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EXHIBIT 10.78
LEASE AGREEMENT
BY AND BETWEEN
XXXXX XXXXX XXXXXXX, LLC,
A CALIFORNIA LIMITED LIABILITY COMPANY,
AS LANDLORD
AND
XXXXX/MERHI ENTERTAINMENT GROUP, INC.,
A CALIFORNIA CORPORATION,
A WHOLLY-OWNED SUBSIDIARY OF XXXXXX ENTERTAINMENT COMPANY
AS TENANT
PREMISES: 0000 XXXXXXXXX XXXXXX, XXXXXXX, XXX XXXXXXX XXXXXX, XX
Dated as of April 1, 2000
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This LEASE AGREEMENT ("Lease") is made as of this 1st day of
April, 2000, by and between Xxxxx Xxxxx Xxxxxxx, LLC, a California Limited
Liability Company, with an address of 0000X Xxxxxxxx Xxxxxxxxx, Xxxxx 000,
Xxxxxxx, Xxxxxxxxxx 00000, Attention: Xxxxxx Xxxxxxx ("Landlord"), and
Xxxxx/Xxxxx Entertainment Group, Inc., a California corporation, a wholly-owned
subsidiary of Xxxxxx Entertainment Company, with an address of 0000 Xxxxxxxxx
Xxxxxx, Xxxxxxx, Xxxxxxxxxx, Attention: Xxxx X. Xxxxxxxxxx, Esq. ("Tenant").
In consideration of the rents and provisions herein stipulated to
be paid and performed, Landlord and Tenant hereby covenant and agree as follows:
1. LEASE OF PREMISES.
Landlord hereby demises, lets and leases to Tenant, and Tenant
hereby takes and leases from Landlord, for the term and upon the provisions
hereinafter specified, the following property (hereinafter referred to as the
"Leased Premises"): (a) the real property commonly known as 0000 Xxxxxxxxx
Xxxxxx, Xxxxxxx, Xxxxxxxxxx (the "Land"), (b) the building on the real property
(the "Building"), the asphalt parking lot on the Land and all other buildings,
structures and other improvements now or hereafter constructed on the Land
(collectively, the "Improvements"), (c) the fixtures, machinery, equipment and
other property described on Exhibit A attached hereto and incorporated herein by
this reference (collectively, the "Equipment"), and (d) the Appurtenances to the
Land. (The items specified in clauses (a) through (d) are collectively referred
to as the "Property".)
2. CERTAIN DEFINITIONS.
"Additional Rent" shall mean any and all Impositions, fees,
charges, Costs, expenses, insurance obligations, late charges, assessments,
Operating Expenses and all other payments, distributions or reimbursements which
are attributable to, payable by or the responsibility of Tenant under this
Lease.
"Alterations" shall mean all changes, additions, improvements or
repairs to, all alterations, re-constructions, renewals, replacements or
removals of and all substitutions or replacements for any of the Improvements or
Equipment, both interior and exterior, structural and non-structural, and
ordinary and extraordinary.
"Appurtenances" shall mean all of Landlord's interest in the
tenements, hereditaments, easements, rights-of-way, rights, privileges in and to
the Land, including (a) easements over other lands granted by any easement
agreement and (b) any streets, ways, alleys, vaults, gores or strips of land
adjoining the Land.
"Basic Rent" shall mean Basic Rent as defined in Paragraph 6.
"Commencement Date" shall mean Commencement Date as defined in
Paragraph 5.
"Condemnation" shall mean a Taking.
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"Costs" of a Person or associated with a specified transaction
shall mean all reasonable costs and expenses incurred by such Person or
associated with such transaction, including without limitation, attorneys' fees
and expenses, court costs, brokerage fees, escrow fees, title insurance
premiums, mortgage commitment fees, mortgage points, recording fees and transfer
taxes, as the circumstances require.
"Environmental Law" shall mean (i) whenever enacted or
promulgated, any applicable federal, state, foreign and local law, statute,
ordinance, rule, regulation, license, permit, authorization, approval, consent,
court order, judgment, decree, injunction, code, requirement or agreement with
any governmental entity, (x) relating to pollution (or the cleanup thereof), or
the protection of air, water vapor, surface water, groundwater, drinking water
supply, land (including land surface or subsurface), plant, aquatic and animal
life from injury caused by a Hazardous Substance or (y) concerning exposure to,
or the use, containment, storage, recycling, reclamation, reuse, treatment,
generation, discharge, transportation, processing, handling, labeling,
production, disposal or remediation of Hazardous Substances, Hazardous Condition
or Hazardous Activity, or (z) industrial hygiene, in each case as amended and as
now or hereafter in effect, and (ii) any common law or equitable doctrine
(including, without limitation, injunctive relief and tort doctrines such as
negligence, nuisance, trespass and strict liability) that may impose liability
or obligations for injuries or damages due to or threatened as a result of the
presence of, exposure to, or ingestion of, any Hazardous Substance. The term
Environmental Law includes, without limitation, the federal Comprehensive
Environmental Response Compensation and Liability Act of 1980, the Superfund
Amendments and Reauthorization Act, the federal Water Pollution Control Act, the
federal Clean Air Act, the federal Clean Water Act, the federal Resources
Conservation and Recovery Act of 1976 (including the Hazardous and Solid Waste
Amendments to RCRA), the federal Solid Waste Disposal Act, the federal Toxic
Substance Control Act, the federal Insecticide, Fungicide and Rodenticide Act,
the federal Occupational Safety and Health Act of 1970, the federal National
Environmental Policy Act and the federal Hazardous Materials Transportation Act,
each as amended and as now or hereafter in effect and any similar state or local
Law.
"Environmental Violation" shall mean (i) any direct or indirect
discharge, disposal, spillage, emission, escape, pumping, pouring, injection,
leaching, release, migration, seepage, filtration or transporting of any
Hazardous Substance at, upon, under, onto or within the Leased Premises, or from
the Leased Premises to the environment, in violation of any Environmental Law or
in excess of any reportable quantity established under any Environmental Law or
which could result in any liability to Landlord, Tenant or Lender, any Federal,
state or local government or any other Person for the Costs of any removal or
remedial action or natural resources damage or for bodily injury or property
damage, (ii) any deposit, storage, dumping, placement or use of any Hazardous
Substance at, upon, under or within the Leased Premises in violation of any
Environmental Law or in excess of any reportable quantity established under any
Environmental Law or which could result in any liability to any Federal, state
or local government or to any other Person for the Costs of any removal or
remedial action or natural resources damage or for bodily injury or property
damage, (iii) the abandonment or discarding of any barrels, containers or other
receptacles containing any Hazardous Substances in violation of any
Environmental Laws, (iv) any activity, occurrence or condition which could
result in any liability, cost or expense to Landlord or Lender or any other
owner or occupier of the Leased
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Premises resulting from the presence of any Hazardous Substance or (v) any
violation of or noncompliance with any Environmental Law.
"Equipment" shall mean the Equipment as defined in Paragraph 1.
"Escrow Holder" shall mean Chicago Title Insurance Company, 000
Xxxxx Xxxxxx Xxxxxx, Xxxxx 000, Xxx Xxxxxxx, XX 00000, Attention: Escrow
Department.
"Event of Default" shall mean an Event of Default as defined in
Paragraph 24.
"Hazardous Activity" means any activity, process, procedure or
undertaking which directly or indirectly (i) procures, generates or creates any
Hazardous Substance; (ii) causes or results in (or threatens to cause or result
in) the release, seepage, spill, leak, flow, discharge or emission of any
Hazardous Substance into the environment (including the air, ground water,
watercourses or water systems); (iii) involves the containment or storage of any
Hazardous Substance; or (iv) would cause the Leased Premises or any portion
thereof to become a hazardous waste treatment, recycling, reclamation,
processing, storage or disposal facility within the meaning of any Environmental
Law.
"Hazardous Condition" means any condition, which would support any
claim or liability under any Environmental Law, including the presence of
underground storage tanks.
"Hazardous Substance" means (i) any substance, material, waste,
product, petroleum, petroleum product, derivative, compound or mixture, mineral
(including asbestos), chemical, gas, medical waste, or other pollutant, or
component thereof (whether injurious by themselves or in conjunction with other
materials), in each case whether naturally occurring, man-made or the by-product
of any process, that is now or hereafter listed, defined or regulated as a
flammable explosive, radioactive material, toxic, harmful or hazardous or
acutely hazardous to the environment or public health or safety by any federal,
state or local governing or regulatory body having jurisdiction which would
trigger any employee or community "right-to-know" requirements adopted by any
such body, or for which any such body has adopted any requirements for the
preparation or distribution of an MSDS, or (ii) any substance supporting a claim
under any Environmental Law, whether or not defined as hazardous as such under
any Environmental Law. Hazardous Substances include, without limitation, any
toxic or hazardous waste, pollutant, contaminant, industrial waste, petroleum or
petroleum-derived substances or waste, radon, radioactive materials, asbestos,
asbestos containing materials, urea formaldehyde foam insulation, lead,
polychlorinated biphenyls. Without limiting the generality of the foregoing,
Hazardous Substances shall include, but not be limited to substances defined as
"hazardous substances", "hazardous materials", or "toxic substances" in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. Section 9601 et seq.; the Hazardous Materials Transportation
Act, 49 U.S.C. Section 1801 et seq.; the Resource Conservation and Recovery Act,
42 U.S.C. Section 6901 et seq.; and those substances defined as "hazardous
wastes" in Section 25117 of the California Health & Safety Code or as "hazardous
substances" in Section 25316 of the California Health & Safety Code; and in the
regulations adopted and publications promulgated from time to time pursuant to
said laws.
"Improvements" shall mean the Improvements as defined in Paragraph
1.
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"Indemnified Parties" shall mean either the Landlord Indemnified
Parties or the Tenant Indemnified Parties as defined in Paragraph 18.
"Impositions" shall mean the Impositions as defined in Paragraph
11(b).
"Insurance Requirements" shall mean the requirements of all
insurance policies maintained in accordance with this Lease.
"Interest Rate" shall mean the lower of (i) the maximum interest
rate permitted by law or (ii) 5% above the rate publicly announced from time to
time by Bank of America N.T. & S.A. (or if Bank of America N.T. & S.A. ceases to
exist, then the largest bank headquartered in the State of California) ("Bank")
as its Reference Rate. If the use of the announced Reference Rate is
discontinued by the Bank, then the reference to Reference Rate shall mean the
announced rate charged by the Bank which is from time to time substituted for
such Reference Rate.
"Land" shall mean the Land as defined in Paragraph 1.
"Law" shall mean any federal, state or local law, ordinance,
constitution, statute, rule of law, code, ordinance, order, judgment, decree,
injunction, rule, regulation, policy, requirement or administrative or judicial
determination, even if unforeseen or extraordinary, of every duly constituted
governmental authority, court or agency, now or hereafter enacted or in effect.
"Lease" shall mean this Lease Agreement.
"Lease Year" shall mean, with respect to the first Lease Year, the
period commencing on the Commencement Date and ending at midnight on the last
day of the 12th consecutive calendar month following the month in which the
Commencement Date occurred, and each succeeding 12 month period during the Term.
"Leased Premises" shall mean the Leased Premises as defined in
Paragraph 1.
"Legal Requirements" shall mean the requirements of all present
and future Laws (including but not limited to Environmental Laws) and all
covenants, restrictions and conditions now or hereafter of record which may be
applicable to Tenant or to the Leased Premises, or to the use, manner of use,
occupancy, possession, operation, maintenance, alteration, repair or restoration
of the Leased Premises, even if compliance therewith necessitates structural
changes or improvements or results in interference with the use or enjoyment of
the Leased Premises.
"Lender" shall mean any person or entity (and their respective
successors and assigns) which may, after the date hereof, make a Loan to
Landlord or is the holder of any Note.
"Loan" shall mean any loan made by one or more Lenders to
Landlord, which loan is secured by a Mortgage and evidenced by a Note.
"Mortgage" shall mean any mortgage, deed of trust or other
security interest from Landlord to a Lender which (i) encumbers the Leased
Premises and (ii) secures Landlord's obligation to repay a Loan, as the same may
be amended, supplemented or modified.
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"Note" shall mean any promissory note evidencing Landlord's
obligation to repay a Loan, as the same may be amended, supplemented or
modified.
"Person" shall mean an individual, partnership, association,
limited liability company, corporation or other entity.
"Purchase Agreement" shall mean the agreement to be used upon the
exercise of the Purchase Option as provided in Paragraph 34, which agreement
shall be in the form of Exhibit D.
"Purchase Option" shall mean the purchase option described in
Paragraph 34.
"Rent" shall mean, collectively, Basic Rent and Additional Rent.
All such Basic Rent and Additional Rent shall constitute "rent" within the
meaning of California Civil Code Section 1951(a).
"State" shall mean the State of California.
"Surviving Obligations" shall mean any obligations of Tenant under
this Lease, actual or contingent, which arise on or prior to the expiration or
prior termination of this Lease or which survive such expiration or termination
by their own terms.
"Taking" shall mean (a) any taking or damaging of all or a portion
of the Leased Premises (i) in or by condemnation or other eminent domain
proceedings pursuant to any Law, general or special, or (ii) by reason of any
agreement with any condemnor in settlement of or under threat of any such
condemnation or other eminent domain proceeding, or (iii) by any other means, or
(b) any de facto condemnation. The Taking shall be considered to have taken
place as of the later of the date actual physical possession is taken by the
condemnor, or the date on which the right to compensation and damages accrues
under the law applicable.
"Term" shall have the meaning as defined in Paragraph 5.
3. TITLE, "AS-IS" CONDITION AND UTILITIES.
(a) The Leased Premises are demised, let and leased to Tenant
subject to two Mortgages (a first deed of trust held by City National Bank
securing indebtedness of $1,961,758 and a junior deed of trust held by U.S.
Small Business Administration securing indebtedness of $932,044) and all Legal
Requirements, but excluding any violation thereof existing as of the date of
this Lease which shall be subject to correction by Landlord at its expense.
(b) Tenant acknowledges that neither Landlord nor any of
Landlord's agents has made any oral or written representations or warranties
with respect to the condition of the Lease Premises other than as set forth in
this Lease, and Tenant is leasing the Leased Premises hereunder from Landlord in
its "As-Is" condition. Tenant acknowledges that Landlord shall have no
obligation hereunder to make, install, remodel or alter any tenant improvements
for the benefit of Tenant to enter into this Lease or otherwise to make or
perform any repairs, renewals or replacements to the Leased Premises as an
inducement to Tenant to enter into this Lease, or as a condition precedent to
the effectiveness of this Lease and further that Landlord shall have no
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obligation to maintain or repair any part of the Leased Premises except as
otherwise expressly set forth in Paragraphs 15(e), 20 and 21 herein during the
Term of the Lease.
