, screening of all air conditioning units (roof and
ground mounted), equipment screens and signage. The Tenant Improvements shall
be constructed by Tenant, at Tenant's sole cost and expense, pursuant to the
plans and specifications, as described below. Tenant shall be responsible for
the timely completion of all plans and specifications for the Tenant
Improvements.
2.1 Schematic Tenant Improvement Plans and Specifications.
(a) Preparation. Tenant has or shall retain a space planner to
prepare at Tenant's expense (subject to subparagraph 2.3(a)(iii)) all
architectural, electrical, plumbing, heating, ventilating and air
conditioning plans for construction of the Tenant Improvements. Tenant
shall be responsible for the timely performance of its space planner in the
preparation of the Tenant Improvement plans and specifications hereunder.
Tenant shall have prepared the schematic plans and specifications showing
the basic floor plans of the Tenant Improvements ("Schematic Tenant
Improvements Plans and Specifications") to construct the Tenant
Improvements upon the Property. Tenant shall immediately deliver to
Landlord and the space planner all information that may be required to
timely complete the Schematic Tenant Improvements Plans and Specifications.
(b) Date. Tenant shall have such Schematic Tenant Improvements Plans
and Specifications prepared by June 22, 1998 (and if Tenant does not have
prepared such Schematic Tenant Improvements Plans and Specifications by
such date, then Landlord's sole remedy for such failure is to claim a
Tenant Delay under the provisions of subparagraphs 1.3(a) and 3.1(b). On
or before June 22, 1998, Tenant shall have such Schematic Tenant
Improvements Plans and Specifications delivered to Landlord for Landlord's
approval, which approval shall not be unreasonably withheld. Landlord
shall have five (5) business days from the receipt of such Schematic
Tenant Improvements Plans and Specifications to approve or disapprove. If
Landlord does not disapprove of such plans in the manner specified in this
subparagraph (b) by written notice to Tenant within such five (5) business
day period, then Landlord shall be deemed to have approved of same. If
Landlord disapproves of such plans and specifications, then Landlord and
Tenant shall, within five (5) days from the expiration of the five (5)
business day period, use their best
-4-
55
efforts to resolve such dispute. Landlord and Tenant agree to negotiate in
good faith with each other regarding any of Landlord's disapproved items
described above.
(c) Basis for Final Plans and Specifications. The Final Plans and
Specifications for the Tenant Improvements (as such term is defined in
Paragraph 2.2 below) shall be based upon the Schematic Tenant Improvements
Plans and Specifications.
2.2 Final Plans and Specifications for Tenant Improvements.
(a) Design.
(i) Tenant, by August 15, 1998, shall have prepared, at
Tenant's expense, and deliver to Landlord final plans and specifications
for the Tenant Improvements ("Final Plans and Specifications"). If
subparagraph 3.1(b) applies (where Tenant uses a Qualified Space Planner),
Landlord hereby grants to Tenant a thirty (30) day grace period to have
completed such Final Plans and Specifications, so in such event such Final
Plans and Specifications do not have to be completed until September 15,
1998 in order for Landlord to have a remedy against Tenant for Tenant's
delinquency in the preparation of such Final Plans and Specifications. If
Tenant Engages by July 1, 1998 (as defined in subparagraph 3.1(b)) X.
Xxxxx Associates as a Full Service Space Planner under subparagraph
3.1(b), then X. Xxxxx Associates shall complete such Final Plans and
Specifications as soon as possible, and there shall be no specific
required completion date for such Final Plans and Specifications.
Landlord's sole remedy should Tenant fail to have prepared such Final
Plans and Specifications by the required date shall be to assert that
there is a "Tenant Delay" under the provisions of subparagraphs 1.3(a) and
3.1(b). The Final Plans and Specifications shall be based upon the
Schematic Tenant Improvements Plans and Specifications and shall show the
final design and specifications (including, but not limited to,
architectural, electrical, plumbing, ventilating, heating and air
conditioning) of the Tenant Improvements.
