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EXHIBIT 10.12.2
LEASE AGREEMENT
THIS LEASE is made this 17th day of December, 1993, between MORGON
INVESTMENTS, with its principal place of business located at 708 Fiero Commerce
Park, 4-10, San Luis Obispo, California 93401 (hereinafter referred to as
("Lessor") and QUEST DEVELOPMENT CORPORATION, with its principal place of
business located at 708 Fiero Commerce Park 4-10, San Luis Obispo, California
93401 (hereinafter referred to as ("Lessee").
RECITALS
This lease is made with reference to the following facts and
objectives:
1. Lessor is the owner of the premises described in Exhibit "A", which
consists of an approximate 11,600 square foot building and one (16) parking
spaces.
2. Lessee is willing to lease the premises from Lessor pursuant to the
provisions stated in this lease.
3. Lessee wishes to lease the premises for the purposes of operating a
business known as "QDC, Quest Development Corporation".
4. Lessee has examined the premises and is fully informed of their
condition.
WITNESSETH
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1
Premises
Lessor hereby leases to Lessee that real property located at 708 Fiero
Commerce Park, Suites 4,5,6,7,8,9,10,11, San Luis Obispo, California, more
particularly described in Exhibit "A", and the building and the other
improvements located on that real property (hereinafter called "premises"). This
lease confers no rights either with regard to the subsurface of the land below
the ground level of the premises or with regard to airspace above the top of the
roof of the premises.
SECTION 2
Term
The term of this lease shall commence on January 1, 1994, and shall
expire on January 1, 2001.
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SECTION 3
Option to Extend Term
1. Lessee is given the option to extend the term on all the provisions
contained in this lease, except for minimum monthly rent, for three (3) years
"extended term(s)"), by giving notice of exercise of the option ("option
notice") to Lessor at least four (4) months but not more than one (1) year
before the expiration of the term. Provided that, if Lessee is in default on the
date giving the option notice, the option notice shall be totally ineffective,
or if Lessee is in default on the date the extended term is to commence, the
extended term shall not commence and this lease shall expire at the end of the
initial term.
2. The parties shall have sixty (60) days after Lessor received the
option notice in which to agree on minimum monthly rent during the extended
term. If the parties agree on the minimum monthly rent for the extended term
during that period, they shall immediately execute an amendment to this lease
stating the minimum monthly rent.
3. If the parties are unable to agree on the minimum monthly rent for
the extended term within said period, the option notice shall be of no effect
and this lease shall expire at the end of the term. Neither party to this lease
shall have the right to have a court or third party set the minimum monthly
rent.
4. Lessee shall have no other right to extend the term beyond the
extended term(s).
SECTION 4
Acceptance of Premises
On commencement of the term, the premises shall be in good condition.
Lessee's taking possession of the premises on commencement of the term shall
constitute Lessee's acknowledgement that the premises are in good condition.
Lessor and Lessee shall complete a walk through of the premises prior to Lessee
taking possession and will list the condition of the premises. Lessor and Lessee
shall sign the premises condition statement, and the same will be made part of
this lease as Exhibit "B".
SECTION 5
Rent
1. Lessee shall pay to Lessor as minimum monthly rent, without
deduction, setoff, prior notice, or demand, for the use and occupancy of said
premises the sum of Twenty Four Thousand Dollars ($24,000) per month,
(11,600.00) square feet, to and until such time as the premises are vacated or a
new rental agreement supersedes the existing rental agreement. The minimum
monthly rent, which is subject to possible adjustment as provided in Section 6,
shall be due and payable per month in advance on the first day of each and every
month commencing on the date the term commences and continuing during the term.
Minimum monthly rent for the first month or portion of it shall be paid on the
date the term commences. Minimum monthly rent for any partial month shall be
prorated at the rate of one-thirtieth (1/30) of the minimum monthly rent per
day.
2. All rent shall be paid to Lessor at the address specified in this
lease for the service of notices on Lessor or at such other place or places as
Lessor may from time to time designate by written notice served on Lessee. Rent
may be paid by a personal or business check. In the event the Lessee's check is
returned for insufficient funds or stop-payment. Lessee shall thereafter pay
rent with cash or cashier's check only.
SECTION 6
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Rent Adjustment
The minimum monthly rent provided for in Section 5 shall be subject to
adjustment at the commencement of the second year of the term and each year
thereafter, including the option term as stated in Section 3, ("the adjustment
date") as follows:
1. The base for computing the adjustment is the Consumer Price Index
for All Urban Consumers (base year 1967 = 100) for Los Angeles - Long Beach,
published by the United States Department of Labor, Bureau of Labor Statistics
("Index"); which is in effect on the date of the commencement of the term
("Beginning Index"). The Index published most immediately preceding the
adjustment date in question of the adjustment. If the Extension Index has
increased over the Beginning Index, the minimum monthly rent for the following
year shall be set by multiplying the minimum monthly rent set forth in Section 5
by a fraction, the numerator of which is the Extension Index and the denominator
of which is the Beginning Index. In no case shall the minimum monthly rent be
less than the minimum monthly rent set forth in Section 5. On adjustment of the
minimum monthly rent as provided in this lease, the parties shall immediately
execute an amendment to this lease stating the new minimum monthly rent.
2. If the Index is changed so that the base year differs from that in
effect when the term commences, the Index shall be converted in accordance with
the conversion factor published by the United States Department of Labor, Bureau
of Labor Statistics. If the Index is discontinued or revised during the term
such other government index or computation with which it is replaced shall be
used in order to obtain substantially the same result as would be obtained if
the Index had not been discontinued or revised.
