EXHIBIT 2.3
FACILITIES LEASE
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This Facilities Lease (the "Lease") is made June 17, 1996, between
Fullerton Holdings, Inc., a California corporation ("Landlord") and Morehouse-
COWLES, Inc., a California corporation ("Tenant").
1. Premises.
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1.1 Description. Landlord leases to Tenant and Tenant leases
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from Landlord the real property and all improvements thereon located at 1600
West Commonwealth Avenue, Fullerton, California 92633 and more particularly
described in Exhibit A hereto (the "Premises").
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1.2 Acceptance. Tenant acknowledges that it has made such
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inspections of the Premises as it deems necessary to determine the condition
thereof and that no representations or warranties have been made by Landlord or
its representatives with respect thereto. Tenant acknowledges that it is
relying solely on its inspections in determining the condition of the Premises
and that it accepts the same in an "as is" condition, except to the extent of
the environmental indemnification made by Landlord for the benefit of Tenant as
set forth in Section 16 hereof.
2. Term.
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2.1 Initial Term. The initial term of this lease shall commence
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on June 17, 1996 and end on July 31, 2006, unless sooner terminated pursuant to
any provision hereof.
2.2 Option to Extend. Tenant is given the option to extend the
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term of this Lease for a period of five years commencing on the expiration of
the initial term. The option must be exercised by giving written notice of
exercise to Landlord at least six months, but not more than nine months before
the expiration of the then initial term. If Tenant is in "Default" (as defined
in Section 17 at either the time of giving the notice of exercise of its option
to extend or on the date the term of extended term is to commence, the exercise
of such option shall be deemed to be ineffective and such option shall
automatically terminate unexercised. All of the provisions of this Lease shall
remain in effect during any extension of the term of this Lease.
3. Rent.
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3.1 Monthly Rent. Tenant shall pay to Landlord in advance on the
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first day of each month as monthly rent, without deduction, setoff, prior
notice, or demand (a) the sum of Four Thousand Dollars ($4,000) per month
commencing on July 1, 1996 and continuing through the June 30, 2001; and (b) the
sum of Five Thousand Five Hundred Dollars ($5,500) per
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month commencing on July 1, 2001 and continuing through July 31, 2006. Rent
during any extension of the initial term shall be as set forth in Exhibit B
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hereto. Rent for any period which is for less than one full month shall
be pro rated on a daily basis.
All rent shall be payable in lawful money of the United States to
Landlord at the address to which notices to Landlord are to be given.
3.2 Late Payments. If Tenant shall neglect or fail to pay the
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monthly rent or any other amount required to be paid by it under this Lease
within ten days following the date when the same is due and payable, Tenant
shall pay to Landlord, in addition to such unpaid amounts, a late charge equal
to 10% of the past due installment. Tenant acknowledges that the late payment by
Tenant of any installment of any rent or any other sum of money required to be
paid by Tenant under this Lease will cause Landlord to incur certain costs and
expenses not contemplated under this Lease, the exact amount of which costs
being extremely difficult and impractical to fix. Such costs and expenses shall
include, without limitation, administrative and collection costs, and processing
and accounting expenses and other costs and expenses necessary and incidental
thereto. Landlord and Tenant agree that the late charge set forth in this
Section represents a reasonable estimate of such costs and expenses and is fair
compensation to Landlord for its loss suffered by such non-payment by the tenth
day of the month by Tenant. The interest and late charge provisions contained
herein are in addition to and do not diminish or represent a substitute for any
or all of Landlord's rights contained in this Lease or under applicable law..
3.3 Net Rental. It is the intent of Landlord and Tenant that the
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monthly rent payable to Landlord hereunder shall be net to Landlord so that
this Lease shall yield to Landlord the total rent specified in subsection 3.1
each month during the term of this Lease. Unless otherwise specifically
provided in this Lease, all costs, expenses, and charges of every kind and
nature relating to the Premises which may be attributed to, or become due during
the term of this Lease shall be paid by Tenant as additional rent hereunder.
Such costs, charges and expenses shall be payable upon commencement of this
Lease, notwithstanding the fact that the monthly rent does not commence at such
time.
4. Taxes.
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4.1 Tenant's Obligation. Commencing on the date hereof, and
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continuing thereafter throughout the term of this Lease, Tenant shall pay as
additional rent an amount equal to all taxes (real and personal), excises,
license and permit fees, assessments, utility levies and charges, and other
governmental charges, general and special, ordinary and extraordinary,
unforeseen as well as foreseen, of any kind or nature whatsoever (including, but
not limited to, assessments for public improvements or benefits) which prior to
or during the term of this Lease are assessed, levied or imposed upon, or become
due and payable as a lien against the Premises or any part thereof; upon any
personal property, equipment or other facility used in the operation thereof
(whether or not owned by Tenant); upon the rent and/or income received from
subtenants or licensees of Tenant; and upon any use or occupancy of the Premises
and of
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any rights, obligations, easements and franchises as may now or hereafter
be appurtenant, or appertain, to the use of the Premises (all of the foregoing
being collectively referred to herein as "Taxes"). If any such Taxes are
payable or may at the option of the taxpayer be paid, in installments, Tenant
may pay the same together with any accrued interest on the unpaid balance of
such Taxes in installments as the same respectively become due. Any Taxes
relating to a fiscal period of the taxing authority, only a part of which period
is included within the term of this Lease, shall be adjusted as between Landlord
and Tenant as of the commencement and termination of the term of this Lease, so
that Tenant shall pay only that portion of said Taxes relating to the term of
this Lease. For the purposes of this Section 4, Taxes shall also include any
tax assessed upon or measured by rents, additional rent or other Landlord
receipts from Tenant, and any tax, fee, or license assessed or measured by
expenditures made by Tenant on behalf of Landlord under or in connection with
this Lease.
