Exhibit 10.1
BUSINESS PARK NET LEASE
TABLE OF CONTENTS
1. SALIENT LEASE TERMS ............................................ 1
2. PREMISES ....................................................... 3
3. TERM ........................................................... 5
4. PRE-TERM POSSESSION............................................. 6
5. DELAY IN DELIVERY OF POSSESSION................................. 6
6. OPTIONS......................................................... 7
7. MINIMUM RENT.................................................... 7
8. TAXES........................................................... 8
9. INTENTIONALLY OMITTED........................................... 10
10. ASSIGNMENT AND SUBLETTING...................................... 10
11. PROPERTY INSURANCE............................................. 12
12. LIABILITY INSURANCE............................................ 14
13. INSURANCE POLICY REQUIREMENTS.................................. 15
14. LESSEE INSURANCE DEFAULT....................................... 15
15. INDEMNIFICATION, WAIVER OF CLAIMS AND SUBROGATION.............. 15
16. DESTRUCTION.................................................... 17
17. ACCORD AND SATISFACTION........................................ 19
18. INTENTIONALLY OMITTED.......................................... 19
19. USE............................................................ 19
20. COMPLIANCE WITH LAWS AND REGULATIONS........................... 20
21. UTILITIES...................................................... 27
22. ALTERATIONS.................................................... 28
23. MAINTENANCE AND REPAIRS........................................ 30
24. CONDEMNATION................................................... 31
25. PARKING........................................................ 32
26. ENTRY BY LESSOR................................................ 32
27. SIGNS.......................................................... 33
28. DEFAULT........................................................ 33
29. REMEDIES UPON DEFAULT.......................................... 34
30. FORFEITURE OF PROPERTY AND LESSOR'S LIEN....................... 37
31. SURRENDER OF LEASE............................................. 37
32. LESSOR'S EXCULPATION........................................... 37
33. ATTORNEYS' FEES................................................ 38
i
34. NOTICES.................................................... 38
35. SUBORDINATION.............................................. 39
36. ESTOPPEL CERTIFICATES...................................... 39
37. WAIVER..................................................... 40
38. HOLDING OVER............................................... 40
39. SUCCESSORS AND ASSIGNS..................................... 41
40. TIME....................................................... 41
41. EFFECT OF LESSOR'S CONVEYANCE.............................. 41
42. TRANSFER OF SECURITY....................................... 41
43. CORPORATE AUTHORITY........................................ 41
44. WAIVER OF CALIFORNIA CODE SECTIONS......................... 42
45. WASTE...................................................... 42
46. BANKRUPTCY................................................. 42
47. LATE CHARGES............................................... 44
48. MORTGAGEE PROTECTION....................................... 44
49. MISCELLANEOUS PROVISIONS................................... 44
ii
BUSINESS PARK NET LEASE
1. SALIENT LEASE TERMS
THIS LEASE is dated for reference purposes only this _______ day of July, 1997.
1.1 Parties and Notice Lessor: Square I, LLC
Address: c/o The Edward Pike Co.
3470 Mt. Diablo Blvd.
Suite A205
Lafayette, CA 94549
Fax: (510) 299-4877
Lessee: Cost Plus, Inc.
201 Clay Street
Oakland, CA 94607
Attention: President
Fax: (510) 893-6418
(Section 50.12)
1.2 Premises: (A) Name and Location of Complex:
----------------------------
425 Madison and 430 Jackson Streets, Oakland,
California
(B) Leased Premises:
---------------
The entirety of each Building located at 430
Jackson Street and 425 Madison Street, bounded
by Jackson Street, Madison Street, 4th Street
and 5th Street and the easterly one half of the
adjacent parking lot bounded by 3rd Street, 4th
Street, Jackson Street, and located in Oakland,
California
(C) Approximately 60,000 square feet.
(Section 2.2)
1.3 Term: (A) Commencing on the Commencement Date and
expiring on October 31, 2008;
(B) Two (2) options to extend the term for
five (5) years each
(Section 3.1)
1
1.4 Minimum Rent: Period: Rent per month:
From the Rent Thirty-Five Thousand Five
Commencement Date Hundred Dollars per month
through 120th full month ($35,500);
thereafter:
First Option Period: Forty Thousand Eight
Hundred Twenty-Five
Dollars per month ($40,825);
Second Option Period: Forty-Six Thousand Nine
Hundred Forty-Nine
($46,949).
(Section 7.1)
Subject to the increases, if any, resulting under the
provisions of section 2.4 (c).
1.5 Use: Premises used solely for general office purposes,
training, storage, and any other lawful use approved
by Lessor, which approval shall not be unreasonably
withheld or delayed.
(Section 19.1)
1.6 Contents: This Lease consists of:
Pages 1 through 55
Sections 1 through 50.17
Addenda
Exhibits:
A - Legal Description of Complex
B - Plan of Complex
C - Lessee's Initial Alterations
D - Acknowledgment of Commencement of Term.
The above terms are incorporated in this Lease as indicated above and
referenced herein.
Definitions of the terms in this Lease appear in the following sections:
alterations, 22.2; Award, 24.1(c); bankruptcy event, 46.1; Building, 2.2;
Complex, 2.2; Complex Insurance Premium, 11.3(a); Condemnation, 24.1(a);
Condemnor, 24.1(d); Date of taking, 24.1(b); debtor, 46.1(a); Decision Period,
24.4; Parking Lot 25.1; Environmental Laws, 20.3(a); Hazardous Materials,
20.3(a); Hazardous Use, 20.3(b); Leased Premises, 2.2; Minimum Rent, 7.1;
Nonterminating Party, 24.4; notice, 34.2; obligor, 34.3; person, 49.2; Plans,
22.2(b); Real Property Taxes, or Taxes, 8.1; Report, 20.3(c); restrictions,
2.5;. tax bill, 8.4; Term, 1.3; Terminating Party, 24.4; Transfer of the Leased
Premises, or Transfer, 10.2; uninsured property loss, 16.1; worth at the time of
award, 29.2(b).
2
2. PREMISES
2.1 Demising Clause.
Lessor hereby leases to Lessee, and Lessee hires from Lessor a portion of
the Complex as hereinafter defined.
2.2 Description.
The term "Complex" shall refer to that parcel of real property of which the
Leased Premises forms a part. The Complex is described with particularity in
Exhibit A attached hereto and made a part hereof by reference, and described
generally in Section 1.2(A) hereof. The premises leased herein are described in
Section 1.2(B) and delineated on Exhibit B, which is attached hereto and made a
part hereof by reference, consisting of the approximate amount of square footage
as specified in Section 1.2(C) hereof. The term "Building" shall refer to both
buildings, collectively, which constitute part of the Leased Premises. The
portion leased herein to Lessee, including the Parking Lot, is hereinafter
referred to as the "Leased Premises." As specified in Section 25.1, Lessee shall
be responsible for all costs (including maintenance, taxes and insurance) for
the Parking Lot (as defined in Section 25.1 hereof). Lessor may not change the
shape, size, location, number and extent of the improvements to any portion of
the Complex without consent of Lessee, which shall not be unreasonably withheld.
Lessor shall have the right to reconfigure the Parking Lot to maximize available
parking without Lessee's consent, provided such reconfiguration does not cause
any material detriment to Lessee's access or available parking.
2.3 Condition of Premises
(a) On delivery, the Premises shall be deemed accepted by Lessee "as
is" without representation or warranty by Lessor as to physical condition,
provided however that before the Commencement Date, Lessee, at its own risk, and
expenses, upon reasonable notice to Lessor, and subject to such conditions as
Lessor may impose, may survey the Premises and physically inspect Premises
including and not limited to electrical, plumbing, mechanical, structural, and
roof. Lessee has relied upon its own inspection, and its own professional
advisor in its examination of the Premises and all improvements thereon. Lessee
hereby represents, warrants, and covenants to Lessor that Lessee has conducted,
or prior to the Commencement Date will conduct, Lessee's own investigation of
the Premises and the physical condition thereof, including, without limitation,
accessibility and location of utilities, Use of Hazardous Materials on, from, or
under the Premises, earthquake preparedness of the property, all matters
concerning the Premises with respect to taxes, assessments, income and expense
data, bonds, permissible uses, zoning, covenants, conditions and restrictions,
and other matters which in Lessee's judgment are necessary or advisable or might
affect or influence Lessee's use of the Premises, or bear upon the value and
suitability of the Premises, for Lessee's intended purposes, or Lessee's
willingness to enter into this Lease. Lessee recognizes that Lessor would not
lease the Premises except on an "as is" basis, and acknowledges that Lessor has
made no representations or warranties of any kind in connection with the
Premises other then those, if any, which are expressly set forth in this Lease.
Lessee shall repair all damage to the Premises resulting from
3
Lessee or Lessee's representatives coming upon the Premises to perform any
surveys, inspection, tests or analyses.
(b) Lessee shall indemnify, defend by counsel acceptable to Lessor,
and hold Lessor harmless from and against any cost, claims, damages or
liabilities, including, but not limited to, attorney's fees and court costs,
that may arise in connection with any testing done on the Premises except for
(i) any latent defect in, on, or under the Premises, (ii) the negligence, gross
negligence, or willful misconduct of Lessor, or Lessor's agents,
representatives, contractors, or employees, or (iii) the discovery by Lessee, or
its agents, representatives, contractors, or employees of the presence of any
toxic or hazardous substance in, on, or under the Premises, which condition must
be remediated under applicable Environmental Laws (as defined in Section
20.3(a)). If Lessee does not elect to hire the Premises as provided herein,
Lessee shall: (a) cause the property to be returned to the same condition as it
was prior to any testing done on or with respect to the Premises; and (b)
deliver to Lessor copies of all tests, reports or inspections that Lessee has
conducted on or with respect to the Premises.
2.4 Lessor Premises Obligations
(a) Prior to the earlier of (i) the Rent Commencement Date and (ii)
ninety (90) days after Lessor's receipt of written notice from Lessee (the
"Improvements Notice") during the Term requesting completion of the below
described Lessor improvements (the "Improvements Completion Date") Lessor, shall
cause the replacement of the roof of that portion of the Premises described on
Exhibit B as "Building A", the exterior painting of both buildings which
constitute the Premises and removal of all asbestos tile in the Leased Premises
(the "Lessor Improvements"). The colors used for the exterior painting shall be
subject to Lessee's approval, not to be unreasonably withheld. If for any reason
whatsoever Lessor fails to complete Lessor Improvements by the Improvements
Completion Date, the Lease shall remain in full force and effect, and Lessor
shall have no liability to Lessee for any loss or damage resulting from such
failure. Except as hereinafter provided no such delay or inability to complete
the Premises before the Improvements Completion Date shall give rise to any
right of termination by Lessee of the Lease. Notwithstanding anything in the
foregoing to the contrary, if Lessor has not completed Lessor Improvements by
the Improvements Completion Date, Lessee shall have the right to complete the
Lessor Improvements, pay all costs thereof and off-set those costs up to the
amount of the Construction Upset Figure, as defined below, against Minimum Rent.
(b) Promptly following approval of Lessor Improvements by Lessee,
Lessor shall obtain written estimates, on a competitive bid basis (in accordance
with a procedure established by Lessor following consultation with Lessee), from
three general contractors for the cost to construct, furnish and install Lessor
Improvements. Lessor shall promptly deliver to Lessee a copy of each bid so
obtained and Lessee shall have the right to approve the construction bid and
contractor to construct, furnish and install Lessor Improvements. If Lessee
disapproves the construction bid and/or the contractors, Lessor shall not
proceed with Lessor Improvements. However, if Lessee's approval is unreasonably
withheld, Lessee shall be responsible and liable to Lessor for, and shall pay
all costs and expenses incurred by Lessor in connection with, all delay in the
commencement or completion of Lessor Improvements. Any
4
disapproval by Lessee shall cause the responsibility for obtaining bids and
selecting the contractor to be assumed by the Lessee and the Lessee's right to
terminate this Lease under Section 2.4(a) shall be deemed waived.
(c) Lessor shall pay for all Construction Costs (defined below) not
exceeding One Hundred Thirty Five Dollars ($135,000) (the "Construction Upset
Figure"). Construction Costs exceeding the Construction Upset Figure are herein
referred to as the "Excess Costs". In the event the total estimated Construction
Costs exceed the Construction Upset Figure, Lessee shall pay the Excess Cost
either, at Lessee's option: (i) by a lump sum payment to Lessor (payable prior
to commencement of construction by Lessor) or (ii) provided that Lessee has
obtained the prior written consent of Lessor, which consent Lessor may withhold
in its sole and absolute discretion, by increasing the Minimum Rent payable
under the terms of this Lease by a sum equal to one percent (1%) of the Excess
Costs. In either event, the lump sum payment, or the adjusted Minimum Rent shall
be adjusted to reflect actual Construction Costs within forty-five (45) days
following completion of construction. If Lessee elects to increase its rent as
provided above, the parties shall promptly execute a lease amendment evidencing
such rental increase within five (5) days following establishment of final
Construction Costs, and Lessee shall thereupon pay to Lessor, retroactively, the
amount of any rent payment shortage from Commencement Date through date of
payment.
(d) "Construction Costs" as used herein means all out-of-pocket costs
paid by Lessor to third parties as a result of its performing Lessor
Improvements, including, without limitation, actual cost of construction
(including the contract price for construction); costs of governmental
approvals, inspections, fees and permit charges, additional costs incurred as a
consequence of plan changes required by law or required by Lessor and/or Lessee;
repair of construction defects; restoration after damage or destruction;
recording costs and filing fees; third party management and general overhead
costs; architectural fees and engineering fees incurred by Lessor; cost of
construction period insurance and all other reasonable costs incurred by Lessor
as a result of the construction of the Lessor Improvements.
2.5 Restrictions.
The parties agree that this Lease is subject to the effect of (a) any
zoning laws of the city, county and state where the Complex is situated; and (b)
general and special taxes not delinquent.
3. TERM
3.1 Commencement Date.
The term of this Lease shall commence on the first to occur of (i) the date
the Lessee takes possession of the Premises, or (ii) the date of close of escrow
of Lessor's purchase of the Leased Premises, which shall not be later than
October 31, 1997 (the "Commencement Date") and shall continue through and
including October 31, 2008 (the "Expiration Date"), subject to the provisions of
Article 6 (Option Periods). Should Lessor not purchase the Leased Premises by
October 31, 1997, either party may terminate this Lease immediately upon written
notice to the other party.
5
3.2 Acknowledgment of Commencement.
After delivery of the Leased Premises to Lessee, Lessee shall execute a
written acknowledgment of the date of commencement in the form attached hereto
as Exhibit C and by this reference it shall be incorporated herein.