SECTION 7
Prepaid Rent
On execution of this lease, Lessee shall pay zero Dollars ($0.00) to
Lessor. Zero Dollars ($0.00) of the sum shall be the minimum monthly rent due
for the first full month of the term. If Lessee is not in default of any of the
provisions of this lease, zero dollars ($0.00) of the sum shall be applied
toward the minimum monthly rent due for the last month of the term or the
extended term if Lessee is given an option to extend the initial term, and the
option is exercised. Said prepaid rent to be remitted in the following form:
SECTION 8
Personal Property Taxes
1. Lessee shall pay before delinquency all taxes, assessments, license
fees, and other charges ("taxes") that are levied and assessed against Lessee's
personal property installed or located in or on the premises, and that become
payable during the term. On demand by Lessor, Lessee shall furnish Lessor with
satisfactory evidence of these payments.
2. If any taxes on Lessee's personal property are levied against Lessor
or Lessor's property or if the assessed value of the premises is increased by
the inclusion of a value placed on Lessee's personal property, and if Lessor
pays the taxes on any of these items or the taxes based on the increased
assessment of these items, Lessee, on demand, shall immediately reimburse Lessor
for the sum of the taxes levied against Lessor, or the proportion of the taxes
resulting from the increase in Lessor's assessment. Lessor shall have the right
to pay these taxes regardless of the validity of the levy.
3. Lessee at Lessee's cost shall have the right, at any time, to seek a
reduction in or contest taxes levied or assessed against Lessee's personal
property. Lessor shall not be required to join in any proceeding or contest
brought by Lessee unless the provisions of any law require that the proceeding
or contest be brought by or in the name of Lessor or any owner of the premises.
In that case Lessor shall join in the proceeding or contest or permit
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it to be brought in Lessor's name as long as Lessor is not required to bear any
costs. Lessee, on final determination of the proceeding or contest, shall
immediately pay or discharge any decision or judgments rendered to the other
with all costs, charges, interest, and penalties incidental to the decision or
judgment.
4. If Lessee does not pay such taxes or assessments when due, and
Lessee seeks a reduction or contest of such as provided in this Section, before
the commencement of the proceeding or contest, Lessee shall furnish to Lessor a
surety bond issued by an insurance company qualified to do business in
California. The amount of the bond shall equal one hundred twenty-five percent
(125%) of the total amount of such taxes on assessments in dispute. The bond
shall hold Lessor harmless from any damage arising out of the proceeding or
contest and shall insure the payment of any judgment that may be rendered.
SECTION 9
Real Property Taxes
1. Lessee shall pay all real property taxes and any increases which
result from increased rate and/or valuation levied and assessed against the
premises.
2. Each year lessor shall notify Lessee of the real property taxes;
and, together with such notice, shall furnish Lessee with a copy of the tax
bill. Lessee shall reimburse Lessor for the real property taxes semi-annually
not later than (ten) 10 days before the taxing authority's delinquency date or
(ten) 10 days after receipt of the tax bill, whichever is later.
SECTION 10
Use
1. Lessee shall use the premises for a business and for no other use
without Lessor's prior written consent.
2. Lessee shall conduct Lessee's business at the premises under the
trade name of QDC, Quest Development Corporation.
SECTION 11
Limitations on use
Lessee's usage of the premises as provided in this lease shall be in
accordance with the following:
1. Lessee shall not do, bring, or keep anything in or about
the premises that will cause a cancellation of any insurance covering the
premises.
2. If the rate of any insurance carried by Lessor is increased
as a result of Lessee's use, Lessee shall pay to Lessor within (ten) 10 days
before the date Lessor is obligated to pay a premium on the insurance, or within
(ten) 10 days after Lessor delivers to Lessee a certified statement from
Lessor's insurance carrier stating that the rate increased was caused solely by
an activity of Lessee on the premises as permitted in this lease, whichever date
is later, a sum equal to the difference between the original premium and the
increased premium.
3. Lessee shall comply with all laws concerning the premises
or Lessee's use of the premises; including, without limitation, the obligation
at Lessee's cost to alter, maintain, or restore the premises in compliance and
conformity with all laws relating to the condition, use, or occupancy of the
premises during the term.
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4. Lessee shall not use the premises in any manner that will
constitute waste, nuisance, or unreasonable annoyance (including, without
limitation, the use of loudspeakers or sound or light apparatus that can be
heard or seen outside the premises) to owners or occupants of adjacent
properties.
5. Lessee shall not do anything on the premises that will
cause damage to the premises.
6. The premises shall not be overloaded. No machinery,
apparatus, or other appliance shall be used or operated in or on the premises
that will in any manner injure, vibrate, or shake the premises.
SECTION 12
Lessee's Maintenance
Lessee at Lessee's cost shall maintain, in good condition, all portions
of the premises; including, without limitation, the following:
1. The structural parts of the building and other improvements that are
a part of the premises, which structural parts include the foundations, bearing
and exterior walls, subflooring, and roof.
2. The unexposed electrical, plumbing, and sewage systems; including,
without limitation, those portions of the systems lying outside the premises.
3. Window frames, gutters, and downspouts on the building and other
improvements that are a part of the premises.
4. Lessee's proportionate share of the following areas, including
maintaining in goods condition and repair and replacing whatever necessary, all
parking areas, sidewalks, curbs, roads, driveways, lighting standards,
landscaping, sewers, water, gas and electrical distributions systems and
facilities, drainage facilities and signs, both illuminated and non-illuminated
that are now or hereafter on the premises. Lessee shall maintain the lines
designating the parking spaces in good condition and paint the same as often as
may be necessary so that they are easily definable at all times. Lessee agrees,
at Lessee's expense, to paint the exterior of all buildings on the premises at
least once every five (5) years during the term of this lease or any extension
thereof, in a first class, workman like manner with at lease one (1) coat of
paint. Lessee agrees to take all reasonable precautions to insure that the
drainage facilities of the various roofs are not clogged and are in good
operable condition at all times. All above work is to be executed to the
approval of landlord and/or as provided for herein.
5. All portions of the interior of the premises and the common areas
consisting of the hallways and lavatories used by Lessee.
