Exhibit 10.6
LEASE
BETWEEN
FHL GROUP, A
CALIFORNIA CORPORATION,
AS LANDLORD
AND
VIRCO MFG. CORPORATION,
A DELAWARE CORPORATION,
AS TENANT
TABLE OF CONTENTS
Page
----
1. Term....................................................................................4
1.1 Term......................................................................4
1.2 Early Possession..........................................................4
1.3 "As Is" Delivery of the Property..........................................4
1.4 Lease Year................................................................5
2. Rent and Security Deposit...............................................................5
2.1 Rent......................................................................5
2.2 Additional Rent...........................................................5
2.3 Security Deposit..........................................................5
3. Tenant's Share of Certain Expenses......................................................6
3.1 Tenant's Share of Certain Expenses........................................6
3.2 Definitions...............................................................6
3.2.1 Real Estate Taxes Defined........................................6
3.2.2 Tenant's Share of Real Estate Taxes Defined......................6
3.2.3 Insurance Charges................................................6
3.2.4 Tenant's Share of Insurance Charges..............................7
3.2.5 Earthquake and Flood Insurance...................................7
3.3 Procedure.................................................................7
3.3.1 Estimated Monthly Installments...................................7
4. Tenant's Insurance Obligations and Liability............................................8
4.1 Insurance.................................................................8
4.1.1 Liability Insurance..............................................8
4.1.2 All Risk Insurance...............................................8
4.1.3 Plate Glass Insurance............................................8
4.1.4 Workers' Compensation Insurance..................................8
4.1.5 Business Interruption Insurance..................................9
4.2 Insurer and Policy Form...................................................9
4.3 Blanket Insurance.........................................................9
4.4 Waiver of Subrogation.....................................................9
4.5 Indemnification...........................................................9
4.6 Exemption of Landlord from Liability.....................................10
5. Personal Property Taxes and Utilities..................................................10
5.1 Personal Property Taxes..................................................10
5.2 Utility Charges..........................................................10
6. Operation..............................................................................10
6.1 General..................................................................10
6.2 Environmental Covenants..................................................11
6.2.1 Definition of "Hazardous Material"..............................11
(i)
6.2.2 Definition of "Hazardous Material Contaminations"...............11
6.2.3 Definition of "Pre-existing Contamination"......................11
6.2.4 Tenant's Compliance with Laws related to Hazardous Materials....11
6.2.5 Tenant's Communications with Government Authorities
Regarding Releases of Petroleum Products........................11
6.2.6 Confidentiality of Information Related to Hazardous Materials...11
6.2.7 List of Hazardous Materials Used by Tenant......................11
6.2.8 Tenant's Securing the Property Against Unauthorized
Handling of Hazardous Materials.................................11
6.2.9 Negotiations, Settlement or Litigation by Tenant Related
to Hazardous Materials..........................................12
6.2.10 Indemnification by Tenant.......................................12
6.2.11 Indemnification by Landlord.....................................12
6.2.12 Landlord's Right of Entry for Environmental Investigation
or Cleanup......................................................12
6.2.13 Survival of Indemnities.........................................12
6.3 Use......................................................................12
6.4 Signs....................................................................13
7. Maintenance, Repairs and Alterations...................................................13
7.1 Tenant Maintenance, Repair, Replacement and Restoration Obligations......13
7.2 Landlord Maintenance and Repair..........................................14
7.3 Alterations and Additions................................................14
7.4 Mechanics' Liens.........................................................15
7.5 Failure..................................................................15
7.6 Title....................................................................15
7.7 Surrender................................................................15
7.7.1 Removal of Tenant's Equipment...................................15
7.7.2 Removal of Improvements.........................................16
8. Damage or Destruction..................................................................16
8.1 Definitions..............................................................16
8.2 Partial Damage -- Insured Loss...........................................17
8.3 Partial Damage -- Uninsured Loss.........................................17
8.4 Total Destruction........................................................17
8.5 Damage Near End of Term..................................................17
8.6 Abatement of Rent; Tenant's Remedies.....................................17
8.6.1 Rent Abatement..................................................17
8.6.2 Completion of Repair or Restoration.............................18
8.6.3 Delays..........................................................18
8.7 Termination -- Advance Payments..........................................19
8.8 Waiver of Civil Code Sections............................................19
9. Condemnation...........................................................................19
9.1 Definitions..............................................................19
9.1.1 Condemnation....................................................19
9.1.2 Total Condemnation..............................................19
(ii)
9.1.3 Partial Condemnation............................................19
9.1.4 Condemnation Date...............................................20
9.1.5 Award...........................................................20
9.2 Total Condemnation.......................................................20
9.3 Partial Condemnation.....................................................20
9.3.1 Termination.....................................................20
9.3.2 Abatement of Rent...............................................20
9.3.3 Restoration.....................................................20
9.4 Allocation of Award......................................................20
9.5 Waiver of Code of Civil Procedure Section................................20
10. Assignment and Subletting..............................................................21
10.1 Assignment or Subletting.................................................21
10.2 Notice...................................................................21
10.3 Intentionally Omitted....................................................21
10.4 Assignment/Sublease Amendment............................................21
10.5 Criteria for Approval....................................................21
10.6 Miscellaneous............................................................22
10.7 Additional Transactions..................................................22
11. Subordination..........................................................................23
11.1 Tenants Agreement to Subordinate.........................................23
11.2 Attornment...............................................................23
12. Default and Remedies...................................................................24
12.1 Default..................................................................24
12.1.1 Failure to Pay Rent.............................................24
12.1.2 Abandonment.....................................................24
12.1.3 Bankruptcy......................................................24
12.1.4 Other...........................................................24
12.2 Remedies.................................................................24
12.2.1 Termination.....................................................24
12.2.2 Continuation....................................................25
12.2.3 Additional Rights...............................................25
12.3 Late Charge and Interest.................................................26
12.3.1 Late Charge.....................................................26
12.3.2 Interest........................................................26
12.4 Waiver of Redemption.....................................................26
13. Miscellaneous..........................................................................26
13.1 Default by Landlord......................................................26
13.1.1 Default.........................................................26
13.1.2 Remedies of Tenant..............................................26
13.1.3 Non-Liability of Landlord Parties...............................26
13.2 Estoppel Certificates....................................................27
13.3 Holding Over.............................................................27
13.4 Quiet Enjoyment..........................................................28
(iii)
13.5 Sale of the Premises.....................................................28
13.6 Intentionally Omitted....................................................28
13.7 Recording................................................................28
13.8 Financial Statements.....................................................28
13.9 Access by Landlord.......................................................28
13.10 [Intentionally Omitted]..................................................29
13.11 Notices..................................................................29
13.12 Time.....................................................................29
13.13 Entire Agreement.........................................................29
13.14 Further Assurances.......................................................29
13.15 Applicable Law; Severability.............................................29
13.16 Controversy..............................................................29
13.17 Headings, Gender and Number..............................................29
13.18 Successors...............................................................30
13.19 Corporate Authority......................................................30
13.20 Construction Warranties..................................................30
13.21 Broker's Commission......................................................30
14. Additional Lease Provisions............................................................31
14.1 Options to Extend Term...................................................31
14.1.1 Option..........................................................31
14.1.2 Basic Monthly Rent During Extension Periods.....................31
14.1.2.1 Fair Market Rental Rate................................31
14.1.2.2 Delivery of Extension Notice...........................32
14.2 Conditions to Tenant's Obligations.......................................33
14.2.1 Environmental Investigation.....................................33
14.2.2 Receipt of Governmental Approvals and Permits...................34
14.3 Assumption of the Harpers Obligations....................................34
14.4 Survival of Tenant's Termination Obligations.............................35
14.5 Construction of Tenant Improvements and Roof Work........................35
14.6 Right of First Notice....................................................35
(iv)
EXHIBITS
EXHIBIT A-1: Work Letter Agreement (Tenant Improvements)
EXHIBIT A-2: Work Letter Agreement (Roof)
EXHIBIT B: Conditions to Early Entry
EXHIBIT C: Condition of Building Upon Delivery
EXHIBIT D: Description of the "Warehouse Condition" Upon Surrender
EXHIBIT K: Form of Non-Disturbance and Attornment Agreement
EXHIBIT F: License For Environmental Investigation
EXHIBIT G: Environmental Documents Delivered by Landlord to Tenant
(v)
LEASE
THIS LEASE (the "Lease") is made and entered by and between FHL Group, a
California corporation ("Landlord") and the tenant ("Tenant") described in Item
1 of the Fundamental Lease Provisions.
LEASE OF PREMISES
Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, subject to all of the terms and conditions set forth in this Lease,
including the Fundamental Lease Provisions, the Standard Lease Provisions and
the Exhibits, the real property and all improvements thereon, and appurtenances
thereto, described in Item 2 of the Fundamental Lease Provisions (collectively,
the- "Property").
FUNDAMENTAL LEASE PROVISIONS
1. Tenant: Virco Mfg. Corporation, a Delaware corporation
2. Property: Parcel 1 in the City of Torrance, County of Los
Angeles, State of California as shown on Parcel Map
8389 filed in Book 88, Pages 1 through 4, inclusive,
of Parcel Maps in the Office of the County Recorder of
Los Angeles County consisting of approximately 23.53
acres (the "Land") and all improvements thereon,
including the industrial building consisting of
approximately 559,000 square feet (the "Building")
commonly known as 2027 Harpers Way, Torrance,
California.
3. Term Commencement Date: February 1, 1995
4. Term:
(a) Initial Lease Term: 120 months (plus one (1) partial month if
the Lease Term commences on a date other than the first day of a
calendar month) following the Term Commencement Date (See Section
1)
(b) Options to Extend Initial Lease Term: Two 5-year options to
extend (See Section 14.1)
5. Basic Monthly Rent: The basic monthly rent shall be as follows:
Basic Monthly Rent
------------------
February 1, 1995 through January 31, 1996 $112,000.00 per month
February 1, 1996 through January 31, 1997 $117,600.00 per month
February 1, 1997 through January 31, 1998 $128,800.00 per month
February 1, 1998 through January 31, 1999 $137,200.00 per month
February 1, 1999 through January 31, 2000 $142,800.00 per month
February 1, 2000 through January 31, 2001 $148,400.00 per month
February 1, 2001 through January 31, 2002 $156,800.00 per month
February 1, 2002 through January 31, 2003 $162,400.00 per month
Basic Monthly Rent
------------------
February 1, 2003 through January 31, 2004 $168,000.00 per month
February 1, 2004 through January 31, 2005 $168,000.00 per month
Partial Lease Month (if any) (prorated on a 30-day basis):
$3,733.33 per day
(See Section 2.1)
6. First Month's Rent (payable upon execution): $112,000.00 (which
shall be credited to the first installment of Basic Monthly Rent
due)
7. Security Deposit (payable upon execution): $120,000.00
(See Section 2.3)
8. Permitted Use: Manufacturing and warehousing of furniture,
including all processes related thereto, general office and
administrative uses, and all other uses related thereto.
9. Rent Commencement Date: February 1, 1995.
10. Address for Notice:
Landlord: FHL Group
1219 Morningside Drive
Suite 213
Manhattan Beach, CA 90266
Attention: Henry J. Harper, Jr.
and to:
Pillsbury Madison & Sutro
600 Anton Blvd., Suite 1100
Costa Mesa, CA 92626
Attention: James P. Clough, Esq.
Tenant: Prior to the Term Commencement Date:
1331 V. Torrance Blvd.
Torrance, California 90501-2399
Attention: Mr. Robert Virtue and Mr. Jim Braam
After the Term Commencement Date
Virco Mfg. Corporation
2027 Harpers Way
Torrance, California 90501
Attention: Mr. Robert Virtue and Mr. Jim Braam
2
11. Date of this Lease For Reference Purposes Only: April 25, 1994
References in the Fundamental Lease Provisions to Sections in this Lease
are for convenience only and designate some of the Sections of the Standard
Lease Provisions set forth below where references to the particular Fundamental
Lease Provisions appear. Each reference in this Lease to any of the Fundamental
Lease Provisions shall be construed to incorporate all the terms provided under
each such Fundamental Lease Provision. In the event of any conflict between any
Fundamental Lease Provision and the balance of the Lease, the latter shall
control.
3
STANDARD LEASE PROVISIONS
1. TERM.
1.1 TERM. The Term shall be as specified in Item 4 of the Fundamental
Lease Provisions, commencing as of the Term Commencement Date specified in
Section 1.2. The "Term" shall also include the Extension Period(s) if Tenant
exercises its Extension Option(s) pursuant to Section 14.1, below.
1.2 EARLY POSSESSION. At any time after September 1, 1994 (the "Early
Possession Date") and until the Term Commencement Date, Tenant shall be entitled
to enter the Property as a licensee for the purposes of (x) constructing the
"Tenant Improvements" as that term is defined in paragraph 1 of the Work Letter
Agreement attached hereto as Exhibit A-l (the "Work Letter"), (y) installing
"Tenant's Equipment", as defined in Section 5.1, below, and (z) preparing the
Property for the conduct of Tenant's business (collectively, the "Permitted
Purposes"), provided that: (i) Tenant's entry on and early possession of the
Property in no way interferes any other work of construction or other work on
any part of the Property to be undertaken by Landlord, if any; (ii) Tenant
delivers to Landlord before entering on the Property evidence of insurance
coverage required under this Lease; (iii) Tenant at all times during Tenant's
early possession keeps the Property free of all mechanic's, materialmen's and
design professionals" liens and otherwise complies with the provisions of
Section 7 of this Lease; (iv) Tenant's early possession hereunder shall be
subject to and governed by all the terms and conditions of this Lease, excluding
only the payment of Basic Monthly Rent as described in Item 5 of the Fundamental
Lease Provisions; and (v) Tenant otherwise complies with the terms and
conditions of attached Exhibit B. Tenant's entering the Property is subject to
prior compliance, at Tenant's sole expense, with all statutes, ordinances,
regulations and policies and interpretations thereof applicable to the Property
(collectively, "Applicable Laws") and relating to Tenant's possession thereof;
in this connection, Tenant shall have the sole responsibility at its cost to
obtain a certificate of occupancy or other permit to occupy if legally required
in connection with Tenant's taking possession of the Property. In the event the
Early Possession Date is delayed as of the result of a Landlord Delay, the Term
Commencement Date shall be extended one (1) day for every day of Landlord Delay.
The term "Landlord Delay" shall mean any delay the Early Possession Date which
is caused by any act or omission of Landlord (wrongful, negligent or otherwise).
No Landlord Delay shall be deemed to have occurred unless and until Tenant has
given written notice to Landlord specifying the action or inaction which Tenant
contends constitutes a Landlord Delay. If such action or inaction is not cured
within one (l) business day after Landlord's receipt of such notice, then a
Landlord Delay, as set forth in such notice, shall be deemed to have occurred
commencing as of the date Landlord received such notice and continuing for the
number of days the Early Possession Date was in fact delayed as a direct result
of such action or inaction.
1.3 "AS IS" DELIVERY OF THE PROPERTY. Tenant acknowledges that (i)
delivery of the Property by Landlord to Tenant shall be on an "as is" basis in
its condition as of the date of Tenant's execution of this Lease as set forth on
attached Exhibit C, (ii) Landlord makes no representations or warranties,
express or implied, with respect to the environmental condition of the Property
or the surrounding properties or compliance with any Applicable Laws, and (iii)
Basic Monthly Rental and other monetary and non-monetary provisions of this
Lease are material consideration for delivery of the Property in the foregoing
"as is" condition.
4
1.4 LEASE YEAR. A Lease Year shall consist of a period of 12 consecutive
full calendar months. The first Lease Year shall begin on the Term Commencement
Date or, if the Term Commencement Date does not occur on the first day of a
calendar month, on the first day of the calendar month next following the Term
Commencement Date. Each succeeding Lease Year shall commence upon the
anniversary date of the first Lease Year.
2. RENT AND SECURITY DEPOSIT.
2.1 RENT. Tenant shall pay to Landlord as rent for each month of each
Lease Year during the Term, when due and without offset or deduction, the Basic
Monthly Rent described in Item 5 of the Fundamental Lease Provisions. The amount
referenced in Item 6 of the Fundamental Lease Provisions shall be credited
toward the first installment of Basic Monthly Rent due.
Each installment of Basic Monthly Rent shall be paid in lawful tender in
advance to Landlord at the address specified in Item 10 of the Fundamental Lease
Provisions or to such other address as Landlord shall designate in writing to
Tenant on or before the first day of the calendar month for which Rent is due.
If the Rent Commencement Date is on a day other than the first day of a calendar
month, then the Rent for the Partial Lease Month shall be prorated on the basis
of a thirty (30)-day month and shall be payable in advance on or before the Term
Commencement Date.
2.2 ADDITIONAL RENT. Tenant shall also pay as additional rent at the
address specified in Item 10 of the Fundamental Lease Provisions all other
payments to be made by Tenant pursuant to the provisions of this Lease
("Additional Rent"), payable when due. Basic Monthly Rent and Additional Rent
are sometimes collectively referred to herein as "Rent."
2.3 SECURITY DEPOSIT. Concurrently with the execution of this Lease by
Landlord, Tenant shall deposit with Landlord a security deposit (the "security
Deposit") securing Tenant's faithful performance of all the terms, covenants and
conditions hereunder in the amount set forth in Item 7 of the Fundamental Lease
Provisions. In the event of any Default (as defined in Section 12.1, below),
Landlord may from time to time, without any obligation to do so, use, apply or
retain all or any part of the Security Deposit for the payment of any Rent or
any other sum in Default, or for the payment of any amount which Landlord may
spend or become obligated to spend by reason of Tenant's Default, or to
compensate Landlord for any other loss or damage which Landlord may suffer by
reason of a Default. If any portion of the Security Deposit is so used or
applied, Tenant shall, immediately upon written demand there for by Landlord,
deposit cash with Landlord in an amount sufficient to restore the Security
Deposit to its original amount; Tenant's failure to do so shall be a Default
under this Lease. Landlord shall not be required to keep the Security Deposit
separate from its general funds, and Tenant shall not be entitled to interest on
the Security Deposit. If Tenant shall fully and faithfully perform every
provision of this Lease to be performed by it, the Security Deposit (or any
remaining balance thereof) shall be returned to Tenant (or, at Landlord's
option, to the last assignee of Tenant's interest hereunder) within thirty (30)
days following expiration of the Term. In the event of termination of Landlord's
interest in this Lease, Landlord shall transfer the Security Deposit to
Landlord's successor in interest.
5
3. TENANT'S SHARE OF CERTAIN EXPENSES.
3.1 TENANT'S SHARE OF CERTAIN EXPENSES. In addition to the payment of
Basic Monthly Rent and all forms of Additional Rent, Tenant shall pay to
Landlord in accordance with the provisions of this Section 3, Tenant's Share of
Real Estate Taxes (as defined below), and Tenant's Share of Insurance Charges
(as also defined below).
3.2 DEFINITIONS.
3.2.1 REAL ESTATE TAXES DEFINED. "Real Estate Taxes" means (i) any
and all forms of tax, assessment, license fee, excise, bond, levy, charge or
imposition (collectively referred to herein as "Taxes"), general, special,
ordinary or extraordinary, imposed, levied or assessed against the Building, the
Property or any portion(s) thereof by any authority or entity having the direct
or indirect power to tax, including without limitation, any city, county, state
or federal government, or any fire, school, redevelopment, agricultural,
sanitary, street, lighting, security, drainage or other authority, political
subdivision or improvement district thereof, (ii) any Tax in substitution
partially or totally, of any Tax now or previously included within the
definition of Real Estate Taxes, including without limitation, those imposed,
levied or assessed to increase tax increments to governmental agencies, or for
services such as (but not limited to) fire protection, police protection,
street, sidewalk and road maintenance, refuse removal or other governmental
services previously provided without charge (or for a lesser charge) to property
owners and/or occupants, (iii) any taxes allocable to or measured by the area of
the Building, the Property, or any portion(s) thereof, or any Rent payable
hereunder, including without limitation, any gross income tax or excise tax on
the receipt of such Rent or upon the possession, leasing, operation,
maintenance, repair, use or occupancy by Tenant or Landlord of the Property if
the same are assessed in lieu of Real Estate Taxes or property taxes as the same
are currently determined, and (iv), any increase in Taxes in the event of a
"change of ownership" (as that term is defined and interpreted in sections 61 et
seq. of the California Revenue and Taxation Code and in sections 461 et seq. of
the California Administrative Code and any amendments or successor statutes and
regulations thereto). Real Estate Taxes shall not include any general franchise,
net income, estate or inheritance tax imposed on Landlord.