4. PRE-TERM POSSESSION
4.1 Conditions of Entry.
In the event the Leased Premises are to be constructed or remodeled by
Lessor, Lessor may notify Lessee when the Leased Premises are ready for Lessee's
fixturing or Lessee's work, which may be prior to substantial completion of the
Leased Premises by Lessor. Lessee may thereupon enter the Leased Premises for
such purposes at its own risk, to make such improvements as Lessee shall have
the right to make, to install fixtures, supplies, inventory and other property.
Lessee and Lessor agree that they shall cooperate in good faith so that Lessee's
entry onto the Premises will not in any way interfere with the progress of
Lessor's work. Should such entry prove an impediment to the progress of Lessor's
work, in Lessor's judgment, and despite good faith efforts to cooperate, Lessor
may demand that Lessee forthwith vacate the Leased Premises until such time as
Lessor's work is complete and Lessee shall immediately comply with this demand.
During the course of any pre-term possession, whether such pre-term period
arises because of an obligation of construction on the part of Lessor, or
otherwise, all terms and conditions of this Lease, except for rent and
commencement, shall apply, particularly with reference to indemnity by Lessee of
Lessor under Article 14 herein for all occurrences within or about the Leased
Premises.
5. DELAY IN DELIVERY OF POSSESSION
5.1 Delay.
If Lessor, for any reason whatsoever, cannot deliver possession of the
Leased Premises to Lessee at the commencement of the Term, this Lease shall not
be void or voidable (except as set forth in Section 2.4), nor shall Lessor be
liable for any loss or damage resulting therefrom, but in that event, there
shall be an abatement of rent covering the period between the commencement of
the Term and the time when Lessor can deliver possession. The Term shall be
extended by such delay for an equal period. If Lessor does not deliver the
Leased Premises to Lessee before October 31, 1997, then Lessee shall have the
right to terminate this Lease immediately upon written notice given to Lessor on
or before December 10, 1997.
6
6. OPTIONS
6.1 Option Period(s).
(a) Subject to the provisions hereinafter set forth, Lessor hereby
grants to Lessee two (2) consecutive options (hereinafter the "Option(s)") to
extend the Term of this Lease on the same terms, conditions and provisions as
contained in this Lease, except as otherwise provided herein, for two successive
periods of five (5) years each (the "Options Period(s)"). The first Option
Period shall commence on the day following the Expiration Date (the "First
Option Period Commencement Date") and end on the day prior to the fifth (5)
anniversary of the First Option Period Commencement Date. The second Option
Period shall commence on the fifth (5) anniversary of the First Option
Commencement Date (the "Second Option Period Commencement Date") and end on the
day prior to the fifth (5) anniversary of the Second Option Period Commencement
Date. Each of the First Option Period Commencement Date and the Second Option
Period Commencement Date is hereinafter called an "Option Period Commencement
Date".
6.2 Exercise.
Each Option shall be exercisable by written notice from Lessee to Lessor of
Lessee's election to exercise said Option provided that such notice is received
by Lessor not later than April 30, 2008 and April 30, 2013, as the case may be,
time being of the essence (the "Lessee's Notice of Exercise"). If Lessee fails
to timely give either Notice of Exercise of the applicable Option, said Option
shall thereupon expire. Failure to properly exercise the first Option shall
cause the second Option to thereupon expire.
7. MINIMUM RENT
7.1 Rent Commencement.
(a) Lessee's obligation to pay the Minimum Rent specified Section
1.4(A) shall commence on November 1, 1998 (the "Rent Commencement Date").
However, provided that the responsibility for obtaining bids and selecting the
contractor have not been transferred to Lessee under the provisions of section
2.4(b), and Lessor Improvements are not completed by November 1, 1998, Lessee's
obligation to pay rent shall not commence until Lessor's work is completed.
(b) In the event Lessee takes occupancy of the Premises before
November 1, 1998, Lessee shall pay all expenses for operation and maintenance as
provided for in the Lease of the Premises and all other obligations of Lessee
under the terms of this Lease except for Taxes and Lessor's insurance.
Commencing November 1, 1998, and thereafter during the Term, Lessee shall pay
Taxes and Lessor's insurance premiums as provided for in this Lease, as well as
all other payments required of Lessee under this Lease.
7
7.2 Payment.
(a) Lessee shall pay to Lessor at the address specified in Section
1.1, or at such other place as Lessor may otherwise designate, as "Minimum Rent"
for the Leased Premises the amount specified in Section 1.4 hereof, payable in
advance on the first day of each month during the Term. If the Term commences on
other than the first day of a calendar month, the rent for the first partial
month shall be prorated accordingly.
(b) All payments of Minimum Rent (including sums defined as rent in
Section 29.2) shall be in lawful money of the United States, and payable without
deduction, setoff, offset, counterclaim, recoupment, notice or demand; provided,
however, that if a final judgment is entered in a court of competent
jurisdiction for a Lessor default under the Lease, Lessee shall have the right
to offset rent up to the amount of the judgment against the Lessor not exceeding
Fifty Thousand Dollars ($50,000).
8. TAXES
8.1 Definition.
(a) In this Article 8 the terms "Real Property Taxes" and "Taxes" are used
interchangeably. "Real Property Taxes" as used in this Lease shall include all
Real Property Taxes on the Building, the Complex, the land on which the Building
is situated, and the various estates in the Building and the land, including
this Lease, as well as all personal property taxes levied on the property used
in the operation of the Building or land, whether or not now customary or within
the contemplation of the parties to this Lease. "Taxes" also shall include the
reasonable cost to Lessor of contesting the amount, validity, or applicability
of any Taxes mentioned in this Section as long as Lessee has been notified and
has approved Lessor's decision to contest. If Lessee has disapproved Lessor's
decision to contest by written notice to Lessor within 10 days following
Lessor's request for approval, Lessee shall not be responsible for the cost of
the contest, nor shall Lessee receive any benefit of any tax reduction resulting
therefrom. Further included in the definition of Taxes herein shall be general
and special assessments, fees of every kind and nature, commercial rental tax,
levy, penalty or tax (other than transfer taxes, inheritance or estate taxes)
imposed by any authority having the direct or indirect power to tax, as against
any legal or equitable interest of Lessor in the Leased Premises or in the real
property of which the Leased Premises are a part, as against Lessor's right to
rent or other income therefrom, or as against Lessor's business of leasing the
Leased Premises, any tax, fee, or charge with respect to the possession,
leasing, transfer of interest, operation, management, maintenance, alteration,
repair, use, or occupancy by Lessee, of the Leased Premises or any portion
thereof, the Building, or the Complex, or any tax imposed in substitution,
partially or totally, for any tax previously included within the definition of
Taxes herein, or any additional tax, the nature of which may or may not have
been previously included within the definition of Taxes. The term "Real Property
Taxes" or "Taxes" shall not include any tax which may be levied upon or against
the net income or profits of Lessor or its successors or assigns.
(b) Lessee's Contest. If Lessor does not elect in any year to cause a
contest of the Taxes, then, upon ten (10) days prior written notice to the
Lessor, Lessee may undertake such
8
contest on its own initiative so long as copies of all documents filed in
connection therewith are delivered to the Lessor at least five (5) days prior to
filing with the relevant taxing authority.
8.2 Assessments.
With respect to any general or special assessments which may be levied upon
or against the Leased Premises, the Building, the Complex, or the underlying
realty, or which may be evidenced by improvement or other bonds, and which may
be paid in annual or semi-annual installments, only the current amount of such
installment, prorated for any partial year, and statutory interest, shall be
included within the computation of Taxes for which Lessee is responsible
hereunder.
8.3 Separate Assessment.
Lessee shall pay to such agency at least ten (10) days prior to the date
when such Taxes would be delinquent, all Real Property Taxes as hereinabove
defined applicable to the Leased Premises or arising under this Section.
8.4 Personal Property and Other Taxes.
Lessee shall pay prior to delinquency all Taxes assessed against and levied
upon trade fixtures, furnishings, equipment and all other personal property of
Lessee contained in the Leased Premises or elsewhere. When possible, Lessee
shall cause such trade fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of Lessor.
Lessee shall also pay prior to delinquency all Taxes and other taxes in
connection with any testing, investigation, abatement, remediation, removal,
transportation and/or disposal of any Hazardous Materials by Lessee (or by
Lessor, pursuant to any provision of this Lease granting to Lessor the right to
do any of the foregoing and provided that Lessee, under the Lease, has an
obligation to pay therefor). For purposes of this Section 8.4, the terms "Taxes"
and "taxes" shall include, but not be limited to, any fees, charges, fines,
penalties and costs (including, without limitation, permit, approval or
licensing fees, charges or costs). If any of Lessee's said personal property
shall be assessed with Lessor's real property, or if any other Taxes or taxes
which are payable by Lessee pursuant to this Lease or otherwise are assessed
against Lessor or Lessor's real property, Lessee shall pay Lessor the Taxes and
other taxes attributable to Lessee within ten (10) days after receipt of a
written statement setting forth the Taxes and other taxes attributable to
Lessee.
8.5 Net Rent.
It is the intention of Lessor and Lessee that the rental received by Lessor
be net of any Taxes of any sort to be paid by Lessor, subject to the exclusions
stated in Section 8.1. In the event it shall not be lawful for Lessee to
reimburse Lessor for any of the Taxes covered by this Article, the Minimum Rent
payable to Lessor under the terms of this Lease shall be increased by the amount
of the portion allocable to Lessee so as to net to Lessor the amount which would
have been receivable by Lessor if such tax had not been imposed.
9
9. INTENTIONALLY OMITTED
10. ASSIGNMENT AND SUBLETTING
10.1 "Transfer of the Leased Premises" Defined.
The terms "Transfer of the Leased Premises" or "Transfer" as used herein
shall include any assignment of all or any part of this Lease (including
assignment by operation of law), subletting of all or any part of the Leased
Premises or transfer of possession, or granting of the right of possession or
contingent right of possession of all or any portion of the Leased Premises,
including without limitation, license, mortgage, devise, hypothecation, or
management agreement (except for customary property management agreement), or
suffering any other person (the agents and servants of Lessee excepted) to
occupy or use the Leased Premises or any portion thereof. If Lessee is a
corporation which is not deemed a public corporation, or is an unincorporated
association or partnership, or Lessee consists of more than one party, the
transfer, assignment or hypothecation of any stock or interest in such
corporation, association, partnership or ownership interest, shall be deemed an
Excluded Transfer of the Leased Premises, so long as the following conditions
are met: (i) Lessor receives not less than thirty (30) days prior written notice
of the proposed Excluded Transfer; and (ii) that the surviving entity bound by
the obligations of this Lease upon completion of the transaction giving rise to
the Excluded Transfer has a net worth no less than the entity which was the
Lessee prior to such transaction. Upon satisfaction of both of the above
conditions an Excluded Transfer shall be deemed to be a transfer not requiring
the consent of the Lessor. If Lessee is a public corporation, any transfer of
shares, merger, consolidation or other corporate reorganization shall also
constitute an Excluded Transfer, subject to the same conditions as those set
forth above in this Section 10.1 as (i) and (ii). Notwithstanding the foregoing
provisions of this Section 10.1, all provisions of Section 10.7 hereof shall be
conditions to any Excluded Transfer.
10.2 No Transfer Without Consent.
Lessee shall not suffer a Transfer of the Leased Premises or any interest
therein (other than an Excluded Transfer), or any part thereof, or any right or
privilege appurtenant thereto without the prior written consent of Lessor, and a
consent to one Transfer of the Leased Premises shall not be deemed to be a
consent to any subsequent Transfer of the Leased Premises. Any Transfer of the
Leased Premises without such consent shall (i) be voidable, and (ii) terminate
this Lease, in either case, at the option of Lessor.
10.3 Right to Sublet.
Notwithstanding anything to the contrary contained in this Lease, Lessee
shall have the right, upon not less than ten (10) days prior written notice to
Lessor, but without Lessor's consent, to sublet the Leased Premises to (i) a
100% owned subsidiary or affiliate of Lessee or (ii) up to 20,000 square feet of
leasable floor area, so long as the term expires prior to November 1, 2008
(including Option Periods, if any.)
10
10.4 When Consent Granted.
(a) The consent of Lessor to a Transfer may not be unreasonably
withheld.
(b) Notwithstanding the foregoing, Lessee shall have the right,
without the consent of Lessor, but upon prior written notice to Lessor, to
assign this Lease to a company incorporated or to be incorporated by Lessee,
provided that Lessee owns or beneficially controls all the issued and
outstanding shares of capital stock of the company; further provided, however,
that in the event that at any time following such assignment, Lessee wishes to
sell, mortgage, devise, hypothecate or in any other manner whatsoever transfer
any portion of the ownership or beneficial control of the issued and outstanding
shares in the capital stock of such company, such transaction shall be deemed to
constitute a Transfer and shall be subject to all of the provisions of this
Article 10 with respect to a Transfer of the Premises, including, by specific
reference, the provisions of Section 10.6.
10.5 Procedure for Obtaining Consent.
(a) Lessor need not commence its review of any proposed Transfer, or
respond to any request by Lessee with respect to such, unless and until it has
received from Lessee adequate descriptive information concerning the transferee,
the business to be conducted by the transferee, the transferee's financial
capacity, and such other information as may reasonably be required in order to
form a prudent judgment as to the acceptability of the proposed Transfer,
including, without limitation, the following:
(i) The past two years' Federal Income Tax returns of the
proposed transferee (or in the alternative the past two years' audited annual
Balance Sheets and Profit and Loss statements, certified correct by a Certified
Public Accountant);
(ii) Banking references of the proposed transferee;
(iii) A resume of the business background and experience of the
proposed transferee;
(iv) An executed copy of the instrument by which Lessee
proposes to effectuate the Transfer;
(b) Lessee shall reimburse Lessor as additional rent, up to a maximum
of One Thousand Five-Hundred-Dollars ($1,500.00), for Lessor's reasonable costs
and attorneys' fees incurred in conjunction with the processing and
documentation of any proposed Transfer of the Leased Premises, whether or not
consent is granted.
10.6 Reasonable Restriction.
The restrictions on Transfer described in this Article 10 are
acknowledged by Lessee to be reasonable for all purposes, including, without
limitation, the provisions of California Civil Code (the "Code") Section
1951.4(b)(2). Lessee expressly waives any rights which it might
11
otherwise be deemed to possess pursuant to applicable law, including, without
limitation, Section 1997.040 of the Code, to limit any remedy of Lessor pursuant
to Section 1951.2 or 1951.4 of the Code by means of proof that enforcement of a
restriction on use of the Leased Premises would be unreasonable.
10.7 Effect of Transfer.
If Lessor consents to a Transfer, the following conditions shall apply:
(a) Each and every covenant, condition or obligation imposed upon
Lessee by this Lease and each and every right, remedy or benefit afforded Lessor
by this Lease shall not be impaired or diminished as a result of such Transfer.