6. All Lessee's personal property, signs, storefronts, plate glass, and
show windows.
7. Lessee shall be liable for any damage to the premises resulting from
the acts or omissions of Lessee, Lessee's authorized representatives or
customers.
SECTION 13
Alterations
1. Except as provided in Section 12, Lessee shall not make any
alterations to the premises without Lessor's prior written consent. Any
alterations made shall remain on and be surrendered with the premises on
expiration or termination of the term, except that Lessor can elect within ten
(10) days before expiration of the term,
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or within ten (10) days after termination of the term, to require Lessee to
remove any alterations that Lessee has made to the premises. If Lessor so
elects, Lessee at Lessee's cost shall restore the premises to the condition
designated by Lessor in Lessor's election, before the last day of the term, or
within three (3) days after notice of election is given, whichever is later.
2. If Lessee makes any alterations to the premises as provided in this
Section, the alterations shall not be commenced until ten (10) days after Lessor
has received notice from Lessee stating the date the installation of the
alterations is to commence so that Lessor can post and record an appropriate
notice of non responsibility.
3. Except for construction to be paid by Lessor as provided, Lessee
shall pay all costs for construction done by Lessee, or caused to be done by
Lessee, on the premises as permitted by this lease. Lessee shall keep the
building, other improvements, and land, of which the premises are a part, free
and clear of all mechanics' liens resulting from construction done by or for
Lessee.
4. Lessee shall have the right to contest the correctness or the
validity of any such lien, if, immediately on demand by Lessor, Lessee procures
and records a lien released bond issued by a corporation authorized to issue
surety bonds in California in an amount equal to one and one-half times the
amount of the claim of lien. The bond shall meet the requirement of Civil Code
31343 and shall provide for the payment of any sum that the claimant may recover
on the claim (together with costs of suit, if it recovers in the action).
SECTION 14
Utilities
Lessee shall make all arrangements for and pay for all utilities and
services furnished to or used by it, including, without limitation, gas,
electricity, water, telephone service, and trash collection, and for all
connection charges.
SECTION 15
Exculpation of Lessor
Lessor shall not be liable to Lessee for any damage to Lessee or
Lessee's property from any cause. Lessee waives all claims against Lessor for
damage to person or property arising for any reason, except that Lessor shall be
liable to Lessee for damage to Lessor's authorized representatives.
SECTION 16
Indemnity
Lessee shall hold Lessor harmless from all damages arising out of any
damage to any person or property occurring in, on, or about the premises, except
that Lessor shall be liable to Lessee for damage resulting from the willful acts
or omissions of Lessor or Lessor's authorized representatives. Lessor shall hold
Lessee harmless from all damages arising out of any such damage. A party's
obligation under this section to indemnify and hold the other party harmless
shall be limited to the sum that exceeds the amount of insurance proceeds, if
any, received by the party being indemnified.
SECTION 17
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Public Liability and Property Damage Insurance
Lessee at Lessee's cost shall maintain public liability and property
damage insurance with a single combined liability limit of One Million Dollars
($1,000,000), and property damage limits of not less than Five Hundred Thousand
Dollars ($500,000), insuring against all liability of Lessee and Lessee's
authorized representatives arising out of and in connection with Lessee's use or
occupancy of the premises, and property damage insurance shall insure
performance by Lessee of the indemnity provisions of Section 16. Both parties
shall be named as additional insureds, and the policy shall contain
cross-liability endorsements.
SECTION 18
Lessee's Fire Insurance
1. Lessee at Lessee's cost shall maintain on all Lessee's personal
property, Lessee's improvements, and alterations, in, on, or about the premises,
a policy of standard fire and extended coverage insurance, with vandalism and
malicious mischief endorsements, to the extent of at least one hundred percent
(100%) of their full replacement value. The proceeds from any such policy shall
be used by Lessee for the replacement of personal property or the restoration of
Lessee's improvement or alterations.
2. Lessee at Lessee's cost shall maintain business interruption
insurance, insuring that the minimum monthly rent will be paid to Lessor for a
period of up to one (1) year if the premises are destroyed or rendered
inaccessible by a risk insured against by a policy of standard fire and extended
coverage insurance, with vandalism and malicious mischief endorsements.
SECTION 19
Fire Insurance on Building
1. Lessee at Lessee's cost shall maintain on the building and other
improvements that are a part of the premises a policy of standard fire and
extended coverage insurance, with vandalism and malicious mischief endorsements,
to the extent of at least one hundred percent (100%) of their full replacement
value.
2. The insurance policy shall be issued in the names of Lessor, Lessee,
Lessor's lender and owner's lender (if any), as their interests appear. The
insurance policy shall provide that any proceeds shall be made payable to
Lessor. In case this lease is terminated, the insurance policy and all rights
under it or the insurance proceeds shall be assigned to Lessor at Lessor's
election.
SECTION 20
Other Insurance Matters
1. All the insurance required under this lease shall:
A. Be issued by insurance companies authorized to do business
in the State of California, with a financial rating of at least an A + 3A status
as rated in the most recent edition of Best's Insurance Reports.
B. Be issued as a primary policy.
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C. Contain an endorsement requiring thirty (30) days written
notice from the insurance company to both parties and Lessor's lender before
cancellation or change in the coverage, scope, or amount of any policy.
2. In the event that Lessee fails to procure and/or maintain any
insurance required by this lease, or fails to carry insurance required by law or
governmental regulation, Lessor may (but without obligation to do so) at any
time or from time to time, and without notice, procure such insurance and pay
the premiums therefore, in which event Lessee shall repay the Lessor all sums so
paid by Lessor, together with interest at the highest rate then allowed under
the usury laws of the State of California from the date due until paid, unless
otherwise specifically provided herein, but the payment of such interest shall
not excuse or cure any default by Lessee under this lease.
3. Each policy, or a certificate of the policy, together with evidence
of payment of premiums, shall be deposited with the other party at the
commencement of the term, and on renewal of the policy not less than thirty (30)
days before expiration of the term of the policy.