3.2.2 TENANT'S SHARE OF REAL ESTATE TAXES DEFINED. Landlord shall
pay (i) all Real Estate Taxes up to the amount of Real Estate Taxes which are
based on the assessed value of the Land and Building on the 1994-1995 Los
Angeles County real property tax assessment rolls (the "Real Property Tax Base
Year") and (ii) all increases in Real Estate Taxes for the Land and Building
based on an increase in the assessed value of the Land and Building resulting
from a change in ownership of the Property occurring during the initial Term
only. Tenant shall pay all increases in Real Estate Taxes based on (i) any
increase in the assessed value of Property above the value for the Land and
Building assessed for the Real Property Tax Base Year (excluding increases in
the assessed value based on a change in ownership occurring during the initial
Term, which shall be paid by Landlord as set forth in the immediately preceding
sentence) and (ii) a change in ownership occurring after the initial Term
(collectively, "Tenant's Share of Real Estate Taxes").
3.2.3 INSURANCE CHARGES. "Insurance Charges" means the cost of All
Risk Insurance insuring the Building and the Building General Work (as defined
in paragraph 1 of the Work Letter) ("All Disk Insurance for the Building")
(other than the Tenant's inventory, Tenant-Specific Improvements (as also
defined in paragraph 1 of the Work Letter), Tenant's Equipment
6
(as defined in Section 5.1, below), the Utility Installations (as defined in
Section 7.1, below), and Alterations (defined in Section 7.3, below)) against
loss or damage by (i) fire, sprinkler damage, vandalism and all other perils
customarily covered under an all risk policy, (ii) such other perils or risks,
insurance against which is required by any lender providing financing for the
Property from time to time, and (iii) which Landlord determines in its good
faith subjective discretion is customarily carried in comparable projects, in
each case in an amount equal to their full new replacement cost and with such
deductibles as Landlord in the exercise of its good faith subjective discretion
shall determine. All Risk Insurance for the Building shall not include
earthquake and flood insurance, which shall be allocated among the parties
exclusively as set forth in Section 3.2.5, below. Landlord hereby covenants and
agrees to carry All Risk Insurance for the Building as required in this Section
3.2.3, and shall provide Tenant with written evidence of such insurance coverage
from time to time at the request of Tenant.
3.2.4 TENANT'S SHARE OF INSURANCE CHARGES. "Tenant's Share of
Insurance Charges" means the increase, if any, of Insurance Charges for any
Lease Year over Twelve Thousand and 00/100 Dollars ($12,000.00). Tenant shall be
responsible for paying all Insurance Charges over Twelve Thousand and 00/100
Dollars ($12,000.00) per Lease Year.
3.2.5 EARTHQUAKE AND FLOOD INSURANCE. During the Term, Landlord
shall procure earthquake and flood insurance insuring the Building and the
Building General Work to fifty percent (50%) of its full replacement value and
with a deductible not to exceed five percent (5%) of such replacement cost
(collectively, the "Earthquake Insurance"). The premium for the Earthquake
Coverage shall be paid by Tenant as Additional Rent. In the event of earthquake
damage to the Building and the Earthquake Insurance proceeds together with the
deductible amount is sufficient to repair or restore the Building and the
Building General Work, such earthquake damage shall be considered an Insured
Loss (as defined in Section 8.1.3, below), in which case (i) Landlord shall
commence such repair and restoration in accordance with the provisions of
Section 8, (ii) Landlord shall be responsible for the deductible amount under
the policy of Earthquake Insurance, and (iii) Landlord shall promptly reimburse
Tenant as Additional Rent an amount equal to the total premiums previously paid
by Tenant for the Earthquake Insurance as of the date of such earthquake damage
(or as of the date of the most recent earthquake in the event more than one
earthquake should occur during the Term) plus interest thereon the prime
interest rate announced from time to time by Bank of America, N.A. plus one
percent (1%) but never to exceed the maximum legal rate (the "Interest Rate").
If however, the Earthquake Insurance proceeds together with the approved
deductible amount are not sufficient to repair or restore the Building and the
Building General Work or are otherwise not applied by the insurer to the repair
or restoration of the Building and Building General Work, such earthquake damage
shall be considered damage which is not an Insured Loss, and the parties shall
then proceed in accordance with Section 8.3, below.
3.3 PROCEDURE.
3.3.1 ESTIMATED MONTHLY INSTALLMENTS. Tenant's Share of Real Estate
Taxes and Tenant's Share of Insurance Charges shall be payable by Tenant within
twenty (20) days after a reasonably detailed statement of such actual expenses
is presented to Tenant by Landlord. At Landlord's option, however, Landlord may
deliver to Tenant a written estimate of the amount of Tenant's Share of Real
Estate Taxes and Tenant's Share of Insurance Charges for any Lease Year. In such
event, Tenant shall pay to Landlord such estimated amount in equal monthly
installments, in advance on the first day of each month, and Landlord shall
submit to Tenant
7
within ninety (90) days following the end of each such Lease Year (or as soon
thereafter as all necessary data is reasonably available) a statement showing in
reasonable detail the actual amount of Tenant's Share of Real Estate Taxes and
Tenant's Share of Insurance Charges ("Landlord's Statements") during such
period, and the parties shall make any payment or allowance necessary to adjust
Tenant's estimated payments to the actual amount of Tenant's Share of Real
Estate Taxes and Tenant's Share of Insurance Charges for such period as
indicated by "Landlord's Statement". Any payment due Landlord shall be payable
by Tenant within thirty (30) days following receipt by Tenant of Landlord's
Statement. Any amount due Tenant shall be credited against installments next
becoming due under this Section 3.3. Despite the expiration or early termination
of this Lease, when the final determination is made of Tenant's Share of Real
Estate Taxes and Tenant's Share of Insurance Charges for the year in which the
expiration or early termination occurs, Tenant shall pay on demand any
adjustment due to Landlord and any amount due to Tenant shall be promptly paid
by Landlord.
4. TENANT'S INSURANCE OBLIGATIONS AND LIABILITY.
4.1 INSURANCE. Tenant shall, at Tenant's expense, obtain and keep in
full force during all portions of the Term and effective upon tender of
possession of the Premises:
4.1.1 LIABILITY INSURANCE. A policy of comprehensive general
liability insurance insuring on an occurrence basis (provided occurrence based
insurance continues to be available on a commercially reasonable basis) against
any liability arising out of the ownership, use, occupancy or maintenance of the
Property and contractual indemnity insurance insuring Tenant's obligations under
Section 4.4, with an "Additional Insured--Manager of Lessors of Premises"
endorsement and contain the "Amendment of Pollution Exclusion" for damages
caused by heat, smoke or fumes from hostile fire, and owned or non-owned
automobile (vehicle) coverage (collectively, "Liability Insurance"). Such
insurance shall have limits of not less than $10,000,000 for combined single
limit for injury, death of any one or more persons and property damage. The
limits of the Liability Insurance shall never be decreased, but shall be
increased in accordance with increases, if any, reasonably determined by
Landlord to be necessary to maintain policy limits from time to time in amounts
customary and usual for premises comparable to the Property; such increases, if
any, are to be made not more frequently than once every Lease Year;
4.1.2 ALL RISK INSURANCE. A policy of All Risk Insurance insuring
all of Tenant's Equipment, the Utility Installations, all Alterations, and all
leasehold improvements (other than the Building General Work) against loss or
damage by fire, flood, sprinkler, vandalism, malicious mischief and all perils
customarily covered under a standard all risk coverage policy in an amount equal
to their full new replacement cost. The proceeds from such insurance shall be
used for the replacement or restoration o all the foregoing. If such insurance
has a deductible clause, the deductible amount shall not exceed $25,000 per
occurrence, and Tenant shall be liable for such deductible amount in the event
of an insured loss;
4.1.3 PLATE GLASS INSURANCE. A policy of full coverage plate glass
insurance on the Premises;
4.1.4 WORKERS' COMPENSATION INSURANCE. A policy of workers'
compensation insurance insuring all of Tenant's employees working on or about
the Premises with coverage limits not less than those required by applicable
law; and
8
4.1.5 BUSINESS INTERRUPTION INSURANCE. A policy of loss of income
and business interruption insurance in such amounts as will reimburse Tenant for
direct or indirect loss of earnings attributable to all perils insured against
under the policy of All Risk Insurance and in no event in an amount less than
Rent and any Additional Rent payable under this Lease for a period of one (1)
year.
4.2 INSURER AND POLICY FORM. All insurance policies required to be
obtained by Tenant pursuant to the provisions of this Section 4 (i) shall be
carried only through responsible insurance companies and which for the first
$1,000,000 in coverage shall be rated A:VII or better in the most current
"Best's Key Rating Guide," and which for coverage from $2,000,000 through
$10,000,000 shall be rated A-XV or better in the most current "Best's Key Rating
Guide," (ii) shall be primary and noncontributing with, and not in excess of,
any insurance coverage which may be carried by Landlord, (iii) shall name
Landlord and any other parties designated by Landlord as an additional insured,
with a "separate interests" or "cross liability" endorsement and (iv) shall
contain language or bear endorsements that such policy or policies shall not
lapse, be cancelable or be subject to reduction of coverage without giving
Landlord at least 30 days' prior written notice thereof. On or before the Term
Commencement Date and within thirty (30) days after every material change
therein, Tenant shall provide Landlord a copy of each such policy of insurance
or a certificate of insurance certifying to the existence of such insurance in
effect in a form consistent with the requirements of this Section 4.
4.3 BLANKET INSURANCE. Tenant shall be entitled to provide the foregoing
insurance through a corporate policy or policies of blanket insurance, provided
(i) such blanket policy(ies) is in conformance with section 4.2, above, (ii)
does not result in any decrease in insurance coverage required under this
Section 4, and (iii) specifically allocates no less than $10,000,000 to the
coverage required for the Property. Upon request of Landlord, Tenant shall
provide Landlord with all documentation reasonably requested by Landlord setting
forth the extent of such blanket coverage and the portions thereof allocated to
the Property and allocated to other properties.
4.4 WAIVER OF SUBROGATION. Landlord and Tenant hereby waive their right
of recovery against the other from any claim arising out of loss, damage or
destruction to the Building and other improvements on the Property, or contents
thereon or therein, to the extent its respective property is covered by a policy
of insurance whether or not such loss, damage or destruction may be attributable
to the negligence of either party or its respective agents, visitors,
contractors, servants or employees. Each policy of insurance obtained by either
party pursuant to this Lease insuring against the perils required to be covered
in the All Risk Insurance, whether or not such policy is required to be obtained
hereunder, shall expressly waive all rights of subrogation against the other and
their respective officers, directors, general partners, employees, agents and
representatives.
4.5 INDEMNIFICATION. From and after the date of execution hereof by
Landlord, Tenant shall indemnify, defend and hold Landlord and Landlord's
officers, directors, shareholders, agents, employees, successors and assigns
(collectively, "Landlord's Parties") harmless from and against any and all
claims, losses, costs, expenses, demands, actions, causes of action, damages,
liabilities and obligations, including, but not limited to, reasonable
attorneys' fees, arising from (i) the construction, repair, alteration,
improvement, use, occupancy or enjoyment of the Property by Tenant or any person
thereon, including, but not limited to, any labor dispute involving Tenant, (ii)
any breach or default in the performance of any obligation on Tenant's part to
be performed under the terms of this Lease, or (iii) any negligent or wrongful
act
9
or omission of Tenant, or any officer, agent, employee, guest or invitee of
Tenant, in or about the Property. Notwithstanding the foregoing, the
indemnifications provided under this Section 4.4 shall not apply to any claims
resulting from the gross negligence or willful misconduct of Landlord or
Landlord's Parties.
4.6 EXEMPTION OF LANDLORD FROM LIABILITY. Landlord and Landlord's
Parties shall not be liable for injury or damage to the person or goods, wares,
merchandise or other property of Tenant, Tenant's employees, contractors,
invitees, customers, or any other person in or about the Property, whether such
damage or injury is caused by or results from fire, steam, electricity, gas,
water or rain, or from the breakage, leakage, obstruction or other defects of
pipes, fire sprinklers, wires, appliances, plumbing, air conditioning or
lighting fixtures, or from any other cause, whether the said injury or damage
results from conditions arising upon the Property or from other sources or
places, and regardless of whether the cause of such damage or injury or the
means of repairing the same is accessible or not. Notwithstanding Landlord's or
Landlord's Parties' negligence or breach of this Lease, Landlord shall under no
circumstances be liable for injury to Tenant's business, for any loss of income
or profit therefrom, or other consequential damages.
5. PERSONAL PROPERTY TAXES AND UTILITIES.
5.1 PERSONAL PROPERTY TAXES. Tenant shall pay, or cause to be paid prior
to delinquency all taxes, assessments, license fees and other charges levied or
assessed and which become payable during the Term upon all Alterations, the
Tenant-Specific Improvements (as defined in paragraph 1 of the Work Letter
Agreement) and all other leasehold improvements (other than the Building General
Work), all Utility Installations (as defined in Section 7.1, below), and all
equipment, machinery, furniture, trade fixtures, and other personal property
located in or about the Property (collectively, "Tenant's Equipment". In the
event any or all of the foregoing are assessed and taxed with the Property,
Tenant shall pay to Landlord such taxes within thirty (30) days after delivery
to Tenant by Landlord of a statement in writing setting forth the amount of such
taxes applicable to Tenant's property.
5.2 UTILITY CHARGES. Tenant shall be solely responsible for, and shall
promptly pay the cost of (including connection and other charges), all heat,
water, gas, electrical, light, power, sewer charges, telephone service, fire
monitoring, police and security, and all other services and utilities supplied
to the Premises, together with any taxes thereon. Electricity and all other
utilities and services shall be separately metered to Tenant at Tenant's cost.
6. OPERATION.
6.1 GENERAL. Tenant, for itself, its subtenants and concessionaires
agrees: (i) not to cause, permit or suffer any nuisance or waste to or of the
Premises, (ii) to comply with all federal, state, county or municipal statutes,
laws, ordinances, rules, regulations and orders now or in the future affecting
the Premises and each and all of the provisions of this Lease, and any policies
of insurance now or in the future in effect pursuant to this Lease, and (iii)
not to take, permit or suffer any action or thing which would (a) materially
increase the rates of any policy of insurance now or in the future affecting the
Building or Property, or (b) subject Landlord to any liability for injury to
person or property as a result thereof or (c) subject Landlord to a claim of
damages or liability arising from a Hazardous Material (as defined in Section
6.2.1, below).
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6.2 ENVIRONMENTAL COVENANTS. Landlord and Tenant specifically agree as
follows with respect to the existence or use of any "Hazardous Material" on the
Property:
6.2.1 DEFINITION OF "HAZARDOUS MATERIAL". The term "Hazardous
Material" means any material, substance or waste that is or becomes regulated by
any government authority as a material, substance or waste that may harm human
health or the environment.
6.2.2 DEFINITION OF "HAZARDOUS MATERIAL CONTAMINATIONS". The term
"Hazardous Material Contamination" means any Hazardous Material that is located
on, has been generated at, or has emanated from the Property as a result of the
activities of Tenant or any other person acting at the direction, with the
authorization or for the benefit of Tenant.
6.2.3 DEFINITION OF "PRE-EXISTING CONTAMINATION". The term
"Pre-existing Contamination" means any Hazardous Material that is located on,
has been generated at, or has emanated from the Property before the commencement
of any occupancy or use of the Property by Tenant or any other person acting at
the direction, with the express or implied authorization or for the benefit of
Tenant.
6.2.4 TENANT'S COMPLIANCE WITH LAWS RELATED TO HAZARDOUS MATERIALS.
As part of Tenant's obligations under Paragraph 6.1, Tenant shall comply with
all applicable laws, ordinances, statutes, standards, rules and regulations
related to Hazardous Materials during any use or occupancy by Tenant of the
Property, including but not limited to the written notice requirement of
California Health & Safety Code Section 25359.7(b).
6.2.5 TENANT'S COMMUNICATIONS WITH GOVERNMENT AUTHORITIES REGARDING
RELEASES OF PETROLEUM PRODUCTS. Tenant shall provide Landlord with a copy of any
written communication between Tenant and a government authority regarding any
release of a petroleum product or other Hazardous Material not covered by
California Health & Safety Code Section 25359.7(b) into the environment on or
off the Property. If Tenant's communication with a government authority about
this subject is oral, Tenant shall promptly provide Landlord with a written
description of the substance of the communication.
6.2.6 CONFIDENTIALITY OF INFORMATION RELATED TO HAZARDOUS MATERIALS.
Unless otherwise required by law, Tenant shall not disclose any information
related to Hazardous Materials located on or emanating from the Property to any
person without Landlord's prior written consent.
6.2.7 LIST OF HAZARDOUS MATERIALS USED BY TENANT. Tenant shall
provide Landlord with written lists of the types and quantities of all Hazardous
Materials used on the Property by Tenant or at the direction, with the
authorization or for the benefit of Tenant. The first list shall be submitted
one year after the commencement date of the Lease and shall cover all Hazardous
Materials used on the Property before the date of the first list. A new list
shall be submitted each year thereafter and upon termination of the Lease and
shall cover all Hazardous Materials used on the Property since the date of the
next previous list.
6.2.8 TENANT'S SECURING THE PROPERTY AGAINST UNAUTHORIZED HANDLING
OF HAZARDOUS MATERIALS. Tenant shall exercise due care and take all actions that
are reasonably necessary and appropriate to avoid any handling, storage,
treatment, transportation or disposal of a Hazardous Material on the Property
that is not authorized by Tenant. Tenant's actions in this
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regard shall include but not be limited to reasonably securing the Property to
prevent trespassers from entering the Property.
6.2.9 NEGOTIATIONS, SETTLEMENT OR LITIGATION BY TENANT RELATED TO
HAZARDOUS MATERIALS. Tenant has the right to conduct any negotiation, settlement
or litigation with any person (including government authorities) that is related
to Hazardous Material Contamination or Pre-existing Contamination, provided that
Tenant shall obtain Landlord's prior written consent if there is a substantial
likelihood that the negotiation, settlement or litigation will (i) bind Landlord
or affect Landlord's rights in any manner whatsoever; (ii) require Tenant's
occupancy or use of the Property after expiration of the Lease; or (iii)
adversely affect the value of the Property.
6.2.10 INDEMNIFICATION BY TENANT. Tenant shall indemnify, defend and
hold harmless Landlord, its employees and agents from any and all loss of rents
and/or claims, losses, actions, causes of action, damages, liabilities,
assessments, penalties, fines, and reasonable expenses and costs incident
thereto (including but not limited to attorneys' fees) that arise out of or
result from any of the following: (i) any Hazardous Material Contamination; (ii)
any exacerbation of Preexisting Contamination as a result of an activity by
Tenant or by any other person authorized by Tenant to be on the Property or
perform work in connection with the Property, if and to the extent such
exacerbation adversely impacts the responsibility, if any, that Landlord
otherwise may have for the Pre-Existing Contamination; and (iii) Tenant's breach
of any provision of the Lease, including but not limited to Section 6.2.4.