(b) No Transfer, whether or not consent of Lessor is required
hereunder, shall relieve Lessee of its primary obligation to pay the rent and to
perform all other obligations to be performed by Lessee hereunder. The
acceptance of rent by Lessor from any person shall not be deemed to be a waiver
by Lessor of any provision of this Lease or to be a consent to any Transfer of
the Leased Premises.
(c) If Lessor consents to a sublease, such sublease shall not extend
beyond the expiration of the Term.
(d) No Transfer shall be valid and no transferee shall take
possession of the Leased Premises or any part thereof unless, within ten (10)
days after the execution of the documentary evidence thereof, Lessee shall
deliver to Lessor a duly executed duplicate original of the Transfer instrument
in form satisfactory to Lessor which provides that (i) the transferee assumes
Lessee's obligations for the payment of rent and for the full and faithful
observance and performance of the covenants, terms and conditions contained
herein, (ii) such transferee will, at Lessor's election, attorn directly to
Lessor in the event Lessee's Lease is terminated for any reason on the terms set
forth in the instrument of transfer and (iii) such instrument of transfer
contains such other assurances as Lessor reasonably deems necessary.
11. PROPERTY INSURANCE
11.1 Lessor Insurance and Use of Premises.
(a) Lessor shall obtain property insurance for the Premises
protecting against all risk peril, excluding, earthquake and flood, or the
equivalent also known as "special causes of loss" as defined by the Insurance
Services Office ("ISO") as of the date of this Lease. Lessor may carry, if
required by Lessor's lender, earthquake and/or flood coverage if available at
commercially reasonable rates. Such insurance shall be written with a
replacement cost valuation, with an agreed amount endorsement or other means to
waive a co-insurance penalty, and shall include coverage for demolition and
increased cost of construction due to changes in the building code and rental
income coverage. Landlord may also carry, at its option, difference in
conditions insurance including earthquake, and may carry excess property
policies as necessary to provide insurance in amount sufficient to insure the
Premises to replacement costs.
12
All of the foregoing described insurance carried by Lessor on the Premises shall
constitute "Lessor Insurance".
(b) No use shall be made or permitted to be made on the Leased
Premises, nor acts done, which will cause the cancellation of any insurance
policy covering the Building, or any part thereof, nor shall Lessee sell, or
permit to be kept, used or sold, in or about the Leased Premises, any article
which may be prohibited by the standard form of "All-Risk" fire insurance
policies. Lessor shall, at its sole cost and expense, comply with any and all
requirements pertaining to the Leased Premises, of any insurance organization or
company, necessary for the maintenance of reasonable property damage and
commercial general liability insurance, covering the Leased Premises, the
Building, or the Complex; provided, however, Minimum Rent shall be increased to
reflect the cost to Lessor of such compliance, amortized over the reasonable
useful life of the work or improvement constituting such compliance at ten
percent (10%) interest.
11.2 Increase in Premiums.
Lessee agrees to pay to Lessor, as additional rent, any increase in
premiums on policies which may be carried by Lessor on the Leased Premises, the
Building or the Complex, or any blanket policies which include the Building or
Complex, covering damage thereto and loss of rent caused by fire and other
perils above the rates for the least hazardous type of occupancy for industrial
warehousing, office and distribution operations. Lessee further agrees to pay
Lessor, as additional rent, any increases in such premiums resulting from the
nature of Lessee's occupancy or any act or omission of Lessee. All payments of
additional rent by Lessee to Lessor pursuant to this Section 11.2 shall be made
within ten (10) days after receipt by Lessee of Lessor's billing therefor.
11.3 Payment of Premiums.
(a) Lessee shall pay to Lessor, during the Term hereof, as additional
rent the insurance premiums for any Lessor Insurance carried by Lessor covering
the Complex (the "Complex Insurance Premium"). In the event that the Lessor
Insurance is a blanket policy in which other properties not related to the
Complex are included, the Complex Insurance Premium shall be calculated as that
portion of such blanket policy insurance premium which, in Lessor's good faith
judgment, is properly allocable to the Complex. The sum due under this
subsection shall be in addition to that which may be due under the previous
Section of this Lease. In the event Lessor carries a blanket property and
liability policy that includes other locations, the Complex Insurance Premium
shall not include any increase because of the other locations covered.
(b) Lessee shall pay its obligations under Section 11.3(a) to Lessor
within ten (10) days after receipt by Lessee of Lessor's billing therefor.
11.4 Estimated Payments.
Lessor may, at its option, estimate the amount of insurance premiums for
Lessor Insurance to be due in the future from Lessee and collect from Lessee on
a monthly or quarterly
13
basis, at Lessor's option, the amount of Lessee's estimated insurance premium
obligation. Prior to March 1 of each year, Lessor shall provide Lessee with a
reconciliation of Lessee's account along with a billing for any shortage in the
event of a deficiency or statement for credit applicable to the next ensuing
insurance premium payments, if an overpayment has been made by Lessee.
11.5 Personal Property Insurance.
Lessee shall maintain in full force and effect on all of its fixtures,
furniture, equipment and other business personal property in the Leased Premises
a policy or policies providing protection against any peril included within the
classification "All Risk" to the extent of at least ninety percent (90%) of
their replacement cost, or that percentage of the replacement cost required to
negate the effect of a coinsurance provision, whichever is greater. No such
policy shall have a deductible in a greater amount than $100,000.00. Lessee
shall also insure in the same manner the physical value of all its leasehold
improvements and alterations in the Leased Premises. During the Term, the
proceeds from any such policy or policies of insurance shall be used for the
repair or replacement of the fixtures, equipment, and Lessee paid for leasehold
improvements so insured. Lessor shall have no interest in said insurance, and
will sign all documents necessary or proper in connection with the settlement of
any claim or loss by Lessee. All insurance specified in this Section 11.5 to be
maintained by Lessee shall be maintained by Lessee at its sole cost.
12. LIABILITY INSURANCE
12.1 Lessee's Insurance.
Lessee shall, at Lessee's expense, obtain and keep in force during the
Term, a commercial general liability insurance policy insuring Lessee against
bodily injury and property damage, personal injury, contractual liability,
completed operations, products liability, host liquor liability, arising out of
the use, occupancy or maintenance of the Leased Premises. Such insurance shall
be a combined single limit policy in an amount not less than FIVE MILLION
DOLLARS ($5,000,000.00) per occurrence. Lessor, any lender of Lessor with an
interest in the Leased Premises and Lessor's property manager shall be named as
additional insured(s). The policy shall contain cross-liability endorsements and
shall insure performance by Lessee of the bodily injury and property damage
liability indemnity provisions of this Lease; shall be primary, not contributing
with, and not in excess of coverage which Lessor may carry; shall entitle Lessor
to recovery for the negligence of Lessee even though Lessor is named as an
additional insured; shall provide for severability of interest. The limits of
said insurance shall not limit any liability of Lessee hereunder. Not more
frequently than every three (3) years, if, in the reasonable opinion of Lessor,
the amount of liability insurance required hereunder is not adequate, Lessee
shall promptly increase said insurance coverage as required by Lessor. Lessee
shall also carry One Million Dollar ($1,000,000.00) minimum coverage automobile
liability insurance covering owned, non-owned and hired vehicles.
14
12.2 Workers' Compensation Insurance.
Lessee shall carry Workers' Compensation insurance as required by law,
including an employers' liability endorsement.
13. INSURANCE POLICY REQUIREMENTS
13.1 General Requirements.
All insurance policies required to be carried by Lessee hereunder shall
conform to the following requirements:
(a) The insurer in each case shall carry a designation in "Best's
Insurance Reports" as issued from time to time throughout the Term as follows:
Policyholders' rating of A; financial rating of not less than VII;
(b) The insurer shall be qualified to do business in the state in
which the Leased Premises are located;
(c) The policy shall be in a form and include such endorsements as
are acceptable to Lessor;
(d) Certificates of insurance shall be delivered to Lessor at
commencement of the Term and certificates of renewal, at least thirty (30) days
prior to the expiration of each policy;
(e) Each policy shall require that Lessor be notified in writing by
the insurer at least thirty (30) days prior to any cancellation or expiration of
such policy, or any reduction in the amounts of insurance carried.
14. LESSEE INSURANCE DEFAULT
14.1 Rights of Lessor.
In the event that Lessee fails to obtain any insurance required of it under
the terms of this Lease, Lessor may, at its option, but is not obligated to,
obtain such insurance on behalf of Lessee and bill Lessee, as additional rent,
for the cost thereof. Payment shall be due within ten (10) days of receipt of
the billing therefor by Lessee.
15. INDEMNIFICATION, WAIVER OF CLAIMS AND SUBROGATION
15.1 Intent and Purpose.
This Article 15 is written and agreed to in respect of the intent of the
parties to assign the risk of loss, whether resulting from negligence of the
parties or otherwise, to the party who is obligated hereunder to cover the risk
of such loss with insurance. Thus, the indemnity and waiver of claims provisions
of this Lease have as their object, so long as such object is not in
15
violation of public policy, the assignment of risk for a particular casualty to
the party carrying the insurance for such risk, without respect to the causation
thereof.
15.2 Waiver of Subrogation.
Lessor and Lessee release each other, and their respective authorized
representatives, from any claims for damage to the Leased Premises and the
Building and other improvements in which the Leased Premises are located, and to
the furniture, fixtures, and other business personal property, Lessee's
improvements and alterations of either Lessor or Lessee, in or on the Leased
Premises and the Building and other improvements in which the Leased Premises
are located, including loss of income, that are caused by or result from risks
insured or required under the terms of this Lease to be insured against under
any property insurance policies carried or to be carried by either of the
parties.
15.3 Form of Policy.
Each party shall cause each such insurance policy obtained by it to provide
that the insurance company waives all rights of recovery by way of subrogation
against either party in connection with any damage covered by such policy.
Neither party shall be liable to the other for any damage caused by any peril
included within the classification "All Risk" which is insured against under any
property insurance policy carried under the terms of this Lease.
15.4 Indemnity.
Lessee, as a material part of the consideration to be rendered to Lessor,
shall indemnify, defend, protect and hold harmless Lessor against all actions,
claims, demands, damages, liabilities, losses, penalties, or expenses of any
kind which may be brought or imposed upon Lessor or which Lessor may pay or
incur by reason of injury to person or property or business, from whatever
cause, all or in any way connected with the acts and omissions of Lessee, and
the condition or use of the Leased Premises, or the improvements or personal
property therein or thereon, including without limitation any liability or
injury to the person or property or business of Lessee, its agents, officers,
employees or invitees. Lessor shall indemnify defend, protect and hold harmless
Lessee against all actions, claims, demands, damages, liabilities, losses,
penalties, or expenses of any kind which may be brought or imposed upon Lessee
or which Lessee may pay or incur by reason of injury to person or property or
business connected with the acts and omissions of Lessor. Lessee agrees to
indemnify, defend and protect Lessor and hold it harmless from any and all
liability, loss, cost or obligation on account of, or arising out of, any such
injury or loss however occurring, including breach of the provisions of this
Lease and the negligence of the parties hereto. Nothing contained herein shall
obligate Lessee to indemnify Lessor against its own sole or gross negligence or
willful acts, for which Lessor shall indemnify Lessee.
15.5 Defense of Claims.
In the event any action, suit or proceeding is brought against Lessor by
reason of any such occurrence, Lessee, upon Lessor's request, will at Lessee's
expense resist and defend such
16
action, suit or proceeding, or cause the same to be resisted and defended by
counsel designated either by Lessee or by the insurer whose policy covers the
occurrence and in either case approved by Lessor. The obligations of Lessee
under this Section arising by reason of any occurrence taking place during the
Term shall survive any termination of this Lease.
15.6 Waiver of Claims.
Lessee, as a material part of the consideration to be rendered to Lessor,
hereby waives all claims against Lessor for damages or injury, as described
below, from any cause arising at any time, including breach of the provisions of
this Lease and the negligence of the parties hereto:
(a) damages to goods, wares, merchandise and loss of business in,
upon or about the Leased Premises and injury to Lessee, its agents, employees,
invitees or third persons, in, upon or about the Leased Premises; and
(b) (notwithstanding anything to the contrary contained in this
Lease) damages to goods, wares, merchandise and loss of business, in, upon or
about the Leased Premises or the Complex, and injury to Lessee, its agents,
employees, invitees or third persons in, upon or about the Leased Premises or
the Complex, where such damage or injury results from Lessor's failure to police
or provide security for the Complex or Lessor's negligence in connection
therewith.
Lessee expressly acknowledges and agrees that the provisions of Section 20.5(b)
below apply fully with respect to the matters waived pursuant to this Section
15.6, and, for such purpose, the term "Released Matters," as used in Section
20.5(b), shall be deemed to include the matters waived pursuant to this Section
15.6.
15.7 References.
Wherever in this Article the term Lessor or Lessee is used and such party
is to receive the benefit of a provision contained in this Article, such term
shall refer not only to that party but also to its officers, directors,
shareholders, employees, partners, agents and mortgagees or other lienholders.
16. DESTRUCTION
16.1 Rights of Termination.
In the event the Leased Premises suffers (a) an "uninsured property loss"
(as hereinafter defined) in excess of Fifty Thousand Dollars ($50,000.00), or
(b) during the initial twenty-four (24) months of the Term, a property loss
which cannot be repaired within Two Hundred Seventy (270) days from the date of
destruction under the laws and regulations of state, federal, county or
municipal authorities, or other authorities with jurisdiction, or c) during the
ensuing three (3) years of the Term, unless Lessee exercises its Option under
Section 6 of the Lease, a property loss which cannot be repaired within One
Hundred Eighty (180) days from the date of destruction under the laws and
regulations of state, federal, county or municipal authorities, or other
authorities with jurisdiction, Lessor may terminate this Lease as at the date of
the damage
17
upon written notice to Lessee following the property loss. For purposes of this
Lease, the term "uninsured property loss" shall mean any loss arising from a
peril not covered by the standard form of "All Risk" property insurance policy.
Further, in event of a property loss occurring during the last year of the
original Term hereof or of any extension, Lessor need not undertake any repairs
and may cancel this Lease unless Lessee has the right under the terms of this
Lease to extend the Term for an additional period of at least five (5) years and
does so within thirty (30) days of the date of the property loss. Further, in
event of a property loss occurring during the last year of the original Term
hereof or of any extension, Lessor need not undertake any repairs and may cancel
this Lease unless Lessee has the right under the terms of this Lease to extend
the Term for an additional period of at least five (5) years and does so within
thirty (30) days of the date of the property loss.