4. The parties release each other, and their respective authorized
representatives, from any claim for damage to any person or to the premises and
the building and other improvements in which the premises are located; and, to
the fixtures, personal property, Lessee's improvements, and alterations of
either Lessor or Lessee in or on the premises and the building and other
improvements in which the premises are located that caused by or result from
risks insured against under any insurance policies carried by the parties and in
force at the time of any such damage.
5. Each party shall cause each insurance policy obtained by either
party to provide that the insurance company waives all right of recovery by way
of subrogation against either party in connection with any damage covered by any
policy. Neither party shall be liable to the other for any damage caused by fire
or any of the risks insured against under any insurance policy required by this
lease. If any insurance policy cannot be obtained with a waiver of subrogation,
or is obtainable only by the payment of an additional premium charge above that
charged by insurance companies issuing policies without waiver of subrogation,
the party undertaking to obtain the insurance shall notify the other party of
this fact. The other party shall have a period of thirty (30) days after
receiving the notice either to place the insurance with a company that is
reasonably satisfactory to the other party and that will carry the insurance
with a waiver of subrogation, or to agree to pay the additional premium if such
a policy is obtainable at additional cost. If the insurance cannot be obtained
or the party in whose favor a waiver of subrogation is desired refuses to pay
the additional premium charged, the other party is relieved of the obligation to
obtain a waiver of subrogation rights with respect to the particular insurance
involved.
SECTION 21
Destruction of Premises
If, during the term, the premises are totally or partially destroyed
from any cause, rendering the premises totally or partially inaccessible or
unusable, Lessor shall restore the premises or the building and other
improvements in which the premises are located to substantially the same
condition as they were in immediately before destruction, if the restoration can
be made under the existing laws and can be completed within one hundred twenty
(120) working days after the date of the destruction.
2. Such destruction shall not terminate this lease; however, if the
restoration cannot be made in the time stated in this Section, Lessee can
terminate this lease immediately by giving written notice to Lessor. If Lessee
fails to terminate this lease; and, if restoration is permitted under the
existing laws, Lessor, at its election, can either terminate this lease or
restore the premises or the building and other improvements in which the
premises are located within a reasonable time, and this lease shall continue in
full force and effect. If the existing laws do not permit the restoration,
either party can terminate this lease immediately by giving notice to the other
party.
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3. In case of destruction, there shall be an abatement or reduction of
rent between the date of destruction and the date of completion of restoration,
based on the extent to which the destruction interferes with Lessee's use of the
premises.
4. If Lessor is required or elects to restore premises as provided in
this provision, Lessor shall not be required to restore alterations made by
Lessee, Lessee's improvements, Lessee's trade fixtures, and Lessee's personal
property, such excluded items being the sole responsibility of Lessee to
restore.
5. Lessee waives the provisions of Section 1932(2) and 1933(4) of the
California Civil Code with respect to any destruction of the premises.
SECTION 22
Destruction of premises Not Covered by Lessor's Insurance
1. If, during the term, the premises are totally or partially destroyed
from a risk not covered by the insurance described in Section 19, rendering the
premises totally or partially inaccessible or unusable, Lessor shall restore the
premises to substantially the same condition as they were in immediately before
destruction. Such destruction shall not terminate this lease. If the existing
laws do not permit the restoration, either party can terminate this lease
immediately by giving notice to the other party.
2. If the cost of restoration exceeds ten percent (10%) of the then
replacement value of the premises that are destroyed, Lessor can elect to
terminate this lease by giving notice to Lessee within ten (10) days after
determining the restoration cost and replacement value.
3. If Lessor is required or elects to restore the premises as provided
in this provision, Lessor shall not be required to restore alterations made by
Lessee, Lessee's improvements, Lessee's trade fixtures, and Lessee's personal
property, such excluded items being the sole responsibility of Lessee to
restore.
4. If destruction to the premises occurs during the last one (1) year
of the term, Lessor can terminate this lease by giving notice to Lessee not more
than thirty (30) days after the destruction. Except that, if the destruction
occurs during the last one (1) year of the term and if within thirty (30) days
after the destruction Lessee exercises the option to extend the term as provided
in Section 3 (if the time within which the option can be exercised has not
expired), Lessor shall restore the premises as provided in this provision.
5. Lessee waives the provisions of Civil Code Section 1932(2) and Civil
Code Section 1933(4) with respect to any destruction of the premises.
SECTION 23
Condemnation
1. "Condemnation" means (a) the exercise of any governmental power,
whether by legal proceedings or otherwise, by a condemnor and (b) a voluntary
sale or transfer by Lessor to any condemnor, either under threat of condemnation
or while legal proceedings for condemnation are pending.
2. "Date of taking" means the date the condemnor has the right to
possession of the property being condemned.
3. "Award" means all compensation, sums, or anything of value awarded,
paid, or received on a total or partial condemnation.
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4. "Condemnor" means any public or quasi-public authority or private
corporation or individual having the power of condemnation.
5. If, during the term or during the period of time between the
execution of this lease and the date the term commences, there is any taking of
all or any part of the premises or any interest in this lease by condemnation,
the rights and obligations of the parties shall be determined pursuant to
Sections 24, 25, 26, and 27.
SECTION 24
Total Taking
If the premises are totally taken by condemnation, this lease shall
terminate on the date of taking.