4.2 Payment of Taxes. All Taxes (except real property taxes)
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shall be paid directly to the appropriate governmental authority prior to the
delinquency date established by such authority and Tenant shall provide Landlord
with reasonable proof of payment within five days after payment.
Landlord shall pay all real property taxes attributable to the
Premises and invoice Tenant for the same. Tenant shall reimburse Landlord
within ten business days of the receipt of each invoice for property taxes.
Landlord may, at its option, invoice Tenant for real property taxes not more
than twenty days' prior to the due date of the then current installment.
The failure of Tenant to pay the Taxes as and when herein
specified shall, in addition to all other rights and remedies of Landlord
hereunder, subject Tenant to any fine, penalty, interest or costs which Landlord
may incur as a result thereof. If Tenant fails to pay any Taxes as herein
required, Landlord may, at its option, pay the same. Tenant shall pay to
Landlord on demand the amount of the Taxes so paid together with interest
thereon from the date of Landlord's payment to the date of reimbursement by
Tenant at the lesser of 10% per annum or the maximum interest permitted by law.
4.3 Other Taxes. If at any time during the term of this Lease
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the methods of taxation shall be altered so that in lieu of, or as a supplement
to, the whole or any part of the Taxes now levied, assessed or imposed on the
Premises, there shall be levied, assessed or imposed a tax, assessment, levy,
imposition or charge, wholly or partially as a capital levy or otherwise, on the
rents received therefrom, or a tax, assessment, levy (including but not limited
to any municipal, state or federal levy), imposition or charge measured by or
based in whole or in part upon the Premises, this Lease transaction or any
document to which Tenant is a party, creating or transferring an interest or an
estate in the Premises, and imposed upon Landlord, or a license fee measured by
the rent payable under this Lease, then all such taxes, assessments, levies,
impositions, charges or the part thereof so measured or based, shall be deemed
to be included within the term "Taxes" as defined in subsection 4.1, and Tenant
shall pay and discharge the same as herein provided in respect of the payment of
Taxes, it being the intention of the parties hereto
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that the rent to be paid hereunder shall be paid to Landlord absolutely net
without deduction of any nature whatsoever, foreseeable or unforeseeable.
4.5 Exclusion from Taxes. Nothing contained in this Lease shall
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require Tenant to pay any franchise, or income tax of Landlord.
5. Insurance.
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5.1 Non-Liability of Landlord. Landlord shall not be liable to
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Tenant for any damage to Tenant or Tenant's property from any cause and Tenant
waives all claims against Landlord for damage to person or property arising for
any reason, except that Landlord shall be liable to Tenant for damage to Tenant
or Tenant's property resulting from the gross negligence or willful misconduct
of Landlord. The non-liability of Landlord contained in this subsection and
Tenant's indemnification of Landlord in subsection 5.2 shall extend to the
officer, directors, agents, employees and authorized representatives of
Landlord.
5.2 Indemnity. Tenant shall indemnify and hold Landlord harmless
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from any and all damages and liability arising out of, connected with or
incidental to the use or occupancy of the Premises (including without
limitation, the construction of any "Improvements" thereto as defined in
subsection 11.5), except that Tenant shall not be liable for any damage arising
out of the gross negligence or willful misconduct of Landlord unless (and only
to the extent) covered by insurance that Tenant is required to provide under the
terms of this Lease.
The obligation to indemnify shall include reasonable attorneys'
fees and investigation costs and all other reasonable costs, expenses and
liabilities.
5.3 Insurance by Tenant. Tenant will carry and maintain
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throughout the term of this Lease, at Tenant's sole cost and expense, the
insurance currently maintained on the Premises, as set forth in Exhibit C
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hereto, subject to increases in the liability limits as may be recommended from
time to time by Landlord's insurance agent or consultant, provided such
recommendations are consistent with industry practices.
5.4 Failure by Tenant to Maintain Insurance. If Tenant fails to
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maintain the insurance policies required under the provisions of Section 5,
Landlord, may, at its option, secure and maintain such insurance policies and
Tenant shall reimburse Landlord on demand for the cost of such policies together
with interest thereon from the date of purchase by Landlord to the date of
reimbursement by Tenant at the lesser of 10% per annum or the maximum amount
permitted by law.
6. Destruction.
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6.1 Risk Fully or Partially Covered by Insurance. If, during the
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term of this Lease, the Premises are totally or partially destroyed or damaged
from a risk covered by the insurance described in Section 5, such damage or
destruction shall not terminate this Lease, and
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Tenant shall restore the Premises to the extent of the available insurance
proceeds. If the cost of the restoration exceeds the amount of insurance
proceeds received, if any, (the "Shortfall") and Tenant did not comply with its
insurance obligations herein, Tenant shall be responsible for the Shortfall. If
Tenant complied with its insurance obligations hereunder, Landlord may, at its
option, either (a) accept responsibility for the Shortfall, in which case this
Lease shall continue in full force and effect, or (b) notify Tenant of its
intent to terminate this Lease immediately. Landlord shall advise Tenant of its
election in writing within 30 days after the amount of the Shortfall has been
determined.