16.2 Repairs.
In the event of a property loss which may be repaired within the time
limits set forth in Section 16.1 above, or, in the alternative, in the event the
parties do not elect to terminate this Lease under the terms of Section 16.1
above, then this Lease shall continue in full force and effect and Lessor shall
forthwith undertake to make such repairs to reconstitute the Leased Premises to
as near the condition as existed prior to the property loss as practicable. Such
partial destruction shall in no way annul or void this Lease except that Lessee
shall be entitled to a proportionate reduction of Minimum Rent following the
property loss and until the time the Leased Premises are restored. Such
reduction shall be an amount which reflects the degree of interference with
Lessee's business. So long as Lessee conducts its business in the Leased
Premises, there shall be no abatement until the parties agree on the amount
thereof. If the parties cannot agree within forty-five (45) days of the property
loss, the matter shall be submitted to arbitration under the rules of the
American Arbitration Association. Upon the resolution of the dispute, the
settlement shall be retroactive and Lessor shall within ten (10) days thereafter
refund to Lessee any sums due in respect of the reduced rental from the date of
the property loss. Lessor's obligations to restore shall in no way include any
construction originally performed by Lessee or subsequently undertaken by
Lessee, but shall include solely that property constructed by Lessor prior to
commencement of the Term.
16.3 Repair Costs.
The cost of any repairs to be made by Lessor, pursuant to Section 16.2 of
this Lease, shall be paid by Lessor utilizing available insurance proceeds.
Lessee shall reimburse Lessor upon completion of the repairs for any deductible
for which no insurance proceeds will be obtained under Lessor's insurance
policy, or if other premises are also repaired, a pro rata share based on total
costs of repair equitably apportioned to the Leased Premises. Lessee shall,
however, not be responsible to pay any deductible or its share of any deductible
to the extent that Lessee's payment would be in excess of $10,000 if Lessee's
consent to the amount of the deductible has not been received by Lessor, unless
such denial of consent by Lessee is unreasonable.
18
16.4 Waiver.
Lessee hereby waives all statutory or common law rights of termination in
respect to any partial destruction or property loss which Lessor is obligated to
repair or may elect to repair under the terms of this Article.
17. ACCORD AND SATISFACTION
17.1 Acceptance of Payment.
No payment by Lessee or receipt by Lessor of a lesser amount of Minimum
Rent or any other sum due hereunder, shall be deemed to be other than on account
of the earliest due rent or payment, nor shall any endorsement or statement on
any check or any letter accompanying any such check or payment be deemed an
accord and satisfaction, and Lessor may accept such check or payment without
prejudice to Lessor's right to recover the balance of such rent or payment or
pursue any other remedy available in this Lease, at law or in equity. Lessor may
accept any partial payment from Lessee without invalidation of any contractual
notice required to be given herein (to the extent such contractual notice is
required) and without invalidation of any notice required to be given pursuant
to California Code of Civil Procedure Section 1161, et seq., or of any successor
statute thereto.
18. INTENTIONALLY OMITTED
19. USE
19.1 Permitted Use.
The Leased Premises may be used and occupied only for the purposes
specified in Section 1.5 hereof, and for no other purpose or purposes. Lessee
shall promptly comply with all laws, ordinances, orders and regulations
affecting the Leased Premises, their cleanliness, safety, occupation and use
(hereinafter the "Laws"); provided, however, that Lessee shall not be required
-----------------
to comply with Laws pertaining to the structure of, or requiring capital
improvement to, the Leased Premises. In the event of any such structural change
or capital improvement being required by governmental authority, Lessor may
elect to make such change or improvement, in which event the Minimum Rent shall
be increased to reflect the cost thereof amortized over the reasonably useful
life of the improvement at 10% interest. However, if as a result of such
improvement the Minimum Rent increases by more than 10% of the then current
Minimum Rent, Lessee shall have the right to decline to pay any such rent
increase in which event Lessor may, at its option, either terminate this Lease
upon thirty days prior written notice to the Lessee, or limit the rent increase
to 10% of the then current Minimum Rent. If the Lessor elects to make such
change or improvement, it shall obtain a minimum three competitive bids for the
work and have the work completed by the lowest bidder and shall complete the
work as late as prudently possible within the period of time allowed by the
governmental authority administering the Laws. Alternatively, the Lessor may
decline to make the structural improvement required by the Laws in which event
the Lessee may, at its option, either terminate this Lease within thirty (30)
days following receipt of written notice from the Lessor
19
of its refusal to make the structural improvement required by the Laws, or,
Lessee may arrange for the structural improvement to be performed at Lessee's
sole expense; provided, however, that if the structural or other improvement is
required due to Lessee's use, or proposed change in Lessee's use, of the
Premises, Lessee shall not have the right to terminate this Lease if Lessor
declines to make the change or improvement.
19.2 Hazardous Activities.
Lessee shall not engage in any activities or permit to be kept, used, or
sold in or about the Leased Premises, any article which may be prohibited by the
standard form of fire insurance policies. Lessee shall, at its sole cost and
expense, comply with any and all requirements, pertaining to the Leased
Premises, of any insurance organization or company, necessary for the
maintenance of reasonable fire and public liability insurance covering the
Building and appurtenances.
20. COMPLIANCE WITH LAWS AND REGULATIONS
20.1 Lessee's Obligations.
Lessee, shall, at its sole cost and expense, comply with all of the
requirements of all municipal, state and federal authorities now in force, or
which may hereafter be in force, pertaining to the Leased Premises, and shall
faithfully observe in the use of the Leased Premises all municipal ordinances
and state and federal statutes and regulations now in force or which may
hereafter be in force, including, without limitation, "Environmental Laws," and
the Americans with Disabilities Act, 42 U.S.C. (S)(S) 12101-12213 (and any
rules, regulations, restrictions, guidelines, requirements or publications
promulgated or published pursuant thereto, collectively herein referred to as
the "ADA"), whether or not any of the foregoing were foreseeable or
unforeseeable at the time of the execution of this Lease. Lessee's obligation to
comply with and observe such requirements, ordinances, statutes and regulations
shall apply regardless of whether such requirements, ordinances, statutes and
regulations regulate or relate to Lessee's particular use of the Leased Premises
or regulate or relate to the use of premises in general, and regardless of the
cost thereof. The judgment of any court of competent jurisdiction, or the
admission of Lessee in any action or proceeding against Lessee, whether Lessor
be a party thereto or not, that any such requirement, ordinance, statute or
regulation pertaining to the Leased Premises has been violated, shall be
conclusive of that fact as between Lessor and Lessee. Within five (5) days after
receipt of notice or knowledge of any violation or alleged violation of any
Environmental Law(s), and/or the ADA pertaining to the Complex, any governmental
or regulatory proceedings, investigations, sanctions and/or actions threatened
or commenced with respect to any such violation or alleged violation, and any
claim made or commenced with respect to such violation or alleged violation,
Lessee shall notify Lessor thereof and provide Lessor with copies of any written
notices or information in Lessee's possession. Notwithstanding the foregoing
provisions of this Section 20.1, Lessee shall not be required to comply with
Environmental Laws in regard to any Hazardous Materials contamination of the
Leased Premises existing prior to the commencement of the Term of this Lease or
for which Lessee is not responsible.
20
20.2 No Warranty.
Lessee hereby accepts the Leased Premises subject to all applicable zoning,
municipal, county and state laws, ordinances, rules, regulations, orders, and
requirements in effect at the Commencement Date during the Term or any part of
the Term hereof regulating the Leased Premises, and without representation,
warranty or covenant by Lessor, express or implied, as to the condition,
habitability or safety of the Leased Premises, the suitability or fitness
thereof for their intended purposes, or any other matter.
20.3 Hazardous Materials.
(a) Hazardous Materials Defined. As used herein, the term "Hazardous
---------------------------
Materials" shall mean any wastes, materials or substances (whether in the form
of liquids, solids or gases, and whether or not air-borne), which are or are
deemed to be pollutants or contaminants, or which are or are deemed to be
hazardous, toxic, ignitable, reactive, corrosive, dangerous, harmful or
injurious, or which present a risk, to public health or to the environment, or
which are or may become regulated by or under the authority of any applicable
local, state or federal laws, judgments, ordinances, orders, rules, regulations,
codes or other governmental restrictions, guidelines or requirements, any
amendments or successor(s) thereto, replacements thereof or publications
promulgated pursuant thereto (collectively "Environmental Laws"), including,
without limitation, any waste, material or substance which is:
(i) defined as "hazardous waste," "extremely hazardous waste,"
or "restricted hazardous waste" under Sections 25115, 25117 or 25122.7, or
listed pursuant to Section 25140, of the California Health and Safety Code,
Division 20, Chapter 6.5 (Hazardous Waste Control Law);
(ii) defined as a "hazardous substance" under Section 25316 of
the California Health and Safety Code, Division 20, Chapter 6.8 (Carpenter-
Presley-Tanner Hazardous Substance Account Act);
(iii) defined as a "hazardous material," "hazardous substance,"
or "hazardous waste" under Section 25501 of the California Health and Safety
Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response Plans and
Inventory);
(iv) defined as a "hazardous substance" under Section 25281 of
the California Health and Safety Code, Division 20, Chapter 6.7 (Underground
Storage of Hazardous Substances);
(v) defined as a "waste" or "hazardous substance" under
Section 13050 of the California Water Code, Division 7, Chapter 2 (Porter-
Cologne Water Quality Control Act);
(vi) listed as a chemical known to the State of California to
cause cancer or reproductive toxicity pursuant to Section 25249.8 of the
California Health and Safety Code, Division 20, Chapter 6.6 (Safe Drinking Water
and Toxic Enforcement Act of 1986);
21
(vii) defined as a "hazardous substance" or "pollutant or
contaminant" pursuant to Section 101 of the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. (S) 9601
et seq.;
(viii) listed as an "extremely hazardous substance," "hazardous
chemical," or "toxic chemical" pursuant to the Emergency Planning and Community
Right-to-Know Act of 1986, 42 U.S.C. (S) 11001 et seq.;
(ix) listed as a "hazardous substance" in the United States
Department of Transportation Table, 49 C.F.R. 172.101 and amendments thereto, or
by the Environmental Protection Agency (or any successor agency) in 40 C.F.R.
Part 302 and amendments thereto;
(x) defined, listed or designated by regulations promulgated
pursuant to any Environmental Law; or
(xi) any of the following: a pesticide; a flammable explosive;
petroleum, including crude oil or any fraction thereof; asbestos or an
asbestos-containing material; a polychlorinated biphenyl; a radioactive
material; or urea formaldehyde.
In addition to the foregoing, the term "Environmental Laws" shall be deemed to
include, without limitation, local, state and federal laws, judgments,
ordinances, orders, rules, regulations, codes and other governmental
restrictions, guidelines and requirements, any amendments and successors
thereto, replacements thereof and publications promulgated pursuant thereto,
which deal with or otherwise in any manner relate to, air or water quality, air
emissions, soil or ground conditions or other environmental matters of any kind.
(b) Use, etc., of Hazardous Materials. Lessee agrees that during
---------------------------------
the Term, there shall be no use, presence, disposal, storage, generation,
leakage, treatment, manufacture, import, handling, processing, release, or
threatened release of Hazardous Materials on, from or under the Leased Premises
except to the extent that, and in accordance with such conditions as, Lessor may
have previously approved in writing. The use, presence, disposal, storage,
generation, leakage, treatment, manufacture, import, handling, processing,
release or threatened release of Hazardous Materials are sometimes hereinafter
individually or collectively referred to as "Hazardous Use." It is further
agreed that Lessee shall be entitled to use and store only those Hazardous
Materials which are necessary for Lessee's business, provided that such usage
and storage is in full compliance with Environmental Laws, and all judicial and
administrative decisions pertaining thereto. Lessee shall not be entitled to
install any tanks under, on or about the Leased Premises for the storage of
Hazardous Materials without the express written consent of Lessor, which may be
given or withheld in Lessor's sole arbitrary judgment. For the purposes of this
Section 20.3, the term Hazardous Use shall include Hazardous Use(s) on, from or
under the Leased Premises by any and all lessees, occupants, and/or users of the
Leased Premises (except Lessor), whether known or unknown to Lessee, and whether
occurring and/or existing during or prior to the commencement of the Term.
Neither Lessor nor Lessee shall have an obligation to remediate contamination in
existence prior to the date of execution of this Lease and of which Lessor has
not previously been notified by any governmental agency.
22
(c) Hazardous Materials Report; When Required. Lessee shall submit
-----------------------------------------
to Lessor a written report with respect to Hazardous Materials ("Report") in
the form prescribed in subparagraph(d) below on the following dates:
(i) Within ten (10) days after the Commencement Date, and
(ii) At any time when there has been or is planned any
condition which constitutes or would constitute a change in the information
submitted in the most recent Report, including any notice of violation as
referred to in subparagraph(d)(vii) below.
(d) Hazardous Materials Report; Contents. The Report shall contain,
------------------------------------
without limitation, the following information:
(i) Whether on the date of the Report and (if applicable)
during the period since the last Report there has been any Hazardous Use on,
from or under the Leased Premises.
(ii) If there was such Hazardous Use, the exact identity of the
Hazardous Materials, the dates upon which such materials were brought upon the
Leased Premises, the dates upon which the Hazardous Materials were removed
therefrom, and the quantity, location, use and purpose thereof.
(iii) If there was such Hazardous Use, any governmental permits
maintained by Lessee with respect to such Hazardous Materials, the issuing
agency, original date of issue, renewal dates (if any) and expiration date.
Copies of any such permits and applications therefor shall be attached.
(iv) If there was such Hazardous Use, any governmental
reporting or inspection requirements with respect to such Hazardous Materials,
the governmental agency to which reports are made and/or which conducts
inspections, and the dates of all such reports and/or inspections (if
applicable) since the last Report. Copies of any such Reports shall be
attached.
(v) If there was such Hazardous Use, identification of any
operation or business plan prepared for any government agency with respect to
Hazardous Use.
(vi) Any liability insurance carried by Lessee with respect to
Hazardous Materials, the insurer, policy number, date of issue, coverage
amounts, and date of expiration. Copies of any such policies or certificates
of coverage shall be attached.
(vii) Any notices of violation of Environmental Laws, written or
oral, received by Lessee from any governmental agency since the last Report,
the date, name of agency, and description of violation. Copies of any such
written notices shall be attached.
23
(viii) Any knowledge, information or communication which Lessee
has acquired or received relating to (x) any enforcement, cleanup, removal or
other governmental or regulatory action threatened or commenced against Lessee
or with respect to the Leased Premises pursuant to any Environmental Laws; (y)
any claim made or threatened by any person or entity against Lessee or the
Leased Premises on account of any alleged loss or injury claimed to result from
any alleged Hazardous Use on or about the Leased Premises; or (z) any report,
notice or complaint made to or filed with any governmental agency concerning
any Hazardous Use on or about the Leased Premises. The Report shall be
accompanied by copies of any such claim, report, complaint, notice, warning or
other communication that is in the possession of or is available to Lessee.
(ix) Such other pertinent information or documents as are
requested by Lessor in writing.