SECTION 25
Partial Taking
If any portion of the premises is taken by condemnation, this lease
shall remain in effect, except that Lessee can elect to terminate this lease if
the remaining portion of the building or other improvements or the parking area
that are a part of the premises is rendered unsuitable for Lessee's continued
use of the premises. If Lessee elects to terminate this lease, Lessee must
exercise Lessee's right to terminate pursuant to this Section by giving notice
to Lessor within thirty (30) days after the nature and the extent of the taking
have been finally determined. If Lessee elects to terminate this lease as
provided in this Section, Lessee also shall notify Lessor of the date of
termination, which date shall not be earlier than thirty (30) days nor later
than sixty (60) days after Lessee has notified Lessor of Lessee's election to
terminate; except that this lease shall terminate on the date of taking if the
date of taking falls on a date before the date of termination as designated by
Lessee. If Lessee does not terminate this lease within the sixty (60) day
period, this lease shall continue in full force and effect, except that minimum
monthly rent shall be reduced pursuant to Section 26.
SECTION 26
Effect on Rent
If any portion of the premises is taken by condemnation and this lease
remains in full force and effect, on the date of taking the minimum monthly rent
shall be reduced by an amount that is in the same ratio to minimum monthly rent
as the value of the area of the portion of the premises taken bears to the total
value of the premises immediately before the date of taking.
SECTION 27
Waiver of CCP Section 1265.130
Each party waives the provisions of Code of Civil Procedure Section
1265.130 allowing either party to petition the superior court to terminate this
lease in the event of a partial taking of the premises.
SECTION 28
Assignment
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1. Lessee shall not voluntarily assign or encumber Lessee's interest in
this lease or in the premises, or sublease all or any part of the premises, or
allow any other person or entity (except Lessee's authorized representatives) to
occupy or use all or any part of the premises, without first obtaining Lessor's
written consent. Any assignment, encumbrance, or sublease without Lessor's
written consent shall be voidable and, at Lessor's election, shall constitute a
default. No consent to any assignment, encumbrance, or sublease shall constitute
a further waiver of the provisions of this Section.
2. Lessee immediately and irrevocably assigns to Lessor, as security
for Lessee's obligations under this lease, all rent from any subletting of all
or a part of the premises as permitted by this lease, and Lessor, as assignee
and as attorney-in-fact for Lessee, or a receiver for Lessee appointed on
Lessor's application, may collect such rent and apply it toward Lessee's
obligations under this lease; except that, until the occurrence of an act of
default by Lessee, Lessee shall have the right to collect such rent.
3. If Lessee requests Lessor to consent to a proposed assignment or
subletting, Lessee shall pay to Lessor, whether or not consent is ultimately
given, Lessor's reasonable attorneys' fees incurred in connection with each such
request.
4. If Lessee consists of more than one person, a purported assignment,
voluntary, involuntary, or by operation of law, from one person to the other,
shall be deemed a voluntary assignment.
SECTION 29
Involuntary Assignment
1. No interest of Lessee in this lease shall be assignable by operation
of law (including, without limitation, the transfer of this lease by testacy or
intestacy). Each of the following acts shall be considered an involuntary
assignment:
A. If Lessee is or becomes bankrupt or insolvent, makes an
assignment for the benefit of creditors, or institutes a proceeding under the
Bankruptcy Act in which Lessee is the bankrupt; or, if Lessee is a partnership
or consists of more than one person or entity, if any partner of the partnership
or other person or entity is or becomes bankrupt or insolvent, or makes an
assignment for the benefit of creditors;
B. If a writ of attachment or execution is levied on this
lease;
C. If, in any proceeding or action to which Lessee is a party;
a receiver is appointed with authority to take possession of the premises.
2. An involuntary assignment shall constitute of default by Lessee and
Lessor shall have the right to elect to terminate this lease, in which case this
lease shall not be treated as an asset of Lessee.
SECTION 30
Default
1. The occurrence of any of the following shall constitute a
default by Lessee:
A. Failure to pay rent within ten (10) days of when due, if
the failure continues for three (3) days after notice has been given to Lessee.
B. Abandonment and vacation of the premises (failure to occupy
and operate the premises for fourteen (14) consecutive days, shall be deemed an
abandonment and vacation.
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C. Failure to perform any other provision of this lease if the
failure to perform is not cured with in thirty (30) days after notice has been
given to Lessee. If the default cannot reasonably be cured within thirty (30)
days, Lessee shall not be in default of this lease if Lessee commences to cure
the default within the thirty (30) day period and diligently and in good faith
continues to cure the default.
2. Notices given under this Section shall specify the alleged default
and the applicable lease provisions, and shall demand that Lessee perform the
provisions of this lease or pay the rent that is in arrears, as the case may be,
within the applicable period of time, or quit the premises. No such notice shall
be deemed a forfeiture or a termination of this lease unless Lessor so elects in
the notice.
3. The purpose of the notice requirements set forth in this Section is
to extend the notice requirements of the unlawful detainer statutes of
California.
SECTION 31
Lessor's Remedies
1. Lessor can continue this lease in full force and effect, and the
lease will continue in effect as long as Lessor does not terminate Lessee's
right to possession, and Lessor shall have the right to collect rent when due.
During the period Lessee is in default, Lessor can enter the premises and relet
them, or any part of them, to third parties for Lessee's account. Lessee shall
be liable immediately to Lessor for all costs Lessor incurs in reletting the
premises; including, without limitation, brokers' commissions, expenses of
remodeling the premises required by the reletting, and like costs. Reletting can
be for a period shorter or longer than the remaining term of this lease. Lessee
shall pay to Lessor the rent due under this lease on the dates the rent is due,
less the rent Lessor receives from any reletting. No act by Lessor, allowed by
this Section, shall terminate this lease unless Lessor notifies Lessee that
Lessor elects to terminate this lease; after Lessee's default and for as long as
Lessor elects to terminate this lease. After Lessee's default and for as long as
Lessor does not terminate Lessee's right to possession of the premises, if
Lessee obtains Lessor's written consent, Lessee shall have the right to assign
or sublet Lessee's interest in this lease, but Lessee shall not be released from
liability. Lessor's consent to a proposed assignment or subletting shall not be
unreasonably withheld.
2. If Lessor elects to relet the premises as provided in this Section,
rent that Lessor receives from reletting shall be applied to the payment of:
A. The worth, at the time of award, of the unpaid minimum
monthly rent and/or percentage rent that had been earned at the time of
termination of lease.