(c) Tenant shall provide or cause to be provided, in its own name,
all utilities and services necessary for Tenant's use of the Leased Premises as
permitted by this Lease. The cost of supplying all utilities and services, the
cost of operating, maintaining, repairing, renovating and managing the Building
systems, and the cost of supplies and equipment and maintenance and service
contracts in connection therewith shall be paid by Tenant as its sole cost and
expense.
4. USE OF LEASED PREMISES; QUIET ENJOYMENT; OCCUPANTS.
(a) Tenant may occupy and use the Leased Premises only for
offices, motion picture production, sound stages, animation and computer
generated graphics, storage, distribution, and with the approval of Landlord,
which approval shall not be unreasonably withheld, for such other purposes as
are permitted by Law. Tenant shall not use or occupy or permit the Leased
Premises to be used or occupied, nor do or permit anything to be done in or on
the Leased Premises, in a manner which would or might (i) violate any Law or
Legal Requirement, (ii) make void or voidable or cause any insurer to cancel any
insurance required by this Lease, or make it difficult or impossible to obtain
any such insurance at commercially reasonable rates, (iii) increase the existing
rate of, or affect, any fire or other insurance upon the Leased Premises or its
contents unless Tenant deposits the amount of such increase with Landlord, (iv)
will cause a weight load or stress on the floor or other portion of the Leased
Premises in excess of the weight load or stress which the floor or other portion
of the Leased Premises is designed to bear, or (v) cause structural injury to
any of the Improvements.
(b) Tenant, at Tenant's sole cost, shall comply with (i) all Laws
relating to the use, occupation or alteration of the Leased Premises, now or
hereafter instituted, (ii) the requirements of any Board of Fire Underwriters or
other similar body, now or hereafter instituted, and (iii) all orders,
directives and certificates of occupancy issued pursuant to any Laws, but
excluding any requirements of structural changes unless required because of
Tenant's willful misconduct or gross negligence or because of any Alterations
made by Tenant. In the event Tenant's compliance with the foregoing (except as a
result of Tenant's willful misconduct or gross negligence or because of any
Alterations made by Tenant) requires structural changes to the Leased Premises
which are of a capital nature ("Capital Structural Changes"), Landlord shall be
responsible for making such Capital Structural Changes at Landlord's cost and
expense; provided, however, Tenant shall reimburse Landlord for the amortized
cost of the Capital Structural Changes during the Lease Term, (which cost shall
be amortized over the useful life of the Capital Structural Change as determined
by Landlord), and Tenant shall further, if Tenant exercises the Purchase Option
pursuant to Paragraph 34 below, the unamortized cost of such Capital Structural
Changes shall be added to the Purchase Price of the Property. For the avoidance
of doubt, if Tenant's compliance with the provisions of the first sentence of
this Paragraph 4(b) are required because of Tenant's willful misconduct or gross
negligence or because of any Alterations made by Tenant to the Leased Premises,
Tenant shall be responsible for making such changes at Tenant's sole cost and
expense, without any contribution or reimbursement from Landlord, regardless of
whether such changes are Capital Structural Changes or not. The judgment of any
court of competent jurisdiction or the admission of Tenant
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in any action against Tenant, whether or not Landlord is a party to such action,
shall be conclusive as between Landlord and Tenant in establishing such
violation.
(c) Tenant shall comply with all recorded covenants, conditions
and restrictions now or hereafter affecting the Leased Premises. Tenant shall
not use or allow another person or entity to use any part of the Leased Premises
for the storage, use, treatment, manufacture or sale of Hazardous Substances in
violation of applicable Environmental Law.
(d) Subject to the provisions hereof, so long as no Event of
Default has occurred and is continuing, Tenant shall quietly hold, occupy and
enjoy the Leased Premises throughout the Term, without any hindrance, ejection
or molestation by Landlord with respect to matters that arise after the date
hereof, provided that Landlord or its agents may enter upon and examine the
Leased Premises at such reasonable times as Landlord may select and upon
reasonable notice to Tenant (except in the case of any emergency, in which event
no notice shall be required) for the purpose of inspecting the Leased Premises,
verifying compliance or non-compliance by Tenant with its obligations hereunder
and the existence or non-existence of an Event of Default or event which with
the passage of time and/or notice would constitute an Event of Default, showing
the Leased Premises to prospective Lenders and purchasers and taking such other
action with respect to the Leased Premises as is permitted by any provision
hereof.
(e) Tenant shall have the right to permit any person or company
which is a client or customer of Tenant or which is providing a service to
Tenant (each, an "Occupant") to occupy certain portions of the Leased Premises
for entertainment related purposes without such occupancy being deemed an
assignment or subleasing as long as (i) relationship was not created as a
subterfuge to avoid the obligations set forth in Xxxxxxxxx 00, (xx) for
Occupants which occupy any portion of the Leased Premises for more than 90 days
during a 12 month period, Tenant shall provide Landlord with at least 5 business
days' notice of the identity and contact information of each such Occupant,
(iii) each Occupant shall execute an agreement with Tenant including the
language set forth in Exhibit E attached hereto and incorporated herein by this
reference, which language shall provide that Occupant shall indemnify Landlord
from all loss, cost, expense and liability, including attorneys' fees and Costs,
arising from such use and shall maintain liability insurance naming Landlord as
an additional insured in an amount reasonably acceptable to Landlord, and (iv)
no Occupant shall be granted exclusive possession of all of the Leased Premises.
Any demising walls which are constructed on or behalf of any Occupant must be
approved in accordance with the procedures for approving Alterations pursuant to
Paragraph 16 below.
5. TERM.
Subject to the provisions hereof, Tenant shall have and hold the
Leased Premises for a term ("Term") commencing on April 1, 2000 ("Commencement
Date"), which is the date Tenant acquires the assets of PM Entertainment, Inc.
and ending on the last day of the 24th calendar month next following the
Commencement Date, unless sooner terminated as provided herein. Landlord may
send Tenant notice of the occurrence of the Commencement Date in the form of the
attached Exhibit B, which notice Tenant shall acknowledge by executing a copy of
the notice and returning it to Landlord. If Tenant fails to sign and return the
notice to Landlord within 10 days of receipt of the notice from Landlord, the
notice as sent by Landlord shall be
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deemed to have correctly set forth the Commencement Date. Failure of Landlord to
send such notice shall have no effect on the Commencement Date.
6. BASIC RENT.
Tenant shall pay to Landlord, as rent ("Basic Rent") for the
Leased Premises, the sum of FIFTY THOUSAND AND NO ONE HUNDREDTHS DOLLARS
($50,000.00) per month, which amount shall be payable monthly in advance
commencing on the Commencement Date and continuing on the 1st day of each month
thereafter during the Term. Each such rental payment shall be made to Landlord
at its address set forth above. Concurrently with the execution of this Lease,
Tenant shall pay to Landlord the Basic Rent payable hereunder for the first full
calendar month of the Term after the Commencement Date.
7. LATE CHARGE.
Tenant acknowledges that the late payment of Rent will cause
Landlord to incur damages, including administrative Costs, loss of use of the
overdue funds and other Costs, the exact amount of which would be impractical
and extremely difficult to fix. Landlord and Tenant agree that if Landlord does
not receive a payment of Rent within 5 days of the notice of default as provided
in Paragraph 22, Tenant shall pay to Landlord a late charge equal to 5% of the
overdue amount and the overdue amount shall bear interest at the Interest Rate,
from the date payment of such amount was due until Landlord receives the overdue
payment. Acceptance of the late charge by Landlord shall not cure or waive
Tenant's default, nor prevent Landlord from exercising, before or after such
acceptance, any of the rights and remedies for a default provided by this Lease
or at law. Payment of the late charge is not an alternative means of performance
of Tenant's obligation to pay Rent at the times specified in this Lease. Tenant
will be liable for the late charge regardless of whether Tenant's failure to pay
the Rent when due constitutes a default under the Lease and regardless of
whether Landlord sent Tenant an invoice for such Rent and/or late charge.
Whenever interest is required to be paid under this Lease, the interest shall be
calculated from the date the payment was due or should have been due if
correctly assessed or estimated (or any overcharge paid), until the date payment
is made or the refund is paid or is credited against rent next due.
8. DISPUTES AS TO PAYMENTS OF RENT.
Tenant agrees to pay the Rent required under this Lease within the
time limits set forth in this Lease. If Tenant receives from Landlord an invoice
or statement, which invoice is sent by Landlord in good faith, and Tenant in
good faith disputes whether all or any part of such Rent is due and owing,
Tenant shall nevertheless pay to Landlord the amount of the Rent indicated on
the invoice or statement until Tenant receives a final judgment from a court of
competent jurisdiction (or when arbitration is permitted or required, receives a
final award from an arbitrator) relieving or mitigating Tenant's obligation to
pay such Rent. In such instance where Tenant disputes its obligations to pay all
or part of the Rent indicated on such invoice or statement, Tenant shall,
concurrently with the payment of such Rent, provide Landlord with a letter or
notice entitled "Payment Under Protest," specifying in detail why Tenant is not
required to pay all or part of such Rent. Tenant will be deemed to have waived
its right to contest any past payment of Rent unless it has filed a lawsuit
against Landlord (or when arbitration is
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permitted or required, filed for arbitration and has served Landlord with notice
of such filing), and has served a summons on Landlord, within 1 year of such
payment.
9. SECURITY DEPOSIT.
Concurrently with the execution of this Lease, Tenant shall
deposit with Landlord a security deposit in amount of $25,000.00. The Security
Deposit shall be held by Landlord as security for the full and faithful
performance of Tenant's covenants and obligations under this Lease. The Security
Deposit is not an advance Basic Rent deposit, an advance payment of any other
kind, or a measure of Landlord's damages in case of Tenant's default. If Tenant
fails to comply with the full and timely performance of any or all of Tenant's
covenants and obligations set forth in this Lease, then Landlord may, from time
to time, without waiving any other remedy available to Landlord, use the
Security Deposit, or any portion of it, to the extent necessary to cure or
remedy such failure or to compensate Landlord for all damages sustained by
Landlord resulting from Tenant's failure to comply fully and timely with its
obligations pursuant to this Lease. Tenant shall immediately pay to Landlord on
demand the amount so applied in order to restore the Security Deposit to its
original amount, and Tenant's failure to immediately do so shall constitute a
default under the Lease. If Tenant is in compliance with the covenants and
obligations set forth in this Lease at the time which is 60 days following the
time of both the expiration or termination of the Lease and Tenant's vacating of
the Premises as provided in California Civil Code Section 1950.7, Landlord shall
return the Security Deposit to Tenant after the expiration or termination of the
Lease and Tenant's vacating of the Premises. Landlord's obligations with respect
to the Security Deposit are those of a debtor and not a trustee. Landlord shall
not be required to maintain the Security Deposit separate and apart from
Landlord's general or other funds, and Landlord may commingle the Security
Deposit with any of Landlord's general or other funds. Tenant shall not at any
time be entitled to interest on the Security Deposit.
10. PAYMENT AND PROCEDURE FOR PAYMENT OF OPERATING EXPENSES.
(a) In addition to the payment of Basic Rent, Tenant shall also
pay 100% of all Operating Expenses as defined herein which are incurred by
Landlord and computed as set forth in Paragraph 10(b) and 10(c) below. When any
Operating Expense is incurred by Landlord in a particular month, Landlord shall
provide Tenant with a statement of the amounts Tenant shall owe for Operating
Expenses for that month, together with reasonable supporting documentation (the
"Statement"). No delay by Landlord in providing the Statement shall be deemed a
default by Landlord or a waiver of Landlord's right to require payment of
Tenant's obligations for Operating Expense. Tenant shall pay the amount of
Operating Expenses shown in the Statement within 30 days of receipt of such
Statement from Landlord.
(b) "Operating Expenses" are defined to be the sum of all Costs,
expenses, and disbursements, of every kind and nature whatsoever (except to the
extent paid directly by Tenant as an Imposition in accordance with Paragraph 11
below), which become the obligation of and are incurred by Landlord in
connection with the operation, servicing, maintenance and repair of the Leased
Premises in accordance with the terms of this Lease (but excluding repairs,
replacements, or other liabilities which are the responsibility of Landlord
pursuant to Paragraphs 15(e), 20 and 21 below) as required by this Lease
including, but not limited to, the following: (i)
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the Cost of supplying all utilities, the cost of operating, maintaining,
repairing, renovating and managing the utility systems, mechanical systems,
sanitary and storm drainage systems, and the Cost of supplies and equipment and
maintenance and service contracts in connection therewith; (ii) all of the Costs
(including, without limitation, the policy premiums and up to $10,000 of a
deductible amount for each separate claim) in connection with (A) insurance
obtained by Landlord against physical loss or damage to the Leased Premises,
Equipment and Improvements as provided under a standard "All Risk" property
policy, excluding earthquake and flood coverage, in the amount of $5,700,000
("All Risk Insurance"), (B) rental interruption insurance for at least 12 months
of Basic Rent payable by Tenant to Landlord, and (C) such other insurance on or
in connection with the Leased Premises as Landlord or Lender may reasonably
require, which at the time is usual and commonly obtained in connection with
properties similar in type of building size, use and location to the Leased
Premises; (iii) all expenses for janitorial, maintenance, alarm, security and
safety services, window cleaning, and trash removal; (iv) the Cost of licenses,
certificates, permits and inspections and the cost of contesting the validity or
applicability of any Legal Requirements which may affect Operating Expenses, (v)
the Costs incurred in connection with the implementation and operation of a
transportation system management program or similar program; (vi) the Cost of
landscaping, maintenance, relamping, and all supplies, tools, equipment and
materials used in the operation, repair and maintenance of the Building; (vii)
payments under any easement, license, operating agreement, declaration,
restrictive covenant, underlying or ground lease (excluding rent), or instrument
pertaining to the sharing of costs by the Lease Premises; (viii) the Cost of
parking area maintenance, including, but not limited to, re-striping, and
cleaning; (ix) the Cost of the repair of all plant, machinery, transformers,
duct work, cable, wires, and other equipment, facilities, and systems designed
to supply heat, ventilation, air conditioning and humidity or any other services
or utilities, or comprising or serving as any component or portion of the
electrical, gas, steam, plumbing, sprinkler, communications, alarm, security, or
fire/life safety systems or equipment, or any other mechanical, electrical,
electronic, computer or other systems or equipment which serve the Leased
Premises in whole or in part, and components thereof, and the cost of
replacement of the same to the extent caused by the willful misconduct or gross
negligence of Tenant; and (x) such other usual Costs and expenses which are
customarily reimbursed by Tenants to landlords for the purpose of providing for
the on-site operation, servicing, maintenance and repair of comparable buildings
in Southern California.