6.2.11 INDEMNIFICATION BY LANDLORD. Landlord shall indemnify, defend
and hold harmless Tenant, its employees and agents from any and all claims,
losses, actions, causes of action, damages, liabilities, assessments, penalties,
fines, and reasonable expenses and costs incident thereto (including but not
limited to attorneys' fees) that arise out of or result from any Pre-existing
Contamination. The indemnity in this Paragraph does not extend to any
exacerbation of Preexisting Contamination as a result of an activity by Tenant,
as provided in Section 6.2.10.
6.2.12 LANDLORD'S RIGHT OF ENTRY FOR ENVIRONMENTAL INVESTIGATION OR
CLEANUP. Landlord's right to enter the Property pursuant to Section 13.9
includes the right to conduct an investigation or cleanup of Pre-existing
Contamination, including the drilling of borings and the installation of wells.
In the event Landlord enters the Property to perform such an investigation or
cleanup, Landlord shall use commercially reasonable efforts to minimize its
disruption of Tenant's use of the Property, including consulting with Tenant on
how best to avoid such disruption. Nothing in this Section 6.2.12 shall be
deemed or construed to impose on Landlord any affirmative obligation to
investigate or clean up Pre-existing Contamination.
6.2.13 SURVIVAL OF INDEMNITIES. The indemnities provided in Sections
6.2.10 and 6.2.11 shall survive the expiration or termination of this Lease and
shall be operative whether the condition triggering the indemnity is discovered
during or after the Term of this Lease.
6.3 USE. Tenant shall use the Premises solely for the purposes set forth
under Item 10 of the Fundamental Lease Provisions in compliance with Applicable
Laws and no other purpose whatsoever. Tenant shall keep the Premises in a clean
and safe condition, free from any objectionable noises, odors, or nuisances.
12
6.4 SIGNS. Subject to (a) compliance with applicable governmental
statutes, laws, ordinances, rules, regulations and orders, and (b) the
provisions of Sections 7.3, 7.4, 7.5 and 7.7, Tenant may erect signs on the
Property for purposes of corporate identification, provided further (i) the
installation, maintenance, repair, replacement and removal (upon Lease
expiration or earlier termination) shall be at Tenant's sole cost, (ii) upon
removal at Lease expiration or earlier termination, all damage resulting from
such removal shall be immediately repaired at Tenant's cost, and (iii) prior to
installation, such signage shall be subject to Landlord's prior approval, which
shall not be unreasonably withheld.
7. MAINTENANCE, REPAIRS AND ALTERATIONS.
7.1 TENANT MAINTENANCE, REPAIR, REPLACEMENT AND RESTORATION OBLIGATIONS.
Subject to the provisions of Sections 7.2, 8 and 9.3, Tenant shall, during the
Term, at Tenant's sole cost and expense, keep the Property and every part
thereof in good, clean, safe, and lawful order, condition and repair. Tenant's
obligations under the immediately preceding sentence shall include, without
limitation, the obligation to maintain, repair, and replace all Alterations, all
Tenant Improvements, all Tenant's Equipment, all landscaping and irrigation
systems (collectively, "Landscaping"), and all Utility Installations. "Utility
Installations" shall mean all parts of all electrical, water, gas, telephone,
security, sewage and plumbing systems, utility systems (including all power
panels, air lines, and electrical distribution systems, fire protection systems
(including sprinklers, (and/or stand pipe and hose or other automatic fire
extinguishing systems, fire alarms and other life-safety systems), communication
systems, located within or serving the Property, and all HVAC. "HVAC" shall mean
collectively all portions of the heating, ventilation and air conditioning
systems serving the Building. The term "Improvements" shall collectively mean
all Tenant Improvements (which shall include the Building General Work, the
Tenant-Specific Work), all Tenant installed above ground and underground tanks
and installations and any other storage tanks and installations used by Tenant
(whether or not installed by Tenant), all cubicles, mezzanines, electrical
hardware, electrical and mechanical rooms, telephone closets, offices and
partitions, all Alterations, all signage, all Landscaping, and all Utilities
Installations. Tenant's obligations under this Section 7.1 shall include
restorations and replacements, whether capital or non-capital (subject only to
Section 7.2, below), whenever necessary or reasonable to keep the Property and
all Improvements or parts thereof in good order, condition and state of repair
and in full compliance with all Applicable Laws. Tenant shall, at Tenant's sole
cost and expense, procure and maintain contracts, with copies to Landlord, in
customary form and substance for, and with contractors specializing and
experienced in the inspection, maintenance and service of the following
equipment and improvements located on the Property: (i) HVAC (the "HVAC
Contract"), (ii) boiler, fired or unfired pressure vessels, (iii) fire sprinkler
and/or stand pipe and hose or other automatic fire extinguishing systems,
including fire alarm and/or smoke detection, (iv) roof covering and drain
maintenance (the "Roof Maintenance Contract"), and (v) Landscaping. Tenant shall
also procure and maintain all necessary rubbish disposal contracts necessary for
the disposal of trash and rubbish from the Property in compliance with
Applicable Laws. Tenant shall repaint the exterior of the Building one time
during the initial Term. Additionally, Tenant shall repair the asphalt parking
lot as needed during the Term, and slurry and restripe the parking lot at least
once every three (3) years during the term.
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7.2 LANDLORD MAINTENANCE AND REPAIR. Except as expressly set forth in
this Section 7.2 and in Sections 8 and 9, below, Landlord shall have no
obligation for the maintenance, replacement or repair of the Property or any
portion thereof. Landlord shall, during the Term, at Landlord's sole cost and
expense, (i) maintain in good, clean, safe, and lawful order, condition and
repair, ordinary wear and tear excepted, the structural components of: (a) the
foundation of the Building, (b) all exterior walls of the Building and (c) the
roof of the Building; (ii) provided Tenant has continuously maintained in effect
the approved Roof Maintenance Contract as required above, replace after its
useful life, as reasonably determined by Landlord, the roof membrane of the
Building; and (iii) provided Tenant has continuously maintained the HVAC
Contract as required, above, and has operated the HVAC only at normal levels
during regular business hours, replace the HVAC after its useful life (as
reasonably determined by Landlord), provided the cost of such replacement HVAC
shall be amortized over its useful life and, on that basis, paid by Tenant
during the remainder of the Term as Additional Rent. However, Tenant and not
Landlord shall be responsible for the prompt repair, at Tenant's sole cost, for
any damage to any portion of the foregoing caused by or through Tenant or its
agents, employees, contractors, licensee's or business invitees (whether
intentional, negligent or otherwise). Except as provided in Sections 8 and 9,
there shall be no abatement of Rent and in no case shall there be any liability
of Landlord to Tenant or any other individual or entity by reason of (a) any
injury to or interference with Tenant's business arising from the making of any
repairs, alterations or improvements in or to any portion of the Property or the
Building as required of Landlord (unless such injury is directly caused by
Landlord's own gross negligence or willful act) or (b) any entry onto the
Premises by Landlord for purposes of making such repairs, alterations or
improvements or any other purpose.
7.3 ALTERATIONS AND ADDITIONS. Following construction of the Tenant
Improvements, Tenant shall not make any structural or exterior alterations,
additions, improvements and/or Utility Installations to the Building
(collectively, "Structural Alterations") and shall not, without Landlord's prior
written consent, which consent shall not be unreasonably withheld, make any
non-structural, interior alterations, additions, or improvements or
("Non-Structural Alterations") in or about the Property. However, Landlord
hereby consents to all Nonstructural Alterations, the cost of which does not
exceed $50,000 in the aggregate in any one Lease Year. Structural Alterations
and Non-Structural Alterations are hereinafter defined as "Alterations." As a
condition to its consent, Landlord may require (i) Alterations to be made under
the supervision of a competent architect or structural engineer in accordance
with plans and specifications approved in advance by Landlord (and all costs
incurred by Landlord from such review shall have been reimbursed by Tenant to
Landlord as Additional Rent), and (ii) Tenant to provide Landlord, at Tenant's
sole cost and expense, with such reasonably adequate assurance as Landlord may
require to insure Landlord against any liability for liens and to insure
completion of such Alterations. In determining whether to grant or deny such
consent, Landlord may also consider the aesthetics of any proposed Alterations
and whether such Alterations would enhance the physical appearance and value of
the Property. Upon completion of any Alterations, Tenant shall cause a Notice of
Completion to be recorded in the Office of the County Recorder in accordance
with Section 3093 of the California Civil Code, and shall provide Landlord with
an "as built" set of such Alterations (whether or not such Alterations require
the express approval of Landlord hereunder). All such Alterations shall be done
in a good, workmanlike manner, shall be diligently prosecuted to completion and
shall be performed and done strictly in accordance with all applicable
governmental statutes, laws, rules, regulations, ordinances and orders. In any
event, Tenant shall give Landlord not less than thirty (30) days' written notice
prior to the
14
commencement of any Alterations, and Landlord shall have the right to post
notices of non-responsibility on or about the Property.
7.4 MECHANICS' LIENS. Tenant agrees (i) that it will promptly pay for
all costs of Alterations or other work done or permitted by it or caused to be
done by it on or about the Property, (ii) that it will keep the Property free
and clear of any liens arising out of any such Alterations or otherwise, and C
iii) that should any such lien be made or filed against the Property on account
of such Alterations or other work done or permitted (expressly or through
inaction) by Tenant, Tenant shall, at its sole cost and expense, bond against or
discharge such lien within ten (10) days after receipt of written request to do
so by Landlord.
7.5 FAILURE. In the event that Tenant fails, refuses or neglects (i) to
commence and complete repairs promptly and adequately, to remove any liens or
pay any costs or expenses, (ii) to reimburse Landlord or (iii) to otherwise
perform any act or fulfill any obligation required of Tenant pursuant to this
Section 7, Landlord may, at its option, make or complete any such repairs,
remove such lien, pay such costs, or perform such act, or the like, upon ten
(10) days' prior written notice to Tenant, at the sole cost and expense of
Tenant; Tenant agrees to reimburse Landlord for all costs and expenses of
Landlord thereby incurred within ten days after receipt by Tenant from Landlord
of a statement setting forth an amount of such costs and expenses. The failure
by Tenant to so make repairs, to remove any lien, to pay any such costs or
expense or to so reimburse Landlord (in the case of reimbursement within such
ten (10) day period), shall constitute a default by Tenant under this Lease and
shall carry with it the same consequences as the failure to pay any installment
of Rent. Landlord's rights and remedies, pursuant to this Section 7.5, shall be
in addition to any and all other rights and remedies provided under this Lease
or by law.
7.6 TITLE. All right, title and interest in and to the Property and any
Alterations including, without limitation, all Tenant Improvement Work, shall be
held and retained by Landlord and shall be free and clear of any claim or
interest of Tenant upon expiration of this Lease. Tenant shall not waste,
destroy or remove any improvements, fixtures or other property affixed to the
Property without the prior written consent of Landlord, which consent shall not
be unreasonably withheld.
7.7 SURRENDER.
7.7.1 REMOVAL OF TENANT'S EQUIPMENT. Upon the expiration or any
sooner termination of this Lease, Tenant shall (a) promptly undo and remove all
of Tenant's Equipment, on or about the Property, (b) repair any damage to
floors, ceilings, walls, or other parts of the Property caused by such removal,
and (c) surrender up and deliver possession of the Premises to Landlord, in
broom clean warehouse condition as may be required by Landlord pursuant to
Section 7.7.2, below. By way of illustration, the removal of Tenant's Equipment
shall include, without limitation, removal of all (i) machinery and equipment
(including bolt removal and repair of damage resulting therefrom, (ii)
horizontal and vertical water and electrical lines, all supporting lines, and
any other utility lines, ducting and/or ventilation systems servicing any
machinery or equipment, (iii) sub-power panels, lines and trenching servicing
any tenant operation, (iv) racks and bins, (v) conveyors and related systems,
(vi) baking ovens, (vii) cranes and tracks, (viii) water tanks, and (ix)
mezzanine and office installations.
15
7.7.2 REMOVAL OF IMPROVEMENTS. Subject to Landlord's right to
require their removal as hereinafter provided in this Section 7.7.2, all
Improvements shall be the property of and owned by Lessor and considered a part
of the Property. However, Landlord may require that any or all Improvements be
removed at Tenant's sole cost and expense by the expiration or earlier
termination of this Lease, notwithstanding their installation may have been
consented to by Landlord, such that the interior of the Building will be in the
condition described on attached Exhibit D (the "Warehouse Condition"), clean and
free of debris and in good operating order, condition and state of repair,
ordinary wear and tear excepted. "Ordinary wear and tear" as used in this Lease
shall not include any damage or deterioration that would have been prevented by
good maintenance practice or by Tenant performing all of its obligations under
this Lease. Landlord shall provide Tenant with notice, given at least six (6)
months before expiration of the Term, setting forth which Improvements Landlord
will require remain in the Building or on the Property after expiration of the
Term. Landlord may, however, require the removal at any time of all or any part
of any Improvements made without the required consent of Landlord. The
obligation of Tenant shall include the repair of any damage occasioned by the
removal of the Improvements required to be removed by Landlord, as well as the
removal of any above or below ground storage tank installed by or for Tenant,
and the removal, replacement, or remediation of any soil, material or ground
water contaminated by Tenant, all as may then be required by this Lease,
Applicable Laws and good practice. Tenant's Equipment shall remain the property
of Tenant and shall be removed by Tenant as required by Section 7.7.1.
8. DAMAGE OR DESTRUCTION.
8.1 DEFINITIONS.
8.1.1 "Property Partial Damage" shall mean damage or destruction to
the Building and other improvements on the Property (other than the
Tenant-Specific Improvements, Tenant's Equipment, Alterations, and Utility
Installations), the repair cost of which damage or destruction is less than
fifty percent (50Z) of the then Replacement Cost of the Property immediately
prior to such damage or destruction, excluding from such calculation the value
of the Land, Tenant's Equipment, the Tenant-Specific Improvements, Alterations,
and Utility Installations.
8.1.2 "Property Total Destruction" shall mean damage or destruction
to the Property, other than Tenant Owned Alterations and Utility Installations
the repair cost of which damage or destruction is fifty percent (50%) or more of
the then Replacement Cost of the Property immediately prior to such damage or
destruction, excluding from such calculation the value of the Land and Tenant's
Equipment, the Tenant-Specific Improvements, and Utility Installations.
8.1.3 "Insured Loss" shall mean damage or destruction to the
Building and other improvements on the Property, other than Tenant's Equipment,
the Tenant-Specific Improvements, Alterations, and Utility Installations, which
was caused by an event required to be covered by the insurance described in
Sections 3.2.3 and 3.2.5 above, irrespective of any deductible amounts or
coverage limits involved.
8.1.4 "Replacement Cost" shall mean the cost to repair or rebuild
the Building and the Building General Work at the time of the occurrence to
their condition existing immediately prior thereto, including demolition, debris
removal and upgrading required by the
16
operation of applicable building codes, ordinances or laws, and without
deduction for depreciation.
8.2 PARTIAL DAMAGE -- INSURED LOSS. If a Property Partial Damage that is
an Insured Loss occurs, then Landlord shall, at Landlord's expense, repair such
damage (but not Tenant's Equipment, Tenant-Specific Improvements, Alterations,
and Utility Installations) as soon as reasonably possible, and this Lease shall
continue in full force and effect; provided, however, that Tenant shall, at
Landlord's election, make the repair of any damage or destruction the total cost
to repair of which is $5,000 or less, and, in such event, Landlord shall make
the insurance proceeds available to Tenant on a reasonable basis for that
purpose. Tenant shall in no event have any right to reimbursement from Landlord
for any funds contributed by Tenant to repair any such damage or destruction.
8.3 PARTIAL DAMAGE -- UNINSURED LOSS. If a Property Partial Damage that
is not an Insured Loss occurs, unless caused by a negligent or willful act of
Tenant (in which event Tenant shall make the repairs at Tenant's expense, and
this Lease shall continue in full force and effect, but subject to Landlord's
rights under Section 12, below), Landlord may at Landlord's option, either: (i)
repair such damage as soon as reasonably possible at Landlord's expense, in
which event this Lease shall continue in full force and effect, or (ii) give
written notice to Tenant within thirty (30) days after receipt by Landlord of
knowledge of the occurrence of such damage of Landlord's desire to terminate
this Lease as of the date sixty (60) days following the giving of such notice.
In the event Landlord elects to give such notice of Landlord's intention to
terminate this Lease, Tenant shall have the right within ten (10) days after the
receipt of such notice to give written notice to Landlord of Tenant's commitment
to pay for the repair of such damage totally at Tenant's expense and without
reimbursement from Landlord. Tenant shall provide Landlord with the required
funds or satisfactory assurance thereof within thirty (30) days following
Tenant's commitment. In such event this Lease shall continue in full force and
effect, and Landlord shall proceed to make such repairs as soon as reasonably
possible and the required funds are available. If Tenant does not give such
notice and provide the funds or assurance thereof within the times specified
above this Lease shall terminate as of the date specified in Landlord's notice
of termination.
8.4 TOTAL DESTRUCTION. Notwithstanding any other provision hereof, if a
Property Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Property Total Destruction, whether or not the damage
or destruction is an Insured Loss or was caused by a negligent or willful act of
Tenant.
8.5 DAMAGE NEAR END OF TERM. If at any time during the last six (6)
months of the Term (which shall include any Extension Periods) there is damage
for which the cost to repair exceeds three (3) month's Base Rent, whether or not
an Insured Loss, Landlord may, at Landlord's option, terminate this Lease
effective sixty (60) days following the date of occurrence of such damage by
giving written notice to Tenant of Landlord's election to do so within thirty
(30) days after the date of occurrence of such damage.
8.6 ABATEMENT OF RENT; TENANT'S REMEDIES.
8.6.1 RENT ABATEMENT. In the event of damage described in Section
8.2 (Partial Damage--Insured), whether or not Landlord or Tenant repairs or
restores the Property,
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the Basic Monthly Rent, Tenant's Share of Taxes, Tenant's Share of Insurance
Charges, and other charges, if any, payable by Tenant hereunder for the period
during which such damage, its repair or the restoration continues shall be
abated in proportion to the degree to which Tenant's use of the Property is
impaired. Except for abatement of Basic Monthly Rent, Tenant's Share of Real
Estate Taxes, Tenant's Share of Insurance Charges, and other charges, if any, as
aforesaid, all other obligations of Tenant hereunder shall be performed by
Tenant, and Tenant shall have no claim against Landlord for any damage suffered
by reason of any such repair or restoration.
8.6.2 COMPLETION OF REPAIR OR RESTORATION. If Landlord undertakes or
is obligated to undertake the repair or restoration of the Property after
Property Partial Damage, Landlord shall substantially complete such repair or
restoration within twelve (12) months from the later to occur of the following:
(i) the date of the damage or destruction, and (ii) uninterrupted access to the
Property, subject to Force Majeure Delays and Tenant Delays, as defined in
Section 8.6.3, below (the "Outside Completion Date"). If Landlord fails to
substantially complete repair or restoration of the Property by the Outside
Completion Date, Tenant shall, as Tenant's sole and exclusive remedy, have the
right to terminate this Lease by delivering written notice of such election to
Landlord within fifteen (15) business days after the Outside Completion Date
(the "Termination Date"). If Landlord does not receive Tenant's notice to
terminate this Lease by 5:00 p.m. on the Termination Date, Tenant shall have no
further right to terminate this Lease pursuant to this Section 8.6.2.