(e) Release of Hazardous Materials: Notification and Cleanup. If at
--------------------------------------------------------
any time during the Term, Lessee or Lessor knows or believes that any release
of any Hazardous Materials has come or will come to be located upon, about or
beneath the Leased Premises as a result of Lessee's actions, then Lessee or
Lessor shall immediately, either prior to the release or following the
discovery thereof by Lessee or Lessor, give verbal and follow-up written
notice of that condition to the other. Lessee covenants to investigate, clean
up and otherwise remediate any release of Hazardous Materials caused by Lessee
at Lessee's cost and expense; such investigation, clean-up and remediation
shall be performed only after Lessee has obtained Lessor's written consent,
which shall not be unreasonably withheld; provided, however, that Lessee shall
be entitled to respond immediately to an emergency without first obtaining
Lessor's written consent. All clean-up and remediation shall be done in
compliance with Environmental Laws and to the reasonable satisfaction of
Lessor. Notwithstanding the foregoing, whether or not such work is prompted by
the foregoing notice from Lessee or is undertaken by Lessor for any other
reason whatsoever, Lessor shall have the right, but not the obligation, in
Lessor's sole and absolute discretion, exercisable by written notice to Lessee
at any time, to undertake within or outside the Leased Premises all or any
portion of any investigation, clean-up or remediation with respect to
Hazardous Materials (or, once having undertaken any of such work, to cease
same), and, if the release or contamination is a result of Lessee's act or
omission, all such work shall be at Lessee's sole cost and expense, which
shall be paid by Lessee as additional rent within ten (10) days after receipt
of written request therefor by Lessor (and which Lessor may require to be paid
prior to commencement of any work by Lessor). No such work by Lessor shall
create any liability on the part of Lessor to Lessee or any other party in
connection with such Hazardous Materials or constitute an admission by Lessor
of any responsibility with respect to such Hazardous Materials. It is the
express intention of the parties hereto that Lessee shall be liable under this
Section 20.3 (e) for any and all conditions for which Lessee is responsible.
Lessee shall not enter into any settlement agreement, consent decree or other
compromise with respect to any claims relating to any Hazardous Materials in
any way connected to the Leased Premises without first (i) notifying Lessor of
Lessee's intention to do so and affording Lessor the opportunity to
participate in any such proceedings, and (ii) obtaining Lessor's written
consent.
24
(f) Inspection and Testing by Lessor. Lessor shall have the right at
--------------------------------
all times during the Term to (i) inspect the Leased Premises, as well as
Lessee's books and records, and to (ii) conduct tests and investigations to
determine whether Lessee is in compliance with the provisions of this Section.
Except in case of emergency, Lessor shall give reasonable notice to Lessee
before conducting any inspections, tests, or investigations. The cost of all
such inspections, tests and investigations shall be borne by Lessor. Neither any
action nor inaction on the part of Lessor pursuant to this Section 20.3(f) shall
be deemed in any way to release Lessee from, or in any way modify or alter,
Lessee's responsibilities, obligations, and/or liabilities incurred pursuant to
Section 20.3 hereof.
20.4 Indemnity.
Lessee shall indemnify, hold harmless, and, at Lessor's option (with such
attorneys as Lessor may approve in advance and in writing), defend Lessor and
Lessor's officers, directors, shareholders, trustees, partners, employees,
agents and mortgagees or other lien holders, from and against any and all
claims, demands, expenses, actions, judgments, damages (whether consequential,
direct or indirect, known or unknown, foreseen or unforeseen), penalties, fines,
liabilities, losses of every kind and nature (including, without limitation,
property damage, diminution in value of Lessor's interest in the Leased Premises
or the Complex, damages for the loss or restriction on use of any space or
amenity within the Leased Premises or the Complex, damages arising from any
adverse impact on marketing space in the Complex, sums paid in settlement of
claims and any costs and expenses associated with injury, illness or death to or
of any person), suits, administrative proceedings, costs and fees, including,
but not limited to, attorneys' and consultants' fees and expenses, and the costs
of cleanup, remediation, removal and restoration (all of the foregoing being
hereinafter sometimes collectively referred to as "Losses"), arising from or
related to any violation or alleged violation of any of the requirements,
ordinances, statutes, regulations or other laws referred to in this Article,
including, without limitation, Environmental Laws, any breach of the provisions
of this Article, or any Hazardous Use on, about or from the Leased Premises for
which Lessee is responsible. Lessee warrants that it is leasing the Premises
"as-is, where-is", and that it has thoroughly inspected the Leased Premises
prior to execution of this Lease.
20.5 Release and Assumption of Risk.
(a) Lessee, for itself, and its officers, directors, shareholders,
partners, agents, contractors, attorneys, brokers, servants, employees,
sublessees, lessees, invitees, concessionaires, licensees and representatives
(hereinafter referred to as "Releasors"), hereby waives, releases, acquits and
forever discharges Lessor and its officers; directors, shareholders, trustees,
partners, agents, contractors, attorneys, brokers, servants, employees, lessees,
invitees, licensees and representatives (hereinafter referred to as "Releasees")
of and from any and all Losses, which are in any way connected with, based upon,
related to or arising out of (i) any Hazardous Use or Hazardous Materials on or
about the Leased Premises or the Complex, (ii) any violation by or relating to
the Leased Premises or the Complex (or the ownership, use, condition, occupancy
or operation thereof), or by the Releasors or any other persons or entities, of
any Environmental Laws affecting the Leased Premises or the Complex, or (iii)
any investigation, inquiry, order,
25
hearing, action or other proceeding by or before any governmental agency or any
court in connection with any of the matters referred to in clauses (i) or (ii)
above (collectively, the "Released Matters"), except to the extent caused by the
negligence or willful misconduct of the Releasees. Releasors hereby expressly
assume any and all risk of Losses based on or arising out of or pertaining to
the Released Matters.
(b) Lessee agrees, represents and warrants that the Released Matters
are not limited to matters which are known, disclosed or foreseeable, and Lessee
waives any and all rights and benefits which are conferred upon Lessee by virtue
of the provisions of Section 1542 of the California Civil Code, which provides:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING
THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.
Lessee agrees, represents and warrants that it is familiar with, has read,
understands, and has consulted legal counsel of its choosing with respect to
California Civil Code Section 1542 and Lessee realizes and acknowledges that
factual matters now unknown to it may have given, or may hereinafter give, rise
to Losses which are presently unknown, unanticipated and unsuspected. Lessee
further agrees, represents and warrants that the provisions of this Section 20.6
have been negotiated and agreed upon in light of that realization and that
Lessee nevertheless hereby intends to release, discharge and acquit the
Releasees from any such unknown Losses which are in any way related to this
Lease or the Complex.
20.6 Indoor Air Quality.
To prevent the generation, growth or deposit of any mold, mildew, bacillus,
virus, pollen or other microorganism (collectively, "Biologicals") and the
deposit, release or circulation of any indoor contaminants, including, but not
limited to, emissions from paint, carpet and drapery treatments, cleaning,
maintenance and construction materials and supplies, pesticides, pressed wood
products, insulation, tobacco and other materials and products (collectively
with Biologicals, "Contaminants"), that could adversely affect the health,
safety or welfare of any tenant, employee, or other occupant of the Complex or
their invitees (each, an "Occupant"), Lessee shall use reasonable efforts to, at
Lessee's sole cost and expense, at all times during the Term (i) maintain,
operate and repair the HVAC system servicing the Leased Premises (to the extent
that Lessee is otherwise obligated to perform such maintenance, operation and
repair pursuant to this Lease) in a manner consistent with preventing or
minimizing the generation, growth, circulation, release or deposit of any
Contaminants, (ii) maintain the humidity level and the air exchange rate within
the Leased Premises (to the extent that Lessee has control thereof) at a level
recommended to prevent or minimize the growth of any Biologicals and the
circulation of any other Contaminants, (iii) maintain, operate and repair the
Leased Premises in such a manner to prevent or minimize the accumulation of
stagnant water and moisture in planters,
26
kitchen appliances and vessels, carpeting, insulation, water coolers and any
other locations where stagnant water and moisture could accumulate, and (iv)
otherwise maintain, operate and repair the Leased Premises to prevent the
generation, growth, deposit, release or circulation of any Contaminants. If any
governmental entity or any Occupant alleges that health, safety or welfare has
been or could be adversely affected by any such Contaminants, Lessee shall
notify Lessor in writing within twenty-four (24) hours of the time the
allegation is made. Lessor may then elect to engage the services of an
industrial hygiene testing laboratory (or alternatively or concurrently require
Lessee to do the same) to determine whether the cause of any alleged adverse
health effect is or could be attributable to any Contaminants present within the
Leased Premises. Lessee shall be responsible for all such testing costs and for
any consequential damages and costs (including, without limitation, any third-
party claims, loss of rental, remediation, removal and/or abatement costs, and
increases in insurance premiums) resulting from Lessee's failure to comply in
whole or in part with the terms of this Section 20.7. The indemnity set forth in
Section 20.5 above shall apply to Lessee's failure to comply with any of the
terms of this Section.
21. UTILITIES
21.1 Payment by Lessee.
Lessee, from the time it first enters the Leased Premises for the purpose
of setting fixtures, or from the commencement of this Lease, whichever date
shall first occur, and throughout the Term, shall pay all charges including
connection fees for water, gas, heat, sewer, power, telephone services and any
other utility supplied to or consumed in or on the Leased Premises. Lessee shall
not allow refuse, garbage or trash to accumulate outside of the Leased Premises
except on the day of scheduled scavenger pick-up services, and then only in
areas designated for that purpose by Lessor. Lessor shall not be responsible or
liable for any interruption in utility services, nor shall such interruption
affect the continuation or validity of this Lease. Lessor does not warrant that
any of the utilities supplied to the Leased Premises will be free of
interruption or that any of the utility systems serving the Complex will be free
from the need for maintenance, repairs and/or replacements. Lessee acknowledges
that any one or more such services may be suspended or reduced by reason of
repairs, alterations or improvements necessary to be made, by strikes or
accidents, by any cause beyond the reasonable control of Lessor, or by orders or
regulations of any federal, state, county or municipal authority. In addition,
Lessor shall have no liability for damages arising from, and Lessor does not
warrant that Lessee's use of any Lines will be free from, (a) any eavesdropping
or wiretapping by unauthorized parties, (b) any failure of any Lines to satisfy
Lessee's requirements, or (c) any shortages, failures, variations,
interruptions, disconnections, loss or damage caused by installation,
maintenance, replacement, use or removal of Lines by or for other occupants of
the Complex, by any failure of the environmental conditions or the power supply
for the Building to conform to any requirements for the Lines or any associated
equipment or any other problems associated with any Lines by any other cause.
27
22. ALTERATIONS
22.1 Consent of Lessor; Ownership.
Except for nonstructural alterations the cost of which is less then
$50,000, Lessee shall not make, or suffer to be made, any alterations to the
Leased Premises, the Building, or the Complex, and/or systems, and/or Lines and
facilities therein, or any part thereof, without the written consent of Lessor
first had and obtained, which shall not be unreasonably withheld or delayed. Any
additions to or alterations of the Leased Premises, the Building, or the
Complex, and/or systems, and/or Lines and facilities therein (except trade
fixtures) shall, immediately upon being made, constitute a part of the realty
and Lessor's property, and shall, at the expiration or earlier termination of
this Lease, remain upon the Leased Premises without compensation to Lessee.
Except as otherwise provided in this Lease, Lessee shall have the right to
remove its trade fixtures placed upon the Leased Premises provided that Lessee
restores the Leased Premises as indicated below. Any and all costs incurred by
Lessor, whether in complying with laws, governmental requirements or otherwise,
as a result of any "alterations" (as hereinafter defined), or as a result of
request by Lessee for increased telephone or other utility capacity above that
presently existing (or, in the event the Building is to be constructed or
substantially altered by Lessor prior to the delivery date, above that which is
planned by Lessor for the Building) shall be paid by Lessee within ten (10) days
after demand therefor by Lessor.
22.2 Requirements.
Any alterations, additions or installations performed by Lessee
(hereinafter collectively "alterations") shall be subject to strict conformity
with the following requirements:
(a) All alterations shall be at the sole cost and expense of Lessee;
(b) Prior to commencement of any work of alteration, Lessee shall
submit detailed plans and specifications, including working drawings
(hereinafter referred to as "Plans"), of the proposed alterations, which shall
be subject to the consent of Lessor in accordance with the terms of Section 22.1
above;
(c) Following approval of the Plans by Lessor, Lessee shall give
Lessor at least ten (10) days' prior written notice of commencement of work in
the Leased Premises so that Lessor may post notices of non-responsibility in or
upon the Leased Premises as provided by law;
(d) No alterations shall be commenced without Lessee having
previously obtained all appropriate permits and approvals required by and of
governmental agencies;
(e) All alterations shall be performed in a skillful and workmanlike
manner, consistent with the best practices and standards of the construction
industry, and pursued with diligence in accordance with the Plans previously
approved by Lessor and in full accord with all applicable laws and ordinances.
All material, equipment, and articles incorporated in the
28
alterations are to be new, and of recent manufacture, and of the most suitable
grade for the purpose intended;
(f) Lessee is not required to obtain the prior written approval from
Lessor for Lessee's contractor prior to commencement of the work as long as
Lessee's contractor is licensed, reputable and financially capable, and
reasonable evidence thereof has been presented to Lessor. Lessee's contractor
shall maintain all of the insurance reasonably required by Lessor, including,
without limitation, commercial general liability, workers' compensation,
builder's risk and course of construction insurance. The limits of such
insurance shall be the same as those specified in Article 12;
(g) If the estimated cost of alterations exceeds Five Hundred
Thousand Dollars ($500,000.00), as a condition of approval of the alterations,
Lessor may require performance and labor and materialmen's payment bonds issued
by a surety approved by Lessor, in a sum equal to the cost of the alterations
guarantying the completion of the alterations free and clear of all liens and
other charges in accordance with the Plans. Such bonds shall name Lessor as
beneficiary;
(h) Lessor shall have the right to condition any approval of the
alterations upon (i) submission by Lessee of a Report with respect to Hazardous
Materials, and/or (ii) the performance by Lessee at Lessee's cost and expense of
such investigation, clean-up and remediation with respect to Hazardous
Materials, if required under Article 19, as Lessor may request, in Lessor's sole
and absolute discretion; provided, however, that Lessor shall have the right,
but not the obligation, to undertake all or any portion of such investigation,
clean-up or remediation at Lessee's cost and expense in accordance with the
provisions of Section 20.3(e) above. Lessee acknowledges and agrees that Lessor
shall have the right, in its sole and absolute discretion, to disapprove the
making of any such alterations based upon the results of any investigation with
respect to Hazardous Materials.