(ii) Landlord, upon receipt of such Final Plans and
Specifications, shall have five (5) business days from receipt of the
Final Plans and Specifications to approve or disapprove same based upon
the foregoing. If Landlord does not disapprove of such Final Plans and
Specifications in the manner specified herein, by written notice to Tenant
within such five (5) business day period, then Landlord shall have been
deemed to have approved of same. If Landlord disapproves of the Final
Plans and Specifications, then Landlord and
-5-
56
Tenant shall use their best efforts to resolve such dispute in order to conform
such Final Plans and Specifications to the Schematic Tenant Improvements Plans
and Specifications. Landlord and Tenant agree to negotiate in good faith with
each other regarding any of Landlord's disapproved items, described above. The
Final Plans and Specifications shall supersede any prior plans concerning the
construction of the Tenant Improvements, including but not limited to, any
inconsistencies with the Schematic Tenant Improvements Plans and Specifications.
(iii) Regardless of whether Landlord approves or disapproves of any
plans or specifications, Tenant shall remain solely responsible for the design
of the Tenant Improvements and any specifications thereof, and the construction
thereof. Specifically, Tenant shall be solely responsible that the design and
construction of the Tenant Improvements conforms to Tenant's required use of the
Property and complies with all laws, rules and regulations, including, but not
limited to, all conditional use permits and building codes.
(iv) Tenant shall have the Final Plans and Specifications submitted to
the City of Calabasas for the issuance of a building permit by the City of
Calabasas. Tenant agrees to consult with Landlord in the submission of such
plans and to allow Landlord to submit such plans to the City. If the City of
Calabasas requires changes in the Final Plans and Specifications, then Landlord
and Tenant agree that the space planner (after consulting with Landlord) may
make the changes. It is understood that neither Landlord nor Landlord's
representatives or consultants have any ability to influence the actions or
timeliness of performance of the City of Calabasas, public utilities or other
governmental bodies involved with the construction of the Tenant Improvements or
the issuance of permits regarding same.
2.3 Tenant's Cooperation.
(a) Tenant's Duties.
(i) Landlord shall have the right, from time to time, to review and
provide comments to the plans and specifications for the Tenant Improvements as
they are being prepared by the space planner. Landlord may communicate with the
space planner at any time and shall have the right to have a representative
attend meetings with such space planner and Tenant regarding the preparation of
such plans and specifications.
-6-
57
Tenant has designated either Xxxxxx Xxxxx or Xxx Xxxxxx of Tenant, as
persons who have the actual authority to make any changes to any plans and
specifications on behalf of Tenant and to give any approvals or waivers on
behalf of the Tenant regarding any plans or specifications, and to make all
decisions in connection with the construction of the Tenant Improvements, and
the Lease and Construction Rider, on behalf of the Tenant.
(ii) In order to timely prepare the plans and specifications for the
Tenant Improvements stated in Paragraph 2.1 and 2.2 above, and to construct the
Tenant Improvements in a timely manner, Tenant agrees to timely and promptly
respond to the space planner's request for information. Tenant agrees to
promptly deliver all required information to the space planner necessary to
prepare the Tenant Improvements' plans and specifications. In addition to the
specific approval dates of Tenant outlined in Paragraphs 2.1 and 2.2 above,
architects, designers and engineers will be requesting Tenant's review and
approval of plans, specifications and other items at periodic intervals. Tenant
agrees to promptly respond to all of these requests.
(iii) In order to design the Tenant Improvements, Tenant is employing
the space planner for the Tenant Improvements, and consultants for the
architectural and engineering work relating to the Tenant Improvements, which
costs for such persons shall be paid by Tenant over the space planner allowance
to be paid by Landlord under the immediate following sentence. Landlord shall
reimburse Tenant for Tenant's preliminary space planner to assist in preparing
the Schematic Tenant Improvements Plans and Specifications in an amount not to
exceed Fifteen Cents ($0.15) per square foot of the Building (which square
footage of the Building is defined in Paragraph 3.2, below).
2.4 Change Orders.
(a) Definition. For purposes of this Lease, a "change order(s)" shall
mean: (a) any requested Tenant changes, additions or alterations of the Tenant
Improvements' Final Plans and Specifications, whether such changes, additions
or alterations occur on, before or after the commencement of the construction
of the Building or Tenant Improvements; or (b) any changes to items, plans or
specifications for the Tenant Improvements previously approved by Tenant.