(c) Notwithstanding anything in the definition of Operating
Expenses in the Lease to the contrary, Operating Expenses shall not include the
following, except to the extent specifically permitted by a specific exception
to the following: (i) Costs incurred by Landlord for the repair of damage to the
Leased Premises, to the extent that Landlord is reimbursed by insurance proceeds
(such proceeds to be excluded from Operating Expenses in the year in which
received, except that any deductible amount under any insurance policy shall be
included within Operating Expenses); (ii) Costs incurred by Landlord due to the
violation by Landlord of the terms and conditions of the Lease; (iii)
advertising and promotional expenditures; (iv) depreciation, interest and
amortization on Mortgages, or underlying or ground lease rental payments, if
any; (v) any and all costs arising from the presence, removal, abatement or
remediation of Hazardous Substances in or about the Leased Premises, existing in
the Leased Premises as of the date of this Lease and not placed in the Leased
Premises by Tenant or any Occupant [except for any costs associated with the
normal operation and maintenance of the Leased Premises]; (vi) any management
fees, salaries, employment expenses incurred by
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Landlord including accounting fees and legal fees incurred by reason of
Landlords ownership of the Property and not arising from a breach by Tenant of
its obligations under this Lease; and (vii) all real estate taxes and
assessments including any supplemental taxes and special assessments or other
taxes imposed upon Landlord by reason of its ownership of the Property.
(d) Landlord shall keep adequate records and books of account with
respect to the Leased Premises, in accordance with generally accepted accounting
principles ("GAAP") consistently applied. Tenant shall have a period of 3 months
following receipt of the Statement, within which to dispute any Statement. If
Tenant shall not have disputed any such Statement within a period of 3 months
following receipt of the Statement, Tenant shall be deemed to have accepted as
final and determinative the amounts shown on the Statement. If Tenant disputes
the accuracy of a Statement, Tenant shall nevertheless continue to pay the
amounts as required by the provisions of this Paragraph 10; provided however,
that no later than 6 months after receipt of the Statement, Tenant must (or its
right to contest such charges shall be deemed waived) institute arbitration
proceedings against Landlord in an arbitration proceeding governed by the rules
of the American Arbitration Association to collect and recover any overpayments
made by Tenant; and provided further, that Tenant shall, within 10 days of
filing of the complaint, serve Landlord with a copy of the complaint filed in
any such proceeding. Tenant shall be precluded from contesting Operating
Expenses and Landlord's computations of the amounts payable by Landlord or
Tenant pursuant to this Paragraph 10, unless an arbitration complaint is filed
and served within such 6 month period. Should the arbitrator(s) in any such
arbitration proceeding find errors in excess of 10% of the Statement, then
Landlord shall be responsible for all reasonable fees incurred by Tenant with
respect to the arbitration proceeding. Should the arbitrator(s) find errors of
less than 4% of the Statement, then Tenant shall be responsible for all the
reasonable fees incurred by Landlord with respect to the arbitration proceeding.
Should the arbitrator(s) find errors of between 4% and 10% of the Statement,
then each party shall be responsible for all fees incurred by it with respect to
the arbitration proceeding.
(e) If Tenant institutes such arbitration procedures, then the
arbitrator(s) shall have the power to, and shall inquire into and determine, not
only whether or not Tenant was overcharged for any Operating Expenses, but
whether or not Tenant was undercharged for any Operating Expenses. At the
conclusion of the arbitration, the arbitrator(s) shall issue a ruling as to what
the Operating Expenses should have been had Landlord strictly complied with the
provisions of this Lease. If Landlord overcharged Tenant for the Operating
Expenses, the amount of the overcharge shall be returned to Tenant within 30
days following the issuance of the arbitration ruling. If the arbitrator(s)
determine(s) that Tenant was undercharged for the Operating Expenses, Tenant
shall pay the amount of such undercharge to Landlord within 30 days following
the issuance of the arbitration ruling.
11. TAXES, ASSESSMENTS AND IMPOSITIONS.
(a) Except as set forth in Paragraph 11(b) below, Landlord shall
pay all real property taxes and assessments against the Land, Building and
Improvements existing as of the date of this Lease.
(b) Except as set forth in Paragraph 11(a) above, Tenant shall,
before interest or penalties are due thereon, pay and discharge (collectively,
hereinafter, "Impositions"): (i) all
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taxes assessments, rates, duties, license fees, levies, charges on (A) the
personal property of Tenant, (B) upon Tenant's occupancy of the Leased Premises,
(C) upon any trade fixtures, furnishings, equipment or other personal property
contained in the Leased Premises, and (D) upon any Alterations constructed by or
on behalf of Tenant on the Leased Premises, (ii) all rents and charges for
water, sewer, utility and communications services relating to the Leased
Premises, and (iii) any tax measured by gross rentals received from the Leased
Premises, together with any Costs incurred by Landlord, including attorneys'
fees, in contesting any such taxes but excluding any net income, franchise,
capital stock, estate or inheritance taxes imposed by the State of California or
the United States or by their respective agencies, branches or departments;
provided that, if at any time during the Term there shall be levied, assessed or
imposed on Landlord or the Building by any governmental entity, any general or
special, ad valorem or specific excised capital levy or other taxes on the
payments received by Landlord under this Lease and/or any license fee, excise or
franchise taxes measured by or based, in whole or in part, upon such payments,
and/or transfer, transaction, or taxes based directly or indirectly upon the
transaction represented by this Lease and/or any occupancy, use, per capita or
other taxes, based directly or indirectly upon the use or occupancy of the
Leased Premises, then all such taxes shall be deemed to be included within the
definition of the term Impositions. If any Impositions may be paid in
installments without interest or penalty, Tenant shall have the option to pay
Impositions in installments; in such event, Tenant shall be liable only for
those installments which accrue or become due and payable during the Term.
Tenant shall prepare and file all tax reports required by governmental
authorities which relate to the Impositions. Tenant shall promptly deliver to
Landlord (1) copies of all settlements and notices pertaining to Impositions
which may be issued by any governmental authority, (2) receipts for payments of
all taxes required to be paid by Tenant hereunder and (3) receipts for payment
of all other Impositions.
12. NET LEASE.
(a) This is a net lease and all Rent shall be paid without notice
or demand and without set-off, counterclaim, recoupment, abatement, suspension,
deferment, diminution, deduction, reduction or defense (collectively, a
"Set-Off"), except as otherwise expressly provided herein. All payments owed by
Tenant under this Lease shall be paid to Landlord in lawful money of the United
States of America at the location specified by Landlord pursuant to Paragraph 26
of this Lease. All payments of Rent shall be paid by Tenant by check drawn on a
bank that is a member of the California Banker's Clearing House Association.
(b) The obligations of Tenant hereunder shall be separate and
independent covenants and agreements. All Rent payable by Tenant hereunder shall
constitute "rent" for all purposes (including Section 502(b)(6) of the
Bankruptcy Code).
(c) Tenant hereby waives all rights which it may have under
California Civil Code Sections 1932(2), 1933(4), California Code of Civil
Procedure Section 1265.130 and any other Law (i) to quit, terminate or surrender
this Lease or the Leased Premises, or (ii) to any Set-Off of any Rent.
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(d) If the Term begins on a day other than the first day of a
month or ends on day other than the last day of a month, then the Basic Rent for
such partial month shall be prorated on a daily basis on the basis of the actual
number of days in the applicable month.
13. COMPLIANCE WITH LAWS AND ENVIRONMENTAL MATTERS.
(a) Tenant shall, at its expense, comply with and conform to, and
cause any other Person occupying any part of the Leased Premises to comply with
and conform to, all Insurance Requirements and Legal Requirements (including all
applicable Environmental Laws). Without limiting the generality of the
foregoing, Tenant shall not transport, use, store, maintain, generate,
manufacture, handle, dispose, release or discharge any Hazardous Substance upon
or about the Leased Premises, nor permit Person to engage in such activities
upon or about the Leased Premises. However, the foregoing provisions shall not
prohibit the transportation to and from, and the use, storage, maintenance and
handling within, the Leased Premises of such Hazardous Substances provided: (i)
such Hazardous Substances shall be used and maintained only in such quantities
as are reasonably necessary for the permitted use of the Leased Premises set
forth in this Lease, strictly in accordance with applicable Laws and the
manufacturers' instructions therefor, (ii) such Hazardous Substances shall not
be disposed of, released or discharged on the Leased Premises, and shall be
transported to and from the Leased Premises in compliance with all applicable
Laws, and as Landlord shall reasonably require, (iii) if any applicable Law or
Landlord's trash removal contractor requires that any such Hazardous Substances
be disposed of separately from ordinary trash, Tenant shall make arrangements at
Tenant's expense for such disposal directly with a qualified and licensed
disposal company at a lawful disposal site (subject to scheduling and approval
by Landlord), and shall ensure that disposal occurs frequently enough to prevent
unnecessary storage of such substances in the Leased Premises, and (iv) any
remaining such Hazardous Substances shall be completely, properly and lawfully
removed from the Leased Premises upon expiration or earlier termination of this
Lease. Tenant shall not at any time (1) cause, permit or suffer to occur any
Environmental Violation or (2) permit any sublessee, assignee, Occupant or other
Person occupying the Leased Premises under or through Tenant to cause, permit or
suffer to occur any Environmental Violation.
(b) Landlord shall have the right, at the following times, to
enter the Leased Premises in order to inspect same and to conduct any testing,
monitoring or analysis reasonably required in connection therewith (collectively
"Inspection"):
(i) Once in any calendar year upon reasonable notice to
Tenant;
(ii) At any time during the Term of this Lease if, in
Landlord's reasonable judgment, Tenant is violating the use restrictions of this
Lease or is not in strict compliance with the regulations, rules or procedures
of any applicable governmental entity with respect to the transport, use,
storage, maintenance, generation, manufacturing, handling, disposal, release or
discharge of Hazardous Substances at the Leased Premises, in which case Landlord
shall give notice to Tenant of the reason for the Inspection and Tenant shall
provide Landlord with access to the Leased Premises for such Inspection within 5
days of any such notice; provided, however, that in an emergency situation
Tenant will provide Landlord with immediate access to the Leased Premises.
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(iii) If Tenant is violating the use restrictions of this
Lease or is not in strict compliance with the regulations, rules or procedures
of the applicable governmental entity, then all reasonable Costs and expenses
reasonably incurred by Landlord in connection with any Inspection shall become
due and payable by Tenant as Additional Rent, within 10 days of presentation by
Landlord of an invoice therefor. If a dispute exists between Landlord and Tenant
as to whether Landlord has sufficient reason to believe that Tenant may be
violating the use restrictions of this Lease or may not be in compliance with
any other provision of this Lease or any applicable governmental entity with
respect to the transport, use, storage, maintenance, generation, manufacturing,
handling, disposal, release or discharge of Hazardous Substances at the Leased
Premises, Tenant will provide Landlord with access to the Leased Premises for an
Inspection in accordance with the provisions of the immediately preceding
paragraph; provided, however, that if there is no such violation or strict
noncompliance, Landlord shall be liable for the cost and expense incurred by
Landlord in connection with such Inspection.
(c) Tenant shall promptly notify Landlord of: (i) any enforcement,
cleanup or other regulatory action taken or threatened by any governmental or
regulatory authority with respect to the presence of any Hazardous Substance on
the Leased Premises or the migration thereof from or to other property, (ii) any
demands or claims made or threatened by any party against Tenant or the Leased
Premises relating to any loss or injury resulting from any Hazardous Substance,
(iii) any release, discharge or non-routine, improper or unlawful disposal or
transportation of any Hazardous Substance on or from the Leased Premises, and
(iv) any matters where Tenant is required by law to give a notice to any
governmental or regulatory authority respecting any Hazardous Substance on the
Leased Premises. Landlord shall have the right (but not the obligation) to join
and participate, as a party, in any legal proceedings or actions affecting the
Leased Premises initiated in connection with any Environmental Law. At such
times as Landlord may reasonably request, Tenant shall provide Landlord with a
written list identifying any Hazardous Substances then used, stored, or
maintained upon the Leased Premises, the use and approximate quantity of each
such material, a copy of any material safety data sheet ("MSDS") issued by the
manufacturer thereof, written information concerning the removal, transportation
and disposal of the same, and such other information as Landlord may reasonably
require or as may be required by applicable Law.
(d) If any Hazardous Substance is released, discharged or disposed
of by Tenant or any other Person (other than Landlord) on or about the Leased
Premises in violation of the foregoing provisions, Tenant shall immediately,
properly and in compliance with applicable Laws clean up and remove the
Hazardous Substance from the Leased Premises and any other affected property and
clean or replace any affected personal property, at Tenant's expense. Such
clean-up and removal work shall be subject to Landlord's prior written approval,
which approval shall not be unreasonably withheld (except in emergencies), and
shall include, without limitation, any testing, investigation, and the
preparation and implementation of any remedial action plan required by any
governmental body having jurisdiction or reasonably required by Landlord. If
Tenant shall fail to comply with the provisions of this Paragraph within 5 days
after written notice by Landlord, or such shorter time as may be required by
applicable Law or in order to minimize any hazard to persons or property,
Landlord may (but shall not be obligated to) arrange for such compliance
directly or as Tenant's agent through contractors or other parties selected by
Landlord, at Tenant's expense (without limiting Landlord's other remedies under
this Lease or applicable Law).