22.3 Liens.
Lessee shall keep the Leased Premises and the Complex in which the Leased
Premises are situated free from any liens arising out of any work performed,
materials furnished or obligations incurred by Lessee. In the event a mechanic's
or other lien is filed against the Leased Premises or the Complex of which the
Leased Premises forms a part as a result of a claim arising through Lessee,
Lessor may demand that Lessee furnish to Lessor a surety bond satisfactory to
Lessor in an amount equal to at least one hundred fifty percent (150%) of the
amount of the contested lien claim or demand, indemnifying Lessor against
liability for the same and holding the Leased Premises free from the effect of
such lien or claim. Such bond must be posted within ten (10) days following
notice from Lessor. In addition, Lessor may require Lessee to pay Lessor's
attorneys' fees and costs in participating in any action to foreclose such lien
if Lessor shall decide it is to its best interest to do so. Lessor may pay the
claim prior to the enforcement thereof, in which event Lessee shall reimburse
Lessor in full, including attorneys' fees, for any such expense, as additional
rent, with the next due rental.
29
22.4 Restoration.
Lessee shall return the Leased Premises to Lessor at the expiration or
earlier termination of this Lease in good and sanitary order, condition and
repair, free of rubble and debris, broom clean, reasonable wear and tear
excepted. However, Lessee shall ascertain from Lessor at the time Lessee seeks
Lessor's consent to its plans or, if no consent is required, then at the time
Lessee seeks Lessors' consent to leave the improvements in place at the end of
the Term, whether Lessor desires the Leased Premises, or any part thereof,
restored to its condition prior to the making of permitted alterations,
installations and improvements, and if Lessor shall so desire, then Lessee shall
forthwith restore said Leased Premises or the designated portions thereof as the
case may be, to its original condition, entirely at its own expense, excepting
normal wear and tear. All damage to the Leased Premises caused by the removal of
such trade fixtures and other personal property that Lessee is permitted to
remove under the terms of this Lease and/or such restoration shall be repaired
by Lessee at its sole cost and expense prior to termination.
23. MAINTENANCE AND REPAIRS
23.1 Obligations of Lessor and Lessee.
(a) Lessee shall, at its sole cost and expense, keep and maintain the
Leased Premises, including without limitation, the roof, and appurtenances, and
every part thereof in good, clean and sanitary order, condition and repair
including all necessary replacements, and shall maintain the appearance of the
Leased Premises in a manner consistent with the character, use and appearance of
the Complex. Subject to the obligations of Lessee pursuant to this Article and
pursuant to Article 20 above, Lessor shall perform all necessary repairs,
maintenance and replacement of the foundation and structural parts of the
Building, and replacement of the roof. The cost thereof shall be paid by Lessor
and the Minimum Rent hereunder shall thereupon be increased by an amount equal
to the monthly sum required to amortize the cost thereof over its reasonably
useful life (as determined by Lessor's Certified Public Accountant) at 10%
interest. Lessee shall, at its sole cost, keep and maintain all utilities,
fixtures and mechanical equipment used by Lessee in good order, condition and
repair. In the case of equipment installed by Lessor for Lessee, or installed by
Lessee and being or to become the property of Lessor, such as heating,
ventilating and air conditioning equipment, or other mechanical equipment,
Lessee shall maintain a service contract for its regular maintenance with a
service company acceptable to Lessor, at Lessee's expense. Evidence of such a
service contract will be provided to Lessor at its request. Prior to
commencement of any repairs, Lessee shall give Lessor at least ten (10) days'
prior written notice thereof so that Lessor may post notices of non-
responsibility in or upon the Leased Premises as provided by law. Lessee must
obtain the prior written approval from Lessor for Lessee's contractor before the
commencement of the repair. Lessor may require that Lessee use a specific
contractor for certain types of repairs. Notwithstanding the foregoing, Lessee
shall not make any repairs to the equipment, Lines, facilities or systems of the
Building or Complex which are outside of the Leased Premises or which do not
exclusively serve the Leased Premises.
30
(b) Lessee acknowledges that except as expressly set forth to the
contrary in Subsection (a) above, Lessor shall and does have absolutely no
obligation for maintenance or other building services to the Lessee or the
Premises.
23.2 Waiver.
Lessee waives all rights it may have under law to make repairs at Lessor's
expense.
24. CONDEMNATION
24.1 Definitions.
(a) "Condemnation" means (i) the exercise of any governmental power,
whether by legal proceedings or otherwise, by a condemnor and/or (ii) a
voluntary sale or transfer by Lessor to any condemnor, either under threat of
condemnation or while legal proceedings for condemnation are pending.
(b) "Date of taking" means the date the condemnor has the right to
possession of the property being condemned.
(c) "Award" means all compensation, sums or anything of value
awarded, paid or received on a total or partial condemnation.
(d) "Condemnor" means any public or quasi-public authority, or
private corporation or individual, having the power of condemnation.
24.2 Total Taking.
If the Leased Premises are totally taken by condemnation, this Lease shall
terminate on the date of taking.
24.3 Partial Taking.
(a) If any portion of the Leased Premises is taken by condemnation,
this Lease shall remain in effect, except that Lessee can elect to terminate
this Lease if 33-1/3% or more of the total number of square feet in the Leased
Premises is taken.
(b) If fifty percent (50%) or more of the Building in which the
Leased Premises are located is taken, Lessor shall have the election to
terminate this Lease in the manner prescribed herein.
24.4 Termination or Abatement
If either party elects to terminate this Lease under the provisions of
Section 24.3 (such party is hereinafter referred to as the "Terminating Party"),
it must terminate by giving notice to the other party (the "Nonterminating
Party") within thirty (30) days after the nature and extent of the taking have
been finally determined (the "Decision Period"). The Terminating Party shall
31
notify the Nonterminating Party of the date of termination, which date shall not
be earlier than sixty (60) days after the Terminating Party has notified the
Nonterminating Party of its election to terminate nor later than the date of
taking. If Notice of Termination is not given within the Decision Period, the
Lease shall continue in full force and effect except that Minimum Rent shall be
reduced by subtracting therefrom an amount calculated by multiplying the Minimum
Rent in effect prior to the taking by a fraction the numerator of which is the
number of square feet taken from the Leased Premises and the denominator of
which is the number of square feet in the Leased Premises prior to the taking.
24.5 Restoration.
If there is a partial taking of the Leased Premises and this Lease remains
in full force and effect pursuant to this Article, Lessor, at its cost, shall
accomplish all necessary restoration so that the Leased Premises is returned as
near as practical to its condition immediately prior to the date of the taking,
but in no event shall Lessor be obligated to expend more for such restoration
than the extent of funds actually paid to Lessor by the condemnor.
24.6 Award.
Any award arising from the condemnation or the settlement thereof shall
belong to and be paid to Lessor except that Lessee shall receive from the award
compensation for the following if specified in the award by the condemning
authority, so long as it does not reduce Lessor's award in respect of the real
property: Lessee's trade fixtures, tangible personal property, loss of business
and relocation expenses. At all events, Lessor shall be solely entitled to all
award in respect of the real property, including the bonus value of the
leasehold. Lessee shall not be entitled to any award until Lessor has received
the above sum in full.
25. PARKING
25.1 Designated Areas.
In connection with this Lease, Lessor may purchase the westerly one-half of
that certain property described in Exhibit A-1 attached hereto (the "Parking
Lot") , which parcel is bounded by 3rd Street, 4th Street, Jackson Street, and
Madison Street for Lessee's parking. If purchased, Lessee shall have the option,
to be exercised within fifteen (15) days after notice from Lessor of its
purchase of the westerly one-half (1/2) of the Parking Lot, to add that
one-half (1/2) of the Parking Lot to the Leased Premises hereunder and, if
Lessee then so elects, all costs of maintenance, Taxes and insurance for the
entire Parking Lot shall be includable as Lessee's obligation under this
Lease.
26. ENTRY BY LESSOR
26.1 Rights of Lessor.
Without disturbing Lessee's use of the Leased Premises, Lessee shall permit
Lessor and Lessor's agents to enter the Leased Premises at all reasonable times
for the purpose of inspecting
32
the same or for the purpose of maintaining the Building, the Complex, and the
Lines, systems and facilities therein, or for the purpose of making repairs,
replacements, alterations or additions to any portion of the Building, the
Complex, and the Lines, Systems and facilities therein, including the erection
and maintenance of such scaffolding, canopies, fences and props as may be
required, or for the purpose of posting notices of non-responsibility for
alterations, additions or repairs, or for the purpose of placing upon the
Building any usual or ordinary "for sale" signs, without any rebate of Rent and
without any liability to Lessee for any loss of occupation or quiet enjoyment of
the Leased Premises thereby occasioned, and shall permit Lessor, at any time
within ninety (90) days prior to the expiration of this Lease, to place upon the
Leased Premises any usual or ordinary "to let" or "to lease" signs. This Section
in no way affects the maintenance obligations of the parties hereto.
27. SIGNS
27.1 Approval, Installation and Maintenance.
Lessee shall not place on the Leased Premises or on the Complex, any
exterior signs or advertisements nor any interior signs or advertisements that
are visible from the exterior of the Leased Premises, without Lessor's prior
written consent, which shall not be unreasonably withheld or delayed. The cost
of installation and regular maintenance of any such signs approved by Lessor
shall be at the sole expense of Lessee. At the termination of this Lease, or any
extension thereof, Lessee shall remove all his signs, and all damage caused by
such removal shall be repaired at Lessee's expense.
28. DEFAULT
28.1 Definition.
The occurrence of any of the following shall constitute a material default
and breach of this Lease by Lessee:
(a) Any failure by Lessee to pay the rental or to make any other
payment required to be made by Lessee within three (3) business days following
receipt of written notice from Lessor, which notice shall be concurrent with any
required statutory notice.
(b) Any failure by Lessee to provide executed documents as and when
required under the provisions of Section 35.2 and/or Article 36;
(c) A failure by Lessee to observe and perform any other provision of
this Lease to be observed or performed by Lessee, where such failure continues
for ten (20) days after written notice thereof by Lessor to Lessee; provided,
however, that if the nature of the default is such that the same cannot
reasonably be cured within the ten (20) day period allowed, Lessee shall not be
deemed to be in default if Lessee shall, within such ten (20) day period,
commence to cure and thereafter diligently prosecute the same to completion;
33
(d) Either (1) the appointment of a receiver (except a receiver
appointed at the instance or request of Lessor) to take possession of all or
substantially all of the assets of Lessee, or (2) a general assignment by Lessee
for the benefit of creditors, or (3) any action taken or suffered by Lessee
under any insolvency or bankruptcy act shall constitute a breach of this Lease
by Lessee. In such event, Lessor may, at its option, declare this Lease
terminated and forfeited by Lessee, and Lessor shall be entitled to immediate
possession of the Leased Premises. Upon such notice of termination, this Lease
shall terminate immediately and automatically by its own limitation.
29. REMEDIES UPON DEFAULT
29.1 Termination and Damages.
In the event of any default by Lessee, then in addition to any other remedies
available to Lessor herein or at law or in equity, Lessor shall have the
immediate option to terminate this Lease and all rights of Lessee hereunder by
giving written notice of such intention to terminate. In the event that Lessor
shall elect to so terminate this Lease, then Lessor may recover from Lessee.
(a) The worth at the time of award of any unpaid rent which had been
earned at the time of such termination; plus
(b) The worth at the time of award of the amount by which the unpaid
rent which would have been earned after termination until the time of award
exceeds the amount of such rental loss Lessee proves could have been reasonably
avoided; plus
(c) The worth at the time of award of the amount by which the unpaid
rent for the balance of the Term after the time of award exceeds the amount of
such rental loss that Lessee proves could be reasonably avoided; plus
(d) Any other amount necessary to compensate Lessor for all the
detriment proximately caused by Lessee's failure to perform its obligations
under this Lease or which in the ordinary course of events would be likely to
result therefrom; and
(e) At Lessor's election, such other amounts in addition to or in
lieu of the foregoing as may be permitted from time to time by the applicable
law in the state in which the Leased Premises are located.
29.2 Definitions.
(a) The terms "rent" or "rental," as used in this Lease, shall be
deemed to be and to mean the Minimum Rent and all other sums required to be paid
by Lessee pursuant to the terms of this Lease.
(b) As used in Subsections 29.1(a) and (b) above, the "worth at the
time of award" is computed by allowing interest at the rate of ten percent (10%)
per annum. As used in
34
Subsection 29.1(c) above, the "worth at the time of award" is computed by
discounting such amount at the discount rate of the Federal Reserve Bank for the
region in which the Complex is located at the time of award plus one percent
(1%).
29.3 Personal Property.
(a) In the event of any default by Lessee, Lessor shall also have the
right, with or without terminating this Lease, to reenter the Leased Premises
and remove all persons and property from the Leased Premises; such property may
be removed and stored in a public warehouse or elsewhere at the cost of and for
the account of Lessee.
(b) In the event of default, all of Lessee's fixtures, furniture,
equipment, improvements, additions, alterations and other personal property
shall remain upon the Leased Premises and in that event, and continuing during
the length of such default, Lessor shall have the sole right to take exclusive
possession of such property and to use it, rent or charge free, until all
defaults are cured or, at Lessor's option, at any time during the Term, to
require Lessee to forthwith remove such property. The rights stated herein are
in addition to Lessor's rights described in Section 30.1.
29.4 Recovery of Rent; Reletting.
(a) In the event of the vacation or abandonment of the Leased
Premises by Lessee or in the event that Lessor shall elect to reenter as
provided in Section 29.3 above, or shall take possession of the Leased Premises
pursuant to legal proceeding or pursuant to any notice provided by law under the
provisions of California Civil Code Section 1951.4 (or similar statute), then if
Lessor does not elect to terminate this Lease as provided in Section 29.1 above,
this Lease shall continue in effect for so long as Lessor does not terminate
Lessee's right to possession, and Lessor may enforce all its rights and remedies
under this Lease, including, without limitation, Lessor's right from time to
time, without terminating this Lease, to either recover all rental as it becomes
due or relet the Leased Premises or any part thereof for such term or terms and
at such rental or rentals and upon such other terms and conditions as Lessor, in
its sole discretion, may deem advisable with the right to make alterations and
repairs to the Leased Premises. Acts of maintenance or preservation or efforts
to relet the Leased Premises or the appointment of a receiver upon initiation of
Lessor or other legal proceeding granting Lessor or its agent possession to
protect Lessor's interest under this Lease shall not constitute a termination of
Lessee's right to possession.
(b) In the event that Lessor shall elect to so relet, then rentals
received by Lessor from such reletting shall be applied: first, to the payment
of any indebtedness other than rent due hereunder from Lessee to Lessor; second,
to the payment of any cost of such reletting; third, to the payment of the cost
of any alterations and repairs to the Leased Premises; fourth, to the payment
of rent due and unpaid hereunder; and the residue, if any, shall be held by
Lessor and applied in payment of future rent as the same may become due and
payable hereunder. Should that portion of such rentals received from such
reletting during any month, which is applied by the payment of rent hereunder,
be less than the rent payable during that month by Lessee hereunder, then Lessee
shall pay such deficiency to Lessor immediately upon demand
35
therefor by Lessor. Such deficiency shall be calculated and paid monthly. Lessee
shall also pay to Lessor, as soon as ascertained, any costs and expenses
incurred by Lessor in such reletting or in making such alterations and repairs
not covered by the rentals received from such reletting.