(i) Tenant shall pay for all costs including but not limited to any
architectural, engineering, design,
-7-
58
contractor or material costs caused by such Tenant change orders (whether to
the Tenant Improvements or the Shell).
(ii) If Tenant desires a change order, then Tenant shall deliver a
written request for such change order to Landlord. Landlord's consent to any
change order shall not be unreasonably withheld.
(iii) Any change order which causes a delay in construction of the
Tenant Improvements or the Shell shall be deemed a Tenant Delay.
2.5 Construction of Tenant Improvements.
(a) Construction By Tenant. The Tenant Improvements shall be constructed
by Tenant at Tenant's sole cost and expense in conformance with the Final Plans
and Specifications. The Tenant Improvements shall be constructed by Tenant in
compliance with all federal, state, city and county laws, codes, ordinances and
regulations.
(i) Tenant shall pay all of the permit fees, costs, fees, utility
fees, charges and assessments for the construction of the Tenant Improvements
which are required to be paid to any governmental body or agency for the
construction, occupancy or use of the Tenant Improvements. Landlord shall pay
for the bridge and thoroughfare fees related to the Property ("Bridge Fee"),
which is based upon Three Dollars Ten Cents ($3.10) per square foot of Building
area, including the mezzanine area ("Current Bridge Fee"). If the Tenant
Improvements requested by Tenant cause the Bridge Fee relating to the Property
to exceed for any reason the Current Bridge Fee, then Tenant shall be
responsible for paying for the amount of such increase in the Bridge Fee for
the entire Property. Tenant shall pay for the increase in the Bridge Fee under
the immediately preceding sentence by payment of such amount to Landlord at the
time that the building permits for the Tenant Improvements are to be obtained
from the City of Calabasas (even if the City of Calabasas allows Landlord to
defer the payment of such Bridge Fee by the City of Calabasas recording a
covenant or encumbrance against the Property or receiving other contractual
promises from the Landlord to pay such Bridge Fee).
(ii) Tenant shall pay all of the costs of any space planners,
designers, architectural costs, engineering costs and construction costs of the
Tenant Improvements (except as to that amount for the preliminary space
planner's fee which Landlord has agreed to pay for under subparagraph
2.3(a)(iii) above).
-8-
59
(iii) All of the Tenant Improvements shall become part of the
Property, shall be maintained and repaired by Tenant as part of the Property
under the Lease, and none of the Tenant Improvements may be removed by Tenant
upon the termination of the Lease.
(iv) Tenant shall have the right to hire a general contractor of
Tenant's choice to construct the Tenant Improvements. Landlord shall have the
right to review and approve of Tenant's choice of general contractors, which
approval shall not be unreasonably withheld. Tenant shall enter into the
contract with the general contractor. Landlord shall have the right to review
and approve such contract prior to Tenant's entering into same, which approval
shall not be unreasonably withheld; provided, however, that Landlord may not
request any changes to such general contractor's contract which would
materially cause an increase in the cost of the construction of the Tenant
Improvements, materially delay the completion of the Tenant Improvements or the
design of the Tenant Improvements. Regardless of Landlord's approvals, Tenant
shall be responsible for all of the liabilities and obligations of the Tenant
under such contract and Landlord shall have no liability or obligations
thereunder.
(v) Landlord shall use its reasonable efforts to allow Tenant to
begin construction of the Tenant Improvements as soon as possible during the
construction of the Building Shell. See subparagraph 1.3(b) for the definition
of the Tenant Improvements Start Date. Tenant agrees to have Tenant's
contractors coordinate with Landlord and Landlord's contractors, and not
interfere with same, in order that the construction of the Shell is not delayed
by the construction of the Tenant Improvements. Similarly, Landlord agrees to
have Landlord's Shell general contractor coordinate with Tenant's Tenant
Improvements general contractor (if different from the Shell general
contractor).
(vi) Tenant shall be responsible that the general contractor that
constructs the Tenant Improvements: (i) has adequate insurance, including
liability insurance, and designates Landlord as an additional insured under
such liability insurance; and (ii) has adequate workers compensation insurance.