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(e) In addition to, and not in derogation of any other
indemnification contained in this Lease, Tenant agrees to indemnify, defend and
hold harmless Landlord, its successors and assigns, and its and their trustees,
beneficiaries, directors, officers, shareholders, employees, agents, and
partners from all Costs, expenses, damages, liabilities, claims, fines,
penalties, interest, judgments, and losses of any kind arising from or in any
way related to Tenant's or any other Person's (other than Landlord's) Hazardous
Activity during the Term of this Lease or failure to comply in full with this
Paragraph 13 (collectively, "Environmental Losses"), including consequential
damages, damages for personal or bodily injury, property damage, damage to
natural resources occurring on or off the Leased Premises, encumbrances, liens,
Costs and expenses of investigations, monitoring, clean up, removal or
remediation of Hazardous Substances, defense costs of any claims (whether or not
such claim is ultimately defeated), good faith settlements, attorneys' and
consultants' fees and, and losses attributable to the diminution of value, loss
or use or adverse effects on marketability or use of any portion of the Leased
Premises, whether or not such Environmental Losses are contingent or otherwise,
matured or unmatured, foreseeable or unforeseeable. This indemnity shall not
apply to losses to the extent resulting from the gross negligence or willful
misconduct of Landlord or its employees. Tenant's obligations under this
Paragraph 13 shall survive the expiration or termination of the Lease.
14. NO LIENS; MEMORANDUM OF PURCHASE OPTION.
(a) Except for (i) recordation of the Memorandum, (ii) any lien
which is the subject of a permitted contest pursuant to Paragraph 17 below and
(iii) any lien imposed upon the Leased Premises by an appropriate governmental
authority in connection with an improvement district for the benefit of the
Leased Premises, Tenant shall not create or permit to be created or to remain
and shall promptly discharge or remove any lien, levy or encumbrance on the
Leased Premises which is not created by or through Landlord. At any time Tenant
either desires or is required to make any Alterations which cost more than
$300,000, Landlord may require Tenant, at Tenant's sole cost and expense, to
obtain and provide to Landlord a completion and/or performance bond in a form
and by a surety acceptable to Landlord and in an amount not less than 1-1/2
times the estimated cost of such Alterations, or to provide a letter of credit
or other security reasonably satisfactory to Landlord, to insure Landlord
against liability from mechanics' and materialmen's liens and to insure
completion of the Work. Tenant agrees to indemnify and hold Landlord harmless
from and against any and all claims for mechanics', materialmen's or other liens
in connection with any alterations, repairs, or any work performed, materials
furnished or obligations incurred by or for Tenant, and in connection therewith,
Tenant shall provide Landlord with notice of any and all liens filed against the
Leased Premises. NOTICE IS HEREBY GIVEN THAT LANDLORD SHALL NOT BE LIABLE FOR
ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO TENANT OR TO
ANYONE HOLDING OR OCCUPYING THE LEASED PREMISES THROUGH OR UNDER TENANT, AND
THAT NO MECHANICS' OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS
SHALL ATTACH TO OR AFFECT THE INTEREST OF LANDLORD IN AND TO THE LEASED
PREMISES. LANDLORD RESERVED THE RIGHT TO ENTER THE LEASED PREMISES TO POST ANY
NOTICES ON THE LEASED PREMISES REGARDING SUCH NON-LIABILITY OF LANDLORD AS MAY
BE PERMITTED BY LAW OR DESIRED BY LANDLORD.
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(b) Landlord and Tenant shall execute, deliver and record, at
Tenant's expense, a memorandum of the Lease including the Purchase Option
contained herein ("Memorandum") which shall be in the form attached hereto as
Exhibit C. The Parties shall cause the Memorandum to be recorded in the official
records of Los Angeles County, if and only if Tenant, prior to such recordation,
delivers to Escrow Holder a duly signed and acknowledged quitclaim deed, in form
and substance satisfactory to Landlord, sufficient to release any and all rights
of Tenant in and to the Leased Premises under this Lease (the "Quitclaim Deed"),
and Tenant hereby approves and irrevocably authorizes and directs Escrow Holder
to record the Quitclaim Deed in such manner and in such places as may be
required or permitted by any present or future Law immediately upon the
expiration of the Purchase Option contained in this Lease, without the
requirement for any further or additional instruction from Tenant.
15. MAINTENANCE AND REPAIR.
(a) Subject to the provisions of Paragraph 20 and 21, Tenant shall
at all times, without cost or expense to Landlord, keep and maintain the
non-structural portion of the Leased Premises (including, but not limited to,
all interior partitions, windows, fixtures, lighting facilities, fixtures,
doors, plate glass, skylights, landscaped areas, driveways, parking lots,
fences, signs, sidewalks, parkways, Building systems and Equipment) and
Alterations in substantially the same order, condition and repair and appearance
existing as of the Commencement Date, ordinary wear and tear and loss by fire or
other casualty excepted.
(b) All damage, injury or breakage to any part or portion of the
Leased Premises (including, but not limited to, the roof and the parking area)
caused by the willful or negligent act or omission of Tenant or Tenant's
employees, agents, contractors, licensees, directors, officer, partners,
trustees, visitors, invitees (collectively, "Tenant's Employees") or any of the
Occupants shall be promptly repaired or replaced by Tenant, at Tenant's sole
cost and expense, to the reasonable satisfaction of Landlord; provided, however,
that Tenant shall be entitled to receive reimbursement for such expense to the
extent that the cost of any such repair is covered by insurance obtained by
Landlord as part of Operating Expenses. Without limiting the generality of the
foregoing, Tenant shall be required to replace or re-roof the Leased Premises,
Tenant shall not be required to make structural repairs or replacements required
to bring the Improvements into compliance with Applicable Laws, unless (i) such
repairs or replacements are attributable to Alterations to the Leased Premises
which have been made by Tenant, (ii) such repairs or replacements are caused by
the willful or negligent act or omission of Tenant, Tenant's Employees or any of
the Occupants, or (iii) such Costs are triggered by a change of the use of the
Lease Premises.
(c) Upon not less than 15 days notice (except in the case of
emergency when Landlord may take immediate action), Landlord may make any
repairs which it is Tenant's obligation to make under this Lease and which are
not made by Tenant within a reasonable amount of time, and charge Tenant for the
cost of such repairs. Landlord shall use reasonable efforts not to unreasonably
interfere with Tenant's use of the Leased Properties.
(d) Tenant shall, at Tenant's sole expense, procure and maintain
contracts, with copies to Landlord, in customary form and substance for, and
with contractors specializing and experienced in the maintenance of the
following Equipment and Improvements, if any, as
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and when installed on the Leased Premises: (i) HVAC equipment, (ii) boiler and
pressure vessels, (iii) fire protection systems, (iv) landscaping and irrigation
systems, (v) roof covering and drains, and (vi) asphalt and parking lots, (vii)
clarifiers and (viii) any other equipment, if reasonably required by Landlord.
If Tenant fails to comply with the foregoing sentence, Landlord may at any time
assume the responsibility for procuring and maintaining the aforesaid contracts,
with copies to be furnished to Tenant, but Tenant shall continue to be
responsible for payment of the same within 10 days following receipt of an
invoice therefor from Landlord.
(e) So long as no event of default has occurred and except as set
forth in Paragraph 15(b) above, Landlord shall maintain and repair the
structural elements of the Leased Premises in substantially the same condition,
repair and appearance as existing as of the Commencement Date, ordinary wear and
tear excepted, and except for non-insured damage or wear and tear which is the
result of a negligent or willful act or omission of Tenant, Tenant's Employees
or any of the Occupants. Notwithstanding the foregoing, Landlord shall no
obligation to make any capital repair or replacement to the Leased Premises
unless the same is necessary in order to keep the Leased Premises in a habitable
condition. Landlord shall have no obligation to make repairs until a reasonable
time after receipt of written notice of the need for such repairs. In no event
shall any payments owed by Tenant under the Lease be abated, nor shall Landlord
have any liability for interruption or interference in Tenant's business, on
account of Landlord's failure to make repairs under this Paragraph 15(e).
Landlord and Landlord's agents, contractors, licensees, employees, directors,
officers, partners, trustees and invitees shall have the right to enter the
Leased Premises at all reasonable times for the purpose of making any
improvements, repairs or replacements to the Leased Premises as Landlord may
deem necessary or desirable, without liability to Tenant. Landlord shall use
reasonable efforts not to unreasonably interfere with Tenant's use of the Leased
Premises. Landlord shall give reasonable notice to Tenant of Landlord's intent
to enter the Leased Premises and effect improvements, repairs or replacements,
except, however, in an emergency situation, in which case no prior notice shall
be required. In the event Landlord elects to make any capital improvement,
repair or replacement to the Leased Premises, the cost of each such capital
repairs and replacements shall be amortized (including interest on the
unamortized cost) over its useful life, as Landlord shall reasonably determine,
and the unamortized cost thereof shall be added to the Purchase Price in the
event Tenant exercises the Purchase Option granted to Tenant pursuant to
Paragraph 34 below notwithstanding the fact that such capital improvement,
repair or replacement was installed or paid for by Landlord as a result of a
requirement by any new (or change in) laws, rules or regulations of any
governmental or quasi-governmental authority.
(f) If Landlord shall fail to make any repairs or replacements
which Landlord is required to make pursuant to the terms of this Lease within a
reasonable period of time after receipt of written notice from Tenant regarding
the same, Tenant shall provide Landlord with written notice of its intention to
make such repairs or replacements on behalf of Landlord ("Tenant's Repair
Notice"). If Landlord does not commence to take action to repair or replace such
required items within 60 days after receipt of Tenant's Repair Notice, Tenant
make make such repairs and submit an invoice, together with reasonable
supporting documentation to Landlord and landlord shall reimburse Tenant for the
actual Cost of such documented repairs or replacements within 30 days of receipt
of such invoice. Except as set forth above, Tenant hereby waives and releases
its right to make repairs at Landlord's expense under Sections 1941 and 1942 of
the California Civil Code or under any similar law, statute, or ordinance now or
hereafter
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in effect. Notwithstanding anything to the contrary set forth in this Lease,
Tenant hereby waives the right to deduct the Cost of any repairs or replacements
from any payment owed by Landlord under the Lease.
16. ALTERATIONS AND IMPROVEMENTS.
(a) Provided no Event of Default exists, Tenant shall have the
right, at its sole cost and expense, after having obtained the prior written
consent of Landlord and Lender, which shall not be unreasonably withheld or
delayed, to make Alterations to the Leased Premises, if such Alterations are
made in accordance with this Paragraph 16, are commercially reasonable, normal
for general office or production use, do not adversely affect the utility or
value of the Leased Premises for future tenants, do not substantially alter the
exterior appearance of the Building, do not require extensive removal expenses
and are not otherwise prohibited under the Lease, do not affect the Building
systems and do not adversely affect the Building structure. Notwithstanding the
foregoing, Tenant shall have the right to make non-structural Alterations to the
Leased Premises which meet the conditions set forth in the foregoing sentence
and in Paragraph 16(b) below, without Landlord's prior written approval,
provided such Alterations do not cost in excess of $50,000.
(b) If Tenant makes any Alterations pursuant to this Paragraph 16
or as required by Paragraph 15 (such Alterations and actions being hereinafter
collectively referred to as "Work"), then any such Alterations installed by
Tenant during the Term shall be done in strict compliance with the following:
(i) the market value of the Leased Premises shall not be
lessened by any such Work or its usefulness impaired;
(ii) all such Work shall be performed by Tenant in a
first-class workmanlike manner and in conformity with a valid building permit
and/or all other permits or licenses when and where required, copies of which
shall be furnished to Landlord before the Work is commenced, and any Work not
acceptable to any governmental authority or agency having or exercising
jurisdiction over such Work or not reasonably satisfactory to Landlord, shall be
promptly replaced and corrected at Tenant's expense. Landlord's approval or
consent to any such Work shall not impose any liability upon Landlord. No such
work shall proceed until and unless Landlord has received at least 10 days
notice that such work is to commence so that Landlord can post a notice of
nonresponsibility;
(iii) all such Work shall be expeditiously completed in
compliance with all Legal Requirements;
(iv) all such Work shall comply with the requirements of
all insurance policies required to be maintained by Tenant hereunder;
(v) Tenant shall promptly discharge or remove all liens
filed against the Leased Premises arising out of such Work;
(vi) Tenant shall procure and pay for all permits and
licenses required in connection with any such Work;
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(vii) all such Work shall be the property of Landlord and
shall be subject to this Lease, and Tenant shall execute and deliver to Landlord
any document requested by Landlord evidencing the assignment to Landlord of all
estate, right, title and interest (other than the leasehold estate created
hereby) of Tenant or any other Person thereto or therein;
(viii) Tenant shall, at Tenant's sole cost and expense,
furnish Landlord with a complete set of "as built" drawings for such
Alterations;
(ix) no such Work shall proceed without Landlord's prior
approval, which approval shall not be unreasonably withheld or delayed, of (A)
Tenant's contractor(s); (B) certificates of insurance from a company or
companies approved by Landlord, furnished to Landlord by Tenant's contractor(s)
and/or vendor(s) with the types and amounts of insurance more particularly
described above and (C) detailed plans and specifications for the Work;
(x) Tenant shall immediately reimburse Landlord for any
Costs incurred by Landlord in reviewing and approving the plans and
specifications for such work or by reason of any faulty Work done by Tenant or
Tenant's contractors, or by reason of delays caused by such Work, or by reason
of inadequate cleanup, or which is otherwise incurred by Landlord to review the
plans and specifications, and monitor and inspect the progress of such Work;
(xi) Tenant or its contractors will in no event be allowed
to make (A) any improvements to the Leased Premises which would adversely affect
any of the Building systems or (B) any structural modification to the Building
without first obtaining Landlord's consent, which Landlord can withhold in its
reasonable discretion; and
(xii) Tenant shall obtain any bonds required by Landlord
pursuant to Paragraph 14(a) of the Lease.
17. PERMITTED CONTESTS.
Notwithstanding any other provision of this Lease, Tenant shall
not be required to (a) pay any Imposition or (b) discharge or remove any lien
referred to in Paragraph 14 (such non-compliance with the terms hereof being
hereinafter referred to collectively as "Permitted Violations"), so long as at
the time of such noncompliance no Event of Default exists and so long as Tenant
shall contest, in good faith, the existence, amount or validity thereof, the
amount of the damages caused thereby, or the extent of its or Landlord's
liability therefor by appropriate proceedings which shall operate during the
pendency thereof to prevent or stay (i) the collection of, or other realization
upon, the Permitted Violation so contested, (ii) the sale, forfeiture or loss of
the Leased Premises or any Rent to satisfy or to pay any damages caused by any
Permitted Violation, (iii) any interference with the use or occupancy of the
Leased Premises, (iv) any interference with the payment of any Rent, (v) the
cancellation or increase in the rate of any insurance policy or a statement by
the carrier that coverage will be denied or (vi) the enforcement or execution of
any injunction, order or Legal Requirement with respect to the Permitted
Violation. Tenant shall provide Landlord security which is satisfactory, in
Landlord's reasonable judgment, to assure that such Permitted Violation is
corrected, including all Costs, interest and penalties that may be incurred or
become due in connection therewith. While any
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proceedings which comply with the requirements of this Paragraph 17 are pending
and the required security is held by Landlord, Landlord shall not have the right
to correct any Permitted Violation thereby being contested unless Landlord is
required by law to correct such Permitted Violation and Tenant's contest does
not prevent or stay such requirement as to Landlord (and if Landlord shall elect
to correct such violation, Tenant shall reimburse Landlord for all Costs which
it shall incur within 10 days after receipt by Tenant of Landlord's demand).