(c) No reentry or taking possession of the Leased Premises or any
other action under this Section shall be construed as an election to terminate
this Lease unless a written notice of such intention be given to Lessee or
unless the termination thereof be decreed by a court of competent jurisdiction.
Notwithstanding any reletting without termination by Lessor because of any
default by Lessee, Lessor may at any time after such reletting elect to
terminate this Lease for any such default.
(d) Lessor has the remedy described in California Civil Code Section
1951.4 (Lessor may continue Lease in effect after Lessee's breach and
abandonment and recover rent as it becomes due, if Lessee has right to sublet or
assign, subject only to reasonable limitations).
29.5 No Waiver.
Efforts by Lessor to mitigate the damages caused by Lessee's default in
this Lease shall not constitute a waiver of Lessor's right to recover damages
hereunder, nor shall Lessor have any obligation to mitigate damages hereunder.
29.6 Curing Defaults.
Should Lessee fail to repair, maintain, keep clean, and/or service the
Leased Premises, or any part or contents thereof at any time or times, or
perform any other obligations imposed by this Lease or otherwise, then after
having given Lessee reasonable notice of the failure or failures and a
reasonable opportunity, which in no case shall exceed ten (10) days, to remedy
the failure, Lessor may enter upon the Leased Premises and perform or contract
for the performance of the repair, maintenance, or other Lessee obligation, and
Lessee shall pay Lessor for all direct and indirect costs incurred in connection
therewith within ten (10) days of receiving a bill therefor from Lessor.
29.7 No Right to Cure.
Notwithstanding anything to the contrary set forth in Section 29.1 above,
Lessee shall be deemed to have committed a material default and breach of this
Lease, without any right on Lessee's part to cure such default and breach, upon
the failure by Lessee to observe and perform the provisions of any one or more
of the following Sections (or indicated portions thereof) of this Lease: 10.2,
20.1, 22.1 (first sentence), 27.1,35.2, 36.1 and 36.2.
29.8 Cumulative Remedies.
The various rights, options, election powers, and remedies of Lessor
contained in this Article and elsewhere in this Lease shall be construed as
cumulative and no one of them exclusive of any others or of any legal or
equitable remedy which Lessor might otherwise have
36
in the event of breach or default, and the exercise of one right or remedy by
Lessor shall not in any way impair its right to any other right or remedy.
30. FORFEITURE OF PROPERTY AND LESSOR'S LIEN
30.1 Removal of Personal Property.
Lessee agrees that as at the date of termination of this Lease or
repossession of the Leased Premises by Lessor, by way of default or otherwise,
it shall remove all personal property to which it has the right to ownership
pursuant to the terms of this Lease. Any and all such property of Lessee not
removed by such date shall, at the option of Lessor, irrevocably become the sole
property of Lessor. Lessee waives all rights to notice and all common law and
statutory claims and causes of action which it may have against Lessor
subsequent to such date as regards the storage, destruction, damage, loss of use
and ownership of the personal property affected by the terms of this Article.
Lessee acknowledges Lessor's need to relet the Leased Premises upon termination
of this Lease or repossession of the Leased Premises and understands that the
forfeitures and waivers provided herein are necessary to aid said reletting, and
to prevent Lessor incurring a loss for inability to deliver the Leased Premises
to a prospective lessee.
31. SURRENDER OF LEASE
31.1 No Merger.
The voluntary or other surrender of this Lease by Lessee, or a mutual
cancellation thereof, shall not work as a-merger, and shall, at the option of
Lessor, terminate all or any existing subleases or subtenancies, or may, at the
option of Lessor, operate as an assignment to it of any or all such subleases or
subtenancies.
32. LESSOR'S EXCULPATION
32.1 Limited Liability.
In the event of default, breach, or violation by Lessor (which term
includes Lessor's partners, co-venturers, co-tenants, officers, directors,
trustees, employees, agents, or representatives) of any of Lessor's obligations
under this Lease, Lessor's liability to Lessee shall be limited to its ownership
interest in the Leased Premises (or its interest in the Complex, if applicable)
or the proceeds of a public sale of such interest pursuant to foreclosure of a
judgment against Lessor. Lessor may, at its option, and among its other
alternatives, relieve itself of all liability under this Lease by conveying the
Leased Premises to Lessee. Notwithstanding any such conveyance, Lessee's
leasehold and ownership interest shall not merge.
32.2 No Recourse.
Lessor (as defined in Section 32.1) shall not be personally liable for any
deficiency beyond its interest in the Leased Premises. All personal liability of
all trustees, their employees, agents or representatives is expressly waived by
Lessee.
37
33. ATTORNEYS' FEES
33.1 Actions, Proceedings, etc
If there is any legal action or proceeding (including arbitration) between
Lessor and Lessee arising out of any default by Lessee in the observance or
performance of any obligation under this Lease or to enforce or interpret this
Lease or to protect or establish any right or remedy under this Lease, the
unsuccessful party to such action or proceeding shall pay to the prevailing
party all costs and expenses, including reasonable attorney's fees and
disbursements, incurred by such prevailing party in such action or proceeding
and in any appeal in connection therewith. If such prevailing party recovers a
judgment in any such action or proceeding (including arbitration) or appeal
thereon, such costs, expenses, and attorney's fees and disbursements shall be
included in and as a part of such judgment.
33.2 Survival.
Lessee's obligations under this Section shall survive the expiration or any
other termination of this Lease. This Section is intended to supplement (and not
to limit) other provisions of this Lease pertaining to indemnities and/or
attorneys' fees.
34. NOTICES
34.1 Writing.
All notices, demands and requests required or permitted to be given or made
under any provision of this Lease, shall be in writing and shall be: (i) given
or made by personal service, or (ii) by mailing same by registered or certified
mail, return receipt requested, postage prepaid, or by (iii) reputable courier
which provides written evidence of delivery, addressed to the respective party
at the address set forth in Section 1.1 of this Lease or at such other address
as the party may from time to time designate, by a written notice, sent to the
other in the manner aforesaid.
34.2 Effective Date.
Any such notice, demand or request ("notice") shall be deemed given or made
on the third day after the date so mailed. Notwithstanding the foregoing, notice
given by personal delivery to the party at its address as aforesaid shall be
deemed given on the day on which delivery is made. Notice given by a reputable
courier service which provides written evidence of delivery shall be deemed
given on the business day immediately following deposit with the courier
service.
34.3 Authorization to Receive.
Each person and/or entity whose signature is affixed to this Lease as
Lessee or as guarantor of Lessee's obligations ("obligor") designates such other
obligor its agent for the purpose of receiving any notice pertaining to this
Lease or service of process in the event of any litigation or dispute arising
from any obligation imposed by this Lease.
38
35. SUBORDINATION
35.1 Priority of Encumbrances.
(a) This Lease, at Lessor's option, shall be subordinate to any
ground lease, mortgage, deed of trust, or any other hypothecation for security
now or hereafter placed upon the real property of which the Leased Premises are
a part and to any and all advances made on the security thereof and to all
renewals, modifications, consolidations, replacements and extensions thereof.
Notwithstanding such subordination, Lessee's right to quiet possession of the
Leased Premises shall not be disturbed if Lessee is not in default and so long
as Lessee shall pay the rent and observe and perform all the provisions of this
Lease, unless this Lease is otherwise terminated pursuant to its terms. If any
mortgagee, trustee or ground lessor shall elect to have this Lease prior to the
lien of its mortgage, deed of trust or ground lease, and shall give written
notice thereof to Lessee, this Lease shall be deemed prior to such mortgage,
deed of trust or ground lease, whether this Lease is dated prior or subsequent
to the date of said mortgage, deed of trust or ground lease or the date of
recording thereof.
(b) Lessor shall use reasonably diligent efforts to obtain a non-
disturbance agreement in form reasonably satisfactory to the Lessee from any
Lender whose lien encumbers the Leased Premises, within ten (10) business days
from date of execution hereof and failing to do so, Lessee shall have the right
to terminate this Lease on thirty (30) days prior written notice to the Lessor
at any time within sixty (60) days following the expiration of the ten (10) day
period aforementioned.
35.2 Execution of Documents.
Subject to Lessee's reasonable approval and so long as such documents
contain a non-disturbance agreement, Lessee agrees to execute any documents
required to effectuate such subordination or to make this Lease prior to the
lien of any mortgage, deed of trust or ground lease, as the case may be, and
failing to do so within ten (10) days after written demand, does hereby make,
constitute and irrevocably appoint Lessor as Lessee's attorney-in-fact and in
Lessee's name, place and stead, to do so. It is understood by all parties that
Lessee's failure to execute the subordination documents referred to above may
cause Lessor serious financial damage by causing the failure of a financing or
sale transaction.
35.3 Attornment.
Lessee shall attorn to any purchaser at any foreclosure sale, or to any
grantee or transferee designated in any Deed given in lieu of foreclosure.
36. ESTOPPEL CERTIFICATES
36.1 Execution by Lessee.
(a) Within ten (10) days of request therefor by Lessor or Lessee,
each party shall execute a written statement acknowledging the commencement and
termination dates of
39
this Lease, that it is in full force and effect, has not been modified (or if it
has, stating such modifications), and providing any other pertinent information
as Lessor or Lessee or their agent might reasonably request. Failure to comply
with this Article shall be a material breach of this Lease by Lessee or Lessor
giving each party all rights and remedies under Article 30 hereof, as well as a
right to damages caused by the loss of a loan or sale which may result from such
failure by Lessee or Lessor.
(b) Notwithstanding the provisions of 36.1(a) above, the
circumstances giving rise to a valid request for an estoppel certificate by
either party shall be as follows:
(i) A request by Lessor may be in respect of a financing or
potential financing, sale, ground lease, joint venture or partnership;
(ii) A valid request by Lessee shall be for an assignment of
the entire Lease.
36.2 Financing, Sale or Transfer.
If Lessor desires to finance, refinance, sell, ground lease or otherwise
transfer the Leased Premises, or any part thereof, or the Building, Lessee
hereby agrees, within ten (10) days of request therefor by Lessor, to deliver to
any lender or to any prospective buyer, ground lessor or other transferee
designated by Lessor such financial statements of Lessee, its Guarantor and its
parent company, if any, as may be reasonably required by such party. Such
statements shall include the past three (3) years' financial statements of
Lessee. All such financial statements shall be received by Lessor in confidence
and shall be used only for the purposes herein set forth.
37. WAIVER
37.1 Effect of Waiver.
The waiver by Lessor of any breach of any Lease provision shall not be
deemed to be a waiver of such Lease provision or any subsequent breach of the
same or any other term, covenant or condition therein contained. The subsequent
acceptance of rent hereunder by Lessor shall not be deemed to be a waiver of any
preceding breach by Lessee of any provision of this Lease, other than the
failure of Lessee to pay the particular rental so accepted, regardless of
Lessor's knowledge of such preceding breach at the time of acceptance of such
rent.
38. HOLDING OVER
38.1 Month-to-Month Tenancy on Acceptance.
If Lessee should remain in possession of the Leased Premises after the
expiration of the Term and without executing a new Lease, then, upon acceptance
of rent by Lessor, such holding over shall be construed as a tenancy from month
to month, subject to all the conditions, provisions and obligations of this
Lease as existed during the last month of the Term hereof, so far as applicable
to a month to month tenancy, except that the Minimum Rent shall be equal to
40
twice the Minimum Rent payable immediately prior to the expiration or sooner
termination of the Lease.
39. SUCCESSORS AND ASSIGNS
39.1 Binding Effect.
The covenants and conditions herein contained shall, subject to the
provisions as to assignment, apply to and bind the heirs, successors, executors,
administrators and assigns of all of the parties hereto; and all of the parties
hereto shall be jointly and severally liable hereunder.
40. TIME
40.1 Time of the Essence.
Time is of the essence of this Lease with respect to each and every
article, section and subsection hereof.
41. EFFECT OF LESSOR'S CONVEYANCE
41.1 Release of Lessor.
If, during the Term, Lessor shall sell its interest in the Building or
Complex of which the Leased Premises forms a part, or the Leased Premises, then
from and after the effective date of the sale or conveyance, so long as such
successor assumes all of Lessor's obligations under the Lease, Lessor shall be
released and discharged from any and all obligations and responsibilities under
this Lease, except those already accrued.
42. TRANSFER OF SECURITY
42.1 Transfer to Purchaser.
If any security be given by Lessee to secure the faithful performance of
all or any of the covenants of this Lease on the part of Lessee, Lessor may
transfer and/or deliver the security, as such, to the purchaser of the
reversion, in the event that the reversion be sold, and thereupon Lessor shall
be discharged from any further liability in reference thereto.
43. CORPORATE AUTHORITY
43.1 Authorization to Execute.
If Lessee is a corporation, each individual executing this Lease on behalf
of said corporation represents and warrants that he is duly authorized to
execute and deliver this Lease on behalf of said corporation in accordance with
a duly adopted resolution of the Board of Directors of said corporation or in
accordance with the Bylaws of said corporation, and that this Lease is binding
upon said corporation in accordance with its terms. Further, Lessee or Lessor
shall, within thirty (30) days after execution of this Lease, deliver to the
other a certified copy of
41
a resolution of the Board of Directors of said corporation authorizing or
ratifying the execution of this Lease.
44. WAIVER OF CALIFORNIA CODE SECTIONS
44.1 Waiver by Lessee.
In this Lease, numerous provisions have been negotiated by the parties,
some of which provisions are covered by statute. Whenever a provision of this
Lease and a provision of any statute or other law cover the same matter, the
provisions of this Lease shall control. Therefore, Lessee waives (for itself and
all persons claiming under Lessee) the provisions of Civil Code Sections 1932
(2) and 1933 (4) with respect to the destruction of the Leased Premises; Civil
Code Sections 1941 and 1942 with respect to Lessor's repair duties and Lessee's
right to repair; Civil Code Section 1995.310, granting to a tenant all remedies
provided by law for breach of contract (including, without limitation, the right
to contract damages and the right to terminate the lease) in the event that the
Lessor unreasonably withholds consent to a transfer in violation of the Lessee's
rights under the lease; 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 Leased Premises by condemnation as herein defined;
and any right of redemption or reinstatement of Lessee under any present or
future case law or statutory provision (including Code of Civil Procedure
Sections 473 and 1179 and Civil Code Section 3275) in the event Lessee is
dispossessed from the Leased Premises for any reason. This waiver applies to
future statutes enacted in addition to or in substitution for the statutes
specified herein.
