EXHIBIT 10.9
LEASE
LANDLORD: WATSON LAND COMPANY,
a California corporation
TENANT: LEINER HEALTH PRODUCTS INC.
a Delaware corporation
DATED: October 4, 1993
THE SUBMISSION OF THIS DOCUMENT FOR EXAMINATION AND NEGOTIATION DOES NOT
CONSTITUTE AN OFFER TO LEASE, OR A RESERVATION OF, OR OPTION FOR, THE
PREMISES; THIS DOCUMENT BECOMES EFFECTIVE AND BINDING ONLY UPON EXECUTION AND
DELIVERY HEREOF BY LANDLORD. NO ACT OR OMISSION OF ANY EMPLOYEE OR AGENT OF
LANDLORD OR OF LANDLORD'S BROKER SHALL ALTER, CHANGE OR MODIFY ANY OF THE
PROVISIONS HEREOF.
[BUILDING 160]
INDEX
ARTICLE ----- PAGE
------- ----
ARTICLE I - Basic Lease Provisions . . . . . . . . . . . . . . . . . . 1
ARTICLE II - Condition of Premises . . . . . . . . . . . . . . . . . . 2
ARTICLE III - Term of Lease . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE IV - Rent . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE V - Taxes and Assessments . . . . . . . . . . . . . . . . . . 5
ARTICLE VI - Utility Charges . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE VII - Hold Harmless . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE VIII - Insurance . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE IX - Repairs and Maintenance . . . . . . . . . . . . . . . . . 10
ARTICLE X - Inspection of Premises by Landlord . . . . . . . . . . . . 19
ARTICLE XI - Mechanics' Liens . . . . . . . . . . . . . . . . . . . . 20
ARTICLE XII - Damage or Destruction of Premises . . . . . . . . . . . 20
ARTICLE XIII - Condemnation . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE XIV - Use of Premises - Assignments . . . . . . . . . . . . . 22
ARTICLE XV - Event of Default . . . . . . . . . . . . . . . . . . . . 26
ARTICLE XVI - Surrender of Premises . . . . . . . . . . . . . . . . . 28
ARTICLE XVII - Delays - Extensions of Time . . . . . . . . . . . . . . 29
ARTICLE XVIII - Attorneys' Fees. . . . . . . . . . . . . . . . . . . . 29
ARTICLE XIX - Tenant's Estoppel Certificate . . . . . . . . . . . . . 31
ARTICLE XX - Rights Reserved by Landlord . . . . . . . . . . . . . . . 32
ARTICLE XXI - Covenant of Quiet Enjoyment . . . . . . . . . . . . . . 32
ARTICLE XXII - Recordation . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE XXIII - Subordination . . . . . . . . . . . . . . . . . . . . 33
ARTICLE XXIV - Security Deposit . . . . . . . . . . . . . . . . . . . 33
ARTICLE XXV - Holding Over . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE XXVI - General . . . . . . . . . . . . . . . . . . . . . . . . 35
26.1 Remedies Cumulative . . . . . . . . . . . . . . . . 35
26.2 Successors and Assigns . . . . . . . . . . . . . . 35
26.3 Payments and Interest . . . . . . . . . . . . . . . 35
26.4 Late Charge . . . . . . . . . . . . . . . . . . . . 35
26.5 Late Payments . . . . . . . . . . . . . . . . . . . 35
26.6 Notices . . . . . . . . . . . . . . . . . . . . . . 35
26.7 Captions . . . . . . . . . . . . . . . . . . . . . 36
26.8 Pronouns and Singular/Plural . . . . . . . . . . . 36
26.9 Time of Essence . . . . . . . . . . . . . . . . . . 36
26.10 Reasonable Consent . . . . . . . . . . . . . . . 36
26.11 Fair Meaning . . . . . . . . . . . . . . . . . . 36
26.12 Entire Agreement . . . . . . . . . . . . . . . . 36
26.13 No Accord and Satisfaction . . . . . . . . . . . 36
26.14 Choice of Law . . . . . . . . . . . . . . . . . . 37
26.15 Non-Discrimination . . . . . . . . . . . . . . . 37
26.16 Counterparts . . . . . . . . . . . . . . . . . . 37
26.17 Corporate Resolution . . . . . . . . . . . . . . 37
26.18 Reimbursements to Landlord . . . . . . . . . . . 37
26.19 No Guard Service . . . . . . . . . . . . . . . . 38
26.20 Brokers . . . . . . . . . . . . . . . . . . . . . 38
26.21 Brokerage Commission . . . . . . . . . . . . . . 38
26.22 Limitation of Liability . . . . . . . . . . . . . 38
26.23 Parking . . . . . . . . . . . . . . . . . . . . . 39
26.24 Lease Reviewed . . . . . . . . . . . . . . . . . 39
26.25 Financial Statements . . . . . . . . . . . . . . 39
26.26 Lease Interest Rate . . . . . . . . . . . . . . . 39
26.27 Tenant's Self-Insurance . . . . . . . . . . . . . 39
26.28 Landlord Bankruptcy Proceeding . . . . . . . . . 40
26.29 Waiver of Redemption by Tenant; Holding Over . . 40
EXHIBITS
- --------
Exhibit A - Performance Standards of Watson Industrial Center
Exhibit B - Legal Description
Exhibit C - Form of Lease Addendum
Exhibit D - Hazardous Material Certificate
Exhibit E - Form of Estoppel Certificate
Exhibit F - Initial Improvement Work
Exhibit G - Uses Under Existing Zoning
Exhibit H - Form of Confidentiality Agreement
Exhibit I - Insurance Summary
Lease Rider Number 1
SINGLE TENANT INDUSTRIAL LEASE
THIS SINGLE TENANT INDUSTRIAL LEASE ("Lease") is made and entered
into as of this fourth day of October 1993, by and between WATSON LAND
COMPANY, a California corporation ("Landlord") and LEINER HEALTH PRODUCTS
INC., a Delaware corporation ("Tenant").
Landlord and Tenant mutually covenant and agree that Landlord, in
consideration of the rent payable by Tenant and the covenants and agreements
to be kept, observed and performed by Tenant, hereby rents and leases to
Tenant, and Tenant hereby takes and hires from Landlord, the "Premises" (as
defined herein), pursuant to the provisions of this Lease, subject to (i) all
applicable zoning, municipal, county, state and federal laws; (ii) covenants,
conditions, restrictions, reservations, easements, rights and rights-of-way
of record; and (iii) Performance Standards of Watson Industrial Center
attached hereto as Exhibit A and incorporated herein by reference. In the
event of any conflict between the provisions of this Lease and the provisions
of the Performance Standards, the provisions of this Lease shall govern.
ARTICLE I
BASIC LEASE PROVISIONS
1.1 DESCRIPTION OF PREMISES The Premises, as referred to herein,
shall consist of the parcel of land located in the County of Los Angeles,
State of California, as more particularly described in the attached Exhibit B
(the "Land"); the multi-purpose office, warehouse and industrial building
located on the Land (the "Building") together with the appurtenant
improvements located on the Land; and any other improvements or additions made
by either Landlord or Tenant which become a part of the Premises in accordance
with the provisions of this Lease.
1.2 STREET ADDRESS OF PREMISES: 810 East 233rd Street, Carson,
California 90745.
1.3 APPROXIMATE BUILDING SQUARE FOOTAGE: 204,000.
1.4 LEASE TERM: Ten (10) years beginning on April 1, 1994 or such
other date as is determined pursuant to the provisions of this Lease (the
"Commencement Date") and ending on March 31, 2004 (the "Termination Date").
1.5 EXTENSION OPTION: Two (2) periods of five (5) years each.
(See Paragraphs 1 and 2 of the attached Lease Rider.)
1.6 INITIAL MINIMUM RENT: Sixty-Five Thousand Two Hundred Eighty
Dollars ($65,280).
1.7 PERIODIC RENT ADJUSTMENTS: See Paragraph 3 of the attached
Lease Rider.
1.8 ANNUAL TAX BASE AMOUNT: Fifty-One Thousand Two Hundred
Sixty-Two Dollars ($51,262).
1.9 ANNUAL INSURANCE BASE AMOUNT: Eighteen Thousand Two Hundred
Dollars ($18,200).
1.10 INITIAL SECURITY DEPOSIT: Sixty-Five Thousand Two Hundred
Eighty Dollars ($65,280).
1.11 BROKERS: CB Commercial Real Estate Group (Jeffrey S. Morgan
and Goodall W. McCullough, Jr.).
1.12 INITIAL IMPROVEMENT WORK: See Paragraph 4 of the attached
Lease Rider.
1.13 EXHIBITS AND RIDERS: The following Exhibits and Riders are
attached to this Lease and made a part hereof:
Exhibit A - Performance Standards of Watson
Industrial Center
Exhibit B - Legal Description
Exhibit C - Form of Lease Addendum
Exhibit D - Hazardous Material Certificate
Exhibit E - Form of Estoppel Certificate
Exhibit F - Initial Improvement Work
Exhibit G - Uses Under Existing Zoning
Exhibit H - Form of Confidentiality Agreement
Exhibit I - Insurance Summary
Lease Rider Number 1
1.14 MAILING ADDRESSES:
Landlord: Watson Land Company
22010 Wilmington Avenue, Suite 400
Carson, California 90745
Tenant: Leiner Health Products
1845 West 205th Street
P.O. Box 2010
Torrance, California 90510-2010
(after the Leiner Health Products
Commencement Date) 901 East 233rd Street
Carson, California 90745
ARTICLE II
CONDITION OF PREMISES
2.1 Tenant acknowledges that prior to the execution of this
Lease, Tenant has been furnished full access to, and has inspected the
Premises. Landlord shall deliver the Premises to Tenant clean and free of
debris on the Commencement Date. Landlord warrants that the Initial
Improvement Work described in the attached Lease Rider No. 1 shall be
completed and shall be in good operating condition on the Commencement Date of
the Lease Term. If a non-compliance with said warranty exists as of the
Commencement Date, Landlord shall, except as otherwise provided in this Lease,
promptly after receipt of written notice from Tenant setting forth with
specificity the nature and extent of such non-compliance, rectify the same at
Landlord's expense. If Tenant does not give Landlord written notice of any
non-compliance with this warranty within one year after the Commencement Date,
correction of that non-compliance shall be the obligation of Tenant at
Tenant's sole cost and expense. Landlord hereby agrees to execute any
documentation reasonably requested by Tenant in order to evidence the fact
that effective after the first year of the Lease Term, Landlord shall assign
all of its right, title and interest in and to any warranties regarding
workmanship and material with respect to the Initial Improvement Work
including, by way of illustration and not limitation, the warranties regarding
the operation of systems such as air-conditioning or heating. Landlord shall
cooperate with Tenant relative to the enforcement of any such warranties upon
written request by Tenant. Any such warranties which remain in effect upon
the expiration or sooner termination of this Lease shall be re-assigned to
Landlord. Tenant acknowledges that neither Landlord nor any real estate agent
or broker representing Landlord or Tenant has made any representation or
warranty as to
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the present or future suitability of the Premises for the conduct of Tenant's
business. Landlord warrants to Tenant that, to Landlord's actual knowledge,
the improvements on the Premises comply with all applicable laws, codes,
ordinances, rules or regulations affecting the Premises including, without
limitation, laws, codes ordinances, rules or regulations relating to fire or
life safety, or access by disabled persons (collectively "Codes") affecting
the Premises as of the date the Building was initially constructed, and
Landlord has not received any notice or citation for any violation of any
Codes in effect as of the date of this Lease with respect to the Building (or
with respect to any other building in Watson Industrial Center South which is
reasonably similar to the Building and which would lead a reasonable and
prudent Landlord to conclude that the violation identified in such notice or
citation applied to the Building as well as to such other building). Landlord
shall be responsible for bringing the Premises into compliance with "ADA"
requirements as provided in Paragraph 2.2, below. Such warranty does not
apply to any Codes relating to Tenant's proposed use of the Premises, and
Tenant shall be responsible for determining the suitability and conformity of
the Premises with respect to such Codes, and Tenant shall be responsible for
making any necessary modifications to the Premises in order to comply with
such Codes. Landlord hereby represents to Tenant that the Premises is zoned as
set forth in the attached Exhibit G, and such zoning classification permits
the uses listed on the attached Exhibit G. Landlord agrees to cooperate with
and assist Tenant in connection with Tenant's application for approval of its
proposed specific uses of the Premises to the extent such approvals are
required by any governmental entity with jurisdiction over the Premises,
including assisting Tenant in making any appearances determined to be
reasonably necessary by Tenant before any such governmental entity.
Landlord's agreement in the immediately preceding sentence shall include
cooperation in the same regard with respect to the construction of the
proposed overhead bridge conveyor system described in Paragraph 7 of Lease
Rider No. 1.
2.2 Landlord agrees that it shall cause the Premises to be
brought into compliance with the requirements of Title III of the Americans
with Disabilities Act ("ADA") which are applicable to the Premises as of the
Commencement Date of the Lease Term with respect to use of the Premises as a
warehousing and distribution facility. If Tenant uses or permits the Premises
to be used for any use or purpose constituting a "public accommodation"
pursuant to the ADA, Tenant shall be responsible for bringing the Premises and
related access areas and entrances into compliance with any provisions of the
ADA applicable to, or triggered by, such use.
ARTICLE III
TERM OF LEASE
3.1 The term of this Lease (the "Lease Term") shall be the period set
forth in Item 1.4 of the Basic Lease Provisions. Subject to the terms and
conditions of this Lease, the Lease Term shall commence on the Commencement
Date and shall terminate on the Termination Date, which dates are specified in
Item 1.4 of the Basic Lease Provisions. All of the terms and conditions of
this Lease shall apply as of the date this Lease is signed by both Landlord
and Tenant (the "Execution Date"); provided, however, that Tenant shall have
no obligation to pay Minimum Rent until the Commencement Date. Effective upon
the execution of this Lease, Landlord shall cooperate with Tenant in
scheduling inspections of the Building by Tenant and its design consultants
from time to time as may be reasonably necessary for Tenant to perform its
space planning and design work for the Premises. In addition, commencing on
March 1, 1993, and continuing until the Commencement Date (the "Early
Occupancy"), Tenant and its agents, contractors, vendors, and security
contractors shall be permitted
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to enter the Premises for the purposes of plan layout, facilities planning,
security activities, construction and installation of Tenant's furniture,
fixtures, utilities, telecommunication systems, security systems and the
overhead bridge conveyor system described in the attached Lease Rider.
3.2 If Landlord is unable to deliver possession of the Premises
to Tenant by the Commencement Date specified in Item 1.4 of the Basic Lease
Provisions, for any reason (other than a delay which is attributable to any
act or omission of Tenant, in which event the Lease Term shall be deemed to
have commenced on the date specified in Item 1.4 of the Basic Lease
Provisions), the Lease Term shall not commence until possession of the
Premises is delivered to Tenant. For the purposes of this Paragraph 3.2,
delivery of possession of the Premises to Tenant shall be deemed to occur on
the earlier of: (a) the date on which Initial Improvement Work (if any) is
substantially completed (provided, however, that if the Initial Improvement
Work is substantially completed prior to April 1, 1994, such work shall be
deemed to have been substantially completed on April 1, 1994); or (b) the date
on which Tenant uses or occupies all or any portion of the Premises with any
of Tenant's personnel or property for the purpose of conducting business
therein. If Landlord so desires, Landlord and Tenant shall execute a Lease
Addendum in the form attached to this Lease as Exhibit C, confirming the
actual Commencement Date and Termination Date. Landlord shall not be liable
for any damage caused by any delay in delivery of the Premises to Tenant, and
this Lease shall not be void or voidable as a result of any such delay.
Tenant shall not be liable for rent until Landlord delivers possession of the
Premises to Tenant, and the Lease Term shall be extended for a period of time
equal to the period of such delay. If the Lease Term commences on a day other
than the first day of a calendar month, the Lease Term shall end on the last
day of the calendar month in which said Lease Term would otherwise end. If
Landlord does not deliver possession of the Premises to Tenant within ninety
(90) days of the date specified in Item 1.4 of the Basic Lease Provisions (the
"Outside Date"), Tenant may either (i) terminate this Lease by giving written
notice to Landlord at any time after the Outside Date, provided Landlord has
not delivered possession of the Premises to Tenant before Tenant gives such
notice to Landlord; or (ii) allow this Lease to continue, in which event
Landlord shall credit against the Minimum Rent first coming due under this
Lease an amount equal to one day's Minimum Rent for each day after the Outside
Date that the Commencement Date has not occurred.
3.3 If Tenant occupies all or any portion of the Premises with
Tenant's personnel or property for the purposes permitted during the Early
Occupancy prior to the date specified in Item 1.4 of the Basic Lease
Provisions, such occupancy shall be subject to all terms and provisions of
this Lease, and such occupancy shall not advance the Termination Date.