Each such contest shall be promptly and diligently prosecuted by Tenant to a
final conclusion, except that Tenant, so long as the conditions of this
Paragraph 17 are at all times complied with, has the right to attempt to settle
or compromise such contest through negotiations. Tenant shall pay any and all
losses, judgments, decrees and Costs in connection with any such contest and
shall, promptly after the final determination of such contest, fully pay and
discharge the amounts which shall be levied, assessed, charged or imposed or be
determined to be payable therein or in connection therewith, together with all
penalties, fines, interest and Costs thereof or in connection therewith, and
perform all acts the performance of which shall be ordered or decreed as a
result thereof. No such contest shall subject Landlord to the risk of any civil
or criminal liability.
18. INDEMNIFICATION AND WAIVER.
(a) Landlord shall not be liable for and Tenant hereby waives all
claims against Landlord for damage to any property or injury, illness or death
of any person in, upon, or about the Leased Premises arising at any time and
from any cause whatsoever other than damages proximately caused by reason of the
gross negligence or willful misconduct of Landlord or its agents and employees.
Tenant shall indemnify, defend, and protect Landlord, its successors and
assigns, and its officers, directors, members, shareholders, partners and
employees (collectively the "Landlord Indemnified Parties") and hold the
Landlord Indemnified Parties harmless from any and all losses, Costs, damages,
expenses and liabilities (including without limitation court costs and
reasonable attorneys' fees) incurred in connection with or arising from any
cause in the use or occupancy of the Leased Premises during the Term of this
Lease, including, without limiting the generality of the foregoing: (a) any
default by Tenant in the observance or performance of any of the terms,
covenants or conditions of this Lease on Tenant's part to be observed or
performed; (b) the use or occupancy of the Leased Premises by Tenant or any
person claiming by, through or under Tenant; (c) the condition of the Leased
Premises or any occurrence or happening on the Leased Premises from any cause
whatsoever; or (d) any acts, omissions or negligence of Tenant or any person
claiming by, through or under Tenant or Tenant's Employees or any such person,
in, on or about the Leased Premises either prior to, during, or after the
expiration of the Lease Term, including, without limitation, any acts, omissions
or negligence in the making or performance of any Alterations, provided,
however, that the foregoing indemnification shall not apply to damages
proximately caused by reason of the negligence or willful misconduct of any of
the Landlord Indemnified Parties. The provisions of this Paragraph 18(a) shall
survive any termination, expiration or rejection in bankruptcy of this Lease.
(b) Tenant shall pay, protect, indemnify, defend, save and hold
harmless each of the Landlord Indemnified Parties from and against any and all
liabilities, losses, damages (including punitive damages), penalties, Costs
(including attorneys' fees and costs), causes of action, suits, claims, demands
or judgments of any nature whatsoever, howsoever caused,
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without regard to the form of action and whether based on strict liability,
gross negligence, negligence or any other theory of recovery at law or in
equity, arising from (i) any matter pertaining to the use, occupancy, or
operation by Tenant of the Leased Premises, (ii) any violation by Tenant of any
provision of this Lease, any contract or agreement to which Tenant is a party,
or any Legal Requirement to which Tenant is subject, or (iii) any alleged,
threatened or actual Environmental Violation attributable to the activities of
Tenant or any of Tenant's Employees, including (A) liability for response costs
and for Costs of removal and remedial action incurred by the United States
Government, any state or local governmental unit or any other Person, or damages
from injury to or destruction or loss of natural resources, including the
reasonable Costs of assessing such injury, destruction or loss, incurred
pursuant to Section 107 of CERCLA, or any successor section or act or provision
of any similar state or local Law, (B) liability for Costs and expenses of
abatement, correction or clean-up, fines, damages, response Costs or penalties
which arise from the provisions of any of the other Environmental Laws and (C)
liability for personal injury or property damage arising under any statutory or
common-law tort theory, including damages assessed for the maintenance of a
public or private nuisance or for carrying on of a dangerous activity. The
foregoing indemnification contained in this Paragraph 18(b) shall not apply to
damages proximately caused by reason of the gross negligence or willful
misconduct of any of the Landlord Indemnified Parties. The provisions of this
Paragraph 18(b) shall survive any termination, expiration or rejection in
bankruptcy of this Lease.
(c) Landlord shall indemnify, defend and protect Tenant and its
officers, directors, members, shareholders, partners and employees
(collectively, "Tenant Indemnified Parties") and hold the Tenant Indemnified
Parties harmless from and against all losses, Costs, damages, expenses and
liabilities (including, without limitation, court costs and reasonable
attorneys' fees) to the extent arising from any willful misconduct or gross
negligence of Landlord in the performance of Landlord's obligations under this
Lease, provided, however, the foregoing indemnification shall not apply to
damages proximately caused by reason of the negligence or willful misconduct of
any of the Tenant Indemnified Parties. The provisions of this Paragraph 18(c)
shall survive any termination, expiration or rejection in bankruptcy of this
Lease.
(d) If Landlord is ever made a party to any action or proceeding
by reason of a matter for which Tenant is obligated to indemnify Landlord, then
Tenant, upon notice from Landlord, shall, at Landlord's option, either defend
that action or proceeding on behalf of Landlord at Tenant's expense with counsel
satisfactory to Landlord or reimburse Landlord for all defense costs Landlord
actually incurs in defending against such action or proceeding, whether or not
the action or proceeding is ultimately defeated. Any such counsel retained by
Tenant in connection with a settlement involving Landlord shall represent both
Landlord and Tenant in such matter and shall acknowledge that there is no
conflict of interest between the parties with respect to such settlement. Any
settlement entered into by Tenant with respect to an indemnification matter
involving Landlord shall be subject to the prior approval of Landlord and shall
contain a full and complete release of all claims against Landlord. If any
conflict of interest arises in connection with such joint counsel's
representation of Tenant and Landlord, such counsel shall withdraw and Landlord
shall have the right to appoint separate counsel at Tenant's sole cost and
expense to defend Landlord's interest in such matter.
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19. INSURANCE.
(a) Tenant shall maintain the following insurance on or in
connection with the Leased Premises:
(i) Insurance against physical loss or damage to Tenant's
personal property and Alterations in amounts not less than the actual
replacement cost thereof.
(ii) Commercial General Liability Insurance and Business
Automobile Liability Insurance (including Non-Owned and Hired Automobile
Liability) against claims for personal and bodily injury, death or property
damage occurring on, in or as a result of the use of the Leased Premises, in an
amount not less than $3,000,000 per occurrence/annual aggregate (or such higher
amount as may be required by the Lender) and all other coverage extensions that
are usual and customary for properties of this size and type provided, however,
that the Landlord shall have the right to require such higher limits as may be
reasonable and customary for properties of this size and type. Not more
frequently than once each year, if, in the opinion of Landlord's Lender, the
amount of public liability and property damage insurance coverage at that time
is not adequate, Tenant shall increase the insurance coverage as required by
Landlord's Lender.
(iii) Worker's compensation insurance as required by law
covering all persons employed by Tenant in connection with any work done on or
about the Leased Premises for which claims for death, disease or bodily injury
may be asserted against Landlord, Tenant or the Leased Premises or, in lieu of
such Worker's Compensation Insurance, a program of self-insurance complying with
the rules, regulations and requirements of the appropriate agency of the State
in which the Leased Premises are located. Employer's Liability insurance in an
amount not less than $1,000,000.
(iv) During any period in which substantial Alterations are
being undertaken, builder's risk insurance covering the total completed value
including any "soft costs" with respect to the Improvements being altered or
repaired (on a completed value, non-reporting basis), replacement cost of work
performed and equipment, supplies and materials furnished in connection with
such construction or repair of Improvements or Equipment, together with such
"soft cost" endorsements and such other endorsements as Landlord may reasonably
require and general liability, worker's compensation and automobile liability
insurance with respect to the Improvements being constructed, altered or
repaired.
(b) Landlord shall procure and maintain the insurance described in
Section 10(b)(ii) with the cost to be reimbursed by Tenant as an Operating
Expense as provided in Paragraph 10(b).
(c) Unless Landlord and Tenant otherwise mutually agree, the
insurance required by Paragraph 19(a) shall be written by companies which have a
Best's rating of A:VIII or above and are admitted in, and approved to write
insurance policies by, the State Insurance Department for the states in which
the Leased Premises are located. The insurance policies (i) shall be for such
terms as Landlord may reasonably approve and (ii) shall be in amounts sufficient
at all times to satisfy any coinsurance requirements thereof. The insurance
referred to
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in Paragraphs 19(a)(i), 19(a)(iv) and 19(a)(v) shall name Landlord as Owner and
Lender as loss payee and Tenant as their interest may appear. The insurance
referred to in Paragraph 19(a)(ii) shall name Landlord and Lender as additional
insureds. If said insurance or any part thereof shall expire, be withdrawn,
become void, voidable, unreliable or unsafe for any reason, including a breach
of any condition thereof by Tenant or the failure or impairment of the capital
of any insurer, or if for any other reason whatsoever said insurance shall
become reasonably unsatisfactory to Landlord, Tenant shall immediately obtain
new or additional insurance reasonably satisfactory to Landlord.
(d) Each insurance policy referred to in Paragraph 19(a) shall
contain standard non-contributory mortgagee clauses in favor of and acceptable
to Lender. Each policy required by any provision of Paragraph 19(a), except
clause (iii) thereof, shall provide that it may not be cancelled except after 30
days' prior notice to Landlord and Lender. Each such policy shall also provide
that any loss otherwise payable thereunder shall be payable notwithstanding (i)
any act or omission of Landlord or Tenant which might, absent such provision,
result in a forfeiture of all or a part of such insurance payment, (ii) the
occupation or use of the Leased Premises for purposes more hazardous than those
permitted by the provisions of such policy, (iii) any foreclosure or other
action or proceeding taken by Lender pursuant to any provision of the Mortgage,
Note or other document evidencing or securing the Loan upon the happening of an
event of default therein or (iv) any change in title to or ownership of the
Leased Premises.
(e) Tenant shall pay as they become due all premiums for the
insurance required by Paragraph 19(a), shall renew or replace each policy and
deliver to Landlord evidence of the payment of the full premium therefor or
installment then due at least 30 days prior to the expiration date of such
policy, and shall promptly deliver to Landlord all original policies or
certified copies thereof.
(f) Anything in this Paragraph 19 to the contrary notwithstanding,
any insurance which Tenant is required to obtain pursuant to Paragraph 19(a) may
be carried under a "blanket" or umbrella policy or policies covering other
properties or liabilities of Tenant, provided that such "blanket" or umbrella
policy or policies otherwise comply with the provisions of this Paragraph 19 and
provided further that Tenant shall provide to Landlord a Statement of Values
which shall be reviewed annually and amended as necessary based on Replacement
Cost Valuations. The original or a certified copy of each such "blanket" or
umbrella policy shall promptly be delivered to Landlord.
(g) Tenant shall promptly comply with and conform to (i) all
provisions of each insurance policy required by this Paragraph 19 and (ii) all
requirements of the insurers thereunder applicable to Landlord, Tenant or the
Leased Premises or to the use, manner of use, occupancy, possession, operation,
maintenance, alteration or repair of the Leased Premises, even if such
compliance necessitates Alterations or results in interference with the use or
enjoyment of the Leased Premises, provided, however, Tenant may terminate this
Lease upon 90 days prior written notice to Landlord in the event the
requirements of any insurance carrier necessitates Alterations the cost of which
to Tenant ("Tenant's Share") exceeds $50,000 ("Termination Notice"). Landlord
may void any Termination Notice by providing Tenant with notice within 30 days
of receipt of the Termination Notice of its intention to pay the difference
between the Tenant's Share and $50,000.
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(h) Tenant shall not carry separate insurance concurrent in form
or contributing in the event of a casualty with that required in this Paragraph
19 unless (i) Landlord and Lender are included therein as named insureds, with
loss payable as provided herein, and (ii) such separate insurance complies with
the other provisions of this Paragraph 19. Tenant shall immediately notify
Landlord of such separate insurance and shall deliver to Landlord the original
policies or certified copies therefor.
(i) All policies required by this Paragraph 19 shall contain full
waivers of subrogation against the Landlord and Tenant.
(j) Except for insurance proceeds payable to Tenant, all proceeds
of any insurance required under Paragraph 19(a) shall be payable to Landlord or,
if required by the Mortgage, to Lender. Tenant shall be responsible for payment
any deductible.
(k) Landlord and Tenant each hereby release and relieve the other,
and waive their entire right of recovery against the other for loss or damage
arising out of or incident to the perils required to be insured against under
Paragraph 19, which perils occur in, on or about the Leased Premises, whether
due to the negligence of Landlord or Tenant or their agents, employees,
contractors and/or invitees. Landlord and Tenant shall, upon obtaining the
policies of insurance required hereunder, give notice to the insurance carrier
or carriers that the foregoing mutual waiver of subrogation is contained in this
Lease.
20. CASUALTY.
(a) If the Leased Premises or any portion thereof, is wholly or
partially damaged or destroyed by a casualty, Tenant shall give Landlord and
Lender immediate notice thereof. Landlord and Lender are hereby authorized to
adjust, collect and compromise, in their discretion and upon notice to Tenant,
all claims under any of the insurance policies required by Paragraph 19(a)
(except public liability insurance claims payable to Tenant or Person other than
Landlord or Lender and except for insurance claims by Tenant for loss of its
personal property or business interruption) and to execute and deliver all
necessary proofs of loss, receipts, vouchers and releases required by the
insurers. Each insurer is hereby authorized and directed to make payment under
said policies, including return of unearned premiums, directly to Landlord or,
if required by the Mortgage, to Lender instead of to Landlord and Tenant
jointly. The rights of Landlord under this Paragraph 20(a) shall be extended to
Lender if and to the extent that any Mortgage so provides.