Any costs of builder's risk insurance (whether obtained by Landlord or
otherwise) which is allocated to the Tenant Improvements shall be paid by Tenant
or reimbursed to Landlord. Landlord shall be designated as the loss payee for
such builder's risk insurance. If Landlord receives proceeds from such builder's
risk insurance which are designated by such policy for the Tenant Improvements,
then Landlord agrees to utilize such proceeds (or make such
-9-
60
proceeds available to Tenant) to pay for the repair or reconstruction of the
Tenant Improvements. Tenant shall be responsible to verify that there is
adequate builder's risk and casualty insurance for the Tenant Improvements and
their construction. Landlord shall have the right (but not the obligation) to
verify with Tenant and Tenant's contractor, from time to time, that the
insurance described in this subparagraph has been obtained.
2.6 Payment for Tenant Improvements. Tenant shall pay all expenses, fees and
costs relating to the construction and design of the Tenant Improvements.
Tenant shall promptly (within 20 days of Landlord's billing) reimburse
Landlord for any amounts Landlord or Landlord's contractor expends for the
construction of those items of the Tenant Improvements which Tenant has
previously approved in writing (but it shall not be necessary that Tenant
approved in advance the amount of such item) for such item.
(a) Indemnification. Tenant shall indemnify, defend and hold Landlord
harmless (including the payment of Landlord's reasonable attorneys' fees and
costs) from any and all costs, claims or liability arising from: (a) Tenant's
construction of the Tenant Improvements on the Property; (b) the conduct of any
of Tenant's general contractor or subcontractors or other persons in connection
with the construction of the Tenant Improvements; (c) any breach or default in
the performance of Tenant's obligations under this Construction Rider; and (d)
any claims or mechanic's liens against Landlord or the Property related to the
construction of the Tenant Improvements. Tenant shall immediately pay when due
all claims for labor and materials furnished in connection with the
construction of the Tenant Improvements and agrees to immediately have removed
from the Property any mechanic's liens or notices of action if same are filed
against the Property. Tenant's duty to indemnify Landlord under this
subparagraph 2.6(a) shall not apply to the negligent or willful misconduct of
Landlord or Landlord's employees or contractors during the period of
constructing the Shell and Tenant Improvements.
(b) Letter of Credit.
(i) Because of the large amount of Tenant Improvements being
installed ion the Building, Tenant agrees to obtain a "Letter of Credit" (as
described below) prior to the commencement of construction of the Tenant
Improvements in favor of the Landlord in the aggregate amount of the cost of
the construction of the Tenant Improvements (including any permits or fees
relating to same). The amount of the Letter
-10-
61
of Credit under the immediately preceding sentence shall be reasonably
determined by Landlord based upon the general contractor's cost for
construction of the Tenant Improvements and the other permits and fees relating
thereto. The Letter of Credit shall be an irrevocable unconditional Letter of
Credit in favor of the Landlord as the designated beneficiary for a stated term
of at least six (6) months in favor of Landlord as the designated beneficiary,
drawn on a major Los Angeles bank reasonably approved by Landlord. Tenant shall
deliver such original Letter of Credit to Landlord prior to the commencement of
construction of the Tenant Improvements and shall maintain such Letter of
Credit until the completion of the construction of the Tenant Improvements and
the first to occur of the following (the "Letter of Credit Termination Date"):
(i) the payment of all suppliers and contractors for the Tenant Improvements
and Landlord's receipt of final lien releases from each such supplier and
contractor (including all subcontractors and the general contractor); and (ii)
the occurrence of both of the following: (a) thirty (30) days after the
expiration of the requisite time periods to record mechanics' liens under
California law ("Lien Expiration Date") but not sooner than the Commencement
Date, and (b) no mechanic's lien, lawsuit or legal action has been filed
against the Property or Landlord regarding the construction of the Tenant
Improvements, or if a mechanic's lien shall have been filed against the
Property, such lien shall have been released or bonded against in order that
such lien is released.
(ii) Landlord may draw upon the Letter of Credit only in the
following events: (a) the Letter of Credit is not renewed on or before thirty
(30) days prior to its required renewal or expiration, (b) a lawsuit,
arbitration or other action or proceeding is filed against Landlord or the
Property regarding the construction of the Tenant Improvements by a contractor,
subcontractor or material supplier, and Tenant fails to promptly reimburse
Landlord for the costs incurred by Landlord resulting from the filing of such
lawsuit, arbitration or other action or proceeding, or (c) a mechanic's lien is
filed against the Property and the lien is not released by payment or by a
recordation of a statutory lien release bond in accordance with the requirements
of California Civil Code Section 3143 within five (5) business days after Tenant
receives notice (by service of process or otherwise) of the existence of such
mechanic's lien.