45. WASTE
45.1 Waste or Nuisance.
Lessee shall not commit, or suffer to be committed, any waste upon the
Leased Premises, or any nuisance, or other act or thing which may disturb the
quiet enjoyment of any other tenant or occupant of the Complex in which the
Leased Premises are located.
46. BANKRUPTCY
46.1 Bankruptcy Events.
If at any time during the Term there shall be filed by or against Lessee in
any court pursuant to any statute either of the United States or of any State a
petition in bankruptcy or insolvency or for reorganization or for the
appointment of a receiver or trustee of all or a portion of Lessee's property,
or if a receiver or trustee takes possession of any of the assets of Lessee, or
if the leasehold interest herein passes to a receiver, or if Lessee makes an
assignment for the benefit of creditors or petitions for or enters into an
arrangement (any of which are referred to herein as "a bankruptcy event"), then
the following provisions shall apply:
42
(a) At all events any receiver or trustee in bankruptcy or Lessee as
debtor in possession ("debtor") shall either expressly assume or reject this
Lease within sixty (60) days following the entry of an "Order for Relief."
(b) In the event of an assumption of the Lease by a debtor, receiver,
or trustee, such debtor, receiver, or trustee shall immediately after such
assumption (1) cure any default or provide adequate assurances that defaults
will be promptly cured; and (2) compensate Lessor for actual pecuniary loss or
provide adequate assurances that compensation will be made for actual pecuniary
loss; and (3) provide adequate assurance of future performance.
For the purposes of this paragraph 46.1 (b), adequate assurance of future
performance of all obligations under this Lease shall include, but is not
limited to:
(i) written assurance that rent and any other consideration
due under the Lease shall first be paid before any other of Lessee's costs
of operation of its business in the Leased Premises are paid;
(ii) written agreement that assumption of this Lease will not
cause a breach of any provision hereof including, but not limited to, any
provision relating to use or exclusivity in this or any other Lease, or
agreement relating to the Leased Premises, or if such a breach is caused,
the debtor, receiver or trustee will indemnify Lessor against such loss
(including costs of suit and attorneys' fees), occasioned by such breach;
(c) Where a default exists under the Lease, the party assuming the
Lease may not require Lessor to provide services or supplies incidental to the
Lease before its assumption by such trustee or debtor, unless Lessor is
compensated under the terms of the Lease for such services and supplies provided
before the assumption of such Lease.
(d) The debtor, receiver, or trustee may only assign this Lease in
accordance with the terms of Article 31 and if adequate assurance of future
performance by the assignee is provided, whether or not there has been a default
under the Lease. For the purpose hereof, adequate assurance of future
performance means written agreement that assignment of this Lease will not cause
a breach of any provision hereof including, but not limited to, any provision
relating to use or exclusivity in this or any other Lease or agreement relating
to the Leased Premises, and that if such a breach is caused, the debtor,
receiver or trustee will indemnify Lessor against such loss (including costs of
suit and attorney's fees), occasioned by such breach. Any consideration paid by
any assignee in excess of the rental reserved in the Lease shall be the sole
property of, and paid to, Lessor. Upon assignment by the debtor or trustee, the
obligations of the Lease shall be deemed to have been assumed and the assignee
shall execute an assumption agreement on request of Lessor.
(e) Lessor shall be entitled to the fair market value for the Leased
Premises and the services provided by Lessor (but in no event less than the
rental reserved in the Lease) subsequent to the commencement of a bankruptcy
event.
43
(f) Lessor specifically reserves any and all remedies available to
Lessor in Article 30 hereof or at law or in equity in respect of a bankruptcy
event by Lessee to the extent such remedies are permitted by law.
47. LATE CHARGES
47.1 Late Payment by Lessee.
Lessee acknowledges that late payment by Lessee to Lessor of rent or any
other payment due hereunder will cause Lessor to incur costs not contemplated by
this Lease, the exact amount of such costs being extremely difficult and
impractical 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 Leased
Premises. Therefore, if any installment of rent, or any other payment due
hereunder from Lessee is not received by Lessor within five (5) days after the
date it is due, Lessee shall pay to Lessor an additional sum of three percent
(3%) of such rent or other charge as a late charge. The parties agree that this
late charge represents a fair and reasonable estimate of the cost that Lessor
will incur by reason of late payment by Lessee. Acceptance of any late charge
shall not constitute a waiver of Lessee default with respect to the overdue
amount, or prevent Lessor from exercising any other rights or remedies available
to Lessor.
48. MORTGAGEE PROTECTION
48.1 Notice and Right to Cure Default.
Lessee agrees to give any mortgagee(s) and/or trust deed holders, by
registered mail, a copy of any notice of default served upon Lessor, provided
that prior to such notice Lessee has been notified, in writing (by way of Notice
of Assignment of Rents and Leases, or otherwise), of the address of such
mortgagees and/or trust deed holders. Lessee further agrees that if Lessor shall
have failed to cure such default within the time provided for in this Lease,
then the mortgagees and/or trust deed holders shall have an additional thirty
(30) days within which to cure such default or, if such default cannot be cured
within that time, then such additional time as may be necessary (but not in any
event to exceed ninety (90) days) if within such thirty (30) days, any mortgagee
and/or trust deed holder has commenced and is diligently pursuing the remedies
necessary to cure such default (including but not limited to commencement of
foreclosure proceedings, if necessary to effect such cure), in which event this
Lease shall not be terminated while such remedies are being so diligently
pursued.
49. MISCELLANEOUS PROVISIONS
49.1 Captions.
The captions of this Lease are for convenience only and are not a part of
this Lease and do not in any way limit or amplify the terms and provisions of
this Lease.
44
49.2 Number and Gender.
Whenever the singular number is used in this Lease and when required by the
context, the same shall include the plural, the plural shall include the
singular, and the masculine gender shall include the feminine and neuter
genders, and the word "person" shall include corporation, firm or association.
If there be more than one Lessee, the obligations imposed under this Lease upon
Lessee shall be joint and several.
49.3 Modifications.
This instrument contains all of the agreements, conditions and
representations made between the parties to this Lease and may not be modified
orally or in any other manner than by an agreement in writing signed by all of
the parties to this Lease.
49.4 Payments.
Except as otherwise expressly stated, each payment required to be made by
Lessee shall be in addition to and not in substitution for other payments to be
made by Lessee.
49.5 Severability.
The invalidity of any provision of this Lease, as determined by a court of
competent jurisdiction, shall in no way affect the validity of any other
provision hereof.
49.6 No Offer.
The preparation and submission of a draft of this Lease by either party to
the other shall not constitute an offer, nor shall either party be bound to any
terms of this Lease or the entirety of the Lease itself until both parties have
fully executed a final document and an original signature document has been
received by both parties. Until such time as described in the previous sentence,
either party is free to terminate negotiations with no obligation to the other.
49.7 Disputed Sums.
Under the terms of this Lease numerous charges are and may be due from
Lessee to Lessor including, without limitation, real estate taxes, insurance
reimbursement and other items of a similar nature including advances made by
Lessor in respect of Lessee's default at Lessor's option. In the event that at
any time during the Term there is a bona fide dispute between the parties as to
the amount due for any of such charges claimed by Lessor to be due, the amount
demanded by Lessor shall be paid by Lessee until the resolution of the dispute
between the parties or by litigation. Failure by Lessee to pay the disputed sums
until resolution shall constitute a default under the terms of the Lease.
45
49.8 Light, Air and View.
No diminution of light, air, or view by any structure which may hereafter
be erected (whether or not by Lessor) shall entitle Lessee to any reduction of
Rent, result in any liability of Lessor to Lessee, or in any other way affect
this Lease or Lessee's obligations hereunder.
49.9 Public Transportation Information.
Lessee shall establish and maintain during the Term hereof a program to
encourage maximum use of public transportation by personnel of Lessee employed
on the Leased Premises, including without limitation the distribution to such
employees of written materials explaining the convenience and availability of
public transportation facilities adjacent or proximate to the Complex,
staggering working hours of employees, and encouraging use of such facilities,
all at Lessee's sole reasonable cost and expense. Lessee shall comply with all
requirements of any local transportation management ordinance.
49.10 Joint and Several Liability.
Should Lessee consist of more than one person or entity, they shall be
jointly and severally liable on this Lease.
49.11 Survival of Obligations.
All obligations of Lessee which may accrue or arise during the Term or as a
result of any act or omission of Lessee during said Term shall, to the extent
they have not been fully performed, satisfied or discharged, survive the
expiration or termination of this Lease.
49.12 Real Estate Brokers.
Other than C.B. Commercial, which has been employed and shall be paid
solely by Lessor, Lessor and Lessee each represents and warrants to the other
party that it has not authorized or employed, or acted by implication to
authorize or employ, any real estate broker or salesman to act for it in
connection with this Lease. Lessor and Lessee shall each indemnify, defend and
hold the other party harmless from and against any and all claims by any real
estate broker or salesman whom the indemnifying party authorized or employed, or
acted by implication to authorize or employ, to act for the indemnifying party
in connection with this Lease.
49.13 Nonliability of Lessor for Approvals.
Except as may otherwise be expressly stated by a provision of this Lease,
and only to the extent so stated, the consent or approval, whether express or
implied, or the act, failure to act or failure to object, by Lessor in
connection with any plan, specification, drawing, proposal, request, act,
omission, notice or communication (collectively, "act") by or for, or prepared
by or for, Lessee, shall not create any responsibility or liability on the part
of Lessor, and shall not
46
constitute a representation by Lessor, with respect to the completeness,
sufficiency, efficacy, propriety, quality or legality of such act.
49.14 Interest On Past Due Amounts.
If any sum due Lessor from Lessee is not received by Lessor within five (5)
calendar days after the date such sum is due and payable, such sum shall bear
interest from the due date until paid by Lessee at the rate of two percent (2%)
above the Prime Rate (as herein defined), not to exceed the maximum rate of
interest allowed by law in the state where the Leased Premises are located, and
such interest shall be deemed to be additional rent. "Prime Rate" means the
highest rate charged by Bank of America NT&SA, San Francisco Main Office, on
short-term unsecured loans to its most creditworthy corporate borrowers.
49.15 Conversion to a Limited Liability Entity.
(a) No Conversion Without Consent. Anything to the contrary in this
-----------------------------
Lease notwithstanding, if Lessee is currently a partnership (either general or
limited), joint venture, cotenancy, joint tenancy or an individual, Lessee may
not convert (the "Conversion") the Lessee entity or person into any type of
entity which possesses the characteristic of limited liability such as, by way
of example only, a corporation, a limited liability company, limited liability
partnership or limited liability limited partnership (singularly and
collectively, "Limited Entity"), without the consent of Lessor, which consent,
subject to fulfillment of the conditions below, shall not be unreasonably
withheld.
(b) Conditions to Lessor's Consent. The following are conditions
------------------------------
precedent to Lessor's obligation to act reasonably with respect to a Conversion
to a Limited Entity:
(i) The Limited Entity assumes all of Lessee's liabilities and
is assigned all of Lessee's assets as of the effective date of the Conversion;
(ii) As of the effective date of the Conversion, the Limited
Entity shall have a net worth ("Net Worth"), which is not less than the greater
of (i) Lessee's Net Worth on the date of execution of the Lease or (ii) Lessee's
Net Worth as of the date Lessee requests Lessor's consent to the Conversion;
(iii) Lessee has timely fulfilled all its obligations under any
of the terms, covenants or conditions of this Lease during the term of the
Lease;
(iv) Lessee delivers to Lessor an agreement, in form and
substance satisfactory to Lessor and executed by each equity interest holder of
Lessee, wherein each equity interest holder of Lessee agrees to remain
personally liable for all of the terms, covenants and conditions of the Lease
that are to be observed and performed by the Limited Entity; and
(v) Lessee shall reimburse Lessor within ten (10) days
following Lessor's written demand therefor for any and all reasonable costs and
expenses that may be
47
incurred by Lessor in connection with the Conversion including, without
imitation, reasonable attorney's fees.
(c) Nothing in this Section 49.15 shall modify or reduce the
obligations of Lessee under this Lease.
49.16 Memorandum of Lease.
Lessee may, at Lessee's option and expense, record a memorandum of this
Lease in a form approved by Lessor, at any time after the Commencement Date.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease as of the
day and year first written above.
LESSOR: LESSEE
SQUARE I, LLC COST PLUS, INC.
By: /s/ Edward D. Pike III By: /s/ Alan Zimtbaum
-------------------------------- ---------------------------------
By: Manager By: Alan Zimtbaum
-------------------------------- ---------------------------------
FOR OFFICE USE ONLY
PREPARED BY:_____________
REVIEWED BY:_____________
APPROVED BY: _____________
48
EXHIBIT A
LEGAL DESCRIPTION
REAL PROPERTY in the City of Oakland, County of Alameda, State of California,
described as follows:
PARCEL ONE: (430 Jackson Street)
- ----------
Beginning at the point of intersection of the Northern line of 4th Street with
the Eastern line of Jackson Street; running thence Northerly along said line of
Jackson Street, 200 feet to the Southern line of 5th Street; thence Easterly
along said Southern line of 5th Street, 225 feet; thence Southerly, parallel
with the Western line of Madison Street, 200 feet to the Northern line of 4th
Street; thence Westerly along said last named line, 225 feet to the point of
beginning.
Being a portion of Block 37, as said Block is shown on Kellersberger's Map of
The City of Oakland, on file in the Office of the County Recorder of Alameda
County.
A.P. No: 001-0161-001
PARCEL TWO: (425 Madison Street)
- ----------
Portion of Block 37, as said block is shown on Kellerberger's Map of the City of
Oakland, on file in the Office of the County Recorder of Alameda County,
described as follows:
Beginning at the intersection of the Southwestern line of 5th Street with the
Northwestern line of Madison Street; running thence along said line of 5th
Street Northwesterly, 75 feet; thence parallel with said line of Madison Street,
Southwesterly 200 feet to the Northeastern line of 4th Street; thence along the
last named line Southeasterly, 75 feet to said line of Madison Street; thence
along the last named line Northeasterly, 200 feet to the point of beginning.
A.P. No. 00l-0161-002
EXHIBIT A
PARKING LOT
LEGAL DESCRIPTION
-----------------
EAST HALF:
BEING ALL OF LOTS 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24 AND 25 IN
BLOCK 36, ACCORDING TO KELLERSBERGER'S MAP OF THE CITY OF OAKLAND, ON FILE AND
OF RECORD IN THE OFFICE OF THE RECORDER OF ALAMEDA COUNTY.
WEST HALF:
BEING ALL OF LOTS 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 26, 27 AND 28 IN BLOCK 36,
ACCORDING TO KELLERSBERGER'S MAP OF THE CITY OF OAKLAND, ON FILE AND OF RECORD
IN THE OFFICE OF THE RECORDER OF ALAMEDA COUNTY.
Exhibit "A-1"