(b) If any such casualty, the loss to Landlord from which is fully
covered by insurance, and which casualty renders the Leased Premises totally or
partially inaccessible or unusable by Tenant in the ordinary conduct of Tenant's
business then:
(i) Within 20 days of notice to Landlord of such damage or
destruction, Landlord shall provide Tenant with its determination of whether the
damage or destruction can be repaired within 120 days of such damage or
destruction without the payment of overtime or other premiums. If all repairs to
the Leased Premises can, in Landlord's reasonable judgment, be completed within
120 days following the date of notice to Landlord of such damage or destruction
without the payment of overtime or other premiums, Landlord shall,
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at Landlord's expense, promptly commence and diligently repair the same as
nearly as possible to their value, condition and character immediately prior to
such casualty and this Lease shall remain in full force and effect and a
proportionate reduction of the Basic Rent and Additional Rent shall be allowed
Tenant for such portion of the Leased Premises as shall be rendered inaccessible
or unusable to Tenant, and which is not used by Tenant, during the period of
time that such portion is unusable or inaccessible and not used by Tenant, to
the extent such rental interruption insurance is received pursuant to Paragraph
10(b)(B) of this Lease. If the Leased Premises are not restored within 120 days
following the date of notice to Landlord of such damage or destruction, then
Tenant may upon written notice to Landlord (a "Termination Notice") terminate
the Lease effective 30 days after Landlord's receipt of the Termination Notice.
If Landlord shall complete the repair or restoration within the 30 day period
between receipt of the Termination Notice and termination of the Lease, the
Termination Notice shall be null and void and this Lease shall continue as if
Tenant had not sent the Termination Notice. Landlord shall keep Tenant informed
as to the progress of any restoration or repair.
(ii) If all such repairs to the Leased Premises cannot, in
Landlord's reasonable judgment, be completed within 120 days following the date
of notice to Landlord of such damage or destruction without the payment of
overtime or other premiums, Landlord shall notify Tenant of such determination
and Landlord may, at Landlord's sole and absolute option, upon written notice to
Tenant given within 30 days after notice to Landlord of the occurrence of such
damage or destruction, elect to repair such damage or destruction at Landlord's
expense, and in such event, this Lease shall continue in full force and effect
but the Basic Rent and Additional Rent shall be proportionately reduced as
hereinabove provided in Paragraph 20(b)(i). If Landlord shall give a Termination
Notice pursuant to this Paragraph 20, Tenant may elect to exercise the Purchase
Option by written notice to Landlord, given at any time within 60 days following
the receipt of the Termination Notice and all insurance proceeds shall be
assigned to Tenant or if received by Landlord shall be deducted from the
purchase price paid at closing.
(iii) If, at any time prior to the expiration or
termination of this Lease, the Leased Premises is totally or partially damaged
or destroyed from a casualty, the loss to Landlord from which is not fully
covered by insurance maintained by Landlord, which damage renders the Leased
Premises inaccessible or unusable to Tenant in the ordinary course of its
business, Landlord, at its option, upon written notice to Tenant within 20 days
after notice to Landlord of the occurrence of such damage or destruction, may
elect to repair or restore such damage or destruction, or Landlord may elect to
terminate this Lease. If Landlord elects to repair or restore such damage or
destruction, this Lease shall continue in full force and effect but the Basic
Rent and Additional Rent shall be proportionately reduced as provided in
Paragraph 20(b)(i). If Landlord does not elect by notice to Tenant to repair
such damage, or if the damage cannot, in Landlord's reasonable judgment, be
completed within 180 days following the date of notice to Landlord of such
damage or destruction, the Lease shall terminate and Tenant may elect to
exercise the Purchase Option by written notice to Landlord, given at any time
within 60 days following termination of the Lease hereunder and all insurance
proceeds shall be assigned to Tenant or if received by Landlord shall be
deducted from the purchase price paid at closing.
(iv) Notwithstanding anything to the contrary contained in
Paragraphs 20(a) or 20(b)(i)-(iii) above, if the Leased Premises is wholly or
partially damaged or destroyed within the final 4 months of the Term of this
Lease, Landlord or Tenant may, at its option, by
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giving notice to the other party within 30 days after occurrence of such damage
or destruction, elect to terminate the Lease.
(v) In the event of any damage to or destruction of the
Leased Premises, under no circumstances shall Landlord be required to repair any
injury, or damage to, or make any repairs to or replacements of, Tenant's
personal property. However, Tenant shall deliver to Landlord the proceeds of
insurance received by Tenant from the "all risk" property policy carried by
Tenant on any Alterations, and Landlord shall, pursuant to its receipt thereof,
repair same to the extent Landlord shall receive such insurance proceeds from
Tenant (but if the amount of insurance proceeds shall not be sufficient to cause
the repair of the Alterations to be fully made by Landlord, Tenant shall pay to
Landlord, within 10 days of receipt of request therefor, the additional amount
of funds requested by Landlord in order to complete the repair of the
Alterations) and this Lease shall remain, in full force and effect. Landlord
shall have no responsibility for any contents placed or kept in or on the Leased
Premises by Tenant or any of Tenant's employees, agents, invitees, contractors,
assignees or sublessees.
(vi) This Paragraph 20 shall be Tenant's sole and exclusive
remedy in the event of damage or destruction to the Leased Premises and Tenant,
as a material inducement to Landlord entering into this Lease, irrevocably
waives and releases Tenant's rights under California Civil Code Sections 1932(2)
and 1933(4). No damages, compensation or claim shall be payable by Landlord for
any inconvenience, any interruption or cessation of Tenant's business, or any
annoyance, arising from any damage to or destruction of all or any portion of
the Leased Premises.
21. CONDEMNATION.
(a) Tenant, immediately upon receiving notice or knowledge of the
institution of or intention to institute any proceeding for Condemnation, shall
notify Landlord and Lender thereof.
(b) If the whole of the Leased Premises, or so much of the Leased
Premises as to render the balance unusable by Tenant, shall be taken under the
power of eminent domain, the Lease shall automatically terminate as of the date
of final judgment in such condemnation, or as of the date possession is taken by
the condemning authority, whichever is earlier. No award for any partial or
entire Taking shall be apportioned and Tenant hereby irrevocably assigns to
Landlord any award or payment which may be made in such Taking or Condemnation,
together with all rights of Tenant to such award, including, without limitation,
any award or compensation for the value of all or any part of the leasehold
estate; provided that nothing contained in this Paragraph 21 shall be deemed to
give Landlord any interest in or to require Tenant to assign to Landlord any
award made to Tenant for (a) the taking of Tenant's personal property, trade
fixtures, equipment or other tangible property which is not part of the
Equipment, (b) moving expenses, or (c) interruption of or damage to Tenant's
business, if available. Notwithstanding the foregoing, if Tenant exercises its
Purchase Option within 60 days after termination of the Lease hereunder, then
Landlord's award shall be assigned to Tenant, or if the award has been paid to
Landlord or Lender then upon closing the purchase price shall be reduced by the
amount of such award.
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(c) Provided that no Event of Default has occurred and is
continuing and provided further that Tenant has properly and timely exercised
the Purchase Option, Tenant shall be entitled to consult with Landlord with
respect to any Condemnation proceeding or negotiations under threat thereof or
the amount of the award therefor.
(d) In the event of a partial Taking which does not result in
termination of this Lease under Paragraph 21(a), Basic Rent and Additional Rent
shall be proportionately reduced based on the portion of the Premises rendered
unusable, to the extent to rental interruption insurance received by Landlord
pursuant to Paragraph 10(b)(B) of this Lease, as of the date of the Taking with
respect to the portion of the Leased Premises which are affected until such time
as the Leased Premises are restored and available for occupancy. Promptly after
such partial Condemnation, Landlord shall commence and diligently continue to
restore the Leased Premises as nearly as possible to their value, condition and
character immediately prior to such event to the extent of available
Condemnation proceeds. Landlord shall keep Tenant informed as to the progress of
any restoration or repair.
(e) If the Leased Premises are not restored within 6 months
following the date of Taking, then Tenant may send a Termination Notice to
terminate the Lease effective 60 days after Landlord's receipt of the
Termination Notice. If Landlord shall complete the repair or restoration within
the 60 day period between receipt of the Termination Notice and termination of
the Lease, the Termination Notice shall be null and void and this Lease shall
continue as if Tenant had not sent the Termination Notice. If Landlord shall not
complete the repair or restoration within the 60 days prior between receipt of
the Termination Notice and termination of the Lease, the Lease shall terminate.
Notwithstanding the foregoing, if Tenant exercises its Purchase Option within 60
days after termination of the Lease hereunder, then Landlord's award shall be
assigned to Tenant, or if the award has been paid to Landlord or Lender then
upon closing the purchase price shall be reduced by the amount of such award.
(f) No temporary Taking of the Leased Premises or any part of the
Leased Premises and/or of Tenant's rights to the Leased Premises or under this
Lease shall terminate this Lease or give Tenant any right to any abatement of
any payments owed to Landlord pursuant to this Lease; any award made to Tenant
by reason of such temporary Taking shall belong entirety to Tenant.
(g) This Paragraph 21 shall be Tenant's sole and exclusive remedy
in the event of a Taking or Condemnation. Tenant hereby waives the benefit of
California Code of Civil Procedure Section 1265.130.
22. LANDLORD DEFAULTS.
(a) Landlord shall not be in default hereunder unless Landlord
fails to perform the obligations required of Landlord within a reasonable time,
but in no event later than 30 days after written notice by Tenant to Landlord in
writing specifying wherein Landlord has failed to perform such obligation;
provided, however, that if the nature of Landlord's obligation is such that more
than 30 days are required for performance, then Landlord shall not be in default
if Landlord commences performance within such 30 day period and thereafter
diligently prosecutes the same to completion. Tenant shall have no rights as a
result of any default by Landlord until
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Tenant gives 30 days' notice to any person who has a recorded interest
pertaining to the Property, specifying the nature of the default. Such 30 days'
notice may be given concurrently with Tenant's delivery of written notice of
such default to Landlord.
(b) Notwithstanding anything to the contrary in the Lease,
Landlord's liability to Tenant for damages resulting from Landlord's breach of
any provision or provisions of the Lease shall not exceed the value of
Landlord's equity interest in the Property.
(c) If (i) neither Landlord nor Lender cures the default within
the time period set forth herein, and (ii) if such default continues for a
period of 60 days, if the nature of Landlord's obligation is such that it can be
cured within 30 days or, if the default is one which cannot be cured within 30
days, Landlord does not commence performance within 60 days or once having
commenced performance is not diligently prosecuting the same to completion, and
(iii) if such default relates to a default under a Mortgage which may be cured
with a monetary payment, and (iv) if the default relates to a default under a
Mortgage for which the appropriate Lender has not provided Tenant with a
subordination, non-disturbance and attornment agreement as described in
Paragraph 32 below, then Tenant may offer to cure the default by paying such
outstanding monetary amount under the Mortgage to the applicable Lender and
deduct such amount from the Basic Rent due under this Lease.
23. ASSIGNMENT AND SUBLETTING.
(a) Tenant may not assign this Lease, voluntarily or
involuntarily, whether by operation of law or otherwise, or sublet the Leased
Premises (collectively "Transfer") at any time to any other Person (a
"Transferee") without the prior written consent of Landlord, which consent shall
not be unreasonably withheld. Any such purported Transfer in the absence of
Landlord's express written consent shall be null and void, or, at Landlord's
option, shall serve to terminate this Lease.
(b) Tenant agrees that it shall be reasonable for Landlord to
withhold its consent to any proposed Transfer for any of the following reasons,
which shall not limit other reasonable grounds for withholding consent:
(i) The proposed Transferee does not have a satisfactory
financial worth and/or financial stability in view of the responsibilities
involved; or
(ii) The proposed Transferee is a governmental authority
(or subdivision or agency thereof) or quasi-governmental agency, whether local,
state, federal or foreign, including, without limitation, the office of the
consulate general or other diplomatic representative of a foreign state or
sovereignty; or
(iii) The proposed use of the Leased Premises by the
Transferee is not permitted under this Lease.
(c) Any Transfer without Landlord's consent shall, at the option
of Landlord, terminate this Lease. Tenant's request for Landlord's consent
pursuant to this Paragraph 23 shall be submitted in writing (the "Transfer
Notice") not less than 15 days prior to the date Tenant desires to secure such
consent. Such request shall be accompanied by all relevant information
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reasonably necessary for Landlord to consider such request including, without
limitation, (i) notice to Tenant's intent to assign or sublease this Lease, (ii)
the name of the proposed assignee or sublessee, and evidence reasonably
satisfactory to Landlord that such proposed assignee or sublessee is comparable
in reputation, stature and financial condition to the other tenants then leasing
comparable space in the Building, and (c) the terms of the proposed assignment
or subletting. Upon request Tenant shall reimburse Landlord for reasonable
attorneys' fees and costs incurred by Landlord in the preparation or review of
the documentation of the Transfer including the consent.
(d) In the event of a Transfer, (i) the terms and conditions of
this Lease shall in no way be deemed to have been waived or modified, (ii)
Landlord's consent to such Transfer shall not be deemed consent to any further
Transfer by either Tenant or a Transferee, (iii) Tenant shall deliver to
Landlord promptly after execution, an original executed copy of all
documentation pertaining to the Transfer and in the event of an assignment such
documentation shall include the Transferee's assumption of Tenant's obligations
under this Lease, and (iv) no Transfer relating to this Lease or agreement
entered into with respect thereto, whether with or without Landlord's consent,
shall relieve Tenant or any guarantor of this Lease from liability under this
Lease.
(e) Notwithstanding any permitted Transfer, Tenant shall at all
times remain directly, primarily and fully responsible and liable for all
payments owed by Tenant under the Lease and for compliance with all obligations
under the terms, provisions and covenants of the Lease.
(f) Notwithstanding the provisions of this Paragraph 23, Tenant
may assign or sublet the Leased Premises, or any portion thereof, without
Landlord's consent but with prior written notice to Landlord, to any corporation
or entity which controls, is controlled by or is under common control with
Tenant, or to any corporation or entity resulting from a merger or consolidation
with Tenant, or to any person or entity which acquires all of the assets of
Tenant as a going concern of the business, or any venture, partnership or
limited liability company so long as Tenant and its Affiliates hold not less
than a 50% interest in such entity ("Affiliate Transferee").
(g) As security for performance of its obligations under this
Lease, Tenant hereby grants, conveys and assigns to Landlord all right, title
and interest of Tenant in and to all subleases now in existence or hereafter
entered into for any or all of the Leased Premises, any and all extensions,
modifications and renewals thereof and all rents, issues and profits therefrom.