(iii) If the Letter of Credit is issued so that Landlord may draw
down on part of the Letter of Credit while the remaining portion of the Letter
of Credit remains effective, then the following provisions shall apply: (a) if
-11-
62
Landlord has the right to draw upon the Letter of Credit as a result of an
event described in subparagraph 2.6(b)(ii)(b), Landlord may draw only upon that
amount necessary to pay the costs described in such subparagraph 2.6(b)ii)(b);
and (b) if Landlord has the right to draw upon the Letter of Credit as a result
of an event described in subparagraph 2.6(b)(ii)(c), then Landlord may only
draw upon that amount necessary to cause the mechanic's lien in question to be
released and to reimburse Landlord for its attorneys' fees and cost regarding
same.
(iv) If Landlord draws upon the Letter of Credit because of an event
described in subparagraph 2.6(b)(ii)(a), and Tenant subsequently replaces the
Letter of Credit in accordance with the requirements hereof, then Landlord
shall return all proceeds from the Letter of Credit held by Landlord upon the
Landlord's receipt of such replacement Letter of Credit. If Tenant fails to
provide a replacement Letter of Credit, then Landlord shall return to Tenant
all remaining Letter of Credit proceeds held by Landlord on the Letter of
Credit Termination Date after the application of such proceeds under this
subparagraph 2.6(b). All proceeds form the Letter of Credit held by Landlord
shall be placed in a separate account in Landlord's name and only used for the
purposes permitted herein.
(c) Notice of Non-responsibility and Notice of Completion. Landlord may
post a notice of non-responsibility for the construction of the Tenant
Improvements. Within five (5) days after completion of construction of the
Tenant Improvements, Tenant shall cause a Notice of Completion to be recorded
in the office of the County Recorder of Los Angeles County in accordance with
the civil code of the State of California, and Tenant shall furnish a copy
thereof to Landlord at the time of such recordation. If Tenant fails to so
record such Notice of Completion, Landlord may execute and file same on behalf
of Tenant as Tenant's agent and at Tenant's expense.
(d) Plans. At the conclusion of the construction of the Tenant
Improvements, Tenant shall cause to be delivered to Landlord a final set of
working drawings for the Tenant Improvements to reflect all of the changes to
the Tenant Improvements made during the course of construction. Such working
drawings shall include all of the design of the Tenant Improvements, mechanical
systems, plumbing and electrical, along with the specifications of the Tenant
Improvements. Although Tenant shall retain all written warranties, guaranties
and operating manuals for the Tenant Improvements,
-12-
63
copies of such items shall be delivered to Landlord upon the termination
or expiration of the Lease.
2.7 Special Improvements. Prior to the Commencement Date of the Lease,
Tenant may, provided that same does not delay or in any way interfere
with Landlord's construction of the Building Shell, install (at Tenant's
sole cost and expense) telephones, computer systems, cable and special
electrical work, with the prior written approval of Landlord ("Special
Improvements"). Any work on such Special Improvements shall be solely the
responsibility of Tenant and shall be installed at Tenant's sole cost and
expense. Tenant shall indemnify and hold Landlord harmless for any damage
to person or property as a result of any installation and work on the
Special Improvements and such work shall be governed by the provisions of
Section 6.5 of the Lease.
2.8 Other Improvements or Alterations. Tenant's right to make any
alterations or additions to the Property after the Commencement Date of
the Lease shall be subject to Section 6.5 of the Lease.