3.4 If, prior to the Commencement Date set forth in Item 1.4 of
the Basic Lease Provisions, the Building is damaged or destroyed by an event
or cause which is not attributable to any act or omission of Tenant or
"Tenant's Agents" (as defined herein), but such damage or destruction does not
result in the termination of this Lease pursuant to the terms of Article XII,
then this Lease shall continue in full force and effect, but for each month
that the Commencement Date is delayed as a result of such damage or
destruction, Tenant shall be entitled to a credit against Minimum Rent
subsequently coming due under this Lease in the amount of Twelve Thousand Five
Hundred Dollars ($12,500), but in no event more than One Hundred Fifty
Thousand Dollars in the aggregate. No more than Twelve Thousand Five Hundred
Dollars ($12,500) shall be applied as a credit during any one month of the
Lease Term.
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ARTICLE IV
RENT
4.1 Tenant agrees to pay to Landlord at the office of Landlord or
at such other place as may be designated by Landlord from time to time,
without any prior demand therefor and without any deduction or setoff
whatsoever, except as may be specifically provided by the provisions of this
Lease, as minimum monthly rent ("Minimum Rent"), the sum specified as the
Initial Minimum Rent in Item 1.6 of the Basic Lease Provisions. Minimum Rent
shall be payable in advance on the first day of each calendar month of the
Lease Term. If the Lease Term shall commence upon a day other than the first
day of a calendar month, then Tenant shall pay, upon the Commencement Date, a
pro rata portion of the Minimum Rent for the first fractional calendar month.
Minimum Rent payable by Tenant under this Lease is subject to adjustment in
accordance with the provisions of Item 1.7 of the Basic Lease Provisions.
Unless specifically designated otherwise in this Lease, all fees, charges,
costs, expenses or other payments to be paid by Tenant to Landlord pursuant to
this Lease shall be deemed to be additional rent.
ARTICLE V
TAXES AND ASSESSMENTS
5.1 Tenant covenants and agrees to pay to Landlord, as additional
rent hereunder, the amount by which all real estate taxes and assessments, and
installments thereof which may be taxed, charged, levied, assessed or imposed
during any fiscal tax year occurring during the Lease Term (and any extensions
or renewals thereof) upon all or any portion of or in relation to the Premises
and the improvements at any time erected thereon and the appurtenances
thereof, exceed the Annual Tax Base Amount specified in Item 1.8 of the Basic
Lease Provisions. In the partial fiscal tax year in which the Lease Term
shall commence, and in the partial fiscal tax year in which the Lease Term
shall terminate, such taxes and assessments and the Annual Tax Base Amount
shall be prorated on a daily basis (using a 365-day year), and Tenant's
payment obligations shall be computed accordingly. If any assessments or
taxes are levied or assessed against the Premises which are payable or may be
paid in monthly or more frequent installments, Tenant shall be required to pay
only such installments as shall become due and payable during the Lease Term;
provided however, if an assessment or tax is imposed upon the Premises because
of the acts or upon the request of Tenant, then Tenant shall pay the total
amount thereof in equal annual installments during the Lease Term, on a date
established by Landlord.
5.2 Tenant shall pay the amount of any taxes and assessments
which it is obligated to pay hereunder directly to Landlord within fourteen
(14) days after receipt of Landlord's invoice therefor, Landlord agrees, in
turn, to promptly pay such taxes and assessments to the appropriate taxing
authority.
5.3 In the event of any "Tax Reassessment" (as defined herein),
Tenant shall have the right, in Tenant's or Landlord's name, but at Tenant's
sole cost and expense, to contest the validity of any tax or assessment or
assessed valuation of the Premises by appropriate proceedings timely
instituted; provided that: (a) Tenant gives Landlord written notice of
Tenant's intention to do so prior to the date on which Tenant is obligated to
pay such taxes pursuant to Paragraph 5.2, above; (b) Tenant makes timely
payment to Landlord of all taxes payable pursuant to this Article V; (c) at
the time of Tenant's payment of such taxes to Landlord, Tenant requests
Landlord, in writing, to pay such taxes under protest; and (d) Tenant
diligently prosecutes any such contest. As used herein, the term "Tax
Reassessment" means any change in the assessed full cash value of the
Premises as a
5
result of a sale transfer or conveyance of all or any portion of the
Premises, or a "change in ownership" (as the phrase is defined in Section 60
of the California Revenue and Taxation Code) of all or any portion of the
Premises. Landlord shall, if requested by Tenant, cooperate with Tenant in
any such proceedings, provided, however, that Landlord shall not be liable
for any expenses whatsoever in connection therewith, and Tenant shall
protect, indemnify, and reimburse Landlord for all claims loss, cost,
liability, expense, attorneys' fees or damages resulting therefrom. If
Tenant prevails in such tax contest, Landlord shall, within thirty (30) days
following Landlord's receipt of the refund of any overpaid taxes, pay to
Tenant any such overpaid taxes which were paid by Tenant during the Lease
Term.
5.4 As used herein, the term "real estate taxes" shall include
any form of real estate tax or assessment, general, special, ordinary or
extraordinary, and any license fee, commercial rental tax, rental excise tax,
improvement bond or bonds, levy or tax (other than income taxes) imposed on
the Premises by any authority having the direct or indirect power to tax,
including any city, state or the federal government, or any school,
agricultural, sanitary, fire, street, drainage, water or other improvement
district thereof, as against any legal or equitable interest of Landlord in
the Premises or in the real property of which the Premises are a part, as
against Landlord's right to rent or other income therefrom, and as against
Landlord's business of leasing the Premises. With respect to any assessment
for capital improvements benefitting the Premises which is included within
the definition of real estate taxes and which is imposed over a period which
is substantially less than the estimated useful life of such capital
improvements, such assessment shall be amortized over the useful life of the
improvement in question, at a commercially reasonable rate of interest, and,
notwithstanding any governmental requirement concerning payment, Tenant
shall only be obligated to pay installment payments of such assessment based
upon the semi-annual amortization payments which would be required during the
Lease Term had the cost of such improvements been amortized over the
estimated useful life such improvements in equal semi-annual installments and
at a commercially reasonable rate of interest. Where any such capital
improvement is funded by a bonded indebtedness, the term of the bond maturity
shall be deemed to be the useful life of the capital improvement. The term
"real estate taxes" shall also include any tax, fee, levy, assessment or
charge (i) in substitution of, partially or totally, any tax, fee, levy,
assessment or charge hereinabove included within the definition of "real
property tax"; or (ii) the nature of which was hereinbefore included within
the definition of "real property tax"; or (iii) which is imposed for a
service or right not charged prior to June 1, 1978, or, if previously
charged, has been increased since June 1, 1978; or (iv) which is imposed by
reasons of this transaction, any modifications or changes hereto, or any
transfers hereof. Notwithstanding anything to the contrary set forth in the
Lease, real estate taxes shall not include: (a) any excess profits taxes,
franchise taxes, gift taxes, capital stock taxes, inheritance and succession
taxes, estate taxes, federal and state income taxes, and other taxes to the
extent applicable to Landlord's general or net income (as opposed to rents or
receipts), (b) penalties incurred as a result of Landlord's negligence,
inability or unwillingness to make payments of, and/or to file any tax or
information returns with respect to, any real estate taxes, when due, or (c)
any other taxes or assessments charged or levied against Landlord which are
not directly incurred as a result of the operation of the Premises.
5.5 In the event of a sale by Landlord of its fee simple
interest in the Premises to a third party, Tenant shall have no obligation to
pay any increase in real estate taxes which result from such sale. However,
nothing contained in this Paragraph 5.5 shall limit Tenant's obligation to
pay any other
6
increases in real estate taxes, including, without limitation, inflation
factor adjustments as provided in Section 51 of the California Revenue and
Taxation Code and changes in the manner or method of computing or imposing
taxes pursuant to applicable law. No transfer of stock of Landlord, and no
transfer of the property to a lender pursuant to foreclosure or acceptance of
a deed in lieu of foreclosure (or to any purchaser of the Premises or the
Building Complex from such a lender) shall constitute a "sale by Landlord of
its fee simple interest in the Premises to a third party" for the purposes of
this Paragraph 5.5.
ARTICLE VI
UTILITY CHARGES
6.1 Tenant shall contract for, in Tenant's name, and shall pay
or cause to be paid, all charges for gas, electricity, light, heat,
air-conditioning, power, telephone, sewer, trash collection and waste removal
and/or disposal, security or guard service, alarm systems, or other service,
and any taxes, levies or excises thereon, used, rendered or supplied to
Tenant in connection with the Premises; and for all connection and closing
charges, and any tax or excise thereon; and for any governmental service or
service subject to governmental regulation, however described, furnished to
the Premises during the Lease Term and during any other period in which
Tenant uses or occupies the Premises. Landlord and Tenant (or Landlord only,
in Landlord's name, if Landlord so elects) shall contract for water service
for the Premises, but Tenant shall be solely responsible for any fees,
charges or costs of any nature imposed or incurred in connection with such
water service. Landlord may elect to have bills for such water service
delivered directly to Tenant, or Landlord may have such bills delivered to
Landlord and separately invoice Tenant for the actual cost of such water
service. Tenant shall pay any such bill or invoice within ten (10) days
following Tenant's receipt thereof. Landlord shall not be liable to Tenant
for any loss, injury, damage, disruption of business or any other harm
resulting from any interruption of utility services to the Premises, unless
such interruption results solely from the gross negligence or willful
misconduct of Landlord. In the event of any interruption or disruption in
utility services to the Premises, Landlord agrees to reasonably cooperate
with Tenant to minimize the length and impact of any such interruption or
disruption.
ARTICLE VII
HOLD HARMLESS
7.1 Tenant covenants and agrees that Landlord shall not at any
time or to any extent whatsoever be liable, responsible, or in any way be
accountable for any loss, injury, death or damage to persons or property
which at any time may be suffered or sustained by Tenant or by any person
whomsoever who may at any time be using, occupying or visiting the Premises,
or be in, on, or about the same, whether such loss, injury, death or damage
shall be caused by or in any way result from or arise out of any act,
omission or negligence of Tenant or of any occupant, subtenant, visitor or
user of any portion of the Premises or from fire, steam, electricity, water,
rain, act of God, or from breakage or leakage or any defect in any pipes,
sprinklers, or plumbing, electrical or heating and air conditioning systems
or fixtures, or from any other cause. Tenant does hereby release Landlord
and agrees to indemnify, defend, hold and save Landlord free and harmless of,
from, and against any and all claims, losses, costs, liabilities, expenses or
damages whatsoever arising out of or related to any use or occupancy of the
Premises by Tenant or any of Tenant's agents, employees, invitees or
contractors (collectively "Losses"), including attorneys' fees and costs on
account of any such Losses, except for any Losses resulting
7
solely from the gross negligence or willful misconduct of Landlord.
7.2 Landlord covenants and agrees that Tenant shall not at any
time or to any extent whatsoever be liable, responsible, or in any way
accountable to Landlord for any injury to or death of persons which at any
time may be suffered or sustained by Landlord or by any person whomsoever who
may at any time be using, occupying or visiting the Premises, or be in, on,
or about the same, to the extent such injury or death shall be caused by or
in any way result from or arise out of any act, omission or negligence of
Landlord, or any of Landlord's agents or employees. To the extent of any loss
which is covered by Landlord's property insurance policies and for which a
waiver of subrogation under such policies exists, Tenant shall not be liable
to Landlord for damage from fire, steam, electricity, water, rain, act of
God, or from breakage or leakage, or any defect in any pipes, sprinklers, or
plumbing, electrical or heating and air conditioning systems or fixtures, or
from any other cause. Landlord agrees to indemnify, defend, hold and save
Tenant free and harmless of, from, and against any and all claims, losses,
costs, liabilities, expenses or damages, including attorneys' fees and costs
on account of any such losses, resulting solely from the gross negligence or
willful misconduct of Landlord.
ARTICLE VIII
INSURANCE
8.1 Unless Tenant elects to become the "Insuring Party" (as
defined herein) Landlord shall, throughout the Lease Term, keep the "Building
Shell" (as defined in Paragraph 12.1, below) (but not Tenant's trade
fixtures, furnishings or equipment) insured against all risks (as the term
"all risk" is used in the insurance industry), and for earthquake and flood
risks, in such form and with such policy limits as Landlord may determine
from time to time, so as to provide reasonable protection of Landlord's
ownership interests in the Premises at a reasonable cost. Notwithstanding the
foregoing, Landlord shall not be required to maintain any insurance which
becomes unavailable or commercially unreasonable to carry in the Southern
California insurance marketplace. Landlord agrees that prior to changing the
insurance limits or deductible amounts of such insurance in a manner which
would materially decrease the insurance limits or materially increase the
deductible amounts from the limits and deductibles shown in the Insurance
Summary attached hereto as Exhibit I, Landlord will notify Tenant and
provide Tenant with an opportunity to obtain its own insurance against any
increased risk resulting from any such decrease in insurance limits or
increase in deductibles or to become the Insuring Party under this Lease. If
Landlord fails to so notify Tenant, then in the event of a loss for which
insurance is required under this Paragraph 8.1, Tenant shall not be
responsible for any additional increment or portion of such loss to the
extent such loss would have been covered pursuant to the insurance program
described in the attached Exhibit I, but is not covered under the revised
insurance program. In the event that Tenant desires to provide insurance on
the Building Shell (which insurance shall include policy coverages, limits
and deductibles in the same amounts as would be provided by Landlord, and
which shall otherwise satisfy the requirements set forth in this Paragraph
8.1 for coverage which would be carried by Landlord, and which shall satisfy
the applicable requirements of Paragraph 8.4, below), Tenant may, at any time
other than the period from sixty (60) days prior to the expiration of the
then-current Policy Year through thirty (30) days following the commencement
of the immediately following Policy Year, upon written notice to Landlord and
at Tenant's sole cost, elect to obtain, in lieu of
8
Landlord's insurance pursuant to this Paragraph 8.1, Tenant's own insurance
on the Building Shell. For purposes of this Lease, the term "Policy Year"
shall mean the one-year period following the commencement date for coverage
under Landlord's then-effective insurance policy. As of the date of this
Lease, the Policy Year for Landlord's existing coverage commenced on July 15,
1993. However, the date of commencement of subsequent Policy Years may
change from time to time over the Lease Term. Landlord agrees to provide
Tenant with written notice of any change in the commencement date of any
Policy Year. In the event of any insured loss, regardless of whether
Landlord or Tenant is the Insuring Party, Tenant shall be responsible
for paying to Landlord any deductible amounts under any insurance policies
insuring the Premises, whether carried by Landlord or Tenant, and, in the
event Tenant elects to become the Insuring Party under this Paragraph 8.1,
Tenant shall be responsible for any coinsurance amounts. Notwithstanding the
foregoing, if Landlord is the party carrying the policy of earthquake
insurance for the Building Shell, the deductible amount payable by Tenant for
any loss resulting from an earthquake shall not exceed five percent (5%) of
the full replacement cost of the Building Shell. Such limitation on the
deductible amount payable by Tenant for any loss resulting from an earthquake
shall not apply if Tenant is the party carrying such earthquake insurance.
The party providing the "all risk" property insurance required under this
Paragraph 8.1 shall also obtain and maintain "rental value insurance"
covering two year's rent (Minimum Rent, real estate taxes, insurance premiums
and landscape maintenance charges) payable under this Lease. If, taking into
account Landlord's overall insurance program for its properties, it is
possible and reasonably practical for Tenant to obtain and maintain in effect
one or more of the components of the insurance required pursuant to this
Paragraph 8.1, Tenant may do so as provided in this Paragraph 8.1, and in
such event Tenant shall be the "Insuring Party" with respect to the risks
covered by the insurance so carried by Tenant, and Landlord shall be the
"Insuring Party" with respect to the risks covered by the insurance so
carried by Landlord.