B. The worth, at the time of the award, of the amount by which
the unpaid rent that would have been earned after the date of termination of
this lease until the time of award exceeds the amount of loss of rent that
Lessee proves could have been reasonably avoided.
C. The worth of the amounts that would have fallen due as
percentage rent based upon the monthly average of the preceding twelve (12)
months, between the time of termination of this lease and the time of the
judgment or other award, plus interest, less the amount Lessee proves could
reasonably have been avoided.
D. 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 award exceeds the
amount of the loss of rent that Lessee proves could have been reasonably
avoided.
E. Any other amount, and court costs, necessary to compensate
Lessor for all detriment proximately caused by Lessee's default.
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4. "The worth, at the time of the award" as used in subparagraphs 3.a.,
3.b., and 3.c. of this Section is to be computed by allowing interest at the
maximum rate an individual is permitted by law to charge. "The worth, at the
time of the award," as referred to in 3.d. of this Section, is to be computed by
discounting the amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of the award, plus one percent (1%).
5. If Lessee is in default of this lease, Lessor shall have the right
to have a receiver appointed to collect rent and conduct Lessee's business.
Neither the filing of a petition for the appointment of a receiver nor the
appointment itself shall constitute an election by Lessor to terminate this
lease.
6. Lessor, at any time after Lessee commits a default, can cure the
default at Lessee's cost. If Lessor at any time, by reason of Lessee's default,
pays any sum or does any act that requires the payment of any sum, the sum paid
by Lessor shall be due immediately from Lessee to Lessor at the time the sum is
paid; and, if paid at a later date, shall bear interest at the maximum rate an
individual is permitted by law to charge from the date the sum is paid by Lessor
until Lessor is reimbursed by Lessee. The sum, together with interest on it,
shall be additional rent.
SECTION 32
Lessee's Remedies
Lessor shall have thirty (30) days after notice from Lessee to commence
to perform Lessor's obligations under this lease, except that Lessor shall
perform Lessor's obligations immediately if the nature of the problem presents a
hazard or emergency. If Lessor does not perform Lessor's obligations within the
time limitations in this Section, Lessee can perform the obligations and have
the right to be reimbursed for the sum Lessee actually expends in performance of
Lessor's obligations. If Lessor does not reimburse Lessee within thirty (30)
days after demand from Lessee, Lessee's sole remedy shall be to institute suit
against Lessor, and Lessee shall not have the right to withhold from future rent
the sums Lessee has expended.
SECTION 33
Interest on Unpaid Rent
Rent not paid when due shall bear interest from the date due until paid
at the maximum rate an individual is permitted by law to charge.
SECTION 34
Late Charge
Lessee acknowledges that late payment by Lessee to Lessor of rent will
cause Lessor to incur costs not contemplated by this lease, the exact amount of
such costs being extremely difficult and impracticable to fix. Such costs
include, without limitation, processing and accounting charges, and late charges
that may be imposed on Lessor by the terms of any encumbrance and note secured
by any encumbrance covering the premises. Therefore, if any installment of rent
due from Lessee is not received by Lessor within ten (10) days of when due,
Lessee shall pay to Lessor an additional sum of ten percent (10%) of rent due.
The parties agree that this late charge represents a fair and reasonable
estimate of the costs that Lessor will incur by reason of late payment by
Lessee. Acceptance of any late charge shall not constitute a waiver of Lessee's
default with respect to the overdue amount, or prevent Lessor from exercising
any of the other rights and remedies available to Lessor.
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SECTION 35
Signs
1. Lessee at Lessee's cost shall have the right to place, construct,
and maintain on the premises one or more signs advertising Lessee's business at
the premises, and no other signs.
2. Any sign that Lessee has the right to place, construct, and maintain
shall comply with all laws, and Lessee shall obtain any approval required by
such laws. Lessor makes no representation with respect to Lessee's ability to
obtain such approval.
3. Lessee shall have the right to use, for Lessee's signs, the exterior
walls and the roof of the building and other improvements that are a part of the
premises, as allowed by local laws.
4. Lessee's signs shall conform in style and placement to existing
signs located at the premises and commercial center of which the premises is a
part. Lessor's prior written approval of Lessee's signs shall be given as to the
particular style and placement of Lessee's signs.
SECTION 36
Lessor's Entry on Premises
1. Lessor and Lessor's authorized representatives shall have the right
to enter the premises at all reasonable time for any of the following purposes:
A. To determine whether the premises are in good condition and
whether Lessee is complying with Lessee's obligations under this lease.
B. To do any necessary maintenance and to make any restoration
to the premises or the building and other improvements in which the premises are
located that Lessor has the right or obligation to perform.
C. To serve, post, or keep posted any notices required or
allowed under the provisions of this lease.
D. To post "for sale" signs at any time during the term, to
post "for rent" or "for lease" signs during the last three (3) months of the
term, or during any period while Lessee is in default.
E. To show the premises to prospective brokers, agents,
buyers, tenants, or persons interested in an exchange, at any time during the
term, Lessor shall make said showings at commercially reasonable times.
F. To shore the foundations, footings, and walls of the
building and other improvements that are a part of the premises and to erect
scaffolding and protective barricades around and about the premises, but not so
as to prevent entry to the premises, and to do any other act or thing necessary
for the safety or preservation of the premises if any excavation or other
construction is undertaken or is about to be undertaken on any adjacent property
or nearby street. Lessor's right under this provision extends to the owner of
the adjacent property on which excavation or construction is to take place and
the adjacent property owner's authorized representatives.
2. Lessor shall not be liable in any manner for any inconvenience,
disturbance, loss of business, nuisance, or other damage arising out of Lessor's
entry on the premises as provided in this Section, except damage resulting from
the acts or omissions of Lessor or Lessor's authorized representatives.