3. ESTABLISHMENT OF INITIAL LEASE TERM AND INITIAL BASE RENT:
3.1 Commencement Date.
(a) If Tenant Does Not Utilize Full Service Space Planner. If
Tenant does not employ a Full Service Space Planner under the terms of
subparagraph 3.1(b), below, then the following provisions of this
subparagraph 3.1(a) shall apply. The term of the Lease under Section 1.5
of the Lease shall commence on the earlier of: (i) thirty (30) days after
the Completion Date (as the Completion Date is defined in Paragraph 1.3,
above); or (ii) the date a certificate of occupancy (either temporary or
permanent) is issued for the Tenant Improvements, a final inspection
approval is issued for the Tenant Improvements or the City of Calabasas
otherwise allows Tenant's occupancy of the Tenant Improvements. Such date
is herein referred to as the "Commencement Date" of the Lease. Landlord
and Tenant recognize that the Commencement Date of the Lease could occur
prior to the completion of construction of the Tenant Improvements.
(b) If Tenant Utilizes a Full Service Space Planner. If Tenant
on or before July 1, 1998 Engages a "Full Service Space Planner" approved
by Landlord, which approval shall not be unreasonably withheld, to
provide all of the architectural, engineering, construction supervision
and design services for the Tenant Improvements, then the term of the
Lease under Section 1.5 of the Lease shall commence on the first to occur
-13-
64
of the following dates: the date a certificate of occupancy (permanent or
temporary) is issued for the Property; the date that a final inspection
approval has been issued for the Property; or the date that the City of
Calabasas otherwise allows Tenant's legal occupancy of the Property for
conducting business. Such date is herein referred to as the "Commencement Date"
of the Lease. If the provisions of this subparagraph 3.1(b) apply, then
subparagraph 3.1(a) shall not apply. Such Commencement Date under this
subparagraph 3.1(b) shall occur: (i) one (1) day earlier than the defined
Commencement Date, above, for each day that a "Tenant Delay" as defined below
causes a delay in the construction of the Tenant Improvements or the Shell;
(ii) one (1) day earlier than the defined Commencement Date, above, for each
day that Tenant's general contractor takes longer than one hundred eight (108)
days to complete construction of the Tenant Improvements from the date that
Landlord makes the Shell available to Tenant for the commencement of
construction of the Tenant Improvements; and (iii) one (1) day earlier than the
defined Commencement Date, above, for each day that the Final Plans and
Specifications are completed after September 15, 1998; except that if Tenant
Engages by July 1, 1998 X. Xxxxx Associates as a Full Service Space Planner,
then subparagraphs 3.1(b)(ii) and (iii) shall not apply. The following items
causing a delay in construction of the Tenant Improvements or the Shell shall
be a "Tenant Delay" under this subparagraph 3.1(b) instead of the definition of
"Tenant Delay" under subparagraph 1.3(a): Tenant's failure to timely deliver
information to, or attend meetings with, the space planner; Tenant requests a
change order under Paragraph 2.4; there is an installation of any Special
Improvements under Paragraph 2.7; or Tenant fails to timely pay the space
planner or the general contractor, except if nonpayment is due to the fact that
such space planner or general contractor is in default of its contract with
Tenant. For purposes of this subparagraph 3.1(b), the term "Full Service Space
Planner" shall mean a full service space planner who provides all
architectural, engineering, construction supervision and design services for
the Tenant Improvements on a "turn key" basis. For purposes of this
Construction Rider, Tenant "Engages" a Full Service Space Planner or X. Xxxxx
Associates, as the case may be, when the Tenant orally or in writing contracts
such space planner to begin the full-time design and construction services for
the Tenant Improvements and, in fact, such space planner begins such full-time
design and construction services for the Tenant Improvements by the specified
date, and Tenant by such specified date delivers to Landlord a letter signed by
such space planner so indicating such space planner's commencement of space
planning design and construction services.
-14-
65
(c) Initial Lease Term. The initial Lease Term shall terminate one
hundred twenty-three (123) months after the Commencement Date (determined under
the applicable subparagraph 3.1(a) or 3.1(b)). If the Commencement Date of the
initial Lease Term is on a day other than the first day of a month, then such
first fractional month shall be added to the initial one hundred twenty-three
(123) month Lease Term.
3.2 Adjustment to Initial Base Rent Based Upon Square Footage of the Building.
On the Commencement Date, the initial monthly Base Rent under Paragraph 1.8(a)
of the Lease shall be adjusted to equal the product of the following: Square
Feet of the Building multiplied times Seventy Cents ($0.70) per square foot.