8.6.3 DELAYS. The time for Landlord to substantially complete
repairs or perform other obligations shall be extended by Force Majeure Delays
and/or Tenant Delays as those terms are defined below:
"Force Majeure Delays" shall be any delays due to strikes, lockouts,
or other labor disturbance, civil disturbance, riot, sabotage,
blockage, embargo, inability to secure materials, supplies, or labor
through ordinary sources by reason of regulation or order of any
government or regulatory body, delays in the procurement of required
governmental permits and/or licenses (but which are not attributable
to the party pursuing such permits and/or licenses), delays caused
by the insurance adjuster's determination of loss and issuance of
insurance proceeds (which shall be a condition to commencing
construction), lightning, rain, earthquake, fire, storm, hurricane,
tornado, flood, washout, explosion, or any other cause outside of
Landlord's reasonable control, whether similar or dissimilar to the
foregoing.
No Force Majeure Delay shall be deemed to have occurred unless and
until the party claiming such Force Majeure Delay has provided
written notice to the other party specifying the action or inaction
that such notifying party contends constitutes a Force Majeure
Delay. If such action or inaction is not cured within one (l)
business day after receipt of such notice, then a Force Majeure
Delay, as set forth in such notice, shall be deemed to have occurred
commencing as of the date such notice was received and continuing
for the number of days the completion was in fact delayed as a
direct result of such action or inaction.
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"Tenant Delays" shall mean any delays caused in whole or in part by
or through Tenant and/or Tenant's representatives or contractors,
including, without limitation, failure to cooperate with Landlord in
the procurement of required licenses and permits, and/or failure to
approve any plans and specifications to the extent Tenant's approval
is required, commercially advisable, or desired by Landlord. Tenant
shall pay all costs and expenses incurred by Landlord which result
from Tenant Delays, including, without limitation, any costs of and
expenses attributable to increases in the cost of labor or
materials.
No Tenant Delay shall be deemed to have occurred unless and until
Landlord has given written notice to Tenant specifying the action or
inaction which Landlord contends constitutes a Tenant Delay. If such
action or inaction is not cured within one (l) business day after
Tenant's receipt of such notice, then a Tenant Delay, as set forth
in such notice, shall be deemed to have occurred commencing as of
the date Tenant received such notice and continuing for the number
of days completion was in fact delayed as a direct result of such
action or inaction.
8.7 TERMINATION -- ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this Section 8, an equitable adjustment shall be made concerning
advance Base Rent and any other advance payments made by Tenant to Landlord.
Landlord shall, in addition, return to Tenant so much of Tenant's Security
Deposit as has not been, or is not then required to be, used by Landlord
pursuant to Section 2.3, above.
8.8 WAIVER OF CIVIL CODE SECTIONS. Tenant does hereby waive the benefit
of the provisions of Sections 1932(2) and 1933(4) of the California Civil Code
and the provisions of any successor or other statute of like import with respect
to any partial or total destruction of the Premises.
9. CONDEMNATION.
9.1 DEFINITIONS.
9.1.1 CONDEMNATION. "Condemnation" shall be defined as (i) the
taking of all or any portion of the Premises through the exercise of any
governmental power of condemnation or eminent domain whether by legal
proceedings or otherwise, by any public or quasi-public authority, private
corporation, entity or individual, having the power of condemnation or eminent
domain ("Condemnor") or (ii) any voluntary sale or transfer by Landlord, either
under the threat of Condemnation or while Condemnation proceedings are pending.
Landlord agrees to give Tenant written notice of any Condemnation proceeding.
9.1.2 TOTAL CONDEMNATION. "Total Condemnation" shall be defined as
the Condemnation of the entire Premises.
9.1.3 PARTIAL CONDEMNATION. "Partial Condemnation" shall be defined
as any Condemnation that does not constitute a Total Condemnation.
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9.1.4 CONDEMNATION DATE. "Condemnation Date" shall be defined as the
earlier of (i) the date when possession of that portion of the Premises subject
to Condemnation is taken by the Condemnor or (ii) the date when title to that
portion of the Premises subject to Condemnation vests in the Condemnor or its
nominee.
9.1.5 AWARD. "Award" shall be defined as all compensation awarded,
paid or received in connection with a Condemnation.
9.2 TOTAL CONDEMNATION. In the event of a Total Condemnation, this Lease
shall terminate as of the Condemnation Date.
9.3 PARTIAL CONDEMNATION.
9.3.1 TERMINATION. In the event of any Partial Condemnation of (i)
20% or more of the floor area of the Building, or (ii) 50% of the Property, and
in either case substantially impairing the use of the Premises by Tenant, Tenant
and Landlord each shall have the option to terminate this Lease, exercisable
upon 60 days' prior written notice delivered to the other party at any time
within 30 days after the Condemnation Date.
9.3.2 ABATEMENT OF RENT. In the event of any Partial Condemnation,
Basic Monthly Rent payable as of the Condemnation Date, but during and only
during the period of such Partial Condemnation, shall be abated by an amount
equal to the then Basic Monthly Rent multiplied by a fraction, the numerator of
which is equal to the total square footage of rentable area of that portion of
the Premises which is subject to Condemnation and the denominator of which is
equal to the total ground floor square footage of the Premises.
9.3.3 RESTORATION. In the event of any Partial Condemnation where
this Lease is not terminated pursuant to Section 9.3.1, Landlord shall with
reasonable promptness, Restore the Premises to a self-contained unit in a
condition as near as reasonably possible to the condition of the Premises
immediately preceding Condemnation; provided, however, Landlord's obligation to
Restore the Premises shall be limited to that portion of the Award received by
Landlord attributable to severance damages.
9.4 ALLOCATION OF AWARD. Subject to the provisions of this Section 9.4,
the entire Award made as a result of any Condemnation shall belong solely to,
and shall be the sole property of, Landlord, whether such Award shall be as
compensation for diminution in value of this Lease, for the value of any
unexpired portion of the Term, or as compensation for the fee or for the
Premises, and Tenant shall have no claim against either Landlord or the
Condemnor with respect thereto. Notwithstanding the foregoing, Tenant shall be
entitled to pursue an Award for moving or relocation expenses and for the
unamortized value of any trade fixtures, machinery, equipment or Alterations of
Tenant subject to Condemnation. Tenant does hereby covenant and agree, upon the
request of Landlord, to execute an assignment of any Award in substance
consistent with the provisions of this Section 9.4.
9.5 WAIVER OF CODE OF CIVIL PROCEDURE SECTION. Each party hereby waives
the provisions of Section 1265.130 of the California Code of Civil Procedure and
the provisions of any successor or other law of like import.
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10. ASSIGNMENT AND SUBLETTING.
10.1 ASSIGNMENT OR SUBLETTING. Tenant may not assign, transfer,
hypothecate, encumber, by operation of law or otherwise, this Lease, or any of
its interest herein or hereto, nor sublet the Premises, or any portion thereof,
nor grant any license or right of use or occupancy with respect to the Premises,
without the prior written consent of Landlord which consent shall not be
unreasonably withheld subject to Sections 10.5 and 10.6 below. Any attempted
assignment or subletting not in compliance with the terms of this Section 10
shall be absolutely null and void and of no force or effect whatsoever.
10.2 NOTICE. If Tenant desires to undertake any such assignment or
subletting, it shall provide Landlord with written notice of such desire,
specifying the consideration for, and all other terms and conditions of, such
transaction and identifying the proposed assignee or subtenant (the "Proposed
Party") and including with the notice the current financial statement of the
Proposed Party.
10.3 INTENTIONALLY OMITTED.
10.4 ASSIGNMENT/SUBLEASE AMENDMENT. Landlord may condition its consent
to any proposed transaction upon the execution of an assignment or sublease
amendment by Tenant and the Proposed Party, pursuant to which (i) in the case of
any proposed transaction providing for, as consideration to Tenant or any
affiliate of Tenant for the proposed transaction, the payment of any lump sum,
periodic payment or other consideration, other than the payment of rent greater
than the payment of Rent hereunder (the "Non-rent Consideration"), Tenant shall
pay to Landlord in cash an amount equal to sixty percent (60%) of the Non-rent
Consideration upon consummation of the transaction and (ii) in the case of any
proposed transaction providing for the payment of rent in the case of an
assignment in an absolute amount greater than the Rent ("Assignment Excess
Rent"), or, in the case of a sublease, in an amount greater than the Rent
allocable on a square footage basis to that portion of the Premises to be
subleased in the proposed transaction ("Sublease Excess Rent"), the Rent
hereunder shall be increased by an amount equal to sixty percent (60%) of the
annual Assignment Excess Rent or the annual Sublease Excess Rent, as the case
may be.
10.5 CRITERIA FOR APPROVAL. In connection with any request by Tenant to
assign its interest in this Lease or enter into a sublease, it shall not be
unreasonable for Landlord to withhold its consent to such transaction if:
10.5.1 the Proposed Party has been required by any prior landlord,
lender or governmental authority to take remedial action in connection with
Hazardous Material contaminating a property if the contamination resulted from
such assignee's or sublessee's actions or use of the property in question;
10.5.2 the Proposed Party is subject to an enforcement order issued
by any governmental authority in connection with the use, disposal or storage of
a Hazardous Material;
10.5.3 in the reasonable judgment of Landlord, the Proposed Party
lacks the financial resources necessary to perform the obligations of Tenant
under this Lease;
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10.5.4 in the reasonable judgment of Landlord, the Proposed Party is
not a reputable party; or
10.5.5 the proposed use of the Premises by the Proposed Party would
be substantially different from the use of the Property by Tenant permitted in
Section 10 of the Fundamental Lease Provisions; or
10.5.6 The Proposed Party has been negotiating with Landlord during
the preceding twelve (12) month period for a direct lease of the Property;
10.5.7 The Proposed Party is a real estate developer or landlord
and/or is acting directly or indirectly on behalf of a real estate developer or
landlord; or
10.5.8 The Proposed Party has been involved in civil, criminal or
administrative litigation or proceedings with its prior landlord or landlords or
is otherwise involved in civil, criminal or administrative litigation or
proceedings which is unsatisfactory in the reasonable opinion of Landlord.
10.6 MISCELLANEOUS. Notwithstanding any other provision of this Section
10 to the contrary, in connection with any proposed assignment or subletting,
(i) Tenant shall pay to Landlord as Additional Rent all reasonable expenses,
including reasonable attorneys' fees incurred by Landlord in connection with
such transaction (the receipt of which shall be a further material and
reasonable condition to Landlord's consent), (ii) Tenant and its Proposed Party
shall, within 10 days after notice to do so, execute and deliver to Landlord
such documents, and take such further action, as Landlord may reasonably require
to effect such transaction or to protect Landlord's rights, (iii) the acceptance
by Landlord of rent from any person other than Tenant shall not be deemed a
consent to any transaction subject to this Section 10, (iv) the consent to any
particular transaction shall not be deemed a consent to any other transaction
subject to this Section 10, and (v) the consent to any assignment, subletting or
other such transfer (or the consummation of any such transaction) shall not in
any way relieve Tenant of any of its direct and primary obligations under this
Lease, whether arising before or after such consent. If Landlord consents to any
proposed assignment, then Tenant may consummate the proposed assignment or
subletting only at the price, and on the terms and conditions, and with the
parties, specified in the notice to Tenant under Section 10.2. If the proposed
assignment or subletting is not so consummated within ninety (90) days after
delivery of Landlord's consent thereto, it shall again be subject to all of the
provisions of this Section 10.
10.7 ADDITIONAL TRANSACTIONS. If Tenant is a corporation which is not
the issuer of any security registered under Section 12(b) or 12(g) of the
Securities Exchange Act of 1934, or is an unincorporated association, trust or
partnership, the transfer, sale, assignment, pledge or hypothecation of a
majority or controlling interest in the stock or interest in such corporation,
association, trust or partnership in one or more transactions during the Term
shall be deemed to be an assignment of this Lease for purposes of this Section
10. The involvement of Tenant or its assets in any transaction, or series of
transactions (by way of merger, sale, acquisition, financing, refinancing,
transfer, leveraged buy-outs or otherwise), which results or will result in a
reduction of the Net Worth of Tenant (as hereinafter defined) by an amount equal
or greater than twenty-five percent (25%) of the Net Worth of Tenant as it was
represented to Landlord at the time of the execution of this Lease by Landlord.
"Net Worth of Tenant" for purposes of this Lease shall be
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the net worth of Tenant established under generally accepted accounting
principles consistently applied.
11. SUBORDINATION.
11.1 TENANTS AGREEMENT TO SUBORDINATE. Tenant, for itself and its
subtenants, agrees, without the necessity of any further consideration or
action, to subordinate all of its right, title and interest in and to this Lease
to the lien of any mortgage or deed of trust now or hereafter encumbering the
Premises or any portion thereof, and to all advances made or hereafter to be
made upon the security thereof, provided, however, (i) that the beneficiary or
beneficiaries of any such mortgages and/or deeds of trust agree in a writing
delivered to Tenant to recognize all of Tenant's right, title and interest in
and to this Lease so long as Tenant performs and complies with each and all of
its covenants, agreements, terms and conditions under this Lease, which writing
may at Landlord's request be substantially in the form of attached Exhibit E,
(ii) that all terms of such indebtedness, including, without limitation, the
precise amount thereof and the interest rate with respect thereto, shall be as
determined solely by Landlord and such beneficiary or beneficiaries, and (iii)
Tenant, for itself and its subtenants, within 10 days after Landlord or such
beneficiary or beneficiaries provides Tenant with written notice to do so, shall
execute and deliver to Landlord such documents and take such further action as
Landlord or such beneficiary or beneficiaries may deem necessary or advisable to
effect or maintain such subordination. Tenant also agrees that any mortgagee or
beneficiary may elect to have this Lease constitute a lien prior to its mortgage
or deed of trust, and in the event of such election and upon notification by
such mortgagee or beneficiary to Tenant to that effect, this Lease shall be
deemed a prior lien to such mortgage or deed of trust, whether this Lease is
dated prior to or subsequent to the date of said mortgage or deed of trust.
11.2 ATTORNMENT. Tenant, for itself and its subtenants, agrees that (i)
upon delivery to Landlord of the written election of the beneficiary or
beneficiaries of any encumbrance affecting the Premises which is superior to
this Lease, that such encumbrance shall be deemed subordinate to this Lease, (a)
this Lease shall, without the necessity of any further consideration or action
whatsoever, be deemed superior to such encumbrance, whether this Lease was
executed before or after the execution of such encumbrance, and (b) the
beneficiary or beneficiaries of such encumbrance shall have the same rights with
respect to this Lease as if this Lease had been executed and delivered prior to
execution and delivery of such encumbrance and had thereafter been assigned to
such beneficiary or beneficiaries and (ii) if, by reason of Landlord's default
under any encumbrance now or hereafter affecting the Premises in any way, any or
all of Landlord's interest in and to the Premises is terminated, Tenant (a)
shall waive all rights at law or in equity now or hereafter in effect to
terminate this Lease and surrender Possession of the Premises, (b) shall attorn
to the transferee, whether by foreclosure, judicial or trustees' sale, deed in
lieu of foreclosure or otherwise, of any or all of Landlord's interest in or to
the Premises, (c) shall recognize such transferee and its transferees as the
Landlord under this Lease, and (d) shall execute and deliver to Landlord and to
such transferee and its transferees within 10 days after Landlord, such
transferee or its transferees, provides Tenant with written notice to do so,
such documents and take such further action as Landlord, such transferee and its
transferees may deem necessary or advisable to effect or maintain such
attornment.
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12. DEFAULT AND REMEDIES.
12.1 DEFAULT. Tenant agrees that the occurrence of any of the following
events shall constitute a material default (each, a "Default") under this Lease
by Tenant:
12.1.1 FAILURE TO PAY RENT. The continued failure of Tenant to pay
in full when due any installment of Rent, or any other payment required to be
made by Tenant hereunder, for five (5) business days after receipt by Tenant of
written notice from Landlord of such failure; provided, that any notice required
hereunder shall be in lieu of, and not in addition to, any notice required under
California Code of Civil Procedure section 1161, as amended.
12.1.2 ABANDONMENT. The abandonment or vacation of the Premises by
Tenant for more than ten days without the prior written consent of Landlord,
which consent may be granted or withheld in the discretion of Landlord.
12.1.3 BANKRUPTCY. The levy or attachment or other judicial seizure
of all or substantially all of the assets of Tenant located in, on or about the
Premises or of the right, title or interest of Tenant in and to this Lease
unless Tenant has commenced to cure or dismiss the action within thirty (30)
days thereafter, the making by or on behalf of Tenant of any general assignment
for the benefit of creditors, the voluntary or involuntary filing of a petition
for adjudication of Tenant as insolvent or bankrupt or for reorganization or
arrangement under an insolvency act or any law relating to bankruptcy, unless
dismissed within thirty (30) days thereafter, the appointment of any receiver or
trustee in any insolvency proceedings for Tenant or for all or substantially all
of the assets of Tenant located in, on or about the Premises or for the right,
title or interest of Tenant in and to this Lease, unless Tenant has commenced to
cure or dismiss the action within thirty (30) days thereafter, or the filing of
any petition for or consent to any of the foregoing insolvency or bankruptcy
matters.
12.1.4 OTHER. The continued failure by Tenant in the performance of
or compliance with any of the other covenants, terms or conditions of this Lease
for thirty (30) days after Landlord shall have given written notice of such
failure to Tenant, provided, however, that if the nature of such Default is such
that Tenant cannot reasonably cure such Default within said 30-day period, such
failure shall not constitute a Default if Tenant shall, within such 30-day
period, commence such performance and thereafter diligently and continuously
pursue such performance or compliance to completion; and provided further, that
any notice required hereunder shall be in lieu of, and not in addition to, any
notice required under California Code of Civil Procedure Section 1161, as
amended. However, the foregoing shall not extend any period of time by which
Tenant is required by this Lease to deliver to Landlord non-disturbance
agreements, estoppel certificates, or financial statements.
12.2 REMEDIES. In the event of a Default, Landlord may, in addition to
any and all remedies or means of redress to which it may be lawfully or
equitably entitled, in its discretion, while such Default continues:
12.2.1 TERMINATION. Terminate this Lease and any and all rights of
Tenant hereunder, by any lawful means, in which event, Landlord, without the
requirement of any further notice to Tenant, shall have the right immediately to
enter the Premises and take actual, full, complete and exclusive possession
thereof, all within the protective scope and ambit of the provisions set forth
in Section 4.5 and 13.1.3 of this Lease, in which event Landlord shall also
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have the right to recover from Tenant (i) the worth at the time of award made on
account of the Default resulting in such termination ("Award"), together with
interest thereon at the maximum lawful interest rate per annum, of any unpaid
portion of the Rent which had been earned by Landlord at the time of such
termination, (ii) the worth at the time of Award, together with interest thereon
at the maximum lawful interest rate per annum, of the amount by which any unpaid
portion of the Rent which would have been earned after such termination until
the time of Award exceeds the amount of loss of any unpaid portion of the Rent
which Tenant proves could have reasonably been avoided, (iii) the worth at the
time of Award, discounted at the discount rate of the Federal Reserve Bank of
San- Francisco at the time of the Award plus one percent, of the amount by which
any unpaid portion of the Rent for the balance of the Term exceeds the amount of
loss of an y unpaid portion of the Rent which Tenant proves could have
reasonably been avoided, and (iv) any and all other amounts necessary to
compensate Landlord for any and all detriment proximately caused by such Default
or which in the ordinary course of business would be likely to result therefrom,
including, without limitation, any costs or expenses incurred by Landlord in
maintaining or preserving the Premises after such Default, preparing the
Premises for reletting to a new tenant, accomplishing any repairs or alterations
to the Premises for purposes of such reletting, rectifying any damage thereto
occasioned by the act or omission of Tenant, any unamortized brokers'
commissions and leasehold improvement costs and any other costs necessary or
appropriate to relet the Premises.