8.2 Should Tenant elect to become the Insuring Party as to all
or any portion of the insurance described in Paragraph 8.1, above, any
insurance so carried by Tenant shall have attached thereto such form of
lender's loss payable endorsement as Landlord's Lender may require. Tenant
shall, within ten (10) days following Landlord's request therefor, provide
Landlord with a copy of the insurance policy or policies obtained by Tenant
pursuant to Paragraph 8.1, together with a certificate of insurance for such
policy or policies which shall confirm, among other things, that such policy
shall not be modified, cancelled or non-renewed without at least thirty (30)
days prior written notice to Landlord. If Tenant elects to become the
Insuring Party as to all of the insurance described in Paragraph 8.1, Minimum
Rent for each month during which Tenant is the Insuring Party shall be
reduced by one-twelfth (1/12th) of the Annual Insurance Base Amount set forth
in Item 1.9 of the Basic Lease Provisions. If Tenant elects to become the
Insuring Party as to only a portion of the insurance described in Paragraph
8.1, then the Minimum Rent for each month during which Tenant is the Insuring
Party for such insurance shall be reduced by the portion of one-twelfth of
the Annual Insurance Base Amount which is attributable to the insurance
originally carried by Landlord (at the rate included in the Annual Insurance
Base Amount) so carried by Tenant, and the Annual Insurance Base Amount shall
be reduced accordingly. Tenant covenants and agrees to pay to Landlord, as
additional rent hereunder, the amount by which the annual premiums and
related fees for the insurance specified in Paragraph 8.1 which is carried
by Landlord exceeds the Annual Insurance Base Amount specified in Item 1.9 of
the Basic Lease Provisions. Such amount shall be paid by Tenant to Landlord
within ten (10) days after receipt by Tenant of Landlord's
9
statement of the cost thereof. If at any time during the Lease Term during
which Landlord is the Insuring Party, the annual premiums and related fees
for the insurance carried by Landlord pursuant to Paragraph 8.1, above,
exceeds the "Insurance Cap Amount" (as defined herein), Tenant shall not be
required to pay any portion of such premiums and related fees exceeding the
Insurance Cap Amount. For the purposes of this Lease, the Insurance Cap
Amount for any Policy Year shall be an amount equal to two and one-half
(2-1/2) times the Annual Insurance Base Amount, as adjusted by any increases
in the "CPI" (as defined in Lease Rider No. 1) from the date of this Lease to
the date of the Policy Year in question. In the Policy Year in which the
Lease Term shall commence and in the Policy Year in which it shall terminate,
such insurance premiums and the Annual Insurance Base Amount shall be
prorated on a daily basis (using a 365-day year), and Tenant's payment
obligations shall be computed accordingly. With respect to any insurance for
which Tenant is the Insuring Party, Tenant shall pay the premiums for such
insurance directly to the insurance carrier at Tenant's sole cost and expense.
8.3 Landlord and Tenant agree that if the Building Shell shall
be damaged or destroyed by risks insured against under Paragraph 8.1, or if
any of Tenant's machinery, fixtures, furniture, merchandise or other
property, real or personal, are damaged or destroyed from any cause covered
by a property policy obtained by Tenant, then and to the extent allowable and
without invalidating such insurance, and whether or not such damage or
destruction was caused by the negligence of the other party, neither party
shall have any liability to the other nor to any insurer of the other for or
in respect of such damage or destruction. If obtainable, each party shall
require all policies of fire or other insurance carried by such party during
the Lease Term upon the Premises or contents therein to include a provision
whereby the insurer designated therein shall waive its right of subrogation
against the other party.
8.4 During the entire Lease Term, Tenant, at Tenant's sole cost
and expense, shall procure and maintain in full force and effect personal
injury and property damage liability insurance with a combined single limit
of not less than Five Million Dollars ($5,000,000). Such insurance may be
evidenced by a Primary Policy or a combination of a Primary Policy and an
Excess Policy. Tenant's liability insurance shall be primary and any
liability insurance maintained by Landlord shall not be contributory.
Landlord shall be named as an additional insured in such policies, and a
policy endorsement so naming Landlord shall be furnished to Landlord. All
such insurance shall insure the performance by Tenant of the indemnity
provisions of Article VII of this Lease. In the event that either party
hereto shall at any time deem the limits of such liability insurance then
carried to be insufficient, the parties shall endeavor to agree upon the
proper and reasonable limits for such insurance then to be carried. If the
parties shall be unable to agree thereon, the proper and reasonable limits
for such insurance then to be carried shall be determined by an impartial
third person knowledgeable of insurance risk matters selected by the parties,
or should they be unable to agree upon a selection by an impartial third
person such third person shall be chosen by the Presiding Judge of the
Superior Court of Los Angeles County upon application by either party made
after five (5) days written notice to the other party of the time and place
of application. The decision of such impartial third person as to such
limits then to be carried shall be binding upon the parties. Such insurance
shall be carried with the limits as agreed upon or determined pursuant to
this Paragraph until such limits shall again be changed pursuant to the
provisions of this Paragraph. The expenses of such determination shall be
borne equally between Landlord and Tenant.
8.5 All of the insurance provided by Tenant under this Article
VIII and all renewals thereof shall be issued by such
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good, responsible and standard companies rated at least A-: Class VII (or the
weighted average rating of all insurers in the group of companies providing
the insurance carried by Landlord under Paragraph 8.1, if such weighted
average rating is lower than A-: Class VII) in the current edition of Best's
Insurance Guide, and authorized to do business in California. Any insurance
carrier providing Tenant's liability insurance must be an "admitted" carrier
in the State of California. The policy or policies of insurance provided for
in Paragraph 8.1 hereof shall be payable to Landlord, or to Tenant or jointly
to Landlord and Landlord's Lender, and Tenant agrees to endorse any check to
the order of Landlord which might be made payable directly to Tenant, or
jointly to Landlord and Tenant, by the insurance company. Tenant agrees to
immediately comply with any request of the insurance carrier providing
insurance described in Paragraph 8.1 if the failure to comply therewith will
cause cancellation of such insurance. All policies provided by Tenant shall
expressly provide that the policy shall not be cancelled or non-renewed
without thirty (30) days' prior written notice to Landlord. Neither Landlord
nor Tenant shall do or permit to be done anything which will invalidate the
insurance policies provided for in this Article VIII. Upon the issuance or
renewal of the liability insurance policy described in this Article VIII, or
upon commencement of the Lease Term if such policy is then in force or
effect, Tenant shall have its insurance carrier furnish Landlord with a
Certificate of said insurance. If requested in writing by Landlord following
a claim or occurrence for which coverage may be available under any policy of
insurance carried by Tenant under this Lease, Tenant shall reproduce and
forward to Landlord a true copy of any such insurance policy. Tenant shall
obtain such fire insurance and other insurance on Tenant's machinery,
fixtures, furniture and other property, real or personal (or shall
self-insure such property), as Tenant deems appropriate, and with which
Landlord shall not otherwise be concerned.
ARTICLE IX
REPAIRS AND MAINTENANCE
9.1 Landlord shall maintain and repair the foundation, floor
slab, exterior walls, exterior paint, roof, asphalt paving, concrete paving
and fire sprinkler system of the Premises at its own cost and expense
(subject to Tenant and insurance contributions relating to damage or
destruction affecting the Premises), provided, however, that if any
maintenance or repair work for the foundation, floor slab, exterior walls,
exterior paint, roof, asphalt paving, concrete paving or fire sprinkler
system of the Premises is required as a result of any negligence or willful
misconduct of Tenant or any of Tenant's agents, employees, shippers,
customers, invitees or contractors, such work shall be at Tenant's sole cost
and expense except to the extent such matter is covered by the insurance
required to be carried by Landlord under the terms of this Lease. Tenant
shall keep all other portions and components of the Premises, and including
all plumbing, HVAC systems, electrical and lighting systems, ceilings, plate
glass and skylights in good order, condition and repair during the Lease Term
and any Extended Term. Without limiting the generality of the foregoing,
Tenant shall perform all maintenance detailed in Paragraph K (mechanical
service controls) of the Performance Standards of the Watson Industrial
Center attached hereto as Exhibit A. Tenant shall also maintain any of
Tenant's property visible from outside the Building in the same condition,
with the surfaces thereof painted at such intervals and such colors as
Landlord shall approve. Except as provided below, Tenant shall promptly
replace any portion of the Premises or system or equipment in the Premises
which cannot be fully repaired. In the event it becomes necessary to replace
a component of the HVAC system or lighting for the Premises and such
replacement would constitute a capital
11
improvement, Tenant shall pay a portion of the cost of such capital
improvement computed by multiplying such cost by a fraction, the numerator of
which shall be the total number of years of the Lease Term (including any
Extended Term for which Tenant has or ultimately exercises its extension
option) and the denominator of which shall be the number of years of the
projected useful life of such capital improvement. With respect to any
capital improvement to major plumbing lines within the Building which have an
aggregate replacement cost in excess of Twenty-Five Thousand Dollars
($25,000.00), Tenant shall pay a portion of such cost of such capital
improvement computed by multiplying the total cost of such improvements by a
fraction, the numerator of which shall be the number of years remaining in
the Lease Term (including any Extended Term for which Tenant has or
ultimately exercises its extension option) and the denominator of which shall
be fifteen (15). If the replacement of any such capital improvement item
occurs prior to the end of the Lease Term, and Tenant subsequently exercises
one or both of its extension options, the amount previously computed as being
payable by Tenant hereunder shall be adjusted to reflect the change in the
numerator of such fraction resulting from Tenant's exercise of such extension
option. Tenant's portion of such cost shall be paid in equal monthly
payments, amortized at a commercially reasonably interest rate, over the
portion of the Lease Term remaining as of the date such capital improvement
is commenced. Any payment adjustment resulting from the exercise of an
extension option shall be paid by Tenant in equal monthly payments amortized
over the Extended Term at a commercially reasonable interest rate. Tenant
shall maintain the Premises in an orderly, first-class and fully operative
condition. Landlord shall maintain the exterior landscaping for the Premises
in accordance with Landlord's then-prevailing landscape maintenance
standards, and the amount by which the cost of such landscape maintenance
work exceeds the Landscape Base Amount of One Thousand One Hundred
Forty-Eight Dollars ($1,148) shall be paid by Tenant to Landlord as
additional rent. Such payments shall be made by Tenant within thirty (30)
days following Tenant's receipt of an invoice from Landlord. Except for
Landlord's obligations for maintenance and repair of the foundations,
exterior walls, exterior paint and roof of the Premises, Landlord shall have
no obligation to repair or maintain the improvements or any areas adjacent
thereto. Tenant waives the provisions of any law permitting Tenant to make
repairs at Landlord's expense.
9.1.1 If Tenant provides notice (the "Repair Notice") to Landlord
of an event or circumstance which Landlord is required to repair, alter or
maintain pursuant to the terms of this Lease (a "Required Action"), and
Landlord fails to provide the Required Action within the time period required
by this Lease, or a reasonable period of time, if no specific time period is
specified in this Lease, after a reasonable period of time following the
receipt of the Repair Notice (the "Notice Date"), or, in any event, does not
commence the Required Action within ten (10) days after the Notice Date and
complete the Required Action within thirty (30) days after the Notice Date
(provided that if the nature of the Required Action is such that the same
cannot reasonably be completed within a thirty (30) day period, Landlord's
time period for completion shall not be deemed to have expired if Landlord
diligently commences such cure within such period and thereafter diligently
proceeds to rectify and complete the Required Action, as soon as possible),
then Tenant may proceed to take the Required Action, pursuant to the terms of
this Lease, and after delivering a second notice to Landlord specifying that
Tenant is taking the Required Action (the "Second Notice").
9.1.2 Notwithstanding the foregoing, if there exists an emergency
such that the Premises or a portion thereof are rendered untenantable and
Tenant's personnel are forced to vacate the Premises or such portion thereof
and if Tenant gives
12
Landlord notice (the "Emergency Notice") of Tenant's intention to take action
with respect thereto (the "Necessary Action") and the Necessary Action is
also a Required Action, Tenant may take the Necessary Action if Landlord does
not commence the Necessary Action within one (1) business day after the
Emergency Notice (the "Emergency Cure Period") and thereafter use its best
efforts and due diligence to complete the Necessary Action as soon as
possible.
9.1.3 If any Necessary Action will affect the structural integrity
of the Building, or the exterior appearance of the Building, Tenant shall use
only those contractors used by Landlord in the Building for work on the
Building Systems, or its structure, and Landlord shall provide Tenant (when
available and upon Tenant's request) with notice identifying such contractors
and any changes to the list of such contractors, unless such contractors are
unwilling or unable to perform such work or the cost of such work is not
competitive, in which event Tenant may utilize the services of any other
qualified contractors which normally and regularly perform similar work in
the vicinity of the Building except for any contractors who Landlord
specifically notifies Tenant in writing within five (5) business days of
Landlord's receipt of a Repair Notice or within one (1) business day of
Landlord's receipt of an Emergency Notice that Tenant may not use for such
work (which notice shall specify the commercially reasonable reasons for
Landlord's not allowing Tenant to use such contractor.)
9.1.4 If any Requested Action or Necessary Action is taken by
Tenant pursuant to the terms of this Paragraph 9.1, and such Required Action
or Necessary Action relates to an item for which Landlord is allocated
payment responsibility under this Lease, then Landlord shall reimburse Tenant
for Tenant's reasonable and documented costs and expenses in taking the
Required Action or Necessary Action within thirty (30) days after receipt by
Landlord of an invoice from Tenant which sets forth a reasonably
particularized breakdown of its costs and expenses in connection with taking
the Required Action or Necessary Action on behalf of Landlord (the "Repair
Invoice). In the event Landlord does not pay Tenant the amount of the repair
invoice within the time required pursuant to this Paragraph 9.1.4, Tenant
shall have the right to seek recovery of such amount pursuant to a judicial
reference proceeding conducted in accordance with the provisions of Paragraph
18.2, below. If ownership of the Premises has been conveyed to a person
other than: (a) a lender pursuant to foreclosure of acceptance of a deed in
lieu of foreclosure; (b) an institutional owner, such as a pension trust
fund, life insurance company or commercial bank with a property management
presence in California; or (c) a non-institutional owner headquartered in the
state of California, then if Tenant obtains a final judgment against such
Landlord in such judicial reference proceeding, and such Landlord fails to
make the payment to Tenant in the amount of such judgment within ten (10)
days following Tenant's demand for such payment, then Tenant shall have the
right to deduct up to twenty percent (20%) of the amount of Tenant's monthly
Minimum Rent payments under this Lease until such time as Tenant has deducted
an amount equal to the amount of such judgment, together with interest on any
unpaid outstanding balance of such judgment that may exist from time to time
at the Lease Interest Rate.
9.2 All of Tenant's obligations to maintain and repair shall be
accomplished at Tenant's sole expense. If Tenant fails to maintain and
repair the Premises, Landlord may, at its election, notify Tenant of Tenant's
obligation to undertake such repair and maintenance work. If Tenant fails to
commence such work within a reasonable period of time following receipt of
such notice (determined in light of then-prevailing facts and circumstances)
Landlord may enter the Premises and perform any such work on behalf of
Tenant. Notwithstanding the foregoing, no
13
notice to Tenant shall be required in case of emergency, and in the event of
an emergency Landlord may enter the Premises and perform such repair and
maintenance on behalf of Tenant. In any such case, Tenant shall reimburse
Landlord for all costs so incurred immediately upon demand, together with
interest thereon at the "Lease Interest Rate" (as defined in Paragraph 26.26,
below). Landlord's right to perform maintenance and repair work pursuant to
this Paragraph 9.2 shall not be deemed to create any obligation on the part
of Landlord to do so, and shall not in any way limit Landlord's remedies
under this Lease.
9.3 Upon the expiration or sooner termination of this Lease,
Tenant shall surrender the Premises to Landlord, broom clean and in the same
condition as received, except for ordinary wear and tear which Tenant is not
otherwise obligated to remedy under any provision of this Lease, and except
for repair and maintenance items which are the obligation of Landlord
pursuant to Paragraph 9.1, above. Any damage to, or deterioration of, the
Premises shall be deemed not to be ordinary wear and tear if the same was the
responsibility of Tenant under this Lease, and could have been prevented by
good maintenance practices. In addition, Landlord may require Tenant to
remove any alterations, additions or improvements prior to the termination of
the Lease and to restore the Premises to its prior condition, or Landlord may
perform such removals and restorations itself, all at Tenant's expense.
Notwithstanding the foregoing, Landlord and Tenant hereby agree that Tenant
shall not be required to remove from the Premises the overhead bridge
conveyor system described in Paragraph 7 of the attached Lease Rider. All
alterations, additions and improvements which Landlord has not required
Tenant to remove or which Tenant has not elected to remove, as provided
herein, shall become Landlord's property and shall be surrendered to Landlord
upon the expiration or sooner termination of the Lease, except that Tenant
may remove any of Tenant's machinery or equipment which can be removed
without damage to the Premises. Tenant may, at its election, finance the
purchase of, grant security interests in, and otherwise encumber any trade
fixtures, furnishings, trade equipment, inventory or other personal property
owned by Tenant (collectively, the "Personal Property") (but not any
equipment which is a replacement of or an enhancement to any building systems
existing on the Premises as of the date of this Lease, or any building
equipment which is necessary for the operation or integrity of the Building)
and Landlord agrees to execute a commercially reasonable form of "Landlord
Lien Waiver Agreement" should Tenant request Landlord to do so. As used
herein, the term "Landlord Lien Waiver Agreement" shall mean an agreement
granting the holder of a security interest in the Personal Property the
right, upon reasonable notice to Landlord, to enter the Premises for the
purposes of taking possession of and removing Tenant's Personal Property.