3. Lessee shall not be entitled to an abatement or reduction of rent if
Lessor exercises any rights reserved in this section.
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4. Lessor shall conduct Lessor's activities on the premises as allowed
in this Section in a manner that will cause the lease possible inconvenience,
annoyance, or disturbance to Lessee.
SECTION 37
Notice
Any notice, demand, request, consent, approval, or communication that
either party desires or is required to give to the other party or any other
person shall be in writing and either served personally or sent by prepaid,
first-class mail return receipt requested. Any notice, demand, request, consent,
approval, or communication that either party desires or is required to give to
the other shall be addressed to the other party at the address set forth in the
introductory paragraph of this lease. Either party may change its address by
notifying the other party of the change of address. Notice shall be deemed
communicated within 72 hours from the time of mailing if mailed as provided in
this Section.
SECTION 38
Waiver
1. No delay or omission in the exercise of any right or remedy of
Lessor on any default by Lessee shall impair such a right or remedy or be
construed as a waiver.
2. The receipt and acceptance by Lessor of delinquent rent shall not
constitute a waiver of any other default; it shall constitute only a waiver of
timely payment for the particular rent payment involved.
3. No act or conduct of Lessor; including, without limitation, the
acceptance of the keys to the premises, shall constitute an acceptance of the
surrender of the p[remises by Lessee before the expiration of the term. Only a
notice form Lessor to Lessee shall constitute acceptance of the surrender of the
premises and accomplish a termination of the lease.
4. Lessor's consent to or approval of any act by Lessee requiring
Lessor's consent or approval shall not be deemed to waive or render unnecessary
Lessor's consent to or approval of any subsequent act by Lessee.
5. Any waiver by Lessor of any default must be in writing and shall not
be a waiver of any other default concerning the same or any other provisions of
the lease.
SECTION 39
Attorney's Fees
Should and litigation be commenced between the parties hereto
concerning the premises, this lease, or the rights and duties of either in
relation thereto, or should an attorney be retained to enforce any provision
herein, whether or not any litigation commences, the party, Lessee or Lessor,
prevailing in such litigation or other action, shall be entitled, in addition to
such other relief as may be granted, to a reasonable sum as and for his
attorney's fees.
SECTION 40
Surrender of Premises: Holding Over
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1. On expiration of the term, or any extended terms, Lessee shall
surrender to Lessor the premises and all Lessee's improvements and alterations
in good condition (except for ordinary wear and tear occurring after the last
necessary maintenance made by Lessee and destruction to the premises covered by
Section 21, except for alterations that Lessee has the right to remove or is
obligated to remove under the provisions of Section 13. Lessee shall remove all
Lessee's personal property within the above stated time. Lessee shall perform
all restoration made necessary by the removal of any alterations or Lessee's
personal property within the time periods stated in this Section.
2. Lessor can elect to retain or dispose of in any manner any
alterations or Lessee's personal property that Lessee does not remove from the
premises on expiration or termination of the term a allowed or required by this
lease by giving at least fifteen (15) days notice to Lessee. Title to any such
alterations or Lessee's personal property that Lessor elects to retain or
dispose of an expiration of the fifteen (15th) day period shall vest in Lessor.
Lessee waives all claims against lessor for any damage to lessee resulting from
Lessors' retention or disposition of any such alterations or lessee's personal
property. Lessee shall be liable to Lessor for Lessor's costs for storing,
removing, and disposing of any alterations or Lessee's personal property.
3. If Lessee fails to surrender the premises to Lessor an expiration of
the term, or any extended terms, as required by this Section, Lessee shall hold
Lessor harmless from all damages resulting from Lessee's failure to surrender
the premises, including, without limitation, all claims made by a succeeding
tenant resulting from Lessee's failure to surrender the premises.
4. If Lessee, with lessor's written consent, remains in possession of
the premises after expiration or termination of the term, or after the date in
any notice given by Lessor to Lessee terminating this lease, such possession by
Lessee shall be deemed to be a month-to-month tenancy terminable on thirty (30)
days notice given at any time by either party. All provisions of this lease,
except those pertaining to term, option to extend, and option to acquire the
premises, shall apply to the month-to-month tenancy.
SECTION 41
Estoppel Certificate
1. At any time during the term of this lease, within five (5) days
after the service on Lessee of a written request by Lessor, Lessee shall
execute, acknowledge, and deliver to Lessor a true statement in writing
certifying:
A. That this lease has not been modified and is in full force and
effect; or
B. The manner in which this lease has been modified and that so
modified this lease is in full force and effect;
C. The date to which rent reserved in this lease has been paid;
and
D. Such other matters pertaining to this lease and the premises
as Lessor may request.
2. Failure to deliver the certificate within the five (5) days shall be
conclusive upon the party failing to deliver the certificate for the benefit of
the party requesting the certificate and any successor to the party requesting
the certificate, that this lease is in full force and effect and has not been
modified except a may be represented by the party requesting the certificate.
3. If a party fails to deliver the certificate within the five (5)
days, the party failing to deliver the certificate irrevocably constitutes and
appoints the other party a its special attorney-in-fact to execute and deliver
the certificate to any third party.
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SECTION 42
Subordination of Lease
This lease and Lessee's leasehold interest under this lease are and
shall be subject, subordinate, and inferior to any lien or encumbrances now or
hereafter placed on the premises by Lessor, to all advances made under and such
lien or encumbrance, and to any and all renewals and extensions of such liens or
encumbrances.
SECTION 43
Governing Law
The parties agree that the laws of the State of California will govern
all disputes under this lease and determine all rights hereunder and that the
venue for any action concerning this lease shall be San Luis Obispo County,
California. If any provision in this lease is held by any court to be invalid,
void, or unenforceable, the remaining provisions shall nevertheless continue in
full force.