12.2.2 CONTINUATION. Continue this Lease in full force and effect,
but enforce any of its other rights and remedies hereunder, including, without
limitation, the right to recover all of the Rent as it becomes due under this
Lease, in which event the rights of Tenant to possession of the Premises under
this Lease and the right of Tenant to assignment and sublease, if any, pursuant
to the provisions of Section 10 of this Lease shall continue, provided, however,
that any and all acts of maintenance or preservation or efforts to relet the
Premises by Landlord or the appointment of a receiver by Landlord to protect its
interest in and to the Premises or any portion thereof or this Lease, shall
neither constitute termination of this Lease nor interference with such rights
of Tenant to possession, assignment and sublease.
12.2.3 ADDITIONAL RIGHTS. Pursue all rights and remedies of
Landlord, which shall in any event be cumulative and not alternative, and shall
be in addition to any and all rights provided at law or in equity, in connection
with which Tenant does hereby agree that (i) the waiver of any Default by
Landlord shall be effective only if in writing and signed by Landlord, and shall
not in any event be continuing in nature or otherwise a waiver of any subsequent
Default, (ii) the acceptance of any unpaid but due portion of the Rent shall be
in mitigation of Landlord's damages and shall not, unless specified with
particularity in writing signed and dated by Landlord, (a) constitute a waiver
of any Default, or any of the rights and remedies of Landlord hereunder, at law
or in equity or (b) invalidate or compromise any notice of a Default provided
before such acceptance, or any deadline specified in such notice, and (iii)
Landlord, in its discretion, without prejudice to any other remedies Landlord
may have, may, following the continued failure of Tenant to cure any Default
after receipt of written notice thereof, elect to cure such Default, in which
event Tenant shall, within ten (10) days after Landlord provides Tenant with
written notice to do so, pay to Landlord any and all costs and expenses incurred
by Landlord in connection therewith.
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12.3 LATE CHARGE AND INTEREST.
12.3.1 LATE CHARGE. In the event that any installment of Rent or any
other sum payable by Tenant hereunder is not received by Landlord within 10 days
of the date when due, a late charge of six percent (6%) of such overdue
installment or other payment shall be immediately and automatically payable by
Tenant to Landlord, without the necessity of delivery of any notice.
12.3.2 INTEREST. In addition to the late charge payable pursuant to
Section 12.3.1, any and all unpaid but due portion of the Rent and other
payments by Tenant hereunder not received by Landlord within 30 days of the date
when due shall bear interest at the Interest Rate.
12.4 WAIVER OF REDEMPTION. Tenant hereby expressly waives any and all
rights of redemption granted by or under any present or future law to Tenant in
connection with the eviction or dispossession of Tenant for any cause or on
account of a Default.
13. MISCELLANEOUS.
13.1 DEFAULT BY LANDLORD.
13.1.1 DEFAULT. Landlord shall not be in default under this Lease
unless Landlord has failed to perform the Obligations required of Landlord
hereunder for more than thirty (30) days after Tenant delivers written notice of
such default to Landlord and to any lender having a secured interest in the
Property or portion thereof; provided, however, that in the event the nature of
Landlord's obligation is such that more than 30 days is required for complete
performance, Landlord shall not be in default pursuant to this Section 13.1 if
Landlord or any other party to whom notice is given commences performance within
such 30-day period and thereafter diligently prosecutes such performance to
completion.
13.1.2 REMEDIES OF TENANT. Tenant's sole remedies for default by
Landlord under this Lease shall be the right to damages and/or injunctive relief
and in no event shall Tenant have the right to terminate this Lease or abatement
of Rent hereunder as the result of Landlord's default.
13.1.3 NON-LIABILITY OF LANDLORD PARTIES. In consideration of the
benefits accruing under this Lease, Tenant and all successors and assigns agree
that, in the event of any actual or alleged failure, breach or default under
this Lease by Landlord (a) the sole and exclusive remedy shall be against
Landlord's interest in the Property; (b) no officer, director, shareholder,
trustee, executor, beneficiary, agent or employee of Landlord or of any
shareholder of Landlord shall be named as a party in any suit or proceeding
(except as may be necessary to secure jurisdiction of Landlord, if applicable);
(c) no judgment will be taken against any officer, director, shareholder,
trustee, executor, beneficiary, agent or employee of Landlord or of any
shareholder of Landlord; (d) no writ of execution will ever be levied against
the assets of any officer, director, shareholder, trustee, executor beneficiary,
agent or employee of Landlord or of any shareholder of Landlord; and (f) the
obligations of Landlord under this Lease do not constitute personal obligations
of the individual directors, officers, shareholders, trustees, executors,
beneficiaries, agents or employees of Landlord or of any shareholder of
Landlord, and Tenant shall not seek recourse against the individual directors,
officers, shareholders, trustees, executors, beneficiaries, agents or employees
of Landlord or of any shareholder of Landlord or
26
any of their personal assets for satisfaction of any liability in respect to
this Lease. Further, any claim, defense, or other right of Tenant arising in
connection with this Lease or negotiations before this Lease was signed shall be
barred unless Tenant files an action or interposes a defense based thereon
within one hundred eighty (180) days after the expiration or earlier termination
of the Term.
13.2 ESTOPPEL CERTIFICATES. Tenant, for itself and its subtenants,
agrees (i) to execute, acknowledge and deliver to Landlord, from time to time
during the Term within fifteen (15) days after Landlord provides Tenant with a
written request to do so, an estoppel certificate certifying in writing (a) that
this Lease is in full force and effect, unmodified or modified solely as set
forth in such estoppel certificate, including, without limitation, confirmation
of the Term and Rent Commencement Dates, and the date of expiration of the
Lease, (b) the dates to which Rent has been paid, (c) that Landlord has, as of
the date of such estoppel certificate, fully performed all of its obligations
under this Lease, without exception or except only as set forth in such estoppel
certificate, (d) the amount of Basic Monthly Rent currently payable under the
Lease, (e) that Tenant has no option to purchase the Property or right of first
refusal with respect to the Property, or setting forth any such options to
purchase or rights of first refusal, (f) that there are no remaining free rent
periods or specifying any remaining free rent periods, and (g) such other
matters regarding the Lease and Tenant's occupancy of the Premises as Landlord
reasonably may request, (ii) that any such estoppel certificate may be relied
upon by a prospective purchaser or encumbrancer of the Premises (or, at the
election of Landlord, such estoppel certificate shall be addressed directly to
any such prospective purchaser or encumbrancer), and (iii) that the failure of
Tenant to so deliver such estoppel certificate in such period of time shall be
conclusive upon Tenant (a) that this Lease is in full force and effect, without
modification except as may be represented by Landlord, (b) that the Rent has not
been prepaid under this Lease except as required pursuant to the provisions of
Section 2 of this Lease, (c) that Landlord has, as of the date on which Tenant
failed to deliver such estoppel certificate, fully performed all of its
obligations under this Lease, without exception, (d) that the amount of Basic
Monthly Rent currently payable under the Lease is as represented by Landlord,
(e) that Tenant has no option to purchase the Property or right of first refusal
with respect to the Property, and (f) that there are no remaining free rent
periods under the Lease. At Landlord's option, the failure to deliver such
statement within such time shall be a material default of this Lease by Tenant.
13.3 HOLDING OVER. If Tenant holds over in the Property after the
expiration of the Term or any extension thereof, with the express or implied
consent of Landlord, such holding over, in the absence of written agreement on
the subject, shall be deemed to have created a tenancy from month to month
terminable upon thirty (30) days' written notice given at any time by either
party to the other, and otherwise subject to all the terms and provisions of
this Lease. During any such holdover period, Rent shall be paid monthly and
shall be computed on the basis of one hundred twenty-five percent (125%) of the
then total Basic Monthly Rent and other charges estimated by Landlord in its
sole and absolute discretion to be payable by Tenant to Landlord for the next
succeeding twelve-month period. Notwithstanding the foregoing, in the event
Tenant fails to surrender the Premises on the expiration of this Lease, in
addition to any other liabilities to Landlord accruing therefrom, Tenant shall
indemnify and hold Landlord harmless from and against any loss or liability
resulting from such failure to surrender, including, without limitation, any
claims of any succeeding Tenant founded upon such failure to surrender.
27
13.4 QUIET ENJOYMENT. So long as Tenant continues to perform and comply
with each and all of the terms and conditions to be performed and complied with
under this Lease, and subject to (i) all federal, state, county and municipal
statutes, laws, ordinances, rules, regulations and orders and (ii) all of the
provisions of (a) this Lease, (b) any encumbrance now or in the future affecting
the Property, (c) any reciprocal easement agreement or conditions, covenants and
restrictions agreement now or in the future affecting the Property and (d) any
policy of insurance now or in the future affecting the Property, Landlord does
hereby covenant and agree that Tenant shall lawfully, peaceably and quietly
have, hold, occupy and enjoy the Property during the Term or any extension
thereof, without hindrance or interference with its quiet enjoyment and
possession by any persons lawfully claiming under Landlord.
13.5 SALE OF THE PREMISES. In the event of any sale or exchange of the
Property by Landlord or an assignment by Landlord of this Lease, Landlord shall
automatically be relieved of all obligations on the part of Landlord accruing
from and after the date of such sale, exchange, or assignment, including,
without limitation, any obligation to Tenant with respect to the Security
Deposit upon assignment of the same to the transferee; provided, however, that
(i) the interest of the transferor, as Landlord, and any funds then in the hands
of Landlord in which Tenant has an interest shall be turned over, subject to
such interest, to the transferee, and (ii) notice of such sale, transfer,
exchange or lease shall be delivered to Tenant as required by law. No holder of
a mortgage, deed of trust or other encumbrance to which this Lease is or may be
subordinate shall be responsible in connection with the transfer of said
Security Deposit hereunder, unless such mortgagee or holder of such deed of
trust or lessor shall have actually received such Security Deposit.
13.6 INTENTIONALLY OMITTED.
13.7 RECORDING. Tenant shall not under any circumstances record this
Lease nor a short form memorandum thereof.
13.8 FINANCIAL STATEMENTS. Upon Landlord's written request, Tenant shall
promptly furnish Landlord, from time to time, with the most current audited
financial statements of Tenant, also certified by Tenant (or, if Tenant is not
an individual, by an executive officer of Tenant) to be true and correct
reflecting Tenant's then current financial condition. Tenant's financial
statement shall be furnished within ten (10) business days after Landlord's
request therefor. Failure to deliver such financial statements within this
10-day period shall be a material default under this Lease.
13.9 ACCESS BY LANDLORD. Landlord and Landlord's agents shall have the
right to enter the Premises at reasonable times upon reasonable prior written
notice (which notice shall not be necessary in the case of emergency) and in
such a manner so as not to interfere with Tenant's business to examine the
Building and to show the same to prospective purchasers or tenants of the
Building or the Property, to make such repairs, alterations, improvements or
additions as may be required in connection with the development or maintenance
of the Building, without the same constituting an eviction of Tenant, in whole
or in part, or a trespass; provided, however, that the Rent shall not abate
while said repairs, alterations, improvements or additions are being made, by
reason of loss or interruption of business of Tenant or otherwise. During the
six months prior to the expiration of the Term, Landlord may place upon the
Building "for lease," "for sale" or similar notices or signs which Tenant shall
permit to remain thereon. Nothing herein contained shall be deemed or construed
to impose upon Landlord any obligation,
28
responsibility or liability whatsoever for the care and maintenance or repair of
the Premises, or any part thereof, except as is specifically provided in this
Lease.
13.10 [INTENTIONALLY OMITTED]
13.11 NOTICES. All notices and other communications pertaining to this
Lease shall be in writing and shall be deemed to have been given only when (i)
delivered personally (ii) 72 hours after being mailed from within the State of
California, certified or registered mail, return receipt requested, postage
prepaid, or (iii) one (1) business day after deposit with a nationally
recognized overnight mail courier service (such as Federal Express) to the
respective addresses set forth in Item 10 of the Fundamental Lease Provisions or
to such other addresses as any of the parties hereto may from time to time in
writing designate to the other parties hereto.
13.12 TIME. Time is of the essence of this Lease with respect to each
and every provision of this Lease in which time is a factor.
13.13 ENTIRE AGREEMENT. This Lease, including, without limitation, the
exhibits attached hereto and made a part hereof, sets forth the entire agreement
between the parties hereto, fully supersedes any and all prior agreements or
understandings between the parties hereto pertaining to the subject matter
hereof, whether oral or written, and no change in, modification of or addition,
amendment or supplement to this Lease shall be valid unless set forth in writing
and signed by each and all of the parties hereto subsequent to the execution of
this Lease.
13.14 FURTHER ASSURANCES. Each of the parties hereto, without further
consideration, agrees to execute and deliver such other documents and take such
other action as may be necessary to more effectively consummate the purposes and
subject matter of this Lease.
13.15 APPLICABLE LAW; SEVERABILITY. The existence, validity,
construction, operation and effect of this Lease, any and all of its covenants,
agreements, terms and conditions and the rights and obligations hereunder of
each of the parties hereto shall be determined in accordance with the laws of
the State of California; provided, however, that any provision of this Lease
which may be prohibited by law or otherwise held invalid shall be ineffective
only to the extent of such prohibition or invalidity and shall not invalidate or
otherwise render ineffective any or all of the remaining provisions of this
Lease and under no circumstances whatsoever shall this Lease be construed as
creating either a partnership, an agency or an employment relationship between
the parties hereto.
13.16 CONTROVERSY. In the event of any controversy, claim or dispute
between the parties hereto arising out of or relating to this Lease, the
prevailing party shall be entitled to recover from the party, reasonable
expenses, including, without limitation, reasonable accountants', consultants'
and attorneys' fees and court costs. Additionally, Tenant shall reimburse
Landlord for all costs and expenses (including reasonable attorneys' fees and
court costs) which are incurred by Landlord in connection with any action for
relief from automatic stay arising under Bankruptcy Code Section 362(a) (11
U.S.C. Section 362(a)) or any successor statute.
13.17 HEADINGS, GENDER AND NUMBER. The section heading used in this
Lease are intended solely for convenience of reference and shall not in any way
or manner amplify, limit,
29
modify or otherwise be used in the interpretation of any of the provisions of
this Lease, and the masculine, feminine or neuter gender and the singular or
plural number shall be deemed to include the others whenever the context so
indicates or requires.
13.18 SUCCESSORS. Subject to the provisions of Section 10 of this Lease,
the covenants, agreements, terms and conditions contained in this Lease shall be
binding upon and inure to the benefit of the successors and assigns of the
parties hereto.
13.19 CORPORATE AUTHORITY. If Tenant 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, and that this Lease is binding upon said corporation in accordance
with its terms. If Tenant is a corporation, Tenant and those persons executing
this Lease on behalf of Tenant hereby represent and warrant that: (i) Tenant is
a corporation duly organized, validly existing and in good standing under the
laws of the State of California (or, if a foreign corporation, that such
corporation is duly organized, validly existing and in good standing in the
state of incorporation and is qualified to do business and in good standing in
the State of California); (ii) Tenant has all requisite corporate power and
authority to lease the Property and otherwise perform under this Lease; (iii)
the execution and delivery of this Lease by Tenant and the performance of the
transactions contemplated herein have been duly authorized by all requisite
corporate action and proceedings; (iv) this Lease constitutes the legal, valid
and binding obligation of Tenant and is enforceable against Tenant in accordance
with its terms, and (v) the execution, delivery and performance by Tenant of
this Lease (a) will not require any consent or approval that has not been
validly and lawfully obtained, (b) will not require any authorization, consent,
approval, license, exemption of or filing or registration with any court or
governmental department, commission, board, bureau, agency or instrumentality of
government except as shall have been lawfully and validly obtained prior to the
date hereof, and (c) will not cause Tenant to violate or contravene any
provision of law or any rule or regulation of any agency or government, domestic
or foreign, now in effect or any provision of any other agreement to which
Tenant is a party. On or before delivery of this Lease, both Landlord and Tenant
shall deliver to one another original secretary's certificates with corporate
resolutions authorizing Landlord and Tenant, respectively, to enter into this
Lease and designating authorized signatories.
13.20 CONSTRUCTION WARRANTIES. Following delivery of the Property,
Landlord shall, following request by Tenant, assign to Tenant the right to
enforce any warranties or guaranties held by Landlord (and which are assignable)
with respect to portions or components of the Property which Tenant is required
to maintain and repair pursuant to section 7.1; provided, however, that any
expiration or sooner termination of this Lease shall automatically be deemed an
assignment of the same by Tenant back to Landlord and following request by
Landlord, Tenant shall execute and deliver all instruments requested of it to
confirm such assignment.
13.21 BROKER'S COMMISSION. Each party represents that it has not had
dealings with any real estate broker, finder, or other person, with respect to
this Lease in any manner, except for The Klabin Company. Each party shall hold
harmless the other party from all damages resulting from any claims that may be
asserted against the other party by any broker, finder, or other person, with
whom the other parry has or purportedly has dealt. Landlord shall pay any
commission or fees that are payable to the aforementioned broker with respect to
this Lease in accordance with a separate commission agreement. Under no
circumstances shall The Klabin
30
Company or any other broker or finder be a third party beneficiary to this Lease
or any amendments or modifications thereto.
14. ADDITIONAL LEASE PROVISIONS. The provisions of this Section 14 shall
supersede and override any other provisions in this Lease to the extent such
other provisions may be inconsistent herewith.
14.1 OPTIONS TO EXTEND TERM.
14.1.1 OPTION. Tenant shall have options to extend the Term of this
Lease (the "Extension Options") on the basis of each and all of the provisions
contained in this Lease as then amended for two (2) consecutive periods of five
(5) years each (the "Extension Periods"), the first of which (the "First
Extension Period") commencing on the day after expiration of the initial Term,
and unless sooner terminated pursuant to the provisions hereof, ending on the
last day of the fifth (5th) consecutive year thereafter, and the second of which
(the "second Extension Period") commencing on the day after the expiration of
the First Extension Period, and unless sooner terminated pursuant to the
provisions hereof, ending on the last day of the fifth consecutive year
thereafter. Such option shall be exercised by Tenant, if at all, by giving
written notice of exercise ("Extension Notice") to Landlord (a) in the case of
the First Extension Period, not less than twelve (12) months nor more than
fifteen (15) months prior to the expiration of the initial Term and (b) in the
case of the Second Extension Period, not less than twelve (12) months nor more
than fifteen (15) months prior to the expiration of the First Extension Period.
Notwithstanding the foregoing, in the event (i) Tenant is in Default under this
Lease on the date an Extension Notice is given, or (ii) Landlord has given
Tenant three or more notices regarding Tenant's failure to pay rent when due
during the twelve months preceding the giving of such notice, or (iii) Tenant is
in Default on the date the Initial Lease Term expires (in the case of the First
Extension Period) or is in Default on the date the First Extension Period
expires (in the case of the Second Extension Period), then in any such event the
Extension Option shall be deemed automatically terminated. Tenant shall have no
right to extend the Term for the Second Extension Period unless it shall have
extended the Term for the First Extension Period.