Restoration of the Premises by Tenant shall include restoration of all
furniture, fixtures, equipment, improvements, alterations, additions, and
personal property located at the Premises.
6.2 Risk Not Covered by Insurance. If, during the term of this
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Lease, the Premises are totally or partially destroyed or damaged from a risk
not covered by the insurance described in Section 5, Landlord may, at its
option, either (a) restore the Premises at Landlord's expense, as soon as
reasonably possible, in which case this Lease shall continue in full force and
effect; or (b) notify Tenant of its intent to terminate this Lease immediately.
Landlord shall advise Tenant of its election in writing within 30 days after the
date of the damage or destruction.
If Landlord elects to terminate this Lease, Tenant, within 30 days
after receiving Landlord's notice to terminate, may pay into a joint bank
account (with Landlord or its representative as a required co-signor) the full
amount of the estimated cost of restoration, in which event Tenant may proceed
to restore the Premises at its expense. In such case this Lease shall not
terminate.
If Landlord elects to terminate this Lease and Tenant does not deposit
the estimated cost of the restoration in the bank account described above, this
Lease shall then terminate.
If Landlord elects to restore the Premises, Landlord shall not be
required to restore alterations or improvements made by Tenant, Tenant's trade
fixtures or other personal property, such excluded items being the sole
responsibility of Tenant to restore. If Landlord does not complete restoration
of the Premises within six months from the date of damage or destruction, Tenant
may then terminate this Lease.
6.3 Loss During Last Part of Term. Notwithstanding the provisions of
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subsections 6.1 and 6.2, if the Premises are totally or partially destroyed or
damaged during the last six months of the term of this Lease rendering the
Premises totally or significantly inaccessible or unusable, Tenant may terminate
this Lease by giving written notice to Landlord not more than 20 days after the
destruction.
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6.4 Abatement of Rent. In the event of damage or destruction
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there shall be no abatement or reduction of rent for the first six (6) months of
any time in which the Premise, in part of whole, cannot be used. Thereafter,
however, rent shall abate in proportion to the portion of the Premises that is
still not usable; provided that to the extent that Tenant is obligated to
restore the Premises, it is diligently pursuing completion of such restoration.
6.5 Waiver. Tenant waives any rights it might otherwise have
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under applicable law to terminate this Lease due to any damage or destruction of
the Premises.
6.6 Legal Restrictions. If existing laws do not permit
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restoration of the Premises following damage or destruction, either party can
terminate this Lease immediately by giving notice to the other party.
7. Utilities, Etc. Tenant shall be responsible for obtaining and the
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payment of all utilities provided to the Premises, including, without
limitation, water, sewer, electrical, telephone and gas.
8. Conduct of Business.
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8.1 Permitted Use. Tenant shall use the Premises for the purpose
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of conducting a business of the type and quality presently operated from the
Premises, and for no other use without Landlord's consent.
8.2 Limitations on Use. Tenant's use of the Premises as provided
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in this Lease shall be in accordance with the following:
a. Cancellation of Insurance. Tenant shall not do, grant
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or keep anything in, on or about the Premises that will cause a cancellation of
any insurance covering the Premises.
b. Compliance with Laws. Tenant shall obtain at its sole
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cost all licenses, permits, certificates, variances and approvals necessary for
the operation of its business and shall comply with all other laws, ordinances,
regulations and orders of all governmental entities concerning the Premises or
Tenant's uses of the same, including, without limitation, (i) those pertaining
to the protection of the environment and the handling, storage, and/or
disposition of hazardous waste materials, and (ii) the obligation at Tenant's
cost to alter, maintain or restore the Premises in compliance and conformity
with all laws (whether now existing or hereafter enacted) relating to the
condition, use or occupancy of the Premises during the term of this Lease. The
judgment of any court of competent jurisdiction or the admission of Tenant in
any action or proceeding against it, that Tenant has violated any such laws,
ordinances or regulations shall be conclusive as between Landlord and Tenant.
c. Waste. Tenant shall not use the Premises in any manner
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that will constitute waste, nuisance or unreasonable annoyance.
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d. Overloading. Tenant shall not do anything on the
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Premises that will cause damage to it, reasonable wear and tear excepted. The
Premises' foundations, floors, and other structural components 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 the Premises,
whether by vibration or otherwise.
e. Maintenance. The Premises shall be kept by Tenant in
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clean condition, free from any objectionable noises, odors or nuisances, and all
health and police regulations shall in all respects and at all times be fully
complied with by Tenant.