SECTION 44
Entire Contract
Lessee and Lessor agree that this instrument contains the sole and only
agreement between them concerning the premises and correctly sets forth their
rights and obligations to each other concerning the premises as of its date. Any
agreement or representation respecting the premises as of its date. Any
agreement or representation respecting the premises or the duties of either
Lessor or Lessee in relation thereto not expressly set forth in this instrument
is null and void. Any amendments to this lease shall be null and void unless in
writing, attached hereto, identified as an amendment to the lease, and signed
and dated by Lessee by Lessor, or their respective agents.
SECTION 45
Miscellaneous Provisions
1. Time is of the essence of each provision of this lease.
2. Whenever consent or approval of either party is required, that party
shall not unreasonably withhold such consent or approval.
3. This lease shall be binding on and inure to the benefit of the
parties and their successors.
4. All exhibits referred to are attached to this lease and incorporated
by reference.
5. All provision, whether covenants or conditions, on the part of
Lessee shall be deemed to be both covenants and conditions.
6. The definitions contained in this lease shall be used to interpret
this lease.
7. As used in this lease, the following words and phrases shall have
the following meanings:
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A. Alternation: Any addition or change to, or modification of,
the premises made by Lessee after the fixturing period; including, without
limitation, fixtures, including trade fixtures, as defined here, and tenant's
improvements as defined here.
B. Authorized Representative: Any officer, agent, employee, or
independent contractor retained or employed by either party, acting within
authority given him by that party.
C. Damage: Injury, deterioration, or loss to a person or property
caused by another person's acts or omissions. Damage includes death.
D. Damages: A monetary compensation or indemnity that
can be recovered in the courts by any person who has suffered damage to his
person, property, or rights through another's act or omission.
E. Destruction: Any damage, as defined here, to or disfigurement
of the premises.
F. Encumbrance: Any deed of trust, mortgage, or other written
security device or agreement affecting the premises, and the note or other
obligation secured by it, that constitutes security for the payment of a debt or
performance of an obligation.
G. Expiration: The coming to an end of the time specified in the
lease as its duration, including any extension of the term resulting from the
exercise of an option to extend.
H. Good condition: The good physical condition of the premises
and each portion of the premises; including, without limitation, signs, windows,
show windows, appurtenances, and tenant's personal property as defined here. "In
good condition" means first-class, neat, clean and broom-clean, and is
equivalent to similar phrases referring to physical adequacy in appearance and
for use.
I. Hold Harmless: To defend and indemnify from all liability,
losses, penalties, damages as defined here, costs, expenses (including, without
limitation, attorneys' fees), causes of action, claims, or judgments arising out
of or related to any damage, as defined here, to any person or property.
J. Law: Any judicial decision, statute, constitution, ordinance,
resolution, regulation, rule, administrative order, or other requirement of any
municipal, county, state, federal, or other government agency or authority
having jurisdiction, over the parties or the premises, or both, in effect either
at the time of execution of the lease or at any time during the term, including,
without limitation, any regulation or order of a quasi-official entity or body
(e.g., board of fire examiners or public utilities).
K. Lender: The beneficiary, mortgagee, secured party, or other
holder of an encumbrance, as defined here.
L. Lien: A charge imposed on the premises by someone other than
Lessor, by which the premises are made security for the performance of an act.
Most of the liens referred to in this lease are mechanics' liens.
M. Maintenance: Repairs, replacement, repainting, and cleaning.
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N. Person: One or more human beings, or legal entities or other
artificial persons; including, with limitation, partnerships, corporations,
trusts, estates, associates, and any combination of human beings and legal
entities.
O. Provision: Any term, agreement, covenant, condition, clause,
qualification, restriction, reservation, or other stipulation in the lease that
defines or otherwise controls, establishes, or limits the performance required
or permitted by either party.
P. Rent: Minimum monthly rent, percentage rent, prepaid rent,
security deposit, real property taxes and assessments, common area charges,
operating costs, insurance, utilities, and other similar charges payable by
Lessee to Lessor, and merchants' association dues and assessments (even if
payable directly to a merchants' association).
Q. Restoration: The reconstruction, rebuilding, rehabilitation,
and repairs that are necessary to return destroyed portions of the premises and
other property to substantially the same physical condition as they were in
immediately before the destruction.
R. Substantial Completion: Completion of Lessor's construction
obligation as evidenced by Lessor's architect or by the general contractor
performing Lessor's construction obligation.
S. Successor: Assignee, transferee, personal representative,
heir, or other person or entity succeeding lawfully, and pursuant to the
provisions of this lease, to the rights or obligations of either party.
T. Lessee's Improvement: Any addition to or modification of the
premises made by Lessee before, at, or near the commencement of the term;
including, without limitation, fixtures (including Lessee's trade fixture, as
defined here).
U. Lessee's Personal Property: Lessee's equipment, furniture,
merchandise, and moveable property placed in the premises by Lessee, excluding
Lessee's trade fixtures, as defined here.
V. Lessee's Trade Fixtures: Any property installed in or on the
premises by Lessee for the purposes of trade, manufacture, omament, or related
use.
W. Term: The period of time during which Lessee has a right to
occupy the premises.
X. Termination: The ending of the term for any reason before
expiration, as defined here.
8. The captions and the table of contents of this lease shall have no
effect on its interpretation.
9. When required by the context of this lease, the singular shall
include the plural.
10. "Party" shall mean Lessor or Lessee; and, if more than one person
or entity is Lessor or Lessee, the obligations imposed on that party shall be
joint and several.
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IN WITNESS WHEREOF, the parties hereto have signed this Agreement, by their
respective authorized officers or agents, on the date indicated above.
LESSOR: Morgon Investments.
BY: /s/ Lennart Mengwall
Lennart Mengwall
BY: /s/ Kevin Azzouz
Kevin Azzouz
LESSEE: Quest Development Corporation
BY: /s/ Lennart Mengwall
Lennart Mengwall
BY: /s/ Kevin Azzouz
Kevin Azzouz
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