Any such Landlord Lien Waiver Agreement shall include requirements that: (a)
such lender repair all damage caused by or arising out of any entry of the
Premises, including any damage caused by the removal of Tenant's Personal
Property; (b) the Personal Property be removed no later than thirty (30) days
following delivery of a written demand from Landlord to Tenant or such
Lender, which demand may be made only following the termination of the Lease;
(c) the lender is prohibited from conducting any public sale or auction sale
of any of the Personal Property on the Premises; and (d) the lender indemnify
Landlord from and against and all liabilities, losses, damages and expenses
arising out of or related to the lender's entry on to or use of the Premises,
or the removal of the Personal Property from the Premises. Tenant agrees to
indemnify and hold Landlord harmless from and against any liability, loss,
cost, damage or expense relating to the installation, placement, removal or
financing of any such Personal Property, except to the extent any damages
result solely from the negligence or willful misconduct of Landlord, and
except for any damages covered by property insurance carried by Landlord
pursuant to the terms of this Lease
14
and for which a waiver of subrogation has been obtained. If, whether in
violation of this Lease or pursuant to Landlord's permission (which may be
granted or withheld in Landlord's sole and absolute discretion), Tenant
installs any "Underground Storage Tanks" (as defined herein) on the Premises,
Tenant shall, at its sole cost and expense, remove any such Underground
Storage Tanks immediately upon the request of Landlord, the expiration or
sooner termination of this Lease, or the order of any governmental authority,
whichever occurs first. Notwithstanding any provisions of this Lease to the
contrary, such Underground Storage Tanks shall at all times be and remain the
property of Tenant. As used herein, the term "Underground Storage Tank"
means any one or combination of tanks, including all pipes, sumps, valves and
other equipment connected thereto, which are used for the storage of
petroleum products, hydrocarbon substances or fractions thereof, or other
Hazardous Materials, and which are located wholly or partially beneath the
surface of the ground. Tenant shall repair, at Tenant's expense, any damage
to the Premises caused by the removal of any such machinery or equipment.
9.4 Tenant shall not, without the prior written approval of
Landlord, make any additions, alterations, changes or improvements to the
Premises or any portion thereof. Any request for approval of additions,
alterations, changes or improvements shall be presented to Landlord in
writing, accompanied by detailed drawings and specifications. If Tenant so
requests, Landlord shall notify Tenant in writing, at the time of Landlord's
approval of such additions, alterations, changes or improvements, whether
Landlord will require the removal of such additions, alterations, changes or
improvements, upon the expiration or sooner termination of the Lease Term.
Any item for which Landlord so notifies Tenant that Landlord will not require
to be removed is referred to herein as an "Exempt Alteration". If Landlord
has indicated that Landlord will require the removal of any addition,
alteration, change or improvement, Landlord may subsequently notify Tenant
that Landlord will not require the removal of such item, in which event
Tenant shall not (unless it has previously done so) remove such alteration,
addition, change or improvement. Tenant shall not be required to obtain
Landlord's consent for any non-structural additions, alterations, changes or
improvements to the Premises which do not affect any building service
equipment, and which, as to any particular integrated group of additions,
alterations, changes or improvements, have an aggregate cost of less than
Twenty Thousand Dollars ($20,000.00). No addition, alteration, change or
improvement shall be made which will weaken the structural strength, lessen
the value of, interfere with, or make inoperable any portion of the Premises
or the "building service equipment", or change the architectural appearance
of the Premises, unless such alteration, change or improvement was
constructed pursuant to plans and specifications specifically approved by
Landlord in writing. All approved additions, alterations, changes and
improvements shall be made in workmanlike manner, in full compliance with all
laws and ordinances applicable thereto. Except for any Underground Storage
Tanks, which shall, at all times be and remain the property of Tenant, all
such additions, alterations, changes and improvements shall become a part of
the Premises, and become the property of Landlord upon the expiration or
sooner termination of the Lease Term; and, unless Landlord shall require
removal thereof as required pursuant to Paragraph 16.2, all such
improvements, including all building service equipment improvements (but
specifically excluding any Underground Storage Tanks), shall remain in and be
surrendered as a part of the Premises upon the expiration or sooner
termination of this Lease. Tenant shall furnish Landlord with a copy of
Tenant's final drawings which accurately set forth with field-grade notations
the nature and extent of improvements made by Tenant to the Premises. Tenant
and any assignee or sublessee of Tenant shall obtain Landlord's prior written
consent before any signs are
15
installed on the Premises. Such signs shall remain the property of Tenant or
any assignee or sublessee who installs the same and they shall be removed
from the Premises at the expiration or sooner termination of the Lease Term.
Any damage arising out of or resulting from the installation, placement or
removal of such signs shall be repaired by Tenant at Tenant's sole cost and
expense. Landlord agrees that it shall not unreasonably withhold its consent
to the installation of Tenant's business identity signs for the Premises.
The term "building service equipment" shall include, without limitation,
equipment and property ordinarily necessary or convenient for the operation
and utilization of a building, such as heaters, air conditioners, solar
panels, power panels, transformers, light fixtures, sprinklers, suspended
ceilings, plumbing fixtures, walls, cabinets, shelving affixed to walls in
office areas, doors, floor coverings, fixtures, fencing, paging systems,
emission or pollution control facilities, security and alarm systems, dock
levelers, and utility services such as gas, electricity, water, steam,
telephone, sewer and other similar services used in connection with the
foregoing items. Building service equipment shall also include any related
power installations, plumbing installations, pollution control installations,
sprinkler installations, energy conservation installations, and security
installations, including wiring, conduits, ducts, lines, pipes and meters for
the transportation, distribution, measuring and/or disposal thereof.
Building service equipment shall also include installations affixed to the
Building which serve machinery and equipment, including, without limitation,
air lines, conveyors, crane ways, dust collectors, paint booths, buss
ducting, power panels and related power installations.
9.5 Tenant shall have the right, without Landlord's prior
approval, to install within the Premises Tenant's equipment, trade fixtures,
furniture and furnishings (hereinafter collectively called "Tenant's
Equipment"). Under no circumstances, however, shall Underground Storage
Tanks be installed on the Premises. However, Tenant shall notify Landlord in
writing and Tenant shall obtain Landlord's prior written approval before the
installation of heavy equipment, or heavy trade fixtures in the Premises, and
prior to placing any load on the roof or attaching any load to the walls or
the underside of the roof of any building. Tenant shall not install any of
Tenant's Equipment in such a manner as to weaken the structural strength of
the improvements on the Premises, interfere with, or make inoperable any
portion of the Premises or the building service equipment. If Tenant makes
any addition, alteration, change, or improvement to the Premises described in
Paragraph 9.4 without Landlord's consent, or if Tenant installs any of
Tenant's Equipment in violation of this Paragraph 9.5, then Tenant shall,
upon receipt of written notice from Landlord, promptly remove, replace, or
otherwise correct such installations in such manner as Landlord shall
reasonably require and direct, and Tenant shall reimburse Landlord, on demand
and as additional rent, for all architect's, engineer's and legal fees
incurred by Landlord in connection with such installations. If Tenant or any
person with whom Tenant is engaged in business causes any damage to the
Premises or the improvements, structural or otherwise, Tenant assumes all
risk of such damage to any improvements and Tenant shall, upon demand,
promptly repair all such damage to the reasonable satisfaction of Landlord.
Tenant shall promptly repair any damage to the Premises arising from the
installation, use, and removal of Tenant's Equipment; and Tenant shall
restore the Premises to a clean and orderly condition and appearance, state
of repair and operating order with all remaining improvements thereon in a
good, safe, fully operable condition and in full compliance with all federal,
state and local laws, rules, regulations and ordinances. If Tenant fails to
perform any act or obligation required of Tenant under this Paragraph 9.5,
Landlord shall have the right, but not the obligation, after ten (10) days'
written notice to Tenant specifying the action required by Tenant, to enter
upon the
16
Premises and perform such act or obligation; unless within such ten (10) day
period, Tenant commences to take the specific action and continues to
diligently pursue the completion of such action. In the event Tenant fails
to so commence and pursue such action and Landlord takes such action on
behalf of Tenant, Tenant agrees to pay Landlord, as additional rent within
ten (10) days of receipt of Landlord's invoice, for all costs incurred by
Landlord in performing Tenant's act or obligation, plus an overhead allowance
of fifteen percent (15%) of such cost.
9.6 Landlord shall not be obligated to maintain or to make any
repairs, replacements, or renewals of any kind, nature or description
whatsoever to the Premises or any buildings or improvements thereon, except
as specifically provided in Paragraphs 9.1, 12.1, 13.3 and Exhibit A of this
Lease.
9.7 Tenant shall comply with and abide by all federal, state,
county, municipal and other governmental statutes, ordinances, laws, and
regulations affecting the Premises, the improvements thereon, the business to
be conducted therein and thereon by Tenant, or any activity or condition on
or in the Premises; provided, however, that if such compliance requires
structural or other capital improvements to the Premises which are not
required as a result of the specific use of the Premises by Tenant, but
rather are generally required at law for similar types of buildings, then
Tenant shall only be obligated to pay a pro rata portion of the costs of such
improvements. Such pro rata portion shall be determined by multiplying the
cost of such improvements by a fraction, the numerator of which shall be the
number of years remaining in the Lease Term as of the date such capital
improvement is commenced (including any years of any Extended Term for which
Tenant has exercised or ultimately exercises its extension option) and the
denominator of which shall be fifteen (15). If such improvements are
performed prior to the end of the Lease Term, and Tenant subsequently
exercises one or both of its extension options, the amount previously
computed as being payable by Tenant thereunder shall be adjusted to reflect
the change in the numerator of such fraction resulting from Tenant's exercise
of any such extension option. Tenant's portion of such cost shall be paid in
equal monthly payments, amortized at a commercially reasonably interest rate,
over the portion of the Lease Term remaining as of the date such capital
improvement is commenced. Any payment adjustment resulting from the exercise
of an extension option shall be paid by Tenant in equal monthly payments
amortized over the Extended Term at a commercially reasonable interest rate.
Without limiting the generality of the foregoing, Tenant shall comply with
all environmental laws and laws relating to "Hazardous Materials" (as defined
herein) affecting the Premises, the improvements therein, the business
conducted thereon by Tenant, or any activity or condition on or in the
Premises, to the extent that the necessity of such compliance was caused by
the act of Tenant or Tenant's agents, employees, invitees, customers,
contractors, subcontractors or licensees (collectively "Tenant's Agents").
Tenant shall not be responsible for any costs or expenses of remediating the
presence of any "Hazardous Materials" (as defined herein) which were located
on the Premises prior to the Commencement Date (the "Pre-Existing
Conditions") or which were not caused by the acts of Tenant or Tenant's
Agents, and Landlord shall indemnify and hold Tenant harmless from and
against any fines, removal costs or remediation expenses incurred as a result
of any such Pre-Existing Conditions or incurred as a result of causes other
than the acts of Tenant or Tenant's Agents. This indemnity shall not,
however, bind any lender who succeeds to Landlord's interest in the Premises
through foreclosure or acceptance of a deed in lieu of foreclosure, nor any
purchaser of the Premises from such a lender. Tenant shall not install,
place, construct or maintain any Underground Storage Tanks on the Premises.
Any and all Hazardous Materials and their containers which are brought upon
the Premises by, at the direction of, or
17
with the consent or approval of Tenant shall, at all times, remain the
property of Tenant. Tenant warrants that Tenant's business and all activities
to be performed by Tenant in, on or about the Premises shall comply with such
statutes, ordinances, laws and regulations; and Tenant agrees to change any
such activity or install necessary equipment, safety devices, pollution
control systems, or other installations at any time during the Lease Term to
so comply therewith. If the Premises are, or become subject to, the Los
Angeles County Congestion Management Program (mandated by Sections 65088 et
seq of the California Government Code) or the City of Carson Trip Reduction
and Travel Demand Measures Ordinance, Tenant shall be responsible, at its
sole cost and expense, for complying with all requirements of such programs
and ordinances, including, without limitation, any provisions of such
programs and ordinances requiring improvements or modifications to the
Premises. However, to the extent such compliance requires structural or
other capital improvements to the Premises which are not required as a result
of the specific use of the Premises by Tenant, but rather are generally
required by law for similar types of buildings, such costs shall be allocated
between Landlord and Tenant provided above for capital improvements. If,
during the Lease Term, Landlord or Tenant is required to convert or replace
the HVAC system serving the Premises in order to comply with federal, state
or local statutes, laws, ordinances, rules or regulations concerning the use
of chlorofluorocarbons (including, without limitation, Freon), then the
responsibility for paying the costs of any such conversion or replacement,
including, without limitation, the purchase and installation of new
equipment, and the alteration of existing HVAC equipment in the Premises to
accommodate any new equipment shall be allocated between Landlord and Tenant
as provided above. Tenant agrees not to commit or permit waste upon the
Premises.
9.8 Tenant shall (i) not cause or permit any "Hazardous
Material" (as hereinafter defined) to be brought upon, kept, used, stored,
discharged or released (collectively "used") in or about the Premises during
the Lease Term, without the prior written consent of Landlord.
Notwithstanding the foregoing, so long as Tenant consistently complies with
all applicable legal and regulatory requirements relating to the use,
storage, handling and disposal of Hazardous Materials, Tenant shall be
permitted to use and store on the Premises reasonable quantities of consumer
cleaning products, office supplies and similar over-the-counter cleaning and
maintenance supplies. Landlord agrees that it will not unreasonably withhold
its consent to the use of any Hazardous Materials of a type and in quantities
similar to those used with by other tenants of Landlord at Watson Industrial
Center South or any other master planned industrial park owned by Landlord.
If Tenant breaches the obligations stated in the preceding sentence, or if
any Hazardous Material used on the Premises during the Lease Term results in
contamination of the Premises or any adjacent property, then Tenant shall
indemnify, defend and hold Landlord harmless from any and all claims,
judgments, damages, penalties, fines, costs, liabilities or losses
(including, without limitation, sums paid in settlement of claims, attorneys'
fees, consultant fees and expert fees) which arise or result, during or after
the Lease Term or any Extended Term, as a result of Hazardous Material so
used. This indemnification of Landlord by Tenant includes, without
limitation, costs incurred in connection with any investigation of site
conditions or any cleanup, remedial, removal or restoration work required by
any federal, state or local governmental agency or political subdivision
because of Hazardous Material present in the soil or ground water on or under
the Premises and/or adjacent property. Without limiting the foregoing, if
any Hazardous Material is used on the Premises during the Lease Term and
results in any contamination of the Premises and/or adjacent property, Tenant
shall promptly take all actions at its sole expense as are necessary to
return the Premises
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and/or adjacent property to the condition existing prior to the use of any
such Hazardous Material on the Premises and/or adjacent property; provided
that Landlord's approval of such actions shall first be obtained, which
approval shall not be unreasonably withheld so long as such actions would not
potentially have any material adverse long-term or short-term effect on the
Premises or adjacent property. As used herein, the term "Hazardous Material"
means any petroleum products or other hydrocarbon substances (and fractions
thereof) and any hazardous or toxic substance, material or waste which is or
becomes regulated by any local governmental authority, the State of
California or the United States Government. Upon expiration or earlier
termination of this Lease, Tenant shall duly execute and deliver to Landlord
a certificate (the "Hazardous Material Certificate") in the form of Exhibit D
attached hereto. In the event Tenant shall fail to so deliver the Hazardous
Material Certificate, such failure shall, without further notice or the
passage of time constitute a default under the Lease and, without in any way
limiting or impairing Landlord's remedies against Tenant, shall entitle
Landlord to retain the entire security deposit held by Landlord to be applied
toward payment of the cost of assessing the presence of Hazardous Material on
the Premises and/or adjacent property, and toward payment of all loss, cost,
liability, damage and expense of Landlord arising as a result of any such
contamination and toward such other costs and expenses of Landlord as
Landlord may designate in its sole discretion. Landlord may, if it so
desires, cause a properly licensed and qualified environmental consultant to
conduct an environmental audit of the Premises. The scope and detail of such
environmental audit shall be reasonably determined by Landlord based on all
relevant facts and circumstances then existing. If any environmental audit
recommends or suggests that additional testing be conducted, Landlord may
require that such additional testing be conducted. If such environmental
audit determines that the Premises or any adjacent property has been
contaminated with Hazardous Materials resulting from the acts or omissions of
Tenant or Tenant's Agents, and if the corrective action recommendations
contained in such environmental audit were not previously made known to
Landlord by Tenant as a part of Tenant's own remediation plan for the
Premises, then Tenant shall pay the costs of such environmental audit,
together with the costs of remediating the effects of such contamination to a
standard which complies with all applicable laws and to a standard which will
not cause the market value of such property to be diminished. A copy of any
environmental audit performed by either Landlord or Tenant shall be promptly
delivered to the other party. If, at any time during the Lease Term or upon
the termination or earlier expiration of the Lease, Landlord reasonably
believes that the Premises or any adjacent property has been contaminated as
a result of Hazardous Materials which were used on or about the Premises
during the Lease Term, Landlord may require Tenant to conduct an
environmental audit (in accordance with the above described criteria) to
evaluate the presence of any Hazardous Materials on the Premises (and the
cost of such audit shall be paid by Tenant if such audit indicates that the
Premises or any adjacent property has been contaminated as a result of
Hazardous Materials which were used on or about the Premises by Tenant or
Tenant's Agents during the Lease Term), and to cleanup, remediate, and
otherwise mitigate the effects of the presence of any such Hazardous
Materials on the Premises consistent with the remediation standards described
above, or Landlord may, if it so elects, undertake such an environmental
audit and any such cleanup, remediation or mitigation work on behalf of
Tenant, at Tenant's sole cost and expense. In any event, any such
environmental audit or cleanup, remediation or mitigation work shall be
performed by qualified environmental professionals acceptable to Landlord.