9. Assignment or Sublease. Tenant shall not (voluntarily or
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involuntarily) transfer, assign, sublet, enter into license or concession
agreements, change ownership, mortgage, encumber hypothecate or otherwise
transfer this Lease or Tenant's interest in and to the Premises (collectively
"Assignment") to any third party ("Assignee") without the prior written consent
of Landlord, which consent shall not be unreasonably withheld. By way of
example and not limitation, Landlord may take into account in determining
whether to grant its consent to a proposed Assignment, the proposed Assignee's
business reputation, experience, and financial condition. Tenant shall not be
entitled to an Assignment of this Lease while it is in Default hereunder. Any
Assignment made without Landlord's consent shall be voidable and, at Landlord's
election, shall constitute a "Default" under Section 17. No Assignment,
whether with or without Landlord's consent, shall relieve Tenant from its
covenants and obligations for the term of this Lease. In the event any payments
are to be made by an Assignee to Tenant in connection with this Lease or the
Assignment thereof in excess of the rent provided for hereunder, such payments
shall be deemed to be additional rent due Landlord hereunder and shall be
promptly paid by Tenant to Landlord. If Assignee's tenancy terminates prior to
the expiration of this Lease for any reason, Tenant shall be given a credit
against the remaining monthly rent due under Section 3.1 hereof equal to the
amount of any excess monthly rent actually paid by Assignee. Such credit shall
be applied against future monthly rent installments in inverse order of
maturity. It shall not be applied to any other obligations of Tenant hereunder,
including, without limitation, payment of Taxes, insurance, utilities and
maintenance costs.
10. Personal Property and Equipment. Any trade fixtures, equipment and
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other personal property of Tenant not permanently affixed to the Premises shall
remain the property of Tenant. Tenant shall have the right to remove any of its
personal property from time to time.
11. Maintenance, Repairs and Alterations.
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11.1 Tenant's Obligations. Tenant shall keep in good order,
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condition and repair the Premises and every part thereof, structural and
nonstructural ordinary wear and tear excepted (whether or not such portion of
the Premises requiring repair, or the means of repairing the same are reasonably
or readily accessible to Tenant, and whether or not the need for such repairs
occurs as the result of Tenant's use, any prior use, the elements or age of such
portion of the Premises).
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11.2 Landlord's Rights. If Tenant fails to perform Tenant's
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obligations under this Section 11, Landlord may at its option (but shall not be
required to) enter upon the Premises after five days prior written notice to
Tenant, and put the same in good order, condition and repair and the cost
thereof together with interest thereon at the rate of the lesser of 10% per
annum or the maximum amount permitted by law shall become due and payable as
additional rent to Landlord together with Tenant's next rental installment. In
the event of emergency repairs, no prior notice shall be required.
11.3 Landlord's Obligations. It is intended by the parties hereto
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that Landlord shall have no obligation, in any manner whatsoever, to repair and
maintain the Premises, whether structural or nonstructural, all of which
obligations are intended to be that of Tenant. Tenant expressly waives the
benefit of any statute now or hereinafter in effect which would otherwise afford
Tenant the right to make repairs at Landlord's expense or to terminate this
Lease because of Landlord's failure to keep the Premises in good order,
condition and repair.
11.4 Alterations and Additions. Tenant may at its own expense and
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upon prior written notice to Landlord, from time to time during the term hereof,
make alterations, improvements and additions in and to the interior of the
Premises (except those of a structural nature) at a time necessary or convenient
for its purposes provided that the value of the Premises is not hereby
diminished and provided further that no alterations, additions or improvements
(collectively "Improvements") costing in excess of $10,000 may be made without
prior written approval of Landlord. All Improvements shall be in conformance
with all applicable zoning and related usage laws, and any and all applicable
building and construction codes.
All Improvements which require the approval of Landlord
(structural or those costing in excess of $10,000) shall be under the
supervision of a licensed contractor (or licensed architect or licensed
structural engineer, if required by the contractor) and the Improvements shall
be made in accordance with detailed plans and specifications with respect
thereto, approved in writing by Landlord before the commencement of work. All
work with respect to any Improvements must be done in a workmanlike manner and
diligently prosecuted to completion.
Tenant shall pay, when due, all claims for labor and
materials furnished or alleged to have been furnished to or for Tenant at or for
use on the Premises, which claims are or may be secured by a mechanic's or
materialmen's lien against the Premises or any interest therein. Tenant shall
give Landlord not less than ten days notice prior to the commencement of any
work on the Premises, and Landlord shall have the right to post notices of
nonresponsibility in and on the Premises as provided by law. If required or
requested by Landlord or its mortgage lender, Tenant shall cause performance and
payment bonds to be posted by a surety licensed and qualified to do business in
the State of California.
Any Improvements made shall remain on and be surrendered with
the Premises on expiration or termination of the term, except that Landlord can
elect within 30 days before expiration of the term, or within five days after
termination thereof, to require Tenant
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to remove any Improvements that Tenant has made to the Premises. If Landlord so
elects, Tenant at its cost shall restore the Premises to the condition existing
prior to the installation of the Improvements to be removed, before the last day
of the term, or within 30 days after notice of election is given, whichever is
later.
12. Mechanics' Liens. Tenant will keep the Premises, the Improvements
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thereon, and Tenant's leasehold interest free and clear of all mechanics' liens
and other liens on account of work done for Tenant or persons claiming under it.
Tenant may contest any lien if, immediately on demand by Landlord, Tenant
obtains and records a lien release bond issued by a surety authorized to issue
surety bonds in California in such amount and form as is required by applicable
law.