14.1.2 BASIC MONTHLY RENT DURING EXTENSION PERIODS. For each
Extension Period, the Basic Monthly Rent for each Extension Period shall be the
"Fair Market Rental Rate" at the time the respective Extension Option is
exercised, which shall be established as follows:
14.1.2.1 FAIR MARKET RENTAL RATE. For the purposes of
determining the rental rate and other considerations during the Extension
Periods, the term "Fair Market Rental Rate" shall mean the annual amount per
square foot that comparable landlords have accepted in then current transactions
between non-affiliated parties from non-equity tenants of comparable
credit-worthiness, for comparable industrial facilities, for a comparable use,
and for a comparable period of time ("Comparable Transactions") within the South
Bay Industrial Market of Los Angeles County (the "Market Area"). In any
determination of Comparable Transactions, appropriate consideration shall be
given to the extent of Tenant's liability under the lease (including Landlord's
payment obligations of casualty insurance premiums and Real Property Taxes
hereunder), length of the lease term, and the size and location of premises
being leased. Corresponding consideration must be given to abatement provisions
reflecting free rent and/or no rent during the period of construction or
subsequent to the commencement date, tenant improvement allowances, brokerage
commissions, if any, all of which would be payable by Landlord in similar
transactions, but which would be offset by the actual cost to Tenant of
31
relocating its business operations from the Property to other property or
properties (including, without limitation, moving costs, additional construction
costs, employee relocation costs, negotiation costs, administrative expenses,
and costs of business down-time). The determination of Fair Market Rental Rate
shall also include the determination of any periodic rental adjustments in
methodology, frequency, and amount during the Extension Periods. The intent is
that Tenant will receive the same effective net economic benefit in the exercise
of an Extension Option that Tenant would receive if Tenant should Tenant decide
to enter into a Comparable Transaction.
14.1.2.2 DELIVERY OF EXTENSION NOTICE. Concurrently with and as
a condition to the effectiveness of a timely delivery Extension Notice, Tenant
shall provide Landlord with its good faith written estimate of the Fair Market
Rental Rate. Landlord shall have ten (10) business days ("Landlord's Review
Period") after receipt of the Extension Notice with Tenant's good faith estimate
of the Fair Market Rental Rate within which to accept such rental or to
reasonably object thereto in writing. Failure of Landlord to so object in
writing within Landlord's Review Period shall conclusively be deemed its
disapproval of the Fair Market Rental Rate determined by Tenant. In the event
Landlord objects, Landlord and Tenant shall attempt to agree upon such Fair
Market Rental Rate, using their best good faith efforts. If Landlord and Tenant
fail to reach agreement within twenty (20) days following Landlord's Review
Period ("Outside Agreement Date"), then each party shall have the right within
five (5) business days after the Outside Agreement Date (the "Cancellation
Period") to cancel its respective obligation to lease the Property for the
applicable Extension Period, in which case the Lease shall expire at the end of
the then-existing Term. However, if neither party has exercised the foregoing
cancellation rights by delivery of written notice thereof to the other party
such that the other party is in actual receipt of that notice (notwithstanding
Section 13.11, above) by 5:00 p.m. (California time) on the last day of the
Cancellation Period (the "Cancellation Date"), then the Tenant shall be
irrevocably bound to lease the Property from Landlord for the applicable
Extension Period, and each party shall place in a separate sealed envelope their
final proposal as to Fair Market Rental Rate and such determination shall be
submitted to arbitration in accordance with subsections (a) through (e) below.
(a) Landlord and Tenant shall meet with each other within five
CS) business days of the Cancellation Date and exchange the sealed envelopes and
then open such envelopes in each other's presence. If Landlord and Tenant do not
mutually agree upon the Fair Market Rental Rate within five (5) business days of
the exchange and opening of envelopes, then, within ten (10) business days of
the exchange and opening of envelopes Landlord and Tenant shall each appoint a
single arbitrator who shall by profession be an industrial real estate broker
who shall have been active on a full-time basis over the immediately preceding
five (5) year period ending on the date of such appointment in the leasing of
industrial properties in the Market Area. Landlord's broker and Tenant's broker
shall then together appoint a single arbiter with the foregoing qualifications
within five (5) business days thereafter (the "Arbiter"). Neither Landlord nor
Tenant shall consult with the Arbiter as to his or her opinion as to Fair Market
Rental Rate prior to the appointment. The determination of the Arbiter shall be
limited solely to the issue of whether Landlord's or Tenant's submitted Fair
Market Rental Rate for the Property is the closest to the actual Fair Market
Rental Rate for the Property as determined by the Arbiter taking into account
the requirements of Section 14.1.2.1. The Arbiter may hold such hearings and
require such briefs as the Arbiter, in his or her sole discretion, determines is
necessary. In addition, Landlord or Tenant may submit to the Arbiter with a copy
to the other party within five
32
(5) business days after the appointment of the Arbiter any market data and
additional information that such party deems relevant to the determination of
Fair Market Rental Rate ("FMRR Data") and the other party may submit a reply in
writing within five (5) business days after receipt of such FMRR Data.
(b) The Arbiter FMRR, within thirty (30) days of his or her
appointment, reach a decision as to whether the parties shall use Landlord's or
Tenant's submitted Fair Market Rental Rate, and shall notify Landlord and Tenant
of such determination.
(c) The decision of the Arbiter shall be binding upon Landlord and
Tenant.
(d) If Landlord's broker and Tenant's broker fail to agree upon and
appoint an arbitrator as set for in (a) above, then the appointment of the
arbitrator shall be made by the Presiding Judge of the Los Angeles County
Superior Court, or, if he or she refuses to act, by any judge having
jurisdiction over the parties.
(e) The cost of arbitration shall be paid by the party whose
estimate of Fair Market Rental Value is determined to be the farther from the
actual Fair Market Rental Value.
14.2 CONDITIONS TO TENANT'S OBLIGATIONS. Tenant's obligations under this
Lease shall be expressly conditioned upon the timely satisfaction or waiver of
the following conditions, each of which conditions is for the sole and exclusive
benefit of Tenant (and if any of such conditions is not satisfied or waived,
Tenant shall have no further obligations or liability to Landlord whatsoever
except as expressly set forth in this Section 14.2):
14.2.1 ENVIRONMENTAL INVESTIGATION. At any time after Tenant's
execution of this Lease, Landlord shall provide Tenant and its agents and
contractors with access to the Property for the purpose of conducting
environmental investigations of the Property (collectively, the "Environmental
Investigations") and in accordance with the terms and conditions attached hereto
as Exhibit F. Additionally, Tenant acknowledges receipt of the environmental
documents attached hereto as Exhibit G (the "Environmental Documents"). Based on
the foregoing, Tenant shall have the following contingencies:
(a) On or before 5:00 p.m. (California time) May 9, 1994 (the "First
Environmental Review Date"), if the Environmental Documents reveal conditions on
or within the Property not previously known or disclosed to Tenant that would
have a material adverse effect on Tenant, Tenant may elect to terminate this
Lease and all of Tenant's obligations hereunder (including any arising under
Section 14.4, below) by delivering a written notice of that election to
Landlord. If Tenant fails to deliver such notice to Landlord on or before the
First Environmental Review Date, Tenant shall have no further right to terminate
this Lease under this subparagraph (a); and
(b) On or before 5:00 p.m. (California time) July 29, 1994 (the
"Environmental Review Outside Date"), if the Environmental Investigations
reveals conditions on or within the Property not previously known or disclosed
to Tenant that would have a material adverse effect on Tenant, Tenant may elect
to terminate this Lease and Tenant's obligations hereunder, except for Tenant's
Termination Obligations (as defined below) which shall survive
33
such termination, by delivering to Landlord a written notice of that election
which shall set forth in detail the reason(s) for such termination. If Tenant
fails to deliver to Landlord written notice of such election by the
Environmental Review Outside Date, Tenant shall have no further right to
terminate this Lease based on Environmental Investigations.
All Environmental Documents are and shall remain the property of
Landlord, and their delivery shall be subject to the terms and conditions of the
Confidentiality Agreement, between Landlord and Tenant. Tenant agrees to
prominently mark any copies made of the Environmental Documents as
"Confidential," and to return the originals and all copies of the Environmental
Documents to Landlord no later than May 12, 1994.
14.2.2 RECEIPT OF GOVERNMENTAL APPROVALS AND PERMITS. Tenant shall
have received all necessary governmental approvals and permits necessary for the
operation of Tenant's business at the Property (collectively, "Government
Permits"). On or before 5:00 p.m. (California time) November 1, 1994 (the
"Government Permit Outside Date"), Tenant may elect to terminate this Lease and
Tenant's obligations hereunder, except for Tenant's Termination Obligations
which shall survive such termination, by delivering to Landlord a written notice
of that election. If Tenant fails to deliver to Landlord written notice of such
election by the Government Permit Outside Date, Tenant shall have no further
right to terminate this Lease based on its failure to obtain Government Permits
or any other reason.
14.3 ASSUMPTION OF THE HARPERS OBLIGATIONS. Pursuant to section 7.4 of
the existing Lease dated January 23, 1992 (the "Existing Lease") between
Landlord and Harpers, Inc., a Delaware corporation ("Harpers"), Harpers is
responsible for the complete removal of all Tenant's Equipment, and Utility
Installations, machinery and equipment (collectively, ("Harper's Equipment")
from the Building on expiration of the Existing Lease and surrender of the
Property, such that, on surrender, the Premises are in broom clean warehouse
condition with only overhead lighting and sprinkler systems at the glu-lam
beams. By way of illustration, the removal of Harper's Equipment shall include,
without limitation, removal of all (i) machinery and equipment (including bolt
removal and repair of damage resulting therefrom), (ii) horizontal and vertical
water, air and electrical lines, all supporting lines, and any other utility
lines servicing any machinery or equipment, (iii) sub-power panels, lines, and
trenching servicing any tenant operation, (iv) racks and bins, (v) conveyors and
related systems servicing Tenant's equipment, (vi) baking ovens, (vii) washing
machines, dry-off ovens, cranes and tracks, (viii) water tanks, (ix) mezzanine
and office installations, and (x) duct and ventilation systems that service
Tenant's Equipment. Tenant desires to utilize some or all of Harper's Equipment
that would otherwise be removed by Harpers pursuant to the Existing Lease; and
commence occupancy of the Building prior to expiration of the Existing Lease.
Accordingly, Landlord has negotiated with Harpers, for Tenant's benefit, to
relieve Harpers of certain of its obligations to remove Harper's Equipment on
surrender of the Premises and to provide an early termination of the Existing
Lease. Therefore, Tenant hereby agrees to assume, as direct and primary
obligations to Landlord, Harpers' obligations to remove Harper's Equipment and
to restore the Building to the Warehouse Condition required by section 7.4 of
the Existing Lease to the extent Harpers is relieved of those removal
obligations by Landlord and to pay to Landlord any amount of base monthly rent
and other charges of which Harpers is relieved by Landlord (collectively, the
"Harper Obligations"). Tenant's assumption of the Harper Obligations shall
continue for Landlord's benefit should the parties not enter into a binding
Lease for any reason.
34
14.4 SURVIVAL OF TENANT'S TERMINATION OBLIGATIONS. If Tenant elects to
terminate this Lease pursuant to the provisions of Section 14.2.1 or Section
14.2.2, above, then Tenant shall be responsible for the following
notwithstanding such termination (collectively, the "Tenant Termination
Obligations"):
(i) Continue to be responsible for all the Harper Obligations until such
are completely satisfied, as reasonably determined by Landlord;
(ii) Pay to Landlord an amount equal to the aggregate of all "Advances"
paid pursuant to the Work Letter; and
(iii) Upon and to the extent requested by Landlord, no later than thirty
(30) days after Tenant's termination of the Lease as set forth above, at
Tenant's sole cost, remove the Tenant Improvements from the Building to the
extent necessary (as directed by Landlord) to leave the Building in the
Warehouse Condition. Tenant shall repair any and all damage caused by such
removal of the Tenant Improvements from the Building.
14.5 CONSTRUCTION OF TENANT IMPROVEMENTS AND ROOF WORK. Tenant shall
construct those improvements on and within the Building in accordance with the
terms and conditions of attached Exhibit A-1, and Landlord shall construct the
Roofing Work in accordance with attached Exhibit A-2.
14.6 RIGHT OF FIRST NOTICE. Provided Tenant is not in default under this
Lease, if at any time during the Term Landlord decides to offer the Property for
sale, Landlord shall first contact Tenant and advise Tenant of Landlord's
intention to sell the Property ("Landlord's Notice"). For the period of thirty
(30) days after delivery of Landlord's Notice (the "Negotiation Period"), Tenant
shall have the exclusive right to negotiate with Landlord for the purchase of
the Property on terms and conditions which are, in Landlord's sole and
subjective discretion, acceptable to Landlord. If Landlord and Tenant have not
entered into a binding agreement by the last day of the Negotiation Period,
Landlord shall thereafter have the absolute right to offer the Property and sell
the Property to any third party on any terms and conditions Landlord may
thereafter negotiate.
IN WITNESS WHEREOF, the parties hereto have executed this Lease,
consisting of the Fundamental Lease Provisions, the Standard Lease Provisions
and Exhibits A-l, A-2, B, C, D, E, F and G, each of which is incorporated herein
by this reference, as of the date set forth above.
"LANDLORD"
FHL GROUP, a California corporation
By:
------------------------------------
Henry J. Harper, Jr., President
35
"TENANT"
VIRCO MFG. CORPORATION, a Delaware
By:
------------------------------------
Robert A. Virtue, President
36
EXHIBIT A-1 TO LEASE
WORK LETTER AGREEMENT
(TENANT IMPROVEMENTS)
This Work Letter Agreement ("Agreement") is hereby attached to and made
a part of the lease dated April 25, 1994 ("Lease") between FHL Group, a
California corporation, as Landlord ("Landlord") and Virco Mfg. Corporation, a
Delaware corporation, as Tenant ("Tenant") for the property located at 2027
Harpers Way, Torrance, CA 90501 (the "Property"). Except as otherwise defined
herein, capitalized terms are as defined in the Lease.
1. Description of Tenant Improvements.
Landlord shall engage Neil Stanton & Palmer as architect ("Architect")
and Millie Severson or another licensed general contractor, as general
contractor (the "Contractor"), to design and construct those tenant improvements
within the Building described on attached Schedule 1 (the "Building General
Work"). "Tenant Improvements" for the purposes of the Lease and this Agreement
shall mean collectively the Building General Work and any additional
improvements required by Tenant for the operation of its business on the
Property (the "Tenant-Specific Improvements").
2. Approval Procedure and Permitting.
2.1 As soon as reasonably practicable after execution of the Lease,
Architect shall deliver to Tenant for Tenant's review and approval five (5)
sets, plus one (l) reproducible set of preliminary drawings and specifications
for the Building General Work (the "Preliminary Plans"). Tenant shall review and
approve or disapprove the Preliminary Drawings within five (5) days after
receipt, which approval shall not be unreasonably withheld. Tenant's failure to
disapprove the Preliminary Plans within this 5-day period shall be deemed to be
Tenant's approval. If Tenant disapproves the Preliminary Plans, Tenant shall
provide Landlord and Architect with reasonably specific reasons for such
disapproval, and Architect shall revise the Preliminary Plans to address
Tenant's objections. The parties shall repeat the preceding procedure until the
Preliminary Plans have been approved.
2.2 Within thirty (30) days of the approval of the Preliminary Plans,
Architect shall prepare and deliver to Tenant for Tenant's review and approval
five (5) sets, plus one (1) reproducible set, of all of the final working
drawings for the Building General Work ("BGW Drawings"), which shall be
consistent in all material respects with the Preliminary Plans, including such
mutually approved changes as are necessary to comply with applicable
governmental building requirements taking into account the permitted use under
the Lease. Upon the completion of Tenant's review, Architect shall resubmit, if
necessary, revised BGW Drawings. If Tenant and Landlord are unable to agree on
the BGW Drawings, such dispute shall be resolved by the Architect whose
determination shall be final. Following such approval of the BGW Drawings, both
parties shall sign and deliver to each other duplicate copies of the BGW
Drawings. Thereafter changes may be made only in strict accordance with
paragraph 13, below, and the term "Approved Drawings" shall include such
changes.
2.3 Landlord shall proceed with the Approved Plans to obtain all
necessary permits and licenses to commence construction of the Building General
Work.
2.4 All costs of the design and permitting of the Building General
Work as set forth in paragraph 2.1, 2.2 and 2.3, above, shall be borne by
Landlord.
3. Election to Construct the Building General Work.
3.1 Upon receiving all necessary permits to commence construction of
the Building General Work based on the Approved Plans, Landlord shall obtain
from Contractor a reasonably acceptable guaranteed maximum price for
construction of the Building General Work (the "Guaranteed Maximum Price").
Landlord shall immediately thereafter submit the Guaranteed Maximum Price to
Tenant, whereupon Tenant shall, within five CS) business days thereafter, elect
to either (i) require Landlord to commence and complete construction of the
Building General Work (the "First Option") or (ii) assume Landlord's direct
obligations to the Contractor and itself construct the Building General Work
(the "second Option"). If Tenant fails to respond within the above five (5)
business day period, Tenant shall be deemed to have elected the First Option.
3.2 Should Tenant elect the Second Option, construction of the
Building General Work shall not commence before the Early Possession Date, and,
whether or not Tenant elects the Second Option, construction of any
Tenant-Specific Improvements shall not commence before the Early Possession
Date. Landlord shall have no responsibility for construction of the Tenant
Improvements or any portions thereof undertaken by Tenant pursuant to this Lease
and this Agreement, and Tenant shall remedy, at Tenant's expense, and will be
responsible for any and all defects in all such construction that may appear
during or after the completion thereof. Tenant shall reimburse Landlord, as
additional rent, for any extra expense incurred by Landlord by reason of faulty
work done by Tenant or by Tenant's contractors or by reason of inadequate
clean-up.
3.3 Whether or not Tenant elects the First Option or the Second
Option, in order to ensure consistency with the electrical, plumbing, life
safety and heating ventilation and air conditioning systems within the Building,
Landlord shall have the sole right, if Landlord so elects, to designate the life
safety, plumbing, electrical, heating, ventilation, and air conditioning,
mechanical, and structural subcontractors to construct the Tenant Improvements.
4. Construction Cost For Building General Work.
4.1 It is the intention of the parties that Landlord shall pay for
the construction cost of the Building General Work (the "Construction Cost")
only and that Tenant shall pay for all costs arising from construction of the
Tenant-Specific Improvements and any other construction on the Property.
4.2 If Tenant should elect the Second Option, Landlord shall pay for
the Construction Cost up to the Guaranteed Maximum Price (the "Construction
Allowance") through the procedures set forth in section 5, below. Otherwise, if
Tenant elects the First Option, Landlord shall pay for the Construction Cost
directly as invoices, mechanics' lien releases are presented to Landlord or
Landlord's authorized agent. Landlord makes no representations or warranties
that the Construction Allowance will be sufficient to complete construction of
the Building General Work in accordance with the Preliminary Plans or the
Approved Plans. Tenant shall pay for (i) all costs to construct the Building
General Work to the extent the Construction Cost exceeds the Construction
Allowance, and (ii) subject to paragraph 4.3 below, all costs to
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construct certain Tenant-Specific Improvements. Subject to paragraph 4.3 below,
to the extent of any Excess Funds (as defined below), that amount shall be
retained by Landlord, and Tenant shall receive no payment, rent reduction, or
credit for any unused portion of the Construction Allowance.
4.3 If Tenant elects the Second Option and, during the course of
construction achieves costs savings such that the final Construction Cost is
less than the Guaranteed Maximum Price ("Excess Funds"), Tenant shall be
entitled to utilize such Excess Funds toward the payment of the actual costs of
labor and materials for any Tenant Specific Improvements, provided (i) Tenant
has submitted for Landlord's approval (which approval shall not be unreasonably
withheld) all working drawings and specifications for such Tenant-Specific
Improvements to which the Excess Funds are intended to apply, (ii) the
Tenant-Specific Improvements, in Landlord's reasonable opinion, enhance the
value of the Property, and (iii) the Excess Funds shall be disbursed in
accordance with Section 5, below.
4.4 Notwithstanding the foregoing, Tenant shall be solely
responsible, at its cost but with Landlord's reasonable cooperation (without the
requirement that Landlord incur any costs or liability), for obtaining all
required licenses and permits in connection with the permitted use of the
Property, including, without limitation, any certificate of occupancy or
equivalent permit.