Nothing contained herein shall be deemed or construed to limit the liability
of Tenant to Landlord hereunder for the breach of any covenant of Tenant
under this Paragraph 9.8. The provisions of this Paragraph 9.8 shall
19
survive the expiration or earlier termination of this Lease and Tenant's
surrender of the Premises to Landlord.
9.9 On the fifteenth (15th) day of each January each year of the
Lease Term following the year in which the Commencement Date occurs, (the
"Disclosure Dates"), Tenant shall disclose to Landlord in writing the common
and chemical names and the quantities of all Hazardous Materials which were
stored, used or disposed of on the Premises during the preceding calendar
year. Tenant shall immediately notify Landlord of Tenant's receipt of any
notice, citation or other communication received by Tenant relating to the
presence, storage, use or release of any Hazardous Materials in, on or about
the Premises.
9.10 Landlord shall have the right, but not the duty, to inspect
the Premises at any time to determine whether Tenant is complying with the
requirements of this Lease. If Tenant is not in compliance with the
requirements of the provisions of this Lease relating to Hazardous Materials,
Landlord shall have the right, but not the obligation, to notify Tenant that
Landlord intends to enter upon the Premises to remedy such condition and, if
Tenant fails to remedy such condition within ten (10) days after receipt of
such notice and to diligently pursue the complete correction of such
condition, then Landlord may, but shall not be obligated to immediately enter
upon the Premises to remedy any condition caused by Tenant's failure to
comply with the requirements of this Lease. Landlord shall use reasonable
efforts to minimize interference with Tenant's business as a result of any
such entry by Landlord but shall not be liable for any interference caused
thereby.
9.11 Any failure of Tenant to comply with the provisions of
Paragraphs 9.7, 9.8 and 9.9 of this Lease shall be a material default under
this Lease, enabling Landlord to exercise any of the remedies set forth in
this Lease.
9.12 Tenant acknowledges its understanding and awareness that the
Building was constructed prior to 1979, and that some asbestos-containing
materials may have been used in the construction of the Building. Tenant
acknowledges its receipt of an "Asbestos Disclosure Letter" from Landlord, a
copy of which is incorporated herein by reference. Tenant acknowledges its
awareness that the release of asbestos fibers can present a serious health
risk, and Tenant agrees that it shall not undertake any activities on the
Premises which might disturb or release asbestos-containing materials without
implementing appropriate safety procedures.
9.13 Pursuant to the requirements of California Health and Safety
Code Section 25359.7, Landlord hereby notifies Tenant that Landlord does not
know, and does not have reasonable cause to believe, that any release of any
Hazardous Materials has come to be located on or beneath the Premises. Prior
to the Commencement Date, Landlord shall provide to Tenant, for informational
purposes only, copies of any Phase I environmental reports and other
environmental reports, surveys or studies in Landlord's possession which
relate to the Premises.
ARTICLE X
INSPECTION OF PREMISES BY LANDLORD
10.1 Tenant agrees that Landlord and the authorized
representatives of Landlord shall have the right to enter the Premises upon
reasonable notice to Tenant (determined in light of then-prevailing facts and
circumstances) at all reasonable times during usual business hours, or at any
time in the case of an emergency, for the purpose of (a) inspecting same; and
(b) making such repairs or reconstruction to the Premises required by or
permitted to be made by Landlord, and (c) performing any work
20
therein that may be necessary by reason of Tenant's default under the
provisions of this Lease. Nothing herein shall imply any duty of Landlord to
do any work which, under the provisions of this Lease, Tenant is required to
perform and the performance thereof by Landlord shall not constitute a waiver
of Tenant's default in failing to perform the same. Landlord may, during the
progress of any work on the Premises, keep and store upon the parking area of
or within the Premises, all necessary materials, tools and equipment.
Landlord shall not in any event be liable for any inconvenience, annoyance,
disturbance, loss of business, or other damage sustained by Tenant while
making such repairs or the performance of any such work on the Premises, or
on account of bringing materials, supplies and equipment into or through the
Premises during the course thereof. In the event Landlord makes any repairs
or maintenance which Tenant has failed to do or perform, after reasonable
notice and time to so perform, the cost thereof plus an overhead allowance of
fifteen percent (15%) of such cost shall constitute additional rent and shall
be paid to Landlord within ten (10) days of receipt of Landlord's invoice.
10.2 Landlord is hereby given the right during usual business
hours to enter the Premises and to exhibit the same for purposes of sale or
mortgage, and during the last six (6) months of the Lease Term to exhibit the
same to any prospective tenant.
ARTICLE XI
MECHANICS' LIENS
11.1 Tenant covenants and agrees to keep all of the Premises and
every part thereof and all buildings and other improvements thereon free and
clear of and from any and all mechanics', materialmen's and other liens for
work or labor done, services performed, materials, appliances, transportation
or power contributed, used or furnished or to be used in or about the
Premises for or in connection with any operations of Tenant, any alterations,
improvements, repairs or additions, which Tenant may make or permit or cause
to be made, or any work or construction by, for or permitted by Tenant on or
about the Premises; and at all times Tenant shall promptly and fully pay and
discharge any and all claims upon which any such lien may or could be based;
and Tenant shall save and hold Landlord and all of the Premises free and
harmless of and from any and all such liens and claims of liens and suits or
other proceedings pertaining thereto. Tenant, or any subtenant, assignee or
other occupant of the Premises covenants and agrees to give Landlord written
notice not less than ten (10) days in advance of the commencement of any
construction, alteration, addition, improvements or repair to the Premises in
order that Landlord may post an appropriate notice of Landlord's
non-responsibility.
11.2 No mechanics' or materialmen's liens or mortgages, deeds of
trust, or other liens of any character whatsoever created or suffered by
Tenant shall in any way or to any extent affect the interest or rights of
Landlord in any buildings or other improvements on the Premises, or attach to
or affect Landlord's title to or rights in the Premises.
11.3 Tenant shall have the right to contest any mechanic's lien
or other lien claim filed against the Premises provided that Tenant gives
Landlord written notice of such contest, Tenant diligently prosecutes such
contest, at all times effectually stays or prevents any official or judicial
sale of the Premises under execution or otherwise, and pays or otherwise
satisfies any final judgment adjudging or enforcing such contested lien and
thereafter procures record satisfaction or release thereof. If requested in
writing by Landlord, Tenant shall furnish to Landlord a surety bond issued by
a surety company acceptable to Landlord in an amount not less than one and
21
one-half times the amount of any such mechanic's lien or other lien claim
filed against the Premises.
ARTICLE XII
DAMAGE OR DESTRUCTION OF PREMISES
12.1 In the event the "Building Shell" (as defined herein) is
damaged or destroyed, then so long as the cost of repairing such damage or
destruction is covered by insurance policies carried by the appropriate
Insuring Party (except for deductible amounts, which shall in all cases be
paid by Tenant), Landlord shall repair and restore the Building Shell (but
not any of Tenant's trade fixtures, furnishings or equipment) to its
condition existing prior to said damage or destruction, and this Lease shall
continue in full force and effect. Any damage or destruction of the type
described above is referred to herein as an "Insured Loss." As used herein,
the term "Building Shell" shall mean the core and shell of the Building as it
exists as of the date of this Lease, together with any alterations and
improvements thereto which are generally recognized and accepted as being
real property in nature, and which, by the terms of this Lease become the
property of Landlord upon the expiration or sooner termination of this Lease.
The proceeds of insurance maintained pursuant to Paragraph 8.1 shall be
delivered to Landlord and shall be used to pay the cost and expense of
repairing and rebuilding the Building Shell. If Landlord is the Insuring
Party, and if the cost of repairing any damage or destruction to the Building
Shell is not covered by insurance due solely to Landlord's failure to obtain
and maintain in effect the policies of insurance which Landlord is required
to maintain pursuant to Paragraph 8.1, above, then such damage and
destruction shall be treated in the same manner as an Insured Loss pursuant
to this Paragraph 12.1. If Tenant is the Insuring Party, and if the cost of
repairing any damage or destruction to the Building Shell is not covered by
insurance due solely to Tenant's failure to obtain and maintain in effect the
policies of insurance which Tenant is required to maintain pursuant to
Paragraph 8.1, above, then such damage and destruction shall be treated in
the same manner as an Insured Loss pursuant to this Paragraph 12.1, but
Tenant shall be required to pay to Landlord the full amount of any costs of
repairing such damage or destruction which would have been covered by
insurance had Tenant maintained the required insurance, and Tenant shall be
required to pay to Landlord the full amount of any deductible amounts which
Tenant would have been required to pay pursuant to the terms of this Lease
had Tenant maintained the required insurance.
12.2 In the event the Building Shell is damaged or destroyed,
and, for reasons other than the Insuring Party's failure to maintain in
effect the insurance which the Insuring Party is required to maintain
pursuant to Paragraph 8.1, above, the cost of repairing such damage or
destruction is not covered by insurance policies carried by the Insuring
Party (an "Uninsured Loss"), then so long as the cost of repairing such
damage or destruction does not exceed the "Cap Amount" (as defined herein),
Landlord shall repair and restore the Building Shell (but not any of Tenant's
trade fixtures, furnishings or equipment) to its condition existing prior to
said damage or destruction, and this Lease shall continue in full force and
effect. As used herein, the term "Cap Amount" shall mean the amount of Five
Hundred Thousand Dollars ($500,000). In the event of an Uninsured Loss
having a repair cost which is equal to or less than the Cap Amount, Landlord
and Tenant shall each contribute one-half of the repair cost of such
Uninsured Loss (up to a maximum contribution amount of Two Hundred Fifty
Thousand Dollars ($250,000) each for Landlord and Tenant). If Landlord is
the Insuring Party as to all or any part of the insurance required pursuant
to Paragraph 8.1, and the repair cost of such
22
Uninsured Loss exceeds the Cap Amount, Landlord and Tenant shall each have
the right to terminate this Lease upon thirty (30) days written notice to the
other. However, if a party has elected to terminate this Lease pursuant to
this Paragraph 12.2, the other party may prevent termination of the Lease
pursuant to this Paragraph 12.2 by paying (in addition to any other amounts
to be paid by such party pursuant to this Paragraph 12.2) the amount by which
the cost of repairing such Uninsured Loss exceeds the Cap Amount. If Tenant
is the Insuring Party as to all of the insurance required pursuant to
Paragraph 8.1, and the repair cost of such Uninsured Loss exceeds the Cap
Amount, Landlord shall have the right, within thirty (30) days following the
date of such Uninsured Loss, to elect to either: (a) terminate this Lease;
or (b) repair such damage or destruction, in which event Tenant shall pay to
Landlord Tenant's portion of the Cap Amount, plus any repair costs in excess
of the Cap Amount, and this Lease shall continue in full force and effect.
12.3 In the event Landlord is the Insuring Party as to a
particular risk and the Building Shell is damaged or destroyed, and the cost
of repairing such damage or destruction (exclusive of deductible amounts,
which in all cases shall be paid by Tenant) is not fully covered by insurance
policies carried by Landlord, then Landlord may, at its election, either:
(a) terminate this Lease upon thirty (30) days written notice to Tenant; or
(b) repair such damage or destruction, in which event this Lease shall remain
in full force and effect. However, if Landlord has elected to terminate this
Lease pursuant to this Paragraph 12.3, Tenant may prevent termination of the
Lease pursuant to this Paragraph 12.3 by paying to Landlord, in addition to
the deductible amounts otherwise payable by Tenant, the portion of the cost
of repairing such damaged improvements which is not fully covered by
insurance policies carried by Landlord. If Landlord is the Insuring Party as
to earthquake coverage, the deductible amount payable by Tenant for any loss
resulting from an earthquake shall not exceed five percent (5%) of the full
replacement cost of the Building Shell. Such limitation on the deductible
amount payable by Tenant for any loss resulting from an earthquake shall not
apply if Tenant is the Insuring Party as to earthquake coverage. In the
event Tenant is the Insuring Party as to a particular risk, then if the
Building Shell is damaged or destroyed, and the cost of repairing such damage
or destruction is partially or fully covered by insurance policies required
to be carried by Tenant pursuant to the terms of this Lease, then Tenant
shall pay to Landlord, in addition to the deductible amounts otherwise
payable by Tenant, the full amount of cost of repairing such damaged
improvements, and this Lease shall continue in full force and effect.
12.4 Upon the occurrence of any damage or destruction to the
Building Shell, Landlord shall, within thirty (30) days following the date of
occurrence of such damage or destruction, provide to Tenant a written notice
of Landlord's reasonable and good faith estimate of the time required to
complete the repair and restoration of the Building Shell ("Landlord's Time
Estimate"). Landlord's Time Estimate shall be supported by a certification
letter addressed to both Landlord and Tenant from a properly licensed and
qualified general contractor selected by Landlord, stating the opinion of
such contractor as to the number of days following the issuance of the
necessary building permits necessary to complete the repair and restoration
of the Building Shell. If Landlord reasonably estimates that such repair and
restoration will take more than two hundred seventy (270) days to complete
(measured from the date of issuance of necessary building permits for the
repair and restoration work) either Landlord or Tenant may elect to terminate
this Lease upon written notice to the other, which notice shall be given, if
at all, within twenty (20) days following Tenant's receipt of Landlord's Time
Estimate. Once such notice has been delivered, the twenty (20) day response
period has expired and the repair and
23
restoration work has commenced, neither party shall have the right to
terminate this Lease as a result of the occurrence of such damage or
destruction, regardless of the actual time necessary to complete such repair
and restoration work, but Landlord agrees that it shall use diligent efforts
to complete the restoration work in a timely manner. Upon termination of
this Lease pursuant to this Paragraph 12.4, Tenant shall pay to Landlord one
(but not more than one) of the following amounts: (a) the deductible amount
payable by Tenant in the event of an Insured Loss, if the damage and
destruction results from an Insured Loss; or (b) Tenant's portion of the Cap
Amount, if the damage and destruction results from an Uninsured Loss. If the
reconstruction of the Building Shell is delayed beyond the date established
for completion of repair and restoration work as provided in the general
contract between Landlord and the general contractor selected by Landlord to
perform such repair and restoration work (the "General Contractor"), and if
Tenant actually suffers damages as a result of such delay, then so long as
Landlord continues to receive the proceeds of rent abatement insurance during
the period of such delay, Landlord shall assign to Tenant (to the extent of
any damages actually suffered by Tenant as a result of such delay) any
liquidated damages or other damages payable by the general contractor
pursuant to the terms of its general contract as a result of such delay. To
the extent Landlord does not receive sufficient rent abatement insurance
proceeds to fully compensate Landlord for any abatement of rent under this
Lease, Landlord shall have a first priority claim to any such liquidated
damages or other damages payable by the general contractor.
12.5 The Minimum Rent payable by Tenant pursuant to the
provisions of Paragraph 4.1 shall abate, in the proportion that the part of
the Premises rendered unusable to Tenant bears to the whole thereof, from the
date of the damage or destruction through the time required by Landlord to
repair and rebuild the Building Shell, but only to the extent to which
Landlord receives, or is ultimately entitled to receive, reimbursement for
such abatement pursuant to the rental value insurance maintained under
Paragraph 8.1 of this Lease. If, as of the date any payment of Minimum Rent
is due under this Lease, Landlord is the party responsible for obtaining rent
abatement insurance pursuant to Paragraph 8.1, and Landlord has not received
reimbursement from its insurance carrier for the Minimum Rent then due under
this Lease, then the Minimum Rent then due under this Lease shall nonetheless
be abated, so long as Landlord is ultimately entitled to receive
reimbursement for such rent abatement from Landlord's insurance carrier.