13. Right of Entry. Landlord and its authorized representatives shall
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have the right to enter the Premises at all reasonable times for any of the
following purposes: 1) to determine whether the Premises are in good condition
and whether Tenant is complying with its obligations under this Lease; 2) to do
any necessary maintenance and make any restoration to the Premises that Landlord
has the right or obligation to perform; 3) to serve, post or keep posted any
notices required or allowed under the provisions of this Lease; 4) to post "for
sale" signs at any time during the term, to post "for rent" or "for lease"
during the last six months of the term, or during any period in which Tenant is
in Default; 5) to show the Premises to prospective brokers, agents, buyers,
tenants or persons interested in an exchange, at any time during the term; 6) 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 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 or performed on
any adjacent property or nearby street.
Landlord shall not be liable in any manner for any inconvenience,
disturbance, loss of business, nuisance or other damage arising out of
Landlord's entry on the Premises as provided in this Section, except damage
resulting from the gross negligence or willful misconduct of Landlord.
Tenant shall not be entitled to an abatement or reduction of rent if
Landlord exercises any rights reserved in this section.
14. Condemnation.
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14.1 Condemnation of Entire Premises. In the event the entire
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Premises shall be appropriated or taken under the power of eminent domain by any
public or quasi-public authority, the leasehold estate of Tenant shall cease
upon, but not prior to the date when Tenant shall be actually required to yield
possession of the Premises, and all liabilities of Landlord and Tenant hereunder
accruing subsequent to such date shall cease.
14.2 Partial Condemnation. In the event more than 25% of the
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square footage of the Premises is taken under the power of eminent domain by any
public or quasi-public
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authority, or if because of any appropriation or taking regardless of the amount
so taken the continued conduct of Tenant's business on the Premises would be
prevented or substantially impaired, either Landlord or Tenant shall have the
right to terminate this Lease as of the date of such taking; provided, however,
that this right shall be exercisable only if notice of election to exercise it
is given within 15 days after receipt of notice of the appropriation or taking.
Tenant hereby waives any statutory rights of termination which may arise by
reason of any partial taking of the Premises under the power of eminent domain.
14.3 Continuation of Lease. In the event this Lease is not
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terminated in accordance with the provisions of subsection 14.1 or 14.2, this
Lease shall remain in full force and effect as to the portion of the Premises
remaining after the taking, except that the minimum monthly rent shall be
reduced proportionately to the degree the square footage of the building on the
Premises prior to the taking bears to the square footage of such area after the
taking.
14.4 Condemnation Award. Any award for the taking of all or any
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part of the Premises under the power of eminent domain, or any payment made
under threat of the exercise of such power, shall be the sole property of
Landlord. Tenant shall have no claim thereto and hereby irrevocably assigns and
transfers any right it may have to share in the award to Landlord; provided,
however, that Tenant shall be entitled to apply for a separate award expressly
made for the taking of or damage to leasehold improvements made by Tenant and
Tenant's trade fixtures and personal property, so long as such award does not
otherwise diminish Landlord's award.
15. Bankruptcy and Insolvency. It is specifically recognized between
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Landlord and Tenant that this Lease is entered into to a material extent because
of the unique quality and individuality of Tenant and that the continuing
capacity of Tenant to fulfill each and all of its obligations under this Lease
is essential to Landlord. Accordingly, it is agreed that as an inducement for
Landlord's entering into this Lease, that in the event any of the following
shall occur, neither this Lease nor any interest therein, nor any interest in or
to the Premises shall become an asset of, to, or in any of the below-mentioned
proceedings, nor be passed, transferred or conveyed to any party whatsoever,
whether by operation of law, by judicial order or otherwise (moreover, in any of
the below-enumerated events, Landlord may elect, with or without notice of such
election and with or without entry or other action by Landlord, forthwith to
terminate this Lease; provided, however, that if Landlord should give notice of
such election, it shall be deemed given, and this Lease terminated, upon
transmittal of such notice);
a. Should Tenant institute any proceedings under the
Bankruptcy Act, as such now exists or under any amendments or replacements
thereof or under any other act relating to the subject of insolvency or
bankruptcy;
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b. Should any involuntary proceeding be filed against Tenant
under any such bankruptcy laws and not be dismissed within 60 days;
c. Should Tenant become insolvent or be adjudicated a
bankrupt in any court of competent jurisdiction, or should a receiver or trustee
be appointed of Tenant's property and not removed within 60 days, or should
Tenant make an assignment for the benefit of creditors;
d. Should there occur the attachment, execution or other
judicial seizure of substantially all of Tenant's assets located at the
Premises, or if a writ of attachment is executed on this Lease, and any of the
foregoing are not removed within ten days; or
e. Should this Lease, or any interest therein or to the
Premises, otherwise by operation of law pass to any person or persons other than
Tenant's permitted assigns, unless consented to by Landlord.
16. Environmental Indemnity. Landlord shall indemnify Tenant from all
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costs or liabilities incurred by Tenant as a result of any actions Tenant is
legally required to take following any discovery of contamination of the
Premises by any hazardous or toxic substance, material or waste which is
regulated by any local governmental authority, the State of California, or the
United States Government; other than contamination that can reasonably be
demonstrated to have been caused by Tenant, its agents, employees, customers,
suppliers, invitees or contractors, or by any third parties following the date
hereof.