"Square Feet of the Building" shall mean the square feet of the Building
including the Square Feet of the mezzanine areas measured from the outside of
each outside wall to the outside of each outside wall (including any stairwells
or elevator shaft areas), as calculated by Landlord's architect using those
plans for which the City of Calabasas has issued a building permit for the
Shell.
3.3 Amendment to Lease. On the Commencement Date, Landlord and Tenant shall
promptly execute an amendment to the Lease confirming: (a) the Commencement
Date and termination date of the initial Lease Term; (b) the Square Feet of the
Building; (c) the initial Base Rent as calculated under Paragraph 3.2 above;
(d) the costs of the Tenant Improvements; and (e) an acknowledgment that
Landlord has complied with all of the terms of Paragraph 1, above, for purposes
of Article 7 of the Lease. Regardless of the execution of such amendment, the
Lease shall remain in full force and effect with the Commencement Date and
termination date described in Paragraph 3.1 above, and the initial Base Rent
and square feet of the Building calculated under Paragraph 3.2 above.
3.4 Tenant's Option to Terminate Lease If No Completion of Shell By Specified
Date. If Completion of construction of the Shell has not occurred by September
1, 1999, which date shall be extended one (1) day for each day that any Tenant
Delay (defined in subparagraph 1.2(a)) causes a delay in the completion of the
construction of the Shell (the "Shell Completion Termination Date") or if the
permit to construct the Building Shell is not obtained by Landlord by December
31, 1998 (the "Shell Permit Termination date"), then Tenant shall have the
option to elect to terminate this Lease by delivering written notice to
Landlord of Tenant's election to terminate this Lease. Such written option
notice of Tenant to terminate this Lease must be delivered to Landlord on or
before twenty (20) days after the Shell Completion Termination Date or the
Shell Permit Termination Date, as applicable. If the Lease is properly
terminated by Tenant under this Paragraph 3.4, then Landlord shall promptly
return to Tenant Tenant's security
-15-
66
deposit and first month's rent which Tenant has previously paid to Landlord
along with the Letter of Credit, provided that all amounts for the Tenant
Improvements have been paid to date and there are no mechanics' liens
recorded against the Property relating to the Tenant Improvements. Time is
of the essence in Tenant's election to terminate this Lease under this
Paragraph 3.4 and if Tenant does not elect to terminate this Lease in
strict compliance with the terms of this Paragraph 3.4 for any reason, then
this right to terminate by Tenant shall be of no further force or effect.
If Tenant does not provide written notice to Landlord to elect to terminate
this Lease during the time periods specified in this Paragraph 3.4, then
this Lease shall be deemed to have not been terminated, and Landlord shall
continue to construct the Shell in compliance with the terms of this
Construction Rider.
3.5 Landlord's Option to Terminate the Lease if No Completion of Shell by
Specified Date. If completion of the construction of the Shell has not
occurred by September 1, 1999 due to acts of God, war, fire, flood,
earthquake or other casualty, government regulation or restrictions, or
severe weather conditions, then Landlord shall have the option to elect to
terminate the Lease by delivering written notice to Tenant of Landlord's
election to terminate the Lease. Such written option notice of Landlord to
terminate the Lease must be delivered to Tenant by September 20, 1999. If
Landlord elects to terminate the Lease, then the same provisions of
Paragraph 3.4 regarding the return of Tenant's deposits and the Letter of
Credit shall apply.
4. LANDLORD'S WARRANTY REGARDING BUILDING SHELL AND TENANT IMPROVEMENTS:
4.1 Warranty. Landlord warrants: (1) For a period of twelve (12) months
from the Commencement Date ("Warranty Period") that the Shell portion of
the Building has been constructed in a good and workmanlike manner in
compliance with then applicable laws and using new materials without
defects; and (ii) for a period of twenty-four (24) months from the
Commencement Date that the roof has been constructed in a good and
workmanlike manner, in compliance with then applicable laws, and using new
materials without defects. Landlord's warranty under this Paragraph 4 is in
addition to Landlord's obligations under Section 6.3 of the Lease for
maintenance and repair of certain structural elements, the foundation and
structural portions of the mezzanine deck. Landlord is specifically not
warranting any of the Tenant Improvements, and Tenant shall be responsible
to repair and maintain such Tenant Improvements in compliance with the
terms of this Lease. If there are contractor or material supplier
-16-