Except for abatement of such Minimum Rent, if any, Tenant shall have no claim
against Landlord by reason of any damage, destruction, repair or rebuilding
of the Premises.
12.6 Subject to the provisions of this Paragraph 12.6, if the
Building Shell is damaged or destroyed, either partially or totally, during
the last year of the Lease Term, Landlord or Tenant may, at such party's
option, cancel and terminate this Lease as of the date of occurrence of such
damage by giving written notice to the other party of the electing party's
election to do so within thirty (30) days after the date of occurrence of
such damage. Notwithstanding the foregoing, if Tenant possesses an option to
extend the Lease Term, and the time within which Tenant may exercise such
option has not expired, then if Tenant validly exercises such option within
twenty (20) days after the occurrence of such damage or destruction, Landlord
shall not have the right to terminate this Lease pursuant to this Paragraph
12.6, and the other applicable provisions of this Article XII shall govern
the repair and restoration of the Building Shell or the termination of this
Lease (as the case may be). If there is only partial damage to the Premises,
and either Landlord or Tenant desire for this Lease to continue in effect
notwithstanding such partial damage, then this Lease shall not terminate as a
result of such partial damage, so long as all of
24
the following terms and conditions are satisfied (or are waived by Landlord):
(a) Landlord shall only be obligated to repair or restore such partial
damage to the extent that the full costs of repairing such partial damage are
covered by insurance proceeds and Tenant payments relating to such damage;
(b) Tenant shall provide Landlord with evidence reasonably satisfactory to
Landlord that Tenant's continued use and occupancy of the Premises is in
compliance with all applicable Codes and will not violate the terms of any
insurance policies affecting the Premises: (c) Landlord shall have received
the consent of any lender holding a mortgage or deed of trust encumbering the
Premises to such continued use and occupancy of the Premises and such
non-restoration of the Premises; (d) Minimum Rent for the portion of the
Building which is rendered unusable as a result of such partial damage (and
which is not actually used by Tenant) shall be reduced on pro rata basis, but
in no event shall the amount of such reduction exceed twenty percent (20%) of
the total Minimum Rent otherwise payable under this Lease and Landlord shall
be fully compensated for any such rent abatement by the rent abatement
insurance required pursuant to the terms of Article VIII of this Lease; (e)
Tenant shall indemnify and hold Landlord harmless from and against any loss,
cost, damage, liability or expense arising out of or related to any such use
or occupancy of the partially damaged Building; and (f) at least eighty
percent (80%) of the floor area of the Building can continue to be used and
occupied by Tenant notwithstanding such partial damage.
12.7 Tenant waives the provisions of any statutes which relate to
termination of leases when the leased premises are destroyed; and Tenant
agrees that such event shall be governed by the terms of this Lease and not
by any such statute.
ARTICLE XIII
CONDEMNATION
13.1 If title to all or any portion of the Premises shall be
taken by any public or quasi-public use or authority under any statute or by
right of eminent domain, or by private purchase in lieu thereof, then the
rights of the parties to share in the condemnation award or purchase price
thereby resulting shall be governed by the provisions of this Article XIII.
13.2 Should all or such portion of the Premises be taken in such
a manner as to materially interfere with Tenant's use and occupancy thereof,
then this Lease shall terminate as of the date that possession of said
Premises or part thereof shall be taken. Landlord shall be entitled to (a)
any amount paid for the taking of Landlord's fee interest in the Premises,
(b) any severance damages included in the award, (c) any amount paid for the
taking of the Premises except that paid for any improvements made to the
Premises by Tenant which remain the property of Tenant, and (d) any amount
which represents the present worth of rent payments to be made in the future
under the provisions of this Lease; and none of Landlord's interests in the
above shall be subject to any diminution or apportionment whatsoever. Tenant
shall be entitled to compensation paid under condemnation for the taking of
any improvements made to the Premises by Tenant which remain the property of
Tenant, for Tenant's relocation expenses, loss of good will and/or loss of
Tenant's trade fixtures.
13.3 In the event of a partial taking of the Premises which does
not materially interfere with Tenant's continued use and occupancy of the
Premises and there remains sufficient of the Premises for the continued use
of Tenant, then this Lease shall terminate only as to the part so taken, as
of the date that possession of such part of the Premises is taken, and the
Minimum Rent herein provided for shall be reduced in proportion as the square
footage of building floor area taken bears to the total
25
building floor area existing before such taking. In the event of a partial
taking, Landlord agrees to replace or repair the building facility
constituting a portion of the Premises to its condition as existed when the
Lease Term commenced, and without regard to improvements made by Tenant, by
reinstalling plumbing, electrical, wiring, walls and paving, if necessary, so
that said building facility shall be completely operable and an integral
whole. In the event of such partial taking, Landlord shall be entitled to
receive all amounts described in the second sentence of Paragraph 13.2; and
none of Landlord's interest in the above shall be subject to any diminution
or apportionment whatsoever. Tenant shall be entitled to compensation paid
under condemnation for the taking of any improvements made to the Premises by
Tenant which remain the property of Tenant, for Tenant's relocation expenses,
loss of good will and/or loss of Tenant's trade fixtures.
13.4 Landlord and Tenant agree to execute all documents and
assignments necessary to carry out this Article XIII in the event of
condemnation or purchase in lieu thereof.
ARTICLE XIV
USE OF PREMISES - ASSIGNMENTS
14.1 Tenant shall have the right to use the Premises for
manufacturing, packaging and distributing vitamins, over-the-counter or
prescription drugs and related products in compliance with all applicable
laws and regulations, including, without limitation, environmental laws and
laws relating to Hazardous Materials; and Tenant agrees such use shall comply
with all applicable laws and regulations in effect when this Lease Term
commences and as may be amended or newly enacted during the Lease Term.
Tenant shall not use the Premises for the retail sale of property. Tenant
shall not conduct nor permit to be conducted any auction or auction sale at
the Premises. Tenant's use of the Premises is subject to limitations imposed
by the Watson Industrial Center Performance Standards and the limitations
contained in this Lease. Tenant covenants and agrees that it shall not
permit any of its employees, agents, contractors, vendors or shippers to park
trucks, automobiles, trailers or other vehicles on any of the public streets
in the general vicinity of the Premises or the industrial or business park in
which the Premises are located. Tenant's use of the Premises is subject to
limitations imposed by the Watson Industrial Center Performance Standards and
the limitations contained in this Lease.
14.2 Tenant shall not, assign, sublet or otherwise transfer this
Lease, or Tenant's interest in and to the Premises, nor enter into any
license or concession agreements with respect thereto, without first
procuring the written consent of Landlord. Any such attempted or purported,
assignment, subletting, transfer or license or concession agreement
(collectively "Transfer") without Landlord's prior written consent shall be
void and of no force and effect, and shall not confer any interest or estate
in the purported transferee (the "Transferee") and shall, at Landlord's
option, constitute an incurable default under this Lease. Tenant shall have
no right to mortgage, hypothecate or otherwise encumber its leasehold estate
in the Premises or its rights under this Lease, and Landlord and Tenant
specifically agree that any such mortgage, hypothecation or encumbrance by
Tenant is strictly and absolutely prohibited. Landlord hereby agrees to
consent to Tenant's subleasing, in the aggregate, up to twenty thousand
square feet (20,000) of floor area of the Premises to vendees, suppliers and
consultants to Tenant, and any such sublease shall be treated in the same
manner as a Transfer to an Affiliate as provided herein. Landlord agrees
that, in the event of a proposed Transfer to an "Affiliate" (as defined
herein), Landlord
26
will not withhold its consent to such Transfer so long as: (i) such
Affiliate's use of the Premises is in conformance with Paragraph 14.1; (ii)
such Affiliate's use of the Premises will not result in any material increase
in the potential risk to Landlord arising out of or relating to Hazardous
Materials; and (iii) such Transfer will not cause any portion of the amounts
received by Landlord pursuant to this Lease or any sublease to fail to
qualify as "rents from real property" within the meaning of Section 856(d) of
the Internal Revenue Code, or which could cause any other income received by
Landlord to fail to qualify as income described in Section 856(c)(2) of the
Internal Revenue Code; and (iv) Landlord, acting reasonably and in good
faith, determines that such Transfer does not present an unreasonable risk
relating to the use, storage or disposal of Hazardous Materials. As used
herein, the term "Affiliate" shall mean any corporation for which fifty
percent (50%) or more of the voting stock (i) is owned by Tenant; or (ii) is
owned, directly or indirectly, by a corporation owning more than fifty
percent of the voting stock of Tenant. Any transfer of stock or other
ownership interest of Tenant which is made with the purpose or which has the
practical effect of circumventing the Transfer restrictions imposed under
this Article XIV shall be deemed to be a Transfer requiring Landlord's
consent. The consent of Landlord required hereunder shall not be
unreasonably withheld; however, a condition precedent to any consent to a
Transfer shall be Tenant's agreement to pay to Landlord as rent any costs and
expenses incurred by Landlord for review and consultation by Landlord's legal
counsel, securing credit reports, administrative overhead and the like.
Notwithstanding the foregoing, Landlord and Tenant agree that, in determining
whether to reasonably consent to a proposed transfer, Landlord may consider,
among other things, any or all of the following factors:
14.2.1 The reputation of the Transferee (including any principals,
partners or shareholders of such assignee, subtenant to Transferee),
including, without limitation, the Transferee's reputation for dishonesty,
criminal conduct or unethical business practices;
14.2.2 The financial capacity of the proposed Transferee to perform
its obligations under this Lease (or in the event of a Transfer of less than
all of the Premises, the financial capacity of the proposed Transferee to
perform its obligations as to the portion of the Premises Transferred to such
Transferee);
14.2.3 Whether the business experience and quality of business
operations of the proposed Transferee is comparable to that of Tenant;
14.2.4 The credit history of the proposed Transferee;
14.2.5 The intended use of the Premises by the proposed Transferee,
and Landlord's assessment of the impact of such use upon the Premises and
neighboring properties;
14.2.6 Whether the proposed Transferee's use of the Premises will
involve the generation, storage, use, treatment or disposal of any Hazardous
Materials, or will in any way increase any potential risk or liability to
Landlord arising out of or relating to Hazardous Materials; and
14.2.7 Whether the proposed Transferee is acceptable to the holder
of any mortgage or deed of trust encumbering the Premises (but provided,
however, that the time for approving or disapproving any Transfer as provided
herein shall not be extended by the need to obtain the consent of any such
mortgage holder or deed of trust beneficiary).
27
14.3 Notwithstanding any permitted Transfer, Tenant shall at all
times remain directly, primarily and fully responsible and liable for the
payment of rent and for compliance with all obligations under the terms,
provisions and covenants of this Lease. All Transfer agreements shall
expressly provide that, in the event of a default by Tenant under this Lease,
the Transferee covenants and agrees with Landlord, contemporaneously with
receipt of written notice from Landlord that Tenant is in default of this
Lease, and for so long as such default continues, but not for a period of
time in excess of the term of the Transfer, to accept Landlord as Landlord of
Transferee, to attorn to Landlord as Landlord, to thereafter perform all
duties and responsibilities under the Transfer agreement directly to Landlord
for Landlord's sole benefit, and to cure any default of Tenant under this
Lease. Upon the occurrence of any default by Tenant, if the Premises or any
part thereof are then sublet, Landlord, in addition to any other remedies
herein provided or provided by law, may at its option collect directly from
such subtenant all rents becoming due to Tenant under such sublease and apply
such rent against any sums due to Landlord from Tenant hereunder, and no such
collection shall be construed to constitute a novation or release of Tenant
from the further performance of Tenant's obligations under this Lease. Any
sale, assignment, transfer or hypothecation of Tenant's interest under this
Lease, and any proposed subletting or occupancy of the Premises not in
compliance with this Article XIV shall be void.
14.4 Should Tenant desire to make a Transfer of the Premises,
Tenant shall give not less than thirty (30) days' prior written notice
thereof to Landlord setting forth the name of the proposed Transferee, the
term, use, rental rate and other relevant particulars of the proposed
Transfer, including, without limitation, evidence satisfactory to Landlord
that the proposed Transferee will not use, store or dispose of any Hazardous
Materials in or on the Premises, and that the proposed Transferee will
immediately occupy and thereafter use the Premises for the entire term of the
Lease or the sublease (as the case may be). Such notice shall be
accompanied, in the case of a sublease, by a copy of the proposed sublease,
and in the case of any Transfer, any documents or financial information
Landlord may require in order to make a determination as to the suitability
of the Transferee.
14.5 Landlord shall have the right to condition its consent to
any subletting or assignment upon payment by Tenant to Landlord of fifty
percent (50%) of all "Transfer Consideration" (as defined herein) received or
to be received, directly or indirectly, by Tenant on account of such
subletting or assignment to a party other than an Affiliate. In no event
shall Tenant's monetary obligations to Landlord, as set forth in this Lease,
be reduced. Such Transfer Consideration shall be paid to Landlord at the
same time or times as the same is paid to or used by Tenant. "Transfer
Consideration" shall mean (i) in the case of a sublease, any consideration
paid or given, directly or indirectly, by the sublessee to Tenant pursuant to
the sublease for the use of the Premises, or any portion thereof, over and
above the rent, however denominated, in this Lease, payable by Tenant to
Landlord for the use of the Premises, or portion thereof (after subtracting
therefrom actual and reasonable attorneys' fees and brokerage commissions,
costs of tenant improvements, costs of environmental studies and other
economic concessions made by the sublessee or incurred by Tenant in
connection with such sublease), prorating as appropriate the amount payable
by Tenant to Landlord under this Lease if less than all of the Premises is
sublet, and (ii) in the case of an assignment, the gross amount of any
consideration paid or given, directly or indirectly, by the assignee to
Tenant in exchange for entering into the assignment. Notwithstanding
anything contained in this Lease to the contrary, Tenant shall not (i) sublet
or assign the Premises or this Lease on any basis such that the rent or other
amounts to be paid by the sublessee or assignee there-
28
under would be based, in the whole or in part, on the income or profits
derived by the business activities of the sublessee or assignee; (ii) furnish
or render any services to the sublessee or assignee or operate the Premises
so subleased or assigned; (iii) sublet or assign the Premises or this Lease
to any person that Tenant or Landlord owns, directly or indirectly (by
applying the constructive ownership rules set forth in Section 856(d)(5) of
the Internal Revenue Code [the "Code"]), provided, however, that the
restriction contained in this item (iii) shall not apply to an assignment of
this Lease to an Affiliate of Tenant if no Transfer Consideration arises and
if Landlord does not own, directly or indirectly (as described above), an
interest in such assignee; (iv) sublet or assign less than substantially all
of the Premises or this Lease pursuant to a sublease or assignment under
which Transfer Consideration is paid; or (v) sublet or assign the Premises or
this Lease in any other manner which could cause any portion of the amounts
received by Landlord pursuant to this Lease or any sublease to fail to
qualify as "rents from real property" within the meaning of Section 856(d) of
the Code, or which could cause any other income received by Landlord to fail
to qualify as income described in Section 856(c)(2) of the Code.
14.6 In addition to Landlord's right of approval pursuant to
Paragraph 14.2, above, and Landlord's right to share in Transfer
Consideration pursuant to Paragraph 14.5, above, in the event Tenant
contemplates a proposed Transfer of all or substantially all of the Premises
for all or substantially all of the remaining Lease Term (except for a
proposed Transfer to an Affiliate), Tenant shall notify Landlord, in writing,
of Tenant's desire to commence to locate a proposed Transferee. Landlord
shall then have the option to cancel this Lease effective on a date which is
no later than sixty (60) days following the date of Landlord's notice to
Tenant of Landlord's exercise of such option. The option shall be exercised,
if at all, by Landlord giving Tenant written notice thereof within thirty
(30) days following Landlord's receipt of Tenant's written notice of Tenant's
intention to locate a proposed Transferee. Upon any such cancellation,
Tenant shall pay to Landlord all amounts, as estimated by Landlord, payable
by Tenant to such termination date with respect to any obligations, costs or
charges which are the responsibility of Tenant under this Lease as of the
termination date. Further, upon any such cancellation Landlord and Tenant
shall have no further obligations or liabilities to each other with respect
to the affected portion of the Premises, except with respect to obligations
or liabilities which have accrued as of such cancellation date (in the same
manner as if such cancellation date were the date originally fixed for the
expiration of the Lease Term, or Extended Term, as the case may be).