17. Defaults by Tenant.
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17.1 Types of Default. The occurrence of any of the following
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shall constitute a material default and breach of this Lease by Tenant
("Default"):
a. Rent Default. The failure by Tenant to make, as and
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when due, any payment of rent, additional rent or other charges payable by
Tenant hereunder or to timely discharge any other monetary obligation hereunder.
b. Abandonment. The abandonment or vacation of the
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Premises by Tenant. As used herein, abandonment and vacation is defined to
include, without limitation, any absence of Tenant's personnel from the Premises
for five consecutive days unless due to damage or destruction of the Premises or
for other causes beyond Tenant's reasonable control which prevent Tenant from
gaining access to the Premises.
c. Assignment. The failure of Tenant to obtain Landlord's
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consent, if required, to an Assignment. Such failure shall be deemed incurable
and, at Landlord's option, shall constitute an immediate termination of Tenant's
right to possession of the Premises.
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d. Stock Purchase Transaction. The occurrence of an event
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which constitutes, or with the passage of time or the giving of notice, or both,
would constitute a default under that certain Stock Purchase Agreement between
Tenant and Summa Industries, a California corporation, dated May 24, 1996 (the
"Stock Purchase Agreement") or the instruments or agreements executed pursuant
thereto.
e. Other. The failure to perform any other provisions of
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this Lease where the failure to perform is not cured within 30 days after notice
has been given to Tenant; provided, however, that such notice shall be in lieu
of, and not in addition to, any notice required under California law. If the
breach cannot be reasonably cured within 30 days, Tenant shall not be in Default
of this Lease if it commences to cure the breach within the 30 day period and
diligently and in good faith continues to cure the breach.
17.2 Effect of Notices. The notices specified in Section 19.1
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shall meet the requirements of California law and no further notice shall be
necessary prior to Landlord's assertion of any rights respecting regaining
possession of Premises. The purpose of the 30 day notice specified in Section
17.1(d) is to extend the notice time requirements of the unlawful detainer
statutes of California. In all other respects the statutory notice period shall
apply. Except as might otherwise be provided at law, no notice of default shall
be required under Section 17.1(d). No notice shall be deemed a forfeiture or a
termination of this Lease unless Landlord so elects in the notice.
18. Remedies Upon Default. Landlord shall have the following remedies
---------------------
if Tenant commits a Default. These remedies are not exclusive. They are
cumulative and in addition to any other remedies Landlord may have by agreement
or which are now or later allowed by law.
a. Continuation of Lease. Landlord can continue this Lease
---------------------
in full force and effect, and the Lease will continue in effect as long as
Landlord does not terminate Tenant's right to possession, and Landlord shall
have the right to collect rent when due. During the period Tenant is in
Default, Landlord can enter the Premises and relet them, or any part of them, to
third parties for Tenant's account. Tenant shall be liable immediately to
Landlord for all reasonable costs Landlord incurs in reletting the Premises,
including, without limitation, brokers' commissions, expenses of remodeling the
Premises required by the reletting, and like costs. The reletting can be for a
period shorter or longer than the remaining term of this Lease, subject to
Landlord's duty to mitigate damages. Tenant shall pay the Landlord the rent
when due under this Lease on the dates the rent is due, less the rent Landlord
receives from any reletting. No act by Landlord allowed by this section shall
terminate this Lease unless Landlord notifies Tenant that Landlord elects to
terminate this Lease.
b. Termination of Right to Possession. Landlord can
----------------------------------
terminate Tenant's right to possession of the Premises at any time. No act by
Landlord other than giving notice to Tenant shall terminate this Lease. Acts of
maintenance, efforts to relet the Premises, or the appointment of receiver on
Landlord's initiative to protect Landlord's interest under this Lease shall not
constitute a termination of Tenant's right to possession.
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On termination Landlord may re-enter the Premises and take possession
thereof, remove all persons from the Premises, and Tenant shall have no further
claim under the Lease. Landlord may further take possession of all property of
Tenant and others located on the Premises. Tenant shall have 5 days after
Landlord takes possession of the Premises within which to recover its property
by paying to Landlord all sums owed to it as well as all costs incurred, if any,
by Landlord in storing the property. Should Tenant fail to reclaim the property
in such manner, Landlord may sell or dispose of it in any manner Landlord
chooses and apply the proceeds, if any, first against the cost of storage, then
against any other sums owed to Landlord.