5. Disbursement of Construction Allowance.
5.1 Subject to paragraphs 5.2 and 5.3, below, Landlord shall either
directly or through an industry-recognized reputable third party construction
disbursement company (such as Builders Disbursement, Inc.), selected by
Landlord, disburse portions of the Construction Allowance (each, an "Advance")
directly to the Architect, Contractor and any subcontractors, as Landlord may
elect, only after receiving written authorization therefor signed by Tenant and
the Contractor. That written authorization shall be accompanied by construction
and other cost vouchers and invoices, together with (i) a detailed list and
description of all work for which payment is sought, and (iii) such other
supporting documentation as Landlord may reasonably require (ii) conditional
lien releases from the subcontractors in the form required by California Civil
Code section 3262 for the portion of the Tenant Improvements constructed. Each
of the foregoing documents shall be initialed by the Architect, Tenant and the
Contractor. The initials shall indicate approval of all such documents. All
presentations of requests for an Advance and all vouchers and invoices for any
portion of the Construction Cost presented by Tenant to Landlord shall
constitute a representation on the part of .Tenant that the funds referred to
therein have been used solely for paying only the direct costs of construction
of the Building General Work. Tenant shall indemnify, defend and hold Landlord
and Landlord's agents, employees, and contractors harmless from and against all
liability, claims, causes of action, suits, costs and expenses (including
attorneys' fees), judgments, and damages (collectively, "Claims") arising in
connection with the payment of any voucher presented. All checks representing an
Advance shall be made payable jointly to Tenant and the Contractor or the
Subcontractor, as Landlord may elect. In the event a third party disbursement
agent is used, the disbursement agent shall act in Landlord's place (and shall
act only after receiving Landlord's written approval to any requested Advance)
under the disbursement provisions of this Agreement, and Landlord and Tenant
shall each pay one-half (1/2) of the costs and fees of such disbursement agent.
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5.2 Payment of each Advance shall be less a retainage equal to ten
percent (10?) of the requested disbursement (the "Retainage"). The total
Retainage shall not be paid until the conditions set forth in paragraph 5.3,
below, have all been satisfied in full.
5.3 The Retainage withheld in accordance with the provisions of
section 5.2 shall be disbursed only at such time as the Tenant Improvements have
been fully completed, including, without limitation, the issuance of a
certificate of occupancy (or equivalent permit) and the Expiration of the Lien
Period, provided there are no unpaid Claims or other liens filed against the
Property as a result of work undertaken by or through Tenant. "Expiration of the
Lien Period" shall mean (i) thirty-five C35) days after the filing for
recordation by Tenant of the Notice of Completion for the Tenant Improvements
and the complete, unconditional releases by the Contractor and all
subcontractors and materialmen of their respective lien rights against the
Property, or (ii) if no Notice of Completion is filed, then ninety-five (95)
days after "completion" (as that term is defined in California Civil Code
section 3086) of the Tenant Improvements to the satisfaction of Landlord and
Landlord's title insurance company.
6. Inspection of Progress of Construction. Landlord and its agents shall
have the right at all times during construction of the Tenant Improvements to
enter upon the Property during construction. If the construction is not in
substantial compliance with the Approved Plans or with Applicable Laws, Landlord
may direct the Contractor to conform construction, to such standards.
Notwithstanding the foregoing, Landlord is under no obligation to construct or
supervise construction of the Tenant Improvements. Any inspection by Landlord
shall be for the sole purpose of protecting Landlords' interests and is not to
be relied upon in any regard by Tenant. Furthermore, any inspection by Landlord
shall not be a representation that there has been or will be compliance with the
plans and specifications, applicable laws, regulations, or ordinances or that
the construction is free from faulty material or workmanship. Tenant shall make
or cause to be made any and all such other inspections as Tenant may desire for
its own protection and/or as required by Applicable Laws.
7. Indemnification of Landlord. Tenant shall indemnify, defend, and hold
Landlord and Landlord's agents, employees, and contractors harmless from and
against all Claims arising from or in connection with construction of the
Building General Work (should Tenant elect the Second Option) as well as in
connection with the construction of any Tenant-Specific Improvements, including
without limitation any and all personal injuries and all mechanics' and
materialmen's liens arising therefrom. This indemnity shall survive expiration
or earlier termination of this Lease, including, without limitation, termination
pursuant to Section 14.2.1 or Section 14.2.2 of the Lease.
8. Bonds. At Landlord's election, before Contractor commences
construction of any Tenant-Specific Improvements, Tenant shall obtain and
maintain in effect through completion of construction: (i) a Performance Bond
(also sometimes known as a completion bond) covering performance of the
contractor's obligations under its contract with Tenant, and/or (ii) a Labor and
Material Bond (also sometimes called a payment bond, or a lien-free completion
bond) covering payment of all claims of suppliers of labor and material in
connection with construction of the Tenant-Specific Improvements. The
Performance Bond shall specifically name Landlord as a primary obligee, and the
Labor and Material Bond shall cover as obligee all claimants who would be
entitled to file mechanic's liens under applicable California law. The form and
provisions of such bonds shall be subject to Landlord's prior approval.
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9. Notices. Tenant shall provide Landlord with at least fifteen (15)
days prior written notice of the commencement of construction which Tenant
undertakes pursuant to this Agreement. Tenant irrevocably appoints Landlord as
agent to file for record any notices of completion, cessation of labor, or other
notice that Landlord deems necessary to file for record to protect any of
Landlord's interests under this Agreement.
10. Insurance. Before commencing the construction and as a condition to
Tenant's right to commence any construction, certificates of insurance shall be
delivered to Landlord evidencing (i) that all insurance required to be procured
and maintained by Tenant pursuant to Section 4 of the Lease is in place, and
(ii) the Contractor, any other general contractors, and all major trade
subcontractors have named Landlord as additional insured on their
course-of-construction insurance.
11. Assignment of Warranties. Upon completion of construction, Tenant
shall assign to Landlord all construction warranties Tenant may have obtained
that may be necessary or beneficial for Landlord to perform its obligations
under Section 7.2 of the Lease.
12. Construction Schedule. Before beginning construction of any Tenant
Improvements which Tenant undertakes pursuant to this Agreement. Tenant shall
furnish Landlord for approval in writing a schedule setting forth projected
completion dates and showing the deadlines for any actions required to be taken
by Tenant during construction. Landlord's and Tenant's representatives shall
meet at least once weekly to review the progress of construction, and Landlord's
representatives shall be given at least 48-hours prior notice of and entitled to
attend any construction progress meetings between Tenant and any general
contractor or any subcontractors.
13. Chance Orders. If Tenant requests any change, addition or alteration
to the Approved Drawings, Tenant shall give Landlord a written estimate of the
increase in the Construction Cost necessary to accomplish the change and the
resulting time delay, if any. If Landlord, in writing, approves the written
estimate, Tenant shall immediately have working drawings prepared. If Landlord
approves such a change and if the change increases the estimated Construction
Cost, then the increase shall be borne by Tenant and shall not be paid through
the Construction Allowance. Under no circumstances shall any delays arising from
or in connection with such change orders extend the Term Commencement Date.
14. Construction of Tenant-Specific Improvements. At any time after the
Early Possession Date, whether Tenant elects the First Option or the Second
Option, Tenant shall be entitled, at Tenant's sole cost, expense and liability,
to construct any Tenant-Specific Improvements concurrently with construction of
the Building General Work, provided, (i) Tenant's contractor and subcontractors
for the Tenant-Specific Improvements shall not interfere in any way with
Contractor's construction of the Building General Work, (ii) construction of the
Building General Work shall be given priority for access, staging, and materials
storage, (iii) Tenant shall not claim (and hereby waives any claim of) any
Landlord Delay resulting from the concurrent construction of any Tenant-Specific
Improvements and the Building General Work, and (iv) construction of the
Tenant-Specific Improvements shall be subject to the terms and conditions of
Section 7.3 of the Lease.
15. Term Commencement Date. Under no circumstances shall any delay
(other than a Landlord Delay) in completion of construction of the Tenant
Improvements or the obtaining of
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a certificate of occupancy or equivalent certificate delay or extend the Term
Commencement Date.
16. Property of Landlord. Subject to Section 7.7 of the Lease, all
Tenant Improvements shall become and remain the property of Landlord.
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SCHEDULE 1 TO WORK LETTER AGREEMENT
BUILDING GENERAL WORK
The following is the "Building General Work" to be performed by Tenant
and the direct construction costs of which shall be reimbursed to Tenant as set
forth in this Exhibit A-l:
1. Addition of nine (9) additional 48 inch dock high doors on the
southeast end of the building including a 50 foot concrete apron; relocation of
the fences to isolate the newly expanded loading area from the car parking area,
and the addition of a sliding gate; widening of the existing curb cut onto
Harpers Way to accommodate increased truck traffic; install guard shack by the
curb cut onto Harpers Way with electric and telephonic service to the facility:
2. Addition of an approximately twelve (12) foot wide by fourteen (14)
foot high ground level truck door on the east wall of the facility, the exact
location of which shall be subject to mutual approval and structural engineering
and cost feasibility;
3. If required, by law or code, installation of lights and/or sprinklers
above the existing loading door awnings;
4. The cutting of two (2) openings in the non-structural walls of the
existing mezzanine/woodshop area in the center of the western section of the
facility to accommodate the Tenant's product flow;
5. All parking lot asphalt shall be repaired as is reasonably necessary
and as of the Early Possession Date; and
6. Certain retrofitting of restrooms and other interior improvements to
provide reasonable access to disabled persons.
EXHIBIT A-2 TO LEASE
WORK LETTER AGREEMENT
(ROOF)
This Work Letter Agreement ("Agreement") is hereby attached to and made
a part of the lease dated April 25, 1994 ("Lease") between FHL Group, a
California corporation, as Landlord ("Landlord") and Virco Mfg. Corporation, a
Delaware corporation, as Tenant ("Tenant") for the property located at 2707
Harpers Way, Torrance, CA 90501 (the "Property"). Except as otherwise defined
herein, capitalized terms are as defined in the Lease.
1. Description of the Roof Construction.
Landlord, at Landlord's sole cost and expense, shall employ a qualified
roofer (the "Roofer"), to (i) design and construct the new roof membrane and
drainage system for the westerly portion ("phase 1") of the Building and (ii)
patch and water-tight the roof membrane on the eastern ("phase 2") portion of
the Building (collectively the "Roof Work").
2. Construction of the Roof Work.
Landlord may commence construction of the Roofing Work at any time on or
after execution of this Lease and shall complete the Roofing Work prior to the
Term Commencement Date. Tenant shall not claim (and hereby waives any claim of)
Landlord Delay resulting from any concurrent construction of Tenant Improvements
and of the Roofing Work. Notwithstanding section 7.2 of the Lease, Tenant shall
be solely responsible for any penetrations or other modifications required to
any portion of the roof membrane of the Building as may be directed or permitted
by Tenant from time to time during the Term, whether before, during, or after
construction of the Roof Work.
SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
("Agreement") is entered into as of _________________, 19__, between VIRCO MFG
CORPORATION, a Delaware corporation ("Tenant"), FHL GROUP, a California general
corporation ("Borrower"), 1219 Morningside Drive, Suite 213, Manhattan Beach,
California 90266 and _____________________________________ ("Lender"),
________________________________________________________________.
RECITALS:
A. Tenant is the lessee or successor to the lessee and Borrower is the
lessor or successor to the lessor of a certain lease dated ____________________,
1994 (the "Lease").
B. Lender has made, or will make, to Borrower a mortgage loan to be
secured by a Mortgage, Deed to Secure a Debt, or Deed of Trust and Security
Agreement from Borrower to Lender (the "Mortgage") on the fee title and/or
leasehold interest in the real estate, wherein the premises covered by the Lease
are located, as described in Exhibit A attached hereto.
C. Borrower and Lender have executed, or will execute, an Absolute
Assignment of Leases and Rents (the "Assignment") pursuant to which the Lease is
assigned to Lender.
D. Lender has required the execution of this Agreement by Borrower and
Tenant as a condition to Lender making the requested mortgage loan or consenting
to the Lease.
E. Tenant acknowledges as its consideration for entering into this
Agreement that Tenant will benefit by entering into an agreement with Lender
concerning their relationship in the event of foreclosure of the Mortgage by
Lender.
AGREEMENT:
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce Lender to
make the requested mortgage loan or consent to the Lease, Tenant, Borrower, and
Lender hereby agree and covenant as follows:
1. Assignment of Rents.
Borrower hereby acknowledges, confirms, and agrees that the Lease has
been, or will be, assigned to Lender pursuant to the Assignment, and Lender
acknowledges that the Assignment contains a license back to Borrower permitting
Borrower to collect all rents, income, and other sums payable under the Lease.
2. Revocation of License-Back.
Upon revocation, pursuant to the Assignment, of the license back,
Borrower acknowledges that all rents, income, and other sums payable under the
Lease shall be paid to Lender.
3. Covenants for Benefit of Lender.
Tenant and Borrower agree for the benefit of Lender that:
(a) Tenant shall not pay and Borrower shall not accept, any rent or
additional rent more than one month advance; and
(b) Tenant and Borrower will not enter into any agreement for the
cancellation, surrender, amendment, or modification of the Lease without
Lender's prior written consent. Tenant will not terminate the Lease because of a
default thereunder by Borrower unless Tenant shall have first given Lender
notice and a reasonable opportunity to cure such default.
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EXHIBIT E
4. Subordination.
Tenant and Lender hereby agree that the Lease is and shall at all times
be subject and subordinate in all respects to the Mortgage and to all renewals,
modifications, and extensions thereof, subject to the terms and conditions
hereinafter set forth in this Agreement.
5. Non-Merger.
Borrower, Tenant, and Lender agree that unless Lender shall otherwise
consent in writing, the fee title to, or any leasehold interest in, the real
estate and the leasehold estate created by the Lease shall not merge but shall
remain separate and distinct, notwithstanding the union of said estates either
in the Borrower or the Tenant or any third party by purchase, assignment, or
otherwise.
6. Non-Disturbance and Attornment.
If the interests of Borrower in the real estate are acquired by
Lender by foreclosure, deed in lieu of foreclosure, or any other method:
(a) If Tenant shall not then be in default in the payment of rent or
other sums due under the Lease or be otherwise in material default under the
Lease, Lender agrees that the Lease and the rights of Tenant thereunder shall
continue in full force and effect and shall not be terminated or disturbed
except in accordance with the terms of the Lease or this Agreement;
(b) Tenant agrees to attorn to Lender as its lessor; Tenant shall be
bound under all of the terms, covenant, and conditions of the Lease for the
balance of the term thereof remaining, including any renewal options which are
exercised in accordance with the terms of the Lease;
(c) The interests so acquired shall not merge with any other
interests of Lender in the real estate if such merger would result in the
termination of the Lease; and
(d) If, notwithstanding any other provisions of this Agreement, the
acquisition by Lender of the interest of Borrower in the real estate results, in
whole or in part, in the termination of the Lease, there shall be deemed to have
been created a lease between Lender and Tenant on the same terms and conditions
as the Lease for the remainder of the term of the Lease, with renewal options,
if any.
The provisions of this paragraph shall be effective and self-operative
immediately upon Lender succeeding to the interests of Borrower without the
execution of any other instrument.
7. Liability of Lender as Landlord.
If the interests of Borrower in the real estate are acquired by Lender
by foreclosure, deed in lieu of foreclosure or any other method, Lender shall be
bound to Tenant under all of the terms, covenants, and conditions of the Lease,
and Tenant shall, from and after Lender's acquisition of the interests of
Borrower in the real estate, have the same remedies against Lender for the
breach of the Lease that Tenant would have had under the Lease against Borrower
if Lender had not succeeded to the interests of Borrower, provided, however,
that Lender shall not be:
(a) Liable for any act or omission of any landlord (including
Borrower) prior to the date of Lender's acquisition of the
interests of Borrower in the real estate; or
(b) Subject to any offsets or defenses which Tenant might have
against any landlord (including Borrower) prior to the date of
Lender's acquisition of the interests of Borrower in the real
estate; or
(c) Liable for the return of any security deposit under the Lease
unless such security deposit shall have been actually deposited
with Lender; or
(d) Liable to Tenant, whether before or after Lender acquires
Borrower's interest in the real estate, (i) under any
indemnification provisions set forth in the
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EXHIBIT E
Lease (including, without limitation, any environmental
indemnification) or (ii) for any damages Tenant may suffer as a
result of any representation set forth in the Lease, the breach
of any warranty set forth in the Lease, or any act of, or failure
to act by any party other than Lender and its agents, officers,
and employees.
8. Miscellaneous.
This Agreement may not be modified orally or in any other manner except
by an agreement in writing signed by the parties hereto or their respective
successors-in-interest. This Agreement shall inure to the benefit of and be
binding upon the parties hereto, their respective heirs, successors, and
assigns. Upon recorded satisfaction of the Mortgage this Agreement shall become
null and void and be of no further effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
TENANT: VIRCO MFG. CORPORATION, a
Delaware corporation
By:________________________________
Its:_________________________
BORROWER: FHL GROUP, a California corporation
By:________________________________
Henry J. Harper, Jr.
Its: President
LENDER: ___________________________________
___________________________________
By:________________________________
Its:________________________
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EXHIBIT E
EXHIBIT F
LICENSE AGREEMENT
(ENVIRONMENTAL INVESTIGATION)
THIS LICENSE AGREEMENT is attached to and made a party of that certain
Lease (the "Lease") between FHL GROUP, ("Licensor"), and VIRCO MFG. CORPORATION,
a Delaware corporation ("Licensee").
ARTICLE 1
RECITALS
Section 1.1 Property and Parties. Licensor is the owner of certain real
property and improvements thereon commonly known as 2027 Harpers Way, Torrance,
California (collectively, the "Property") and more particularly described as
Parcel 1 in the City of Torrance, County of Los Angeles, State of California, as
shown on Parcel Map 8389 file in Book 88, Pages 1 to 4, inclusive, of Parcel
Maps in the Office of the Country Recorder of Los Angeles County.
Section 1.2 Purpose. The limited purpose of this license is to provide
Licensee with access to the Property for purposes of undertaking environmental
studies and inspections by licensed California contractors (collectively, the
"Site Investigations") to determine whether Tenant is entitled to exercise its
rights of termination pursuant to Section 14.21 of the Lease.
ARTICLE 2
TERMS AND CONDITIONS
Section 2.1 Permission to Enter Property. Licensor hereby grants to
Licensee for the term provided in Section 2.9, a non-exclusive license to enter
upon the Property for the purposes set forth above and for no other purpose,
subject to Licensee's strict compliance with all the terms of this License
Agreement. Licensee's use of the Property permitted hereunder shall not
interfere with the use thereof by Licensor or any lessees, occupants or person
claiming through or under Licensor. Licensee shall not permit any other party,
except Licensee's duly authorized representatives, agents, and independent
contractors (collectively, "Representatives"), to enter or use the Property
during the term of this License Agreement without Licensor's prior written
consent.
Section 2.2 Compliance with Government Regulations, Plans and Other
Obligations of Licensee. As a condition precedent to this license granted by
Licensor to Licensee, Licensee shall obtain at its sole cost and expense all
governmental permits and authorizations of whatever nature required by any and
all applicable governmental agencies for the Site Investigations, including, but
not limited to, all permits from the City of Torrance. Licensee will furnish
Licensor evidence of such permission prior to its entry on the Property. While
on the Property, Licensee will comply and will cause all of its Representatives
on the Property to comply with all applicable governmental laws and regulations
and the terms and conditions of the License Agreement. All persons who enter
upon the Property pursuant to this License Agreement do so at their own risk,
and shall comply with any and all instructions and directions of Licensor.
Licensee shall cause such persons to observe strict safety precautions, as may
be required from time to time by Licensor.