14.7 Tenant shall in no event assign less than its entire
interest in this Lease. This Lease shall not be assignable by operation of
law, except that if Tenant is a natural person, this Lease shall be binding
upon and inure to the benefit of the estate of Tenant.
14.8 If this Lease is assigned to any person or entity pursuant
to the provisions of the "Revised Bankruptcy Act" (Title 11 of the United
States Code; 11 U.S.C. Section 101 et seq.), any and all monies or other
consideration payable or otherwise to be delivered in connection with such
assignment shall be paid or delivered to Landlord, shall be and remain the
exclusive property of Landlord, and shall not constitute property of Tenant
or of the estate of Tenant within the meaning of the Revised Bankruptcy Act.
Any and all monies or other considerations constituting Landlord's property
under this Article XIV not paid or delivered to Landlord shall be held in
trust for the benefit of Landlord and shall be promptly paid or delivered to
Landlord. Any person or entity to which this Lease is assigned pursuant to
the provisions of the Revised Bankruptcy Act shall be deemed without fur-
29
ther act or deed to have assumed all of the obligations arising under this
Lease on and after the date of such assignment.
14.9 Landlord shall have the right to sell, transfer, delegate or
assign any of its rights or obligations under this Lease but Landlord shall
not assign its obligations to Tenant under this Lease unless Landlord
simultaneously assigns its ownership interest in the Premises to the same
party.
ARTICLE XV
EVENT OF DEFAULT
15.1 Tenant shall be in default under this Lease if:
15.1.1 Tenant shall fail to make any payment of Minimum
Rent, any additional rent payable hereunder, or any other monetary obligation
required of Tenant under this Lease (including, without limitation,
restoration of any security deposit as required under this Lease) and such
failure shall continue for ten (10) days after Tenant's receipt of written
notice from Landlord that said rent or monetary obligation is due and payable
as provided in this Lease; or
15.1.2 Tenant shall neglect or fail to perform or observe
any of the covenants herein contained on Tenant's part to be performed or
observed, and Tenant shall fail to remedy the same within thirty (30) days
after Landlord shall have given to Tenant written notice specifying such
neglect or failure (provided, however, that if the performance or observance
of any such covenant reasonably requires more than thirty (30) days to
perform, Tenant shall not be in default under this Lease as a result of
Tenant's failure to perform or observe any such covenant within such thirty
(30) day period, so long as Tenant has commenced the actions necessary to
perform or observe such covenant within such thirty (30) day period, and is
diligently pursuing such cure to completion); or
15.1.3 Tenant shall abandon the Premises and such
abandonment shall continue for a period of fourteen (14) consecutive days
during which Minimum Rent for the Premises has remained unpaid.
15.2 In the event of any default by Tenant, and without any
further notice or demand, Landlord shall have the right at Landlord's
election, then or at any time thereafter, to:
15.2.1 Terminate this Lease, which shall terminate
Tenant's right to the use, occupancy and possession of the Premises, and
Tenant shall immediately surrender possession of the Premises to Landlord; or
15.2.2 Re-enter and take possession of the Premises or any
part thereof as provided by law, in which event this Lease shall terminate
effective when Landlord takes possession; or
15.2.3 Continue this Lease in effect and enforce any or
all rights and remedies of Landlord under this Lease, including the right to
recover Minimum Rent, additional rent and charges equivalent to rent
(sometimes collectively referred to herein as "rent") as they become due
under this Lease, for so long as Landlord does not terminate Tenant's right
to possession of the Premises; or
15.2.4 Seek any legal or equitable relief permitted by law.
30
15.3 If Landlord terminates this Lease as provided in
subparagraphs 15.2.1 or 15.2.2 hereof, Landlord shall have the right to
recover from Tenant:
15.3.1 The worth, at the time of the award, of the unpaid
rent that had been earned at the time of termination of this Lease; and
15.3.2 The worth, at the time of the award, of the amount
by which the unpaid rent that would have been earned after the date of
termination of this Lease until the time of award exceeds the amount of the
loss of rent that Tenant proves could have been reasonably avoided; and
15.3.3 The worth, at the time of the award, of the amount
by which the unpaid rent for the balance of the term after the time of award
exceeds the amount of the loss of rent that Tenant proves could have been
reasonably avoided; and
15.3.4 Any other amount necessary to compensate Landlord
for all detriment proximately caused by Tenant's breach or which in the
ordinary course of things would be likely to result therefrom; such as, the
reasonable cost of recovering possession of the Premises, expenses of
reletting including reasonable attorney's fees and any real estate
commissions paid or payable, necessary repair, restoration, renovation, or
alteration of the Premises, and care and safekeeping of the Premises.
"The worth, at the time of the award," as used in
subparagraphs 15.3.1 and 15.3.2 of this Paragraph, is to be computed by
allowing interest at the Lease Interest Rate in effect when each installment
of rent referred to in said subparagraphs became payable. "The worth, at the
time of the award," as referred to in subparagraph 15.3.3 of this Paragraph,
is to be computed by discounting the amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of the award, plus one
percent (1%).
15.4 If Tenant shall breach this Lease and abandon the Premises,
this Lease shall continue in full force and effect for so long as Landlord
does not terminate Tenant's right to possession of the Premises, and Landlord
may enforce all of its rights and remedies under this Lease, including but
not limited to the right to recover rent and charges equivalent to rent as
they become due under this Lease. For the purposes of this Paragraph 15.4
and Paragraph 15.2, the following acts by Landlord shall not constitute a
termination of Tenant's right to possession of the Premises: (i) maintenance
or preservation of the Premises, (ii) efforts to relet the Premises, or (iii)
the appointment of a receiver upon initiative of Landlord to protect
Landlord's interest under the Lease.
15.5 In the event Landlord re-enters and takes possession of the
Premises, Landlord may at Landlord's option require Tenant to remove from the
Premises any of Tenant's property located therein. If Tenant fails to do so,
Landlord shall not be responsible for the care or safekeeping thereof and may
remove any of the same from the Premises and place the same in storage in a
public warehouse at the cost, expense and risk of Tenant with authority to
the warehouseman to sell the same in the event that Tenant shall fail to pay
the costs of transportation and storage, all in accordance with the rules and
regulations applicable to the operation of a public warehouseman's business.
Any refusal by a public warehouseman to accept personal property located in
the Premises upon such condition shall be conclusive evidence that the same
is of no substantial value, and shall be an unconditional warrant to Landlord
for disposing of the same in any manner Landlord may see fit, and without
accountability for any alleged value thereof. In addition, Landlord may, at
Land-
31
lord's election, dispose of said property pursuant to the provisions of
Sections 1980 through 1991 of the California Civil Code. In any and all such
cases of re-entry, Landlord may make any repairs in, to or upon the Premises
which may be necessary, desirable or convenient, and Tenant hereby waives any
and all claims for damages which may be caused or occasioned by such reentry
or any of the aforesaid acts of Landlord or by reason of any loss or
destruction or damage to any property in or about the Premises or any part
thereof.
15.6 Tenant further covenants and agrees that if Landlord fails
or neglects for any reason to take advantage of any of the terms hereof
provided for the termination of this Lease or for the termination or
forfeiture of the estate hereby leased, or if Landlord, having the right to
declare this Lease terminated or the estate hereby leased terminated or
forfeited, shall fail so to do, any such failure or neglect of Landlord shall
not be or be deemed or be construed to be a waiver of any provisions for the
termination of this Lease continuing to exist or for the termination or
forfeiture of the estate hereby leased subsequently arising, or as a waiver
of any of the covenants, terms or conditions of this Lease or of the prompt
performance thereof by Tenant. None of the covenants, terms or conditions of
this Lease can be waived by conduct of the parties or by estoppel; any claim
or waiver must be in writing and signed by the party entitled to the benefit
thereof.
ARTICLE XVI
SURRENDER OF PREMISES
16.1 Upon any termination of this Lease, whether by lapse of
time, cancellation pursuant to an election provided for herein, forfeiture,
or otherwise, Tenant shall immediately surrender possession of the Premises
and all buildings and improvements on the same (excepting those improvements
which Landlord shall have required Tenant to remove therefrom pursuant to
Paragraph 9.3 hereof) to Landlord in a clean and orderly condition and
appearance, state of repair and operating order, and with all such
improvements thereon in a good, safe, fully operable condition, and in full
compliance with all Federal, State and local laws, rules, regulations and
ordinances (including, without limitation, any laws, rules, regulations and
ordinances relating to Hazardous Materials) and each provision of this Lease,
including without limitation the provisions of Article IX hereof. If
possession is not immediately surrendered, Landlord may, with process of law,
enter the Premises and repossess the same and expel Tenant or any subtenant
or occupant therefrom. Landlord shall hold the Premises after any such
re-entry free of any right, privilege or estate of Tenant and without any
duty or obligation to Tenant in respect of any subsequent reletting or
disposition of the Premises. If Tenant's business operations on the Premises
or uses of the Premises involve any generation, storage, use, treatment or
disposal of any Hazardous Material, Tenant shall be responsible for removing
any such Hazardous Materials from the Premises and for decontaminating the
Premises and any neighboring properties affected by such Hazardous Materials.
16.2 Upon the termination of this Lease, Tenant, if not in
default hereunder at the time, shall have the right to remove, and if
directed so to do by Landlord shall remove, from the Premises, all of
Tenant's machinery, equipment (excluding building service equipment), trade
fixtures, signs, furniture, furnishings, supplies and inventory then
installed or in place in, on or about the Premises. Except as hereinafter
expressly set forth, such removal shall be completed prior to the expiration
or earlier termination of this Lease. Tenant shall make all repairs to the
Premises required because of such removal and Tenant shall surrender the
Premises to Landlord in good condition, reasonable
32
wear and tear which Tenant is not otherwise obligated to repair under this
Lease excepted. If this Lease shall terminate at any time other than the
time herein fixed as the expiration of the Lease Term, and occurring not due
to a default by Tenant, then Tenant, if not in default hereunder at the time,
shall have a reasonable time thereafter to effect the removal of the
foregoing items, not to exceed sixty (60) days.
16.3 If any of Tenant's machinery, equipment, trade fixtures,
signs, furniture, furnishings, supplies and inventory remain on the Premises
after the end of the term hereof or time allowed to remove the same, such
property shall be deemed abandoned by Tenant and it shall become the property
of Landlord without any claim therein of Tenant should Landlord so elect,
subject to the terms on any Landlord Lien Waiver Agreement executed by
Landlord.
16.4 Upon termination of this Lease, Tenant shall surrender the
Premises in a "broom-clean" condition, with all refuse and debris removed
therefrom, and with all electrical, plumbing, heating and air conditioning
installations in a good, safe and fully operable condition, and prior to such
termination, Tenant shall fill or repair any holes or openings made by Tenant
in the walls, roof or floor of the building, remove any protuberance, and
perform any maintenance or repairs required of Tenant by this Lease. Nothing
contained in this Paragraph 16.4 shall be deemed to limit Tenant's repair and
maintenance obligations pursuant to Article IX of this Lease. If directed so
to do by Landlord, Tenant shall also remove any improvements, additions or
alterations made to the Premises by Tenant (except for any Exempt Alterations
as described in Paragraph 9.1, above) and thereafter restore the Premises to
their original condition, even though such improvements by the terms of this
Lease become a part of the Premises and the property of Landlord.
ARTICLE XVII
DELAYS -- EXTENSIONS OF TIME
17.1 The time within which Landlord or Tenant is obligated herein
to construct, repair or rebuild any building, improvement or other structure
shall be extended and the performance excused when the delay is occasioned by
the other party (such as failure to promptly give required approvals, or
installation of machinery and equipment during construction which interferes
with or delays the contractor); or by strikes, threats of strikes or
lockouts; blackouts, war, threats of war, bombing, insurrection, riot or
invasion; acts of God, calamities, civil commotions, violent action of the
elements or fire; action, inaction or delayed action of any governmental
agency; regulations or laws of any national, state or local governmental
authority; unavailability of materials at reasonable prices, delays in
delivery of materials by suppliers or weather conditions which impair or
delay construction; or other matters or things, whether similar or dissimilar
to the foregoing, beyond the reasonable control of the obligated party.
Delayed action by a governmental agency shall be deemed to occur if a
building permit is not issued within forty-five (45) days after drawings,
specifications, and engineering calculations for such permit are filed for
plan check with such governmental agency.
ARTICLE XVIII
ATTORNEYS' FEES
18.1 In the event that either Landlord or Tenant brings any
action or proceeding against the other for possession of the Premises or for
the recovery of any sum due hereunder, or to interpret or enforce any
provision of this Lease or any rights of either party hereto, or because of
the breach of any covenant,
33
condition or provision hereof, or for any other relief against the other,
declaratory or otherwise, including appeals therefrom and whether being an
action based upon a tort or contract, then the prevailing party to this Lease
in any such proceeding shall be paid reasonable attorneys' fees and costs of
such action or proceeding including an allowance for reasonable attorneys'
fees for appeals and rehearings. Notwithstanding the provisions of
California Civil Code Section 1717, the term "prevailing party" as used
herein shall include, without limitation, both a party as to whom a lawsuit
is dismissed (with or without prejudice) without the written consent of that
party and, if the lawsuit is one for declaratory relief, that party whose
contentions are substantially upheld as to the interpretations of this Lease.
Any attorneys' fees payable pursuant to this Article may be claimed either
as court costs or in a separate suit. In addition to the foregoing award of
attorneys' fees to the prevailing party, the prevailing party in any such
lawsuit shall be entitled to its reasonable attorneys' fees incurred in any
post-judgment proceedings to collect or enforce the judgment. This provision
is separate and several and shall survive the merger of this Lease into any
judgment on this Lease. Should Landlord be made a party to any suit or
proceeding brought by a third party, arising by reason of Tenant's use or
occupancy of the Premises and not being a dispute essentially between
Landlord and Tenant, then Tenant shall defend Tenant and Landlord therein, at
Tenant's sole cost and expense, and shall hold Landlord free and harmless
from any claim loss, liability, duty or obligation therein, including any
reasonable attorneys' fees of Landlord.
18.2 At the election of either Landlord or Tenant, either party
shall have the right to have any dispute arising under this Lease heard by a
reference procedure pursuant to the provisions of California Code of Civil
Procedure Section 638 et seq., for a determination to be made which shall be
binding upon the parties as if tried before a court or jury. Notwithstanding
the foregoing, any action to recover possession of the Premises as a result
of a default by Tenant shall be brought and maintained pursuant to the
provisions of California Code of Civil Procedure Sections 1159 et seq., and
the provisions of this Paragraph 18.2 shall not apply to any such actions.
The parties agree specifically as to the following:
(a) Within seven (7) days after service of a demand by a party
hereto, the parties shall agree upon a single referee who shall then try
all issues, whether of fact or law, and then report a finding and judgment
thereon. If the parties are unable to agree upon a referee, either party
may seek to have one appointed, pursuant to California Code of Civil
Procedure Section 640, by the presiding judge of the Los Angeles County
Superior Court. The venue for any judicial reference heard pursuant to this
Paragraph 18.2 shall be Los Angeles County.
(b) The compensation of the referee shall be such charge as is
customarily charged by the referee for like services. The cost of such
proceeding shall initially be borne equally by the parties. However, the
prevailing party in such proceeding shall be entitled, in addition to all
other costs, to recover its contribution for the cost of the reference as
an item of damages and/or recoverable costs.
(c) If a reporter is requested by either party, then a reporter
shall be present at all proceedings, and the fees of such reporter shall
be borne by the party requesting such reporter. Such fees shall be an
item of recoverable costs. Only a party shall be authorized to request a
reporter.
(d) The referee shall apply all California Rules of Procedure and
Evidence and shall apply the substantive law of California in deciding
the issues to be heard. Notice of
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any motions before the referee shall be given, and all matters shall be set
at the convenience of the referee.
(e) The referee's decision under California Code of Civil
Procedure Section 644, shall stand as the judgment of the Court, subject to
appellate review as provided by the laws of the State of California.
(f) The parties agree that any such dispute shall be decided as
soon as practicably possible. The date of hearing for any proceeding
shall be determined by agreement of the parties and the referee, or if
the parties cannot agree, then by the referee, but in no event shall the
date of the hearing be later than one hundred twenty (120) days after the
date of the service or demand.
(g) The referee shall have the power to award damages and all other
relief in the event of a violation of any of the provisions of this Lease
which are to be resolved pursuant to this Paragraph 18.2.