On termination, Landlord also has the right to recover from Tenant:
(i) the worth at the time of the award of the unpaid rent that had been earned
at the time of termination of this Lease; (ii) the worth at the time of the
award of the amount by which the unpaid rent 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 Tenant proves could have been reasonably avoided; (iii) 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 Tenant proves could have been reasonably avoided; and (iv) any other
amount, and court costs necessary to compensate Landlord for all detriment
proximately caused by Tenant's default. The "worth at the time of the award" as
used in (i) and (ii) of this subsection is computed by allowing interest at the
rate of 10% per annum. "The worth at the time of the award" as referred to in
(iii) of this subsection is computed by discounting the amount at the discount
rate of the Federal Reserve Bank of San Francisco at the time of the award, plus
1%.
c. Cure of Tenant's Default. Landlord, at any time, can
------------------------
cure the Default at Tenant's cost. If Landlord, by reason of the Default, pays
any sum or does any act that requires the payment of any sum, the sum paid by
Landlord shall be immediately due from Tenant to Landlord at the time the sum is
paid, and if paid at a later date shall bear interest at the lesser of 10% per
annum or the maximum amount permitted by law from the date the sum is paid by
Landlord until Landlord is reimbursed by Tenant. The sum, together with
interest upon it, shall be additional rent.
d. Waiver. No delay or omission in the exercise of any
------
right or remedy of either party on any breach or Default by the other shall
impair such right or remedy or be construed as a waiver. All waivers must be in
writing. The waiver of any single breach or Default shall not be deemed to be a
waiver of any subsequent breach or Default.
19. Sale of the Premises. If Landlord sells or otherwise transfers all
--------------------
or any portion of the Premises, Landlord, on consummation of the sale or
transfer, shall be released from any liability thereafter asserted under this
Lease. If any security deposit or prepaid rent has been paid by Tenant,
Landlord can transfer the security deposit or prepaid rent to Landlord's
successor, subject to Tenant's right thereto, and on such transfer Landlord
shall be discharged from any further liability in reference to the security
deposit or prepaid rent.
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20. Subordination, Attornment and Estoppel Certificate.
--------------------------------------------------
20.1 Subordination. Upon written request of Landlord, Tenant
-------------
shall subordinate its rights hereunder to the lien of any mortgagee or trustee
under a deed of trust to any bank, insurance company or other lending
institution, or the lien resulting from any other method of financing or
refinancing now or hereafter enforced against the Premises or any portions
thereof, whether now in existence or in the future acquired or constructed, and
to all advances made or hereafter to be made upon the security therefore;
provided, however, such instrument of subordination shall provide that in the
event of foreclosure, or in the event of the exercise of power of sale, a
purchaser shall recognize Tenant's rights under this Lease, provided, Tenant is
not in Default hereunder.
20.2 Attornment by Tenant. In the event any proceedings are
--------------------
brought for foreclosure or in the event of the exercise of the power of sale
under any mortgage or deed of trust made by Landlord covering the Premises,
Tenant shall attorn to the purchaser upon such foreclosure or sale and recognize
such purchaser as Landlord under this Lease, provided that the purchaser shall
acquire and accept the Premises subject to this Lease.
20.3 Estoppel Certificate. Within ten days after request from
--------------------
Landlord, Tenant shall execute and deliver, in recordable form, a certificate
stating that this Lease is unmodified and in full force and effect, or in full
force and effect as modified, and stating the modifications. The certificate
also shall state the amount of minimum monthly rent, the dates to which the rent
has been paid in advance, and the amount of any security deposit or prepaid
rent.
Failure to deliver the certificate within such ten days shall
be conclusive upon Tenant that this Lease is in full force and effect and has
not been modified, except as may be represented by Landlord. If Tenant fails to
deliver the certificate within the ten-day period, it shall be deemed to have
irrevocably constituted and appointed Landlord as its special attorney-in-fact
to execute and deliver the certificate to any third party.
21. Quitclaim Deed. Tenant shall execute and deliver to Landlord on the
--------------
expiration or termination of this Lease, immediately on Landlord's request, a
quitclaim deed to the Premises in recordable form, designating Landlord as
transferee.
22. Holding Over, Successors and Surrender.
--------------------------------------
22.1 Holding Over. If Tenant remains in possession of the
------------
Premises after the expiration of the tenancy created hereunder without
Landlord's written consent and without the execution of a new Lease, Tenant, at
the option of Landlord, shall be deemed to be occupying the Premises from month
to month, subject to all the terms and conditions of this Lease insofar as the
same are applicable to a month-to-month tenancy, except for minimum monthly
rent. The minimum monthly rent for each month of any such month-to-month
tenancy shall be twice the highest monthly rent for the immediately preceding
12-month period.
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If Tenant receives Landlord's consent to hold over, Tenant shall be
deemed to be occupying the Premises on a month-to-month basis, subject to all
the terms and conditions of this Lease, except as expressly modified in the
consent.
22.2 Surrender. On the last day of the term hereof or two days
---------
after any sooner termination, Tenant shall surrender the Premises and all
Improvements to Landlord in good condition and repair, broom clean, ordinary
wear and tear excepted. Within such time periods, Tenant shall have removed its
personal property from the Premises (unless Landlord has exercised its rights
against such property arising out of a Default hereunder) and repaired any
damage to the Premises occasioned by such removal, which repairs shall include
the patching and filling of holes and repair of structural damage.
Landlord can elect to retain or dispose of in any manner any of
Tenant's personal property that Tenant does not remove from the Premises within
the time periods stated in the preceding paragraph by giving at least five days
notice to Tenant. Tenant may recover its property during such five-day period
by paying to Landlord all sums owed to it as well as Landlord's reasonable costs
of removing and storing the property. Title to the personal property that
Tenant does not recover and that Landlord elects to retain or dispose of on
expiration of the five-day period shall vest in Landlord. Tenant waives all
claims against Landlord for any damage to Tenant resulting from Landlord's
retention or disposition of any personal property. Regardless of whether Tenant
recovers its personal property, Tenant shall be liable to Landlord for
Landlord's reasonable costs of storing, removing and disposing of any personal
property.