Landlord hereby grants to Tenant a license to collect and enjoy all rents and
other sums of money payable under any such sublease of the Leased Premises,
provided, however, that Landlord shall have the absolute right at any time upon
notice to Tenant and any subtenants to revoke said license and to collect such
rents and sums of money and to retain the same. Tenant shall not consent to,
cause or allow any modification or alteration of any of the terms, conditions or
covenants of any of such subleases or the termination thereof, without the prior
written approval of Landlord, which consent shall not be unreasonably withheld,
nor shall Tenant accept any rents more than 30 days in advance of the accrual
thereof.
(h) An Occupant shall not be deemed a Transferee provided such
relationship
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was not created as a subterfuge to avoid the obligations set forth in this
Paragraph 23.
24. EVENTS OF DEFAULT.
(a) The occurrence of any one or more of the following (after
expiration of any applicable cure period as provided in Paragraph 24(b)) shall,
at the sole option of Landlord, constitute an "Event of Default" under this
Lease:
(i) a failure by Tenant to make any payment of Rent or any
other charge (or any portion thereof) due hereunder within 5 days after notice
to Tenant from Landlord that it has failed to make the required payment;
(ii) a failure by Tenant duly to perform and observe, or a
violation or breach of, any other provision hereof (not otherwise specifically
mentioned in this Paragraph 24(a)) 30 days from the date on which notice is
given or, if the default cannot be cured within such 30 day period, the cure
period shall be extended for the period required to cure the default, provided
that Tenant shall commence to cure the default within the said 30 day period and
shall actively, diligently and in good faith proceed with and continue the
curing of the default until it shall be fully cured.
(iii) Tenant shall (A) voluntarily be adjudicated a
bankrupt or insolvent, (B) seek or consent to the appointment of a receiver or
trustee for itself, (C) file a petition seeking relief under the bankruptcy or
other similar laws of the United States, any state or any jurisdiction, (D) make
a general assignment for the benefit of creditors, or (E) be unable to pay its
debts as they mature;
(iv) a court shall enter an order, judgment or decree
appointing, without the consent of Tenant, a receiver or trustee for it or
approving a petition filed against Tenant which seeks relief under the
bankruptcy or other similar laws of the United States, any state or any
jurisdiction, and such order, judgment or decree shall remain undischarged or
unstayed 60 days after it is entered; or
(v) the estate or interest of Tenant shall be levied upon
or attached in any proceeding and such estate or interest is about to be sold or
transferred or such process shall not be vacated or discharged within 60 days
after it is made;
(b) The existence or occurrence of an Environmental Violation by
Tenant shall not be considered and Event of Default hereunder so long as: (i)
Tenant timely notifies Landlord of the existence of the Environmental Violation
and furnishes Landlord with copies of all engineering reports and assessments,
environmental studies, test results and materials obtained by or for Tenant or
its counsel in connection with any Environmental Violation or suspected
violation, (ii) Tenant promptly undertakes investigation and remediation
activities which are satisfactory to Landlord and any Lender with a lien on the
Leased Premises and which are in compliance with all applicable Legal
Requirements and (iii) Tenant demonstrates to the satisfaction or Landlord and
its Lender that Tenant has the financial capacity to properly respond to and
complete the remediation of any Environmental Violation and to satisfy its
indemnification obligations under this Lease.
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25. REMEDIES UPON DEFAULT; ASSIGNMENT OF RENTS; WAIVER OF DEFAULT.
Upon the occurrence of any Event of Default by Tenant under this
Lease, Landlord shall have, in addition to any other remedies available to
Landlord at law or in equity, the option to pursue any one or more of the
following remedies, each and all of which shall be cumulative and nonexclusive,
without any notice or demand whatsoever:
(a) To terminate this Lease, in which event Tenant shall
immediately surrender the Leased Premises to Landlord, and if Tenant fails to do
so, Landlord may, without prejudice to any other remedy which it may have for
possession or arrearages in Rent, enter upon and take possession of the Leased
Premises and expel or remove Tenant and any other person who may be occupying
the Leased Premises or any part thereof, without being liable for prosecution or
any claim or damages therefor; and Landlord may recover from Tenant the damages
provided for in Section 1951.2 of the California Civil Code, as the same is in
effect as of the date hereof (without regard to any subsequent amendment,
modification or repeal thereof) including, without limitation, the worth at the
time of the award of the amount by which the unpaid Rent for the balance of the
Term after the time of the award, exceeds the amount of rental loss for the same
period that the Tenant proves could reasonably have been avoided and at
Landlord's election, such other amounts in addition to or in lieu of the damages
provided for in said Section 1951.2 as may be permitted from time to time by
applicable Law. For the purposes of this Lease, the term "Rent" as used in said
Section 1951.2 shall be deemed to be and to mean all sums of every nature
required to be paid by Tenant pursuant to the terms of this Lease, whether to
Landlord or to others. As used in subdivisions (a)(1) and (a)(2) of said Section
1951.2, the "worth at the time of award" shall be computed by allowing interest
at the lesser of (A) the Interest Rate or (B) the maximum rate permitted by
applicable Law.
(b) If Landlord does not elect to terminate this Lease on account
of any default by Tenant, Landlord may, from time to time, without terminating
this Lease, enforce all of its rights and remedies under this Lease, including
the right to recover all Rent as it becomes due. Landlord has the remedy
described in California Civil Code Section 1951.4 (Landlord may continue the
Lease in effect after Tenant's breach and abandonment and recover Rent as it
becomes due, if Tenant has the right to sublet or assign, subject only to
reasonable limitations).
(c) Landlord may at its election reenter the Leased Premises and,
without terminating this Lease, at any time and from time to time relet the
Leased Premises and Improvements or any parts of them for the account and in the
name of Tenant or Landlord or otherwise to cure any default by Tenant or to
exercise any other right or remedy of Landlord hereunder. Landlord may execute
any leases made under this provision either in Landlord's name or in Tenant's
name and shall be entitled to all Rents from the use, operation or occupancy of
the Leased Premises or Improvements or both. Tenant shall nevertheless pay to
Landlord on the due date specified in this Lease the equivalent of all sums
required of Tenant under this Lease, plus Landlord's expenses, less the proceeds
of any reletting or attornment. In addition to all other rights and remedies it
may have, Landlord shall have all of the rights and remedies of a landlord under
Section 1951.4 of the California Civil Code. Landlord may do all things
reasonably necessary for such reletting, including repairing, remodeling and
renovating of the Leased Premises or Improvements and Tenant shall reimburse
Landlord on demand for all Costs
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incurred by Landlord in connection therewith. If Landlord relets the Leased
Premises it shall apply any sums received upon such reletting in the following
order of priority: (i) to the payment of all Costs incurred by Landlord in
restoring the Leased Premises to good order and repair, or in remodeling,
renovating or otherwise preparing the Leased Premises for reletting, (ii) to the
payment of all Costs (including without limitation any brokerage commissions)
incurred by Landlord in reletting the Leased Premises, and in fulfilling
Landlord's obligations with respect to such reletting (such as, by way of
example, providing services or utilities), (iii) to the payment of Rent (and any
interest thereon) due and unpaid hereunder, and (iv) the balance, if any, to the
payment of future Rent as the same may become due hereunder, but Tenant shall
not in any event have any claim or right to receive any sums so collected by
Landlord, even if such sums exceed the Rents payable hereunder. No act by or on
behalf of Landlord under this provision shall constitute a termination of this
Lease unless Landlord gives Tenant notice of termination. Notwithstanding any
election by Landlord not to terminate this Lease Landlord may at any time
thereafter elect to terminate this Lease for any previous breach or default
hereunder by Tenant which remains uncured or for any subsequent breach or
default.
(d) Landlord shall be entitled at its election to each installment
of Rent or to any combination of installments for any period before termination,
plus interest at the Interest Rate on each such installment of Rent from the due
date of each such installment.
(e) For the purposes of this Paragraph 25, Tenant's right to
possession shall not be deemed to have been terminated by efforts of Landlord to
relet the Leased Premises, by its acts of maintenance or preservation with
respect to the Leased Premises, or by appointment of a receiver to protect
Landlord's interests hereunder. The foregoing enumeration is not exhaustive, but
merely illustrative of acts which may be performed by Landlord without
terminating Tenant's right to possession.
(f) Except for amounts payable by Occupants meeting the
requirements of this Lease, Tenant assigns to Landlord all subrents and other
sums falling due from subtenants, licensees and concessionaires (herein called
"subtenants") during any period in which Tenant is in default and Tenant shall
not have any right to such sums during that period. Landlord may at Landlord's
election reenter the Leased Premises, without terminating this Lease, and either
or both collect these sums or bring action for the recovery of the sums directly
from such obligors. Landlord shall receive and collect all subrents and proceeds
from reletting, applying them in the following order of priority: (i) to the
payment of all Costs incurred by Landlord in restoring the Leased Premises to
good order and repair, or in remodeling, renovating or otherwise preparing the
Leased Premises for reletting, (ii) to the payment of all Costs (including,
without limitation, attorneys' fees or brokers' commissions or both) incurred by
Landlord in reletting the Leased Premises, and in fulfilling Landlord's
obligations with respect to such reletting, (iii) to the payment of Rent (and
any interest thereon) due and unpaid hereunder, and (iv) the balance, if any, to
the payment of future Rent as the same may become due hereunder. Tenant shall
nevertheless pay to Landlord on the due date specified in this Lease the
equivalent of all sums required of Tenant under this Lease, plus Landlords
expenses, less proceeds of the sums assigned and actually collected under this
provision.
(g) No waiver by Landlord or Tenant of any violation or breach of
any of the terms, provisions and covenants herein contained shall be deemed or
construed to constitute a
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waiver of any other or later violation or breach of the same or any other of the
terms, provisions, and covenants herein contained, nor shall any custom or
practice which may develop between the parties in the administration of this
Lease be construed to waive or lessen the right of Landlord or Tenant to insist
upon the performance by the other in strict accordance with all of the terms,
covenants, agreements, conditions, and provisions of this Lease. Forbearance by
Landlord in enforcement of one or more of the remedies herein provided upon an
event of default shall not be deemed or construed to constitute a waiver of such
default. The acceptance of any Rent hereunder by Landlord following the
occurrence of any default, whether or not known to Landlord, shall not be deemed
a waiver of any such default, except only a default in the payment of the Rent
so accepted.
26. NOTICES.
All notices, demands, requests, consents, approvals, offers,
statements and other instruments or communications required or permitted to be
given pursuant to the provisions of this Lease shall be in writing and shall be
deemed to have been given and received for all purposes when delivered in person
or by Federal Express or other reliable 24-hour delivery service or 3 business
days after being deposited in the United States mail, by registered or certified
mail, return receipt requested, postage prepaid, addressed to the other party at
its address stated in the introductory paragraph of this Lease or when delivery
is refused. For the purposes of this Paragraph, any party may substitute another
address stated above (or substituted by a previous notice) for its address by
giving 15 days' notice of the new address to the other party, in the manner
provided above.
27. ESTOPPEL CERTIFICATE.
At any time upon not less than 10 days' prior written request by
either Landlord or Tenant (the "Requesting Party") to the other party (the
"Responding Party"), the Responding Party shall deliver to the Requesting Party
a statement in writing (the "Certificate"), executed by an authorized officer of
the Responding Party, certifying (a) that, except as otherwise specified, this
Lease is unmodified and in full force and effect, (b) the dates to which Basic
Rent, Additional Rent and all other Rent has been paid, (c) that, to the best
knowledge of the signer of such Certificate and except as otherwise specified,
no default by either Landlord or Tenant exists hereunder, (d) such other matters
as the Requesting Party may reasonably request, and (e) if Tenant is the
Responding Party that, except as otherwise specified, there are no proceedings
pending or, to the knowledge of the signer, threatened, against Tenant before or
by a court or administrative agency which, if adversely decided, would
materially and adversely affect the financial condition and operations of
Tenant. Any such statements by the Responding Party may be relied upon by the
Requesting Party, any Person whom the Requesting Party notifies the Responding
Party in its request for the Certificate is an intended recipient or beneficiary
of the Certificate, any Lender or their assignees and by any prospective
purchaser or mortgagee of the Leased Premises.
28. SURRENDER.
No act or thing done by Landlord during the Lease Term shall be
deemed to constitute an acceptance by Landlord of a surrender of the Leased
Premises unless such intent is
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specifically acknowledged in a writing signed by Landlord. The voluntary or
other surrender of this Lease by Tenant, whether accepted by Landlord or not, or
a mutual termination hereof, shall not work a merger, and at the option of
Landlord, shall operate as an assignment to Landlord of all subleases or
subtenancies affecting the Leased Premises. Upon the expiration or earlier
termination of this Lease, Tenant shall, subject to the provisions of this
Paragraph 28, peaceably leave, quit and surrender the Leased Premises to
Landlord in as good order and condition in which the Leased Premises was on the
Commencement Date, except as repaired, rebuilt, restored, altered, replaced or
added to as permitted or required by any provision of this Lease, and except for
ordinary wear and tear or loss by fire or other casualty. Upon such surrender,
Tenant shall, without expense to Landlord, (a) remove or cause to be removed
from the Leased Premises all property which is owned by Tenant or third parties
other than Landlord and (b) repair any damage caused by such removal. Property
not so removed shall become the property of Landlord, and Landlord may
thereafter cause such property to be removed from the Leased Premises. The cost
of removing and disposing of such property and repairing any damage to the
Leased Premises caused by such removal shall be paid by Tenant to Landlord upon
demand. Landlord shall not in any manner or to any extent be obligated to
reimburse Tenant for any such property which becomes the property of Landlord
pursuant to this Paragraph 28.
29. NO MERGER OF TITLE.
There shall be no merger of the leasehold estate created by this
Lease with the fee estate in the Leased Premises by reason of the fact that the
same Person may acquire or hold or own, directly or indirectly, (a) the
leasehold estate created hereby or any part thereof or interest therein and (b)
the fee estate in the Leased Premises or any part thereof or interest therein,
unless and until all Persons having any interest in the interests described in
(a) and (b) above which are sought to be merged shall join in a written
instrument effecting such merger and shall duly record the same.
30. BROKERS.
Landlord and Tenant represent to each other that they have had no
dealings with any broker or agent in connection with this Lease and that they
know of no broker or agent who is entitled to any commission in connection with
this Lease. Each party hereto agrees to indemnify, defend and hold the other
party harmless from and against any claims, demands, losses, liabilities,
lawsuits, judgments, Costs and expenses (including without limitation attorneys'
fees) made by any broker, agent or finder for a commission or fee in connection
with this Lease.