Section 2.3 Maintenance and Condition of Property. During the term of
this License Agreement, Licensee and its Representatives will be responsible for
any damage done to the Property by Licensee or its Representatives. Upon
completion of any work authorized hereunder or upon termination or expiration of
this License Agreement or upon departing from the Property, Licensee will pay
the costs of removing any installations, filling all drill holes, borings or
other exposed openings, repairing any damaged asphalt and cement, replacing any
damaged landscaping, repairing or replacing any damaged underground pipes or
other improvements, and otherwise repairing and restoring the Property and every
portion thereof to at least as good condition as existed prior to Licensee's
entry onto the Property.
Section 2.4 No Construction or Signs without Permission. Except for
those activities generally undertaken by licensed California environmental
contractors (and subject to compliance with this License Agreement) in
connection with a "Phase 2" environmental audit,
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EXHIBIT F
no structure, signs or other improvement of any kind shall be constructed and no
moving of earth shall be undertaken on the Property by the Licensee or its
Representatives as part of the Site Investigations without the express prior
permission of Licensor in each case, which approval may be withheld in Licensor
sole discretion.
Section 2.5 Liens. Licensee shall not suffer or permit to be enforced
against the Property, or any part thereof, any mechanics', material man's,
contractors' or subcontractors' liens, or any claim for damage arising from the
work of any construction, excavation, survey, tests, drilling, repair,
restoration, or replacement by Licensee or its Representatives (collectively,
"Liens"), but Licensee shall pay or cause to be paid all such obligations or
purported obligations before any action is brought to enforce the Liens against
the Property. Licensee expressly agrees to indemnify, defend and hold Licensors,
its officers, directors, shareholders, agents, employees and the Property
harmless from and against all claims, demands, causes of action, liabilities,
costs and expenses (including attorneys fees) airing from or connected with any
and all Liens. Licensee shall cooperate fully with Licensor's title insurance
company to permit the title company to insure against any Liens against the
Property. Licensee's duty of cooperation shall include, without limitation, the
execution of indemnification agreements in favor of the title company and the
payment of appropriate title policy endorsements required by Licensor. Licensor
reserves the right at any time and from time to time to post and maintain on the
Property, or any portion thereof or improvement thereon, such notices of
nonresponsibility or otherwise as may be necessary to protect Licensor against
liability for any Liens.
Section 2.6 Licensor Not Liable. As a material part of the consideration
for this License Agreement, Licensee hereby waives and agrees to indemnify,
defend and hold Licensor, its officers, directors, shareholders, agents and
employees entirely harmless from and against any loss, damage, injury, accident,
fire or other casualty, liability, claim, cost or expense (including, but not
limited to, attorneys' fees and court costs) of any kind or character to any
person or property arising from or caused by (i) any use of the Property by
Licensee or its Representatives, (ii) any act or omission of Licensee or any of
its Representatives, (iii) any bodily injury, property damage, accident, fire,
or other casualty on the Property, (iv) any violation or alleged violation by
Licensee or its Representatives of any law, ordinance, or regulation now or
hereafter enacted, (v) any failure of Licensee to maintain the Property in a
safe, decent, and sanitary condition, (vi) any loss or theft whatsoever of any
property or anything placed or stored by Licensee or its Representatives on or
about the Property, and (vii) any enforcement by Licensor of any provision of
this Agreement and any costs of removing Licensee from the Property or restoring
the same as provided herein.
Section 2.7 Licensor Payment of Claims. In addition to and not in
limitation of Licensor's other rights and remedies under this License Agreement,
should Licensee fail within ten (10) days of a written request from Licensor
either (i) to pay and discharge any Lien arising out of Licensee's use of the
Property or to have bonded around such Liens as provided above, or (ii) to
indemnify and defend Licensor, its officers, directors, shareholders, agents and
employees from and against any loss, damage, injury, liability, or claim arising
out of Licensee's use of the Property as provided above, then in any such case
Licensor may, at its option, pay any such claim, loss, demand, injury, liability
or damages in connection with such Lien, post any required bonds, or settle or
discharge any action there for or satisfy any judgment thereon, and all costs,
expenses and other sums incurred by Licensor, its officers, directors,
shareholders, agents and employees in connection therewith (including but not
limited to reasonable attorneys' fees) shall be paid to Licensor by Licensee
upon written demand, together with interest thereon at the maximum contract rate
permitted by law from the date incurred or paid until repaid, and any default
either in such initial failure to pay or subsequent repayment to Licensor shall
at Licensor's option constitute a material breach under this License Agreement.
Section 2.8 Insurance. Before and at all times after entering upon the
Property, Tenant shall at its sole expense maintain a policy or policies of
comprehensive general liability insurance with respect to the Property and the
operation of or on behalf of Tenant on or about the Property, in full compliance
with Section 4 of the Lease, and provide Landlord with satisfactory written
evidence thereof.
Section 2.9 Term and Remedies. The right or entry granted by this
License Agreement and this License Agreement shall automatically terminate on
July 29, 1994. In addition, if Licensee is in breach of any of its obligations
under this License Agreement and should Licensee fail to cure such breach within
two (2) business days of written notice from Licensor specifying
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EXHIBIT F
the nature of such breach, Licensor shall have the right to terminate this
License agreement by written notice to Licensee. Licensee acknowledges that this
License Agreement is solely a license, that all rights conveyed hereunder are
personal property only and convey no interest in real property, and that
Licensee has no rights as a tenant of the Property by virtue hereof. In the
event of termination hereof due to a breach or threatened breach by Licensee of
any provision hereunder, Licensor may re-enter and take exclusive possession of
the Property and remove all persons or things therefrom, without legal process
to the maximum extent permitted by law, or by such legal process as Licensor may
deem appropriate. Licensor may also seek any other remedy available at law or in
equity, including but not limited to a suit for damages for any compensable
breach or non-compliance herewith or an action for specific performance or
injunction. All remedies provided herein or by law or equity shall be cumulative
and not exclusive. No termination or expiration of this License Agreement shall
relieve Licensee of its obligations to perform those acts required to be
performed hereunder either prior to or after its termination.
Section 2.10 Inspection. Licensor and any authorized representative,
employee, agent or independent contractor, shall be entitled to enter and
inspect the Property or any portion thereof or improvements or work of Licensee
thereon at any time and from time to time. However, any such inspection shall be
for the sole purpose of protecting Licensor's interests and is not to be relied
upon in any regard by Licensee.
Section 2.11 Non-Assignability. This License Agreement cannot be
assigned, whether voluntarily or by operation of law, and Licensee shall not
permit the use of the Property, or any part thereof, except in strict compliance
with the provisions hereof, and any attempt to do so shall be null and void.
Section 2.12 Costs of Enforcement. If it becomes necessary for Licensor
to employ as attorney or other person or commence action to enforce any of the
provisions of this License Agreement or to remove Licensee from the Property,
Licensee agrees to pay all costs of enforcement in connection therewith,
including but not limited to, court costs and attorneys' fees.
Section 2.13 Notices. All notices and other communications required or
permitted in this License Agreement shall be given in conformation with Section
13.11 of the Lease.
Section 2.14 Miscellaneous. The terms and conditions of the Lease, to
the extent not inconsistent herewith, are incorporated herein by reference.
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EXHIBIT F
EXHIBIT G
ENVIRONMENTAL DOCUMENTS DELIVERED BY
LANDLORD TO TENANT
1. ENSR Phase I Investigation dated October 1991 Document #4049-001.
2. ENSR Phase II Investigation dated October 1991 Document
#4049-002-300.1.
3. RMT Phase III Site Assessment dated June 1992.
4. ENSR Assessment Workplan dated December 1992 Document
#4049-004-100.
5. ENSR Addendum to Workplan Sections 3.2, 3.3 & r.1 of December
1992. June 1993 Document #4049-004-101.
6. ENSR Site Assessment Report dated November 1993 Document
#5415-012.5000.
7. Refinery Subsurface Clean-up Progress Report, Second Semester
1993. Prepared by Mobil Oil Corporation January 15, 1994.
EXHIBIT B TO LEASE
CONDITIONS AND COVENANTS FOR EARLY ENTRY
These conditions and covenants for early entry onto the Property by
Tenant are attached to and made a part of the Lease of even date ("Lease")
between FHL Group, a California corporation ("Landlord") and Virco Mfg.
Corporation, a Delaware corporation ("Tenant") as follows (defined terms are as
defined in the Lease):
ARTICLE 1
RECITALS
Section 1.1 Property and Parties. Although Landlord and Tenant have
executed the Lease, which is in full force and effect, the Term does not
commence until February 1, 1994.
Section 1.2 Purpose. Tenant desires to enter onto the property for the
Permitted Purchases (as defined in Section 1.2 of the Lease).
Section 1.3 Transition. Landlord desires to accommodate Tenant to
facilitate the orderly leasehold transition of the Property to Tenant.
Therefore, based on the foregoing and for other valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties agree as
follows:
ARTICLE 2
TERMS AND CONDITIONS
Section 2.1 Permission to Enter Property. Landlord hereby grants to
Tenant for the term provided in Section 2.9, a non-exclusive license to enter
upon the Property from and after the Early Possession Date for Permitted
Purposes and for no other purpose, subject to Tenant's strict compliance with
all the terms of this Exhibit B. Tenant's use of the Property permitted
hereunder shall not interfere with the use thereof by Landlord or any lessees,
occupants or person claiming through or under Landlord. Tenant shall not permit
any other party, except Tenant's duly authorized representatives, agents, and
independent contractors (collectively, "Representatives"), to enter or use the
Property without Landlord's prior written consent.
Section 2.2. Compliance with Government Regulations, Plans and Other
Obligations of Tenant. As a condition precedent to this license granted by
Landlord to Tenant, Tenant shall obtain at its sole cost and expense all
governmental permits and authorizations of whatever nature required by any and
all applicable governmental agencies for the Permitted Purposes, including, but
not limited to, all permits from the City of Torrance. Tenant will furnish
Landlord evidence of such permission prior to its entry on the Property. While
on the Property, Tenant will comply and will cause all of its Representatives on
the Property to comply with all Applicable Laws and all terms and conditions of
the Lease (other than payment of rent), whether or not expressly set forth
below. All persons who enter upon the Property pursuant to this License
Agreement do so at their own risk, and shall comply with any and all
instructions and directions of Landlord. Tenant shall cause such persons to
observe strict safety precautions, as may be required from time to time by
Landlord.
Section 2.3 Maintenance and Condition of Property. Tenant and its
Representatives will be responsible for any damage done to the Property by
Tenant or its Representatives. Upon completion of any work authorized hereunder
or upon termination or expiration of this License Agreement or upon departing
from the Property, Tenant will pay the costs of removing any installations,
filling all drill holes, borings or other exposed openings, repairing any
damaged asphalt and cement, replacing any damaged landscaping, repairing or
replacing any damaged underground pipes or other improvements, and otherwise
repairing and restoring the Property and every portion thereof to at least as
good condition as existed prior to Tenant's entry onto the Property.
Section 2.4 No Construction or Signs without Permission. Except for
those activities generally undertaken by licensed California environmental
contractors (and subject to compliance with this Exhibit B) in connection with a
"Phase 2" environmental audit, no
1
structure, signs or other improvement of any kind shall be constructed and no
moving of earth shall be undertaken on the Property by Tenant or its
Representatives as part of the Site Investigations without the express prior
permission of Landlord in each case, which approval may be withheld in
Landlord's sole discretion.
Section 2.5 Liens. Tenant shall not suffer or permit to be enforced
against the Property, or any part thereof, any mechanics', material men's,
contractors' or subcontractors' liens, or any claim for damage arising from the
work of any construction, excavation, survey, tests, drilling, repair,
restoration, or replacement by Tenant or its Representatives (collectively,
"Liens"), but Tenant shall pay or cause to be paid all such obligations or
purported obligations before any action is brought to enforce the Liens against
the Property. Tenant expressly agrees to indemnify, defend and hold Landlord,
its officers, directors, shareholders, agents and employees and the Property
harmless from and against all claims, demands, causes of action, liabilities,
costs and expenses (including attorneys fees) arising from or connected with any
and all Liens. Tenant shall cooperate fully with Landlord's title insurance
company to permit the title company to insure against any Liens against the
Property. Tenant's duty of cooperation shall include, without limitation, the
execution of indemnification agreements in favor of the title company and the
payment of appropriate title policy endorsements required by Landlord. Landlord
reserves the right at any time and from time to time to post and maintain on the
Property, or any portion thereof or improvement thereon, such notices of
nonresponsibility or otherwise as may be necessary to protect Landlord against
liability for any Liens.
Section 2.6 Landlord Not Liable. As a material part of the consideration
for this License Agreement, Tenant hereby waives and agrees to indemnify, defend
and hold Landlord, its officers, directors, shareholders, agents and employees
entirely harmless from and against any loss, damage, injury, accident, fire or
other casualty, liability, claim, cost or expense (including, but not limited
to, attorneys' fees and court costs) of any kind or character to any person or
property arising from or caused by (i) any use of the Property by Tenant or its
Representatives, (ii) any act or omission of Tenant or any of its
Representatives, (iii) any bodily injury, property damage, accident, fire, or
other casualty on the Property, (iv) any violation or alleged violation by
Tenant or its Representatives of any law, ordinance, or regulation now or
hereafter enacted, (v) any failure of Tenant to maintain the Property in a safe,
decent, and sanitary condition, (vi) any loss or theft whatsoever of any
property or anything placed or stored by Tenant or its Representatives on or
about the Property, and (vii) any enforcement by Landlord of any provision of
this Agreement and any costs of removing Tenant from the Property or restoring
the same as provided herein.
Section 2.7 Landlord Payment of Claims.
In addition to and not in limitation of Landlord's other rights and
remedies under this License Agreement, should Tenant fail within ten (10) days
of a written request from Landlord either (i) to pay and discharge any Lien
arising out of Tenant's use of the Property or to have bonded around such Liens
as provided above, or (ii) to indemnify and defend Landlord, its officers,
directors, shareholders, agents and employees from and against any loss, damage,
injury, liability, or claim arising out of Tenant's use of the Property as
provided above, then in any such case Landlord may, at its option, pay any such
claim, loss, demand, injury, liability or damages in connection with such Lien,
post any required bonds, or settle or discharge any action there for or satisfy
any judgment thereon, and all costs, expenses and other sums incurred by
Landlord, its officers, directors, shareholders, agent and employees in
connection therewith (including but not limited to reasonable attorney's fees)
shall be paid to Landlord by Tenant upon written demand, together with interest
thereon at the maximum contract rate permitted by law from the date incurred or
paid until repaid, and any default either in such initial failure to pay or
subsequent repayment to landlord shall at Landlord's option constitute a
material breach under the License Agreement.
Section 2.8 Insurance.
Before and at all times after entering upon the Property Tenant shall at
its sole expense maintain a policy or policies of comprehensive general
liability insurance with respect to the Property and the operation of or on
behalf of Tenant on or about the Property, in full compliance with Section 4 of
the Lease, and provide Landlord with satisfactory written evidence thereof.
2
Section 2.9. Remedies. If Tenant is in breach of any of its obligations
under this Exhibit B and should Tenant fail to cure such breach within five (5)
business days of a written notice from Landlord specifying the nature of such
breach, Landlord shall have the remedies set forth in Section 12.2 of the Lease.
Landlord may also seek any other remedy available at law or in equity, including
but not limited to a suit for damages for any compensable breach or
non-compliance herewith or an action for specific performance or injunction. All
remedies provided herein or by law or equity shall be cumulative and not
exclusive. No termination or expiration of this Exhibit B shall relieve Tenant
of its obligations to perform those acts required to be performed hereunder or
under the Lease either prior to or after its termination.
Section 2.10 Inspection. Landlord and any authorized representative,
employee, agent or independent contractor, shall be entitled to enter and
inspect the Property or any portion thereof or improvements or work of Tenant
thereon at any time and from time to time. However, any such inspection shall be
for the sole purpose of protecting Landlord's interests and is not to be relied
upon in regard by Tenant.
Section 2.11 Costs of Enforcement. If it becomes necessary for Landlord
to employ an attorney or other person or commence an action to enforce any of
the provisions of this License Agreement or to remove Tenant from the Property,
Tenant agrees to pay all costs of enforcement in connection therewith, including
but not limited to, court costs and attorneys' fees.
Section 2.12 Notices. All notices and other communications required or
permitted in this License Agreement shall be given in conformation with Section
13.11 of the Lease.
Section 2.13 Miscellaneous. The terms and conditions of the Lease, to
the extent not inconsistent herewith, are incorporated herein by reference.
3
Exhibit C
CONDITION OF BUILDING UPON DELIVERY
On or before the Early Possession Date, the following shall be
substantially completed by or through Landlord, or to the extent any of the
following are the obligations of Harpers of which Harpers is released by
Landlord and, therefore, become Harpers Obligations (as those terms are defined
in Section 14.3 of the Lease), shall be assumed by Tenant:
1. Complete removal of all equipment and venting associated with the
paint room and paint pumping room, including, removal of all spray booths,
exhaust stacks, water curtains, storage and mixing containers, pumps, and paint
lines;
2. Cleaning of the paint room and pumping room such that all excess
paint overspray is removed from all surfaces to Tenant's reasonable
satisfaction;
3. Removal of the de-ionizing rinse section of the wash system and
the repair to the etched floor surrounding it. (Landlord shall be responsible
for the removal of the de-ionizing equipment, and Tenant agrees to provide the
associated plumbing connections to cap off or budge around the removed
equipment);
4. Removal of all booths used to apply paint, oil, stains, or glue
and the cleanup of the areas surrounding them;
5. Cleanup of the blue surf oven in the northern area of Building;
6. Removal of all drums storage;
7. Bolt removal at old machine locations and patching;
8. Delivery of HVAC system in good working order on the delivery
date (without any further representation or warranty regarding continued
operations during the Term);
9. Repair, to the extent mutually agreed upon, the etched floor in
the water treatment area of the Building.
Other item nos. 1 through 9, above, and subject to (i) Landlord's
obligation to provide the Tenant Improvement Allowance (as set forth in attached
Exhibit A-1) and the Roofing Allowance (as set forth in attached Exhibit A-2),
and (ii) Landlord's obligations set forth in Section 7.2 of the Lease, Tenant
has agreed to take the Property on a complete "AS IS" "WHERE IS" and "WITH ALL
FAULTS" basis without any warranties express or implied and subject to all
matters of record and all matters disclosed by Landlord to Tenant or that are
otherwise known to Tenant or Tenant's agents, employees, or contractors.
Further Tenant acknowledges that the following items will remain in
the Building and the following conditions will exist as of the delivery of
Building to Tenant.
a. The finishing systems, including:
i. Overhead parts conveyor and safety pan and chain;
ii. Multi-stage washing system (complete);
iii. Parts Dry-off Oven; and
iv. Baking ovens.
b. Blue surf paint burnoff oven and associated conveyor;
c. Cooling tower on northern section of Building roof;
1
d. Horizontal and vertical distribution of process-related
electrical, air, and water to all areas of the western section of the Building
("Phase I") including the press room, welding areas, assembly areas, and wood
shop. It is intended that Harpers will disconnect their equipment and cap the
supply lines at either the point of connection to the machine or at the overhead
supply. Bolts will be cut off at floor and epoxy-patched if required; and
e. The eastern section ("Phase II") of the Building will be
warehouse-ready with all overhead process distribution piping cleared to the
lowest of the lights, sprinklers, or glu lam beams. The rails and bracing for
the old crane will be removed.
2
Exhibit D
THE "WAREHOUSE CONDITION" UPON SURRENDER
The "Warehouse Condition" shall mean the condition of the eastern
warehouse section of the Building as of the Early Possession Date (with all
overhead process distribution piping cleared to the lowest of the ceiling
lights, ceiling sprinklers or glu lam beams) and item nos. 1 and 2 only of
Schedule 1 to attached Exhibit A-1.