If Tenant fails to surrender the Premises to Landlord on expiration or
two days after termination of the term as required by this subsection, Tenant
shall hold Landlord harmless from all damages resulting from Tenant's failure to
surrender the Premises, including, without limitation, claims made by a
succeeding tenant resulting from Tenant's failure to surrender the Premises,
unless Landlord has consented to Tenant's holding over.
23. Dedication.
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23.1 Dedication. Tenant covenants and agrees to join with
----------
Landlord, but at Landlord's sole cost, in the dedication to proper governmental
authorities of all necessary streets, in the granting of easements to any public
or private authority of any plot or building plan for approval or petition for
rezoning, and, further, in any matter connected with any local improvement
district of which said Premises are or may become a part, or in any other
similar action affecting the Premises. Tenant also agrees to join in the
execution and/or recordation of any instrument or document necessary in
connection with any of the foregoing.
24. Miscellaneous.
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24.1 Time. Time is of the essence of each provision
----
of this Lease.
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24.2 Successors. This Lease shall be binding upon and inure to
----------
the benefit of the parties and their respective successors and assigns, except
as provided in Section 9.
24.3 Severability. If any provision of this Lease is held by a
------------
court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall remain in full force and effect and shall in no way
be effected, impaired or invalidated thereby.
24.4 Exhibits. All exhibits referred to herein are incorporated
--------
herein by this reference.
24.5 Governing Law; Venue. This Lease shall be construed and
--------------------
interpreted in accordance with the laws of the State of California without
regard to any of its conflict of laws or choice of laws provisions. In the
event of any dispute hereunder, the parties agree that any resulting legal
action shall be brought and maintained in a court of competent jurisdiction in
Orange County, California, which county shall be the sole and exclusive venue
for such action.
24.6 Counterparts. At the option of either party, this Lease may
------------
be executed in multiple counterparts, all of which shall be deemed originals,
notwithstanding the fact that the parties may have executed different
counterpart signature pages.
24.7 Negation of Partnership. Landlord is not, and shall not
-----------------------
become or be deemed to be a partner or joint venturer with Tenant by reason of
any provision of this Lease.
24.8 Quiet Enjoyment. Upon Tenant paying the rent reserved
---------------
hereunder and observing and performing all of the covenants, conditions and
provisions to be performed by it, Tenant shall have quiet enjoyment of the
Premises for the term hereof, subject to all of the provisions of this Lease.
24.9 Attorneys' Fees. In the event of any dispute arising out of
---------------
this Lease, the prevailing party shall be entitled to its costs and reasonable
attorneys' fees incurred in resolving such dispute.
24.10 Amendment. This Lease can be amended only by written
---------
instrument signed by both Landlord and Tenant.
24.11 Captions. The section headings in this Lease are for
--------
convenience only and are not a part of this Lease.
24.12 Singular and Plural. Whenever the context of any provisions
-------------------
shall require it, the singular number shall be held to include the plural number
and vice versa, and the use of any gender shall include any other or all
genders.
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24.13 Interpretation. Should any provision of this Lease require
--------------
judicial interpretation, it is agreed that the court interpreting or construing
the same shall not apply a presumption that the terms hereof shall be more
strictly construed against Landlord by reason of it having prepared this Lease,
it being agreed that both Landlord and Tenant have prepared this Lease.
24.14 Notices. All notices hereunder shall be in writing and shall
-------
be deemed to have been duly given on the date of service if served personally on
the party to whom notice is to be given, or on the second day after mailing if
mailed to the party to whom notice is to be given by first class certified mail,
return receipt requested, postage prepaid and addressed as follows:
a. If to Tenant:
Morehouse-COWLES, Inc.
1600 W. Commonwealth Avenue
Fullerton, California 92633
Attn: President
b. If to Landlord:
Fullerton Holdings, Inc.
1600 W. Commonwealth Avenue
Fullerton, California 92633
Attn: James R. Swartwout, President
Either party may, at any time, change its address for purposes of this Section
by giving the other party written notice of the new address in the manner set
forth above.
24.15 Consents. Whenever the consent of Landlord is required, it
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shall not be unreasonably withheld.
24.16 Term. References to the term of this Lease shall include
----
both the initial term and any extensions thereof.
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24.17 Entire Agreement. This Lease constitutes the entire
----------------
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior and contemporaneous agreements concerning the same.
"Landlord"
Fullerton Holdings, Inc.
By: /s/ BRET LEWIS
------------------------------------
Title: President
---------------------------------
"Tenant"
Morehouse-COWLES, Inc.
By: /s/ BRET LEWIS
------------------------------------
Title: President
---------------------------------
GUARANTEE OF LEASE
------------------
For valuable consideration contained in the Stock Purchase Agreement,
Summa Industries, a California corporation, hereby guarantees the faithful
performance of all of the obligations of Landlord contained within this Lease
throughout the duration of the Lease and any extension thereof, subject to any
defenses to such performance that Landlord may have.
Summa Industries
By: /s/ JAMES R. SWARTWOUT
-----------------------------------
Title: Chief Executive Officer
--------------------------------
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