31. FINANCING.
If Landlord desires to obtain or refinance any Loan, Tenant shall
agree, upon request of Landlord, to supply any such Lender with such notices and
information as Tenant is required to give to Landlord hereunder and to extend
the rights of Landlord hereunder to any such Lender and to consent to such
financing if such consent is requested by such Lender. Tenant shall provide any
other consent or statement and shall execute any and all other documents that
such Lender reasonably requires in connection with such financing, including any
subordination, nondisturbance and attornment agreement, so long as the same
recognizes
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Tenant's rights under the Lease including the options contained herein and do
not materially adversely affect any right, benefit or privilege of Tenant under
this Lease or materially increase Tenant's obligations under this Lease.
32. SUBORDINATION AND RELEASE OF GUARANTY.
(a) Tenant acknowledges that, as of the date of this Lease, the
Leased Premises is encumbered with a deed of trust in favor of City National
Bank and a deed of trust in favor of U.S. Small Business Administration.
Landlord shall obtain either (i) pay off the lien of such Mortgages existing as
of the date of this Lease or (ii) obtain a subordination, non-disturbance and
attornment agreement from City National Bank and U.S. Small Business
Administration, within 6 months after execution of this Lease. Landlord shall
provide Tenant with prompt written notice of any notice of default given by City
National Bank or U.S. Small Business Administration within such 6 month period.
(b) This Lease shall be subject and subordinate at all times to
the lien of any Mortgage now existing or hereafter executed in any amount.
Notwithstanding the foregoing, Landlord shall have the right to subordinate or
cause to be subordinated any such liens to this Lease. In the event that any
mortgage is foreclosed or a conveyance in lieu of foreclosure is made for any
reason, Tenant shall, notwithstanding any subordination, have the right to
attorn to, and shall attorn to, and become Tenant of, the successor in interest
to Landlord on all of the terms and conditions contained in this Lease. Tenant
covenants and agrees to execute and deliver, within 5 days of request by
Landlord and in the form requested by Landlord, any additional instruments
evidencing the priority or subordination of this Lease with respect to the lien
of any such Mortgage. A condition precedent to the execution of any future
instrument of subordination is that Landlord shall obtain for the benefit of
Tenant a non-disturbance and attornment agreement from the lender in whose favor
the subordination is given, in content reasonably acceptable to Tenant. Tenant
shall promptly review and execute any non-disturbance agreement submitted to
Tenant by Landlord which meets with the requirements of this Paragraph 32, and
shall promptly advise Landlord if Tenant disapproves of any such proposed
agreement. Said agreement shall provide that (i) Tenant will not be named or
joined in any proceeding to enforce the Mortgage unless such is required by law
in order to perfect the proceeding, (ii) enforcement of the Mortgage will not
terminate the Lease or disturb Tenant in the possession and use of the Leased
Premises, unless Tenant is in default beyond the period provided in the Lease to
remedy the default, (iii) any party succeeding to the interest of the Landlord
as a result of the enforcement of the Mortgage shall be bound to the Tenant
under all the terms, covenants and conditions of this Lease from and after the
date of succeeding to the Landlord's interest under this Lease and for the
balance of the Term of the Lease including the right of Tenant under the Option
to acquire the Property free of any mortgage, except that in no event will such
party be liable for claims arising prior to the date of succession, or be
subject to offsets or defenses Tenant might have against a prior Landlord, or be
bound by any amendment to the Lease made without Lender's consent, or be liable
for completion of construction of any improvements, or be bound by any Rent
payments made more than one month in advance to the prior Landlord, and (iv)
Tenant is obligated to attorn to any party succeeding to the interest of the
Landlord as a result of the enforcement of a Mortgage. If Tenant fails to
execute and deliver promptly any documents or instruments required by this
Paragraph 32, such failure shall, at Landlord's option, constitute an Event of
Default under the Lease, and Tenant hereby irrevocably constitutes and
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appoints Landlord as Tenant's special attorney-in-fact to execute and deliver
any such documents or instruments.
(c) Tenant acknowledges that, as of the date of this Lease,
Landlord has guaranteed the Mortgage in favor of City National Bank (the "City
National Guaranty"). Landlord shall cause the City National Guaranty to be
terminated within 6 months after execution of this Lease.
33. HOLDING OVER.
If Tenant holds over after the expiration of the Lease Term or the
earlier termination or cancellation of this Lease with or without the express
written consent of Landlord, Tenant shall become a tenant from month-to-month
only, terminable on 30 days' notice. All the terms, provisions and conditions of
this Lease shall apply to this month-to-month tenancy except those terms,
provisions and conditions pertaining to the Term, and except that Base Rent
shall be immediately adjusted upward upon the expiration or termination of the
Lease to 200% of the Base Rent in effect upon the date of such expiration or
earlier termination or cancellation of this Lease. Acceptance by Landlord of
Rent after such expiration or earlier termination or cancellation shall not
result in a renewal of this Lease or waiver of any default or circumstances of
termination. The provisions of this Paragraph shall not be deemed to limit or
constitute a waiver of any other rights or remedies of Landlord provided herein,
at law or in equity and nothing contained in this Paragraph shall be construed
as consent by Landlord to any holding over by Tenant. In the event that Tenant
fails to surrender the Leased Premises upon such termination or expiration, then
Tenant shall indemnify and hold Landlord harmless against all loss or liability
resulting from or arising out of Tenant's failure to surrender the Premises,
including, but not limited to, any amounts required to be paid to any tenant or
prospective tenant who was to have occupied the Leased Premises after said
termination or expiration and any related attorneys' fees and brokerage
commissions or any loss to Landlord arising out of a prospective sale of the
Leased Premises.
34. PURCHASE OPTION.
Provided there is no monetary Event of Default by Tenant under
this Lease at the time of exercising the option and prior to the Closing Date,
Landlord hereby grants Tenant the right during the Term to acquire the Leased
Premises including the Leased Premises (the "Purchase Option") upon the terms of
the Agreement for Purchase and Sale of Real Estate and Joint Escrow Instructions
in the form attached hereto as Exhibit D (the "Purchase Agreement"). The
Purchase Option may be exercised (a) during the Term upon 30 days written notice
from Tenant to Landlord, (b) as permitted pursuant to Paragraphs 20(b)(ii) and
20(b)(iii) above, (c) within 60 days following Landlord's termination of the
Lease pursuant to Paragraph 20(b)(iv) above, or (d) as permitted pursuant to
Paragraphs 21(b) or 21(e). Upon execution of the Purchase Agreement pursuant to
this Paragraph 34, the parties shall promptly deposit executed copies of the
Purchase Agreement with escrow holder and make all required deposits including
the $7,500,000.00 Purchase Price so that the sale may timely close as provided
in the Purchase Agreement. The Purchase Option granted herein is personal to
Tenant but may be exercised by any Affiliate Transferee or permitted Transferee
that has acquired the entire interest of Tenant in the Leased Premises by
assignment of the Lease with the consent of Landlord. Tenant
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acknowledges that it will have been in possession of the Leased Premises at the
time it exercises the Purchase Option hereunder and, as such, Tenant shall not
have the right to any contingency period in which to review title, the physical
condition (including environmental) and financial condition of the Premises.
35. BANKRUPTCY.
If Tenant assumes this Lease and proposes to assign the same
pursuant to the provisions of the Bankruptcy Code, 11 U.S.C. 101 et seq., or any
successor statute (the "Bankruptcy Code") to any person or entity who shall have
made a bona fide offer to accept an assignment of this Lease on terms acceptable
to Tenant then notice of such proposed assignment, setting forth (a) the name
and address of such person, (b) all of the terms and conditions of such offer,
and (c) the adequate assurance to be provided Landlord to assure such person's
future performance under this Lease, including, without limitation, the
assurance referred to in Section 365(b)(3) of the Bankruptcy Code, shall be
given to Landlord by Tenant no later than 20 days after receipt by Tenant but in
any event no later than 10 days prior to the date that Tenant shall make
application to a court of competent jurisdiction for authority and approval to
enter into such assignment and assumption, and Landlord shall thereupon have the
prior right and option, to be exercised by notice to Tenant given at any time
prior to the effective date of such proposed assignment, to accept an assignment
of this Lease upon the same terms and conditions and for the same consideration,
if any, as the bona fide offer made by such person, less any brokerage
commissions which may be payable out of the consideration to be paid by such
person for the assignment of this Lease.
36. MISCELLANEOUS.
(a) The Paragraph headings in this Lease are used only for
convenience in finding the subject matters and are not part of this Lease or to
be used in determining the intent of the parties or otherwise interpreting this
Lease.
(b) As used in this Lease, the singular shall include the plural
and any gender shall include all genders as the context requires and the
following words and phrases shall have the following meanings: (i) "including"
shall mean "including without limitation"; (ii) "provisions" shall mean
"provisions, terms, agreements, covenants and/or conditions"; (iii) "lien" shall
mean "lien, charge, encumbrance, title retention agreement, pledge, security
interest, mortgage and/or deed of trust"; (iv) "obligation" shall mean
"obligation, duty, agreement, liability, covenant and/or condition"; (v) " the
Leased Premises" shall mean "the Leased Premises or any part thereof or interest
therein"; (vi) "any of the Land" shall mean "the Land or any part thereof or
interest therein"; (vii) "any of the Improvements" shall mean "the Improvements
or any part thereof or interest therein"; and (viii) "any of the Equipment"
shall mean "the Equipment or any part thereof or interest therein."
(c) Any act which Landlord is permitted to perform under this
Lease may be performed at any time and from time to time by Landlord or any
person or entity designated by Landlord. Time is of the essence with respect to
the performance of the obligations under this Lease.
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(d) This Lease constitutes the entire agreement between Landlord
and Tenant and supersedes all prior understandings and agreements, whether
written or oral, between the parties hereto relating to the Leased Premises and
the transactions provided for herein. This Lease may be modified, amended,
discharged or waived only by an agreement in writing signed by the party against
whom enforcement of any such modification, amendment, discharge or waiver is
sought.
(e) If any one or more of the provisions contained in this Lease
shall for any reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Lease, but this Lease shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
(f) In the event of any legal proceedings, including any
arbitration proceeding, dispute resolution, or litigation of any nature,
relating to this Lease, the prevailing Party shall be entitled to reimbursement
of its Costs and reasonable attorneys' fees from the other Party not prevailing.
If any Party secures a judgment in any proceeding brought to enforce or
interpret this Lease, then any Costs or expenses (including reasonable
attorneys' fees) incurred in enforcing or in appealing from such judgment shall
be payable by the Party against whom such judgment has been rendered and shall
be recoverable separately from and in addition to any other amount included in
such judgment. This Paragraph 36(f) is intended to be severable from the other
provisions of this Lease and to survive and not be merged into any such
judgment.
(g) All exhibits attached hereto are incorporated herein as if
fully set forth.
(h) All covenants and agreements to be performed by Tenant under
the Lease shall be performed by Tenant at Tenant's sole cost and expense. If
Tenant shall fail to perform any act on its part to be performed under the
Lease, and such failure shall continue for 3 days after notice thereof to Tenant
(provided that no notice shall be required in cases of emergency), Landlord may,
but shall not be obligated to do so, without waiving or releasing Tenant from
any obligations of Tenant, perform any such act on Tenant's part to be made or
performed as provided in the Lease. All Costs incurred by Landlord with respect
to any such performance by Landlord (including reasonable attorneys' fees) shall
be immediately paid by Tenant to Landlord.
(i) This Lease shall be governed by and construed and enforced in
accordance with the Laws of the State of California.
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40
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to
be duly executed under seal as of the day and year first above written.
LANDLORD:
XXXXX XXXXX XXXXXXX, LLC,
a California Limited Liability Company
By: /s/ Xxxx Xxxxx
------------------------------------
Xxxx Xxxxx, Member
By: /s/ Xxxxxx Xxxxx
------------------------------------
Xxxxxx Xxxxx, Member
By: /s/ Xxxxxx Xxxxxxx
------------------------------------
Xxxxxx Xxxxxxx, Member
TENANT:
XXXXX/MERHI ENTERTAINMENT GROUP, INC., a
California Corporation, a wholly-owned
subsidiary of Xxxxxx Entertainment
Company
By: /s/ Xxxxxx Xxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxx
----------------------------------
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TABLE OF CONTENTS
1. Lease of Premises.................................................................. 1
2. Certain Definitions................................................................ 1
3. Title, "As-Is" Condition And Utilities............................................ 5
4. Use Of Leased Premises; Quiet Enjoyment; Occupants................................ 6
5. Term.............................................................................. 7
6. Basic Rent........................................................................ 8
7. Late Charge....................................................................... 8
8. Disputes as to Payments of Rent................................................... 8
9. Security Deposit.................................................................. 9
11. Taxes, Assessments and Impositions................................................ 11
12. Net Lease......................................................................... 12
13. Compliance with Laws and Environmental Matters.................................... 13
14. No Liens; Memorandum of Purchase Option........................................... 15
15. Maintenance and Repair............................................................ 16
16. Alterations and Improvements...................................................... 18
17. Permitted Contests................................................................ 19
18. Indemnification and Waiver........................................................ 20
19. Insurance......................................................................... 22
20. Casualty.......................................................................... 24
21. Condemnation...................................................................... 26
22. Landlord Defaults................................................................. 27
23. Assignment and Subletting......................................................... 28
24. Events of Default................................................................. 30
25. Remedies Upon Default; Assignment of Rents; Waiver of Default..................... 31
26. Notices........................................................................... 33
27. Estoppel Certificate.............................................................. 33
28. Surrender......................................................................... 33
29. No Merger of Title................................................................ 34
30. Brokers........................................................................... 34
31. Financing......................................................................... 34
32. Subordination and Release of Guaranty............................................. 35
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42
TABLE OF CONTENTS
(Continued)
33. Holding Over...................................................................... 36
34. Purchase Option................................................................... 36
35. Bankruptcy........................................................................ 37
36. Miscellaneous..................................................................... 37
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Exhibits*
Description Exhibit
----------- -------
Machinery and Equipment A
Form of Notice of Lease Commencement B
Memorandum of Lease and Purchase Option C
Form of Purchase Agreement D
Language E
*The Schedules and Exhibits are omitted from this filing. The Company agrees to
furnish supplementally a copy of any Schedule or Exhibit to the Commission upon
request.