ARTICLE XIX
TENANT'S ESTOPPEL CERTIFICATE
19.1 Tenant shall, at any time and from time to time during the
Lease Term (or any Extended Term), upon not less than fourteen (14) days'
prior written notice from Landlord, execute, acknowledge and deliver to
Landlord a written certificate substantially in the form attached hereto as
Exhibit E, certifying: (i) that this Lease represents the entire agreement
between Landlord and Tenant, and is unmodified and in full force and effect
(or, if modified, stating the nature of such modification and certifying that
this Lease, as so modified, is in full force and effect); (ii) the dates to
which Minimum Rent and other charges or additional rent have been paid in
advance, if any; (iii) the Commencement Date and Termination Date of the
Lease Term; (iv) whether Tenant has assigned, subleased or otherwise
transferred the Premises, this Lease or any interest of Tenant therein; (v)
the then-current amount of Minimum Rent and any Security Deposit paid by
Tenant to Landlord under this Lease; (vi) the date upon which, and the amount
or method by which, Minimum Rent, additional rent or other charges payable
under this Lease will next be adjusted or increased (if at all); (vii) that
there are no options to extend the term of this Lease, or if any such options
exist, describing any such options and stating the terms and conditions upon
which any such options may be exercised; (viii) that there are no rights of
first refusal to purchase the Premises or lease additional space contiguous
to the Premises, or if any such rights of first refusal exist, stating the
terms and conditions upon which the same may be exercised; (ix) that to the
best knowledge of Tenant there are not any uncured defaults on the part of
Landlord under this Lease, and that Tenant has no right of offset,
counterclaim or deduction against Minimum Rent or other payment obligations
of Tenant under this Lease, or specifying such defaults if any are claimed
together with the amount of any offset, counterclaim or deduction alleged by
Tenant; and (x) that Landlord has fully performed each and all of its
construction, repair and maintenance obligations (if any), as required under
this Lease, except as may be specifically set forth in said statement (if
applicable), and that Tenant, subject to any such stated exception(s),
accepts the Premises in their present condition.
19.2 In addition to the certificate required pursuant to
Paragraph 19.1, above, Landlord shall have the right to require Tenant to
execute a statement or certificate in a form requested by an existing or
potential purchaser, lender or other party which may acquire the Premises or
hold a security interest in the Premises (or the real property or Building of
which the
35
Premises are a part), so long as such receiving entity is in serious
negotiations with Landlord, or any other certificate or form as may be
requested by Landlord.
19.3 Any such certificate or statement referred to in this
Article XIX may be relied upon by any such existing or potential purchaser,
lender, other secured party, and Tenant's failure or refusal to execute and
deliver such statement within such time shall, at the option of Landlord,
constitute a default under this Lease.
19.4 If Landlord desires to finance, refinance, or sell all or
any portion of the real property of which the Building or the Premises are a
part, Tenant hereby agrees to deliver to any lender or purchaser identified
by Landlord as being in serious negotiations with Landlord, such financial
statements and other documents and instruments of Tenant as may be reasonably
required by any such lender or purchaser. If at the time Landlord requests
such financial statements, Tenant's stock is not traded on a public stock
exchange, Tenant may require that the recipients of such financial statements
execute a confidentiality agreement in substantially the same form as is
attached hereto as Exhibit H. Such statements shall include the last three
(3) years' financial statements of Tenant. All such financial statements and
other information shall be received by Landlord and any such lender or
purchaser in confidence, in accordance with the terms of such confidentiality
agreement.
19.5 Tenant acknowledges and agrees that Tenant's obligation to
provide such certificates or statements constitutes a material inducement to
Landlord to execute this Lease, and Tenant shall provide Landlord with such
certificates and statements within five (5) days following Tenant's receipt
of Landlord's written request therefor, but not more than once per year,
except for any year in which a sale or refinancing of the Premises is being
negotiated.
ARTICLE XX
RIGHTS RESERVED BY LANDLORD
20.1 Landlord expressly reserves all rights in and with respect
to the land hereby leased not inconsistent with Tenant's use of the Premises
as provided in this Lease, including (without in any way limiting the
generality of the foregoing) all rights to the subsurface of the land more
than five (5) feet below ground level, except where building improvements
extend more than five (5) feet below ground level; and all rights to the
airspace more than ten (10) feet above the roof of any building; and the
rights to enter upon the Premises upon prior written notice reasonably in
advance of such entry for itself for the purpose of installing, using,
maintaining, renewing and replacing such overhead or underground water, oil,
gas, sewer drainage, and other pipe lines, and telephone, electric, power,
television and other lines, cables and conduits as Landlord may deem
desirable in connection with the development or use of any other property in
the neighborhood of the Premises, whether owned by Landlord or not, all of
which pipelines, lines and conduits shall be buried to a sufficient depth or
raised to a sufficient height so as not to interfere with the use or
stability of the Premises. Landlord shall coordinate the time of such entry
and the conduct of any such activities on the Premises with Tenant so as to
minimize disruption to Tenant's ongoing business activities on the Premises.
ARTICLE XXI
COVENANT OF QUIET ENJOYMENT
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21.1 Landlord does hereby covenant, promise and agree to and with
Tenant that Tenant, for so long as it is not in default hereof and is in
compliance with all of the terms and conditions of this Lease, shall and may
at all times peaceable and quietly have, hold, use, occupy and possess the
Premises throughout the term of this Lease, subject to all of the terms and
conditions of this Lease, without any molestation or eviction by Landlord or
any persons claiming by or through Landlord.
ARTICLE XXII
RECORDATION
22.1 Neither this Lease nor a short form of memorandum of this
Lease shall be recorded in the office of any county recorder without
Landlord's express written consent. In the event of any such recordation by
Tenant, Tenant shall be solely responsible for any documentary transfer taxes
or other taxes relating to or arising out of such recordation.
ARTICLE XXIII
SUBORDINATION
23.1 Subject to Landlord's obtaining and providing to Tenant a
"non-disturbance agreement" as provided in Paragraph 23.2, below, this Lease
and Tenant's rights hereunder are and will remain subject and subordinate to
any ground lease, mortgage, deed of trust or any other hypothecation for
security now or hereafter placed upon the real property of which the Premises
are a part (the "Property"), and, again, subject to such non-disturbance
protection, to all increases, renewals, modifications, consolidations,
replacements, and extensions thereof (collectively referred to as the
"Mortgage"). If the holder of a Mortgage becomes the owner of the Property
by reason of foreclosure or acceptance of a deed in lieu of foreclosure, at
such holder's election Tenant will be bound to such holder or its
successor-in-interest under all terms and conditions of this Lease, and
Tenant will be deemed to have attorned to and recognized such holder or
successor as Landlord's successor-in-interest for the remainder of the Lease
Term or any extension thereof. The foregoing is self-operative and no further
instrument of subordination and/or attornment will be necessary unless
required by Landlord or the holder of a Mortgage, in which case Tenant will,
within ten (10) days after written request, execute and deliver without
charge any documents reasonably required by Landlord or such holder in order
to confirm the subordination and attornment set forth above. Should the
holder of a Mortgage request that this Lease and Tenant's rights hereunder be
made superior, rather than subordinate, to the Mortgage, then Tenant will,
within ten (10) days after written request, execute and deliver without
charge such agreement as may be reasonably required by such holder in order
to effectuate and evidence such superiority of the Lease to the Mortgage.
23.2 If Tenant fails to execute and deliver any documents as and
when required above, such failure will constitute a default under this Lease,
entitling Landlord to the same rights and remedies as if such default were
with respect to non-payment of Minimum Rent. With respect to each Mortgage
that may encumber the Property at or after the commencement of the Lease
Term, Landlord agrees that promptly following its receipt of written request
by Tenant, Landlord will request the holder of the Mortgage, at Landlord's
expense, to grant Tenant a "non-disturbance agreement," in the usual form
used by such holder. The term "non-disturbance agreement" as used herein
means, in general, an agreement that as long as Tenant is not in default
under this Lease, this Lease will not be terminated if such holder acquires
title to the Property by reason of foreclosure proceedings or acceptance of a
deed in lieu of foreclosure, provided that Tenant
37
attorns to such holder in accordance with such holder's requirements.
ARTICLE XXIV
SECURITY DEPOSIT
24.1 As security for the faithful performance of the terms,
covenants, conditions and provisions of this Lease, as well as to indemnify
Landlord from any damages, costs, expenses, real estate brokerage commissions
or attorneys' fees which Landlord may incur or suffer by reason of any
default by Tenant, Tenant hereby agrees to deposit with Landlord, upon
execution of this Lease, the sum set forth in Item 1.10 of the Basic Lease
Provisions. Landlord shall not be required to keep said deposit separate
from its general accounts. No interest shall be paid by Landlord to Tenant
on said deposit, and no trust relationship is created between Landlord and
Tenant with respect to the security deposit.
24.2 In the event Tenant shall be in default hereof at any time
prior to the end of the term hereof, then Landlord may apply all or any
portion of the security deposit in payment of Landlord's costs, expenses,
damages, real estate broker's commissions, and attorneys' fees in enforcing
the terms, covenants, conditions and provisions hereof. Nothing herein
contained shall be construed to mean that the recovery of damages by Landlord
against Tenant shall be limited to the sum of the security deposit. In the
event any portion or all of the security deposit is applied by Landlord in
accordance with the foregoing, then Tenant shall immediately deposit with
Landlord additional sums so that the security deposit in the hands of
Landlord shall be at all times not less than the sum of the deposit herein
provided for.
24.3 Should the Lease Term and the occupancy of the Premises by
Tenant fail to commence through no fault of Tenant, then Landlord shall
return the security deposit and any prepaid rent then possessed by Landlord
to Tenant within thirty (30) days after such event occurs. If this Lease
should terminate for any reason other than the default of Tenant, Landlord
shall return the security deposit to Tenant promptly after Landlord's
inspection of the Premises and confirmation that the Premises are surrendered
in the condition as required under the terms of this Lease.
ARTICLE XXV
HOLDING OVER
25.1 If Tenant remains in possession of the Premises after the
expiration of the Lease Term or any extension or renewal hereof, such holding
over shall not operate to extend or renew this Lease but shall be construed
as a tenancy from month-to-month which may be terminated by Landlord upon
three (3) days' prior written notice if Tenant is then in default of this
Lease, or by either party upon at least thirty (30) days' prior written
notice directed to the end of a calendar month. Such month-to-month tenancy
by Tenant shall be subject to all the terms and provisions of this Lease,
except that the Minimum Rent payable during the period of holding over shall
be one hundred twenty-five percent (125%) of the average monthly Minimum Rent
payable by Tenant during the last twelve (12) months of the Lease Term or any
extension or renewal thereof. Notwithstanding the foregoing, if Landlord
notifies Tenant, in writing, that Landlord is in serious negotiations with
another tenant for the Premises, then commencing the first day of the month
following the month in which such notice is delivered to Landlord, Minimum
Rent for such holdover period shall be one hundred fifty percent (150%) of
the average monthly Minimum Rent payable by Tenant during the last twelve
(12) months of the Lease Term or any extension or renewal
38
thereof. Any options, rights, or privileges granted to Tenant, if any, to
extend the Lease Term, to acquire the Premises, or re-lease the same, shall
not be applicable during said period of holding over.
ARTICLE XXVI
GENERAL
26.1 REMEDIES CUMULATIVE. The specific remedies to which
Landlord may resort under the terms of this Lease are cumulative and are not
intended to be exclusive of any other remedies or means of redress to which
Landlord may be lawfully entitled in case of any breach or threatened breach
by Tenant of any provision of this Lease.
26.2 SUCCESSORS AND ASSIGNS. The covenants and agreements herein
contained shall bind and inure to the benefit of Landlord, its successors and
assigns, and Tenant, its successors and assigns, subject to the provisions of
this Lease.
26.3 PAYMENTS AND INTEREST. Except as otherwise specifically
provided in this Lease, each covenant, agreement or stipulation by a party
hereto shall be performed at such party's own cost and expense, and without
cost or expense to the other party. Any monetary obligations due from Tenant
to Landlord which are not paid when due shall bear interest from the due date
until paid to Landlord at the Lease Interest Rate. Such interest shall be
paid at the time of payment of the principal obligation as a condition of
remedy of such principal obligation. Any check tendered by Tenant which is
dishonored by the drawee bank shall not constitute payment of any obligation
under this Lease.
26.4 LATE CHARGE. Tenant acknowledges that late payment of
Minimum Rent and items designated in this Lease as additional rent will cause
Landlord to incur costs and suffer damages not contemplated by this Lease,
the exact amount of which will be impracticable to ascertain. Such costs and
damages include, but are not limited to, late charges which may be imposed on
Landlord by the terms of any trust deed covering the Premises; additional
administrative duties of Landlord's personnel in determining delinquent rents
and attempts to collect such rents by reasonable means other than litigation;
additional accounting and budgetary duties of Landlord's personnel; possible
adverse effects on Landlord's credit rating resulting from impairment of
Landlord's cash flow; and attorneys' fees resulting from consultations with
counsel. Accordingly, if any installment of Minimum Rent or items designated
as additional rent are not received by Landlord within ten (10) days after
receipt of written notice that the same are due, Tenant shall pay Landlord,
as additional rent, a late charge equal to five percent (5%) of such overdue
amount. Landlord and Tenant agree that such late charge represents a fair,
equitable, and reasonable estimate of the costs and damages Landlord will
incur because of Tenant's late payment.
26.5 LATE PAYMENTS. In the event that a late charge is payable
pursuant to Paragraph 26.4, whether or not collected, for two (2) consecutive
installments of rent, then rent shall automatically become due and payable
quarterly in advance for the next twelve (12) months, rather than monthly,
notwithstanding Paragraph 4.1 or any other provision of this Lease to the
contrary. All monies paid to Landlord under this Paragraph may be
intermingled with other monies of Landlord and shall not bear interest. All
advance payments provided for in this Paragraph shall be deemed rent under
this Lease.
26.6 NOTICES. Any notice or demand required or permitted by law
or by any of the provisions of this Lease shall be in writing. All notices
or demands by either party shall be
39
deemed to have been properly given upon delivery when served personally; two
(2) business days after being deposited with the U.S. Postal Service when
sent by registered or certified mail, postage prepaid; or by noon on the
business day following the day of deposit with an overnight express-carrier
when sent by overnight express service, such as Federal Express. Notices
from Landlord to Tenant shall be given to Tenant at the address of the
Premises. Notices or demands to Landlord shall be given to Landlord at 22010
Wilmington Avenue, Suite 400, Carson, California 90745. Either party hereto
may change the place to which notices are to be given by advising the other
party in writing.
26.7 CAPTIONS. The headings or captions of Articles in this
Lease are for convenience and reference only, and they in no way define,
limit or describe the scope or intent of this Lease or the provisions of such
Articles.
26.8 PRONOUNS AND SINGULAR/PLURAL. Feminine or neuter pronouns
shall be substituted for those masculine form or vice versa, and the plural
shall be substituted for the singular number of vice versa, in the place or
places herein where the context may require such substitution or
substitutions.
26.9 TIME OF ESSENCE. Time is hereby declared to be of the
essence of this Lease and of each and every scheduled monetary or material
non-monetary covenant, term, condition or provision hereof.
26.10 REASONABLE CONSENT. Except for determinations expressly
described as being in the "absolute discretion" of the applicable party, or
for which this Lease otherwise establishes express standards, neither
Landlord nor Tenant shall unreasonably withhold or delay any consent,
approval or other determination provided for hereunder, and determinations
subject to absolute discretion shall not be unreasonably delayed. In the
event that either Landlord or Tenant disagrees with any determination made by
the other hereunder (other than a determination in the absolute discretion of
the determining party) and reasonably requests the reasons for such
determination, the determining party shall furnish its reasons in writing and
in reasonable detail within three (3) business days following such request.
Furthermore, in addition to the foregoing, whenever the Lease grants Landlord
or Tenant the right to take action, exercise discretion, establish rules and
regulations, make allocations or other determinations, or otherwise exercise
rights or fulfill obligations, Landlord and Tenant shall act reasonably and
in good faith and take no action which might result in the frustration of the
reasonable expectations of a sophisticated landlord and sophisticated tenant
concerning the benefits to be enjoyed under this Lease. Landlord shall
exercise its rights and perform its obligations hereunder, in such a way as
to reasonably minimize any resulting interference with Tenant's use of the
Premises, and Tenant shall exercise its rights and perform its obligations
hereunder, and otherwise operate the Premises, except as provided under this
Lease, in such a way as to reasonably minimize any resulting interference
with Landlord's obligations.
26.11 FAIR MEANING. The language in all parts of this Lease shall
be in all cases construed as a whole according to its fair meaning, and not
strictly for nor against either Landlord or Tenant.
26.12 ENTIRE AGREEMENT. This Lease contains all of the agreements
of the parties hereto with respect to any matter covered or mentioned in this
Lease, and no prior agreement or understanding pertaining to any such matter
shall be effective for any purpose. No provision of this Lease may be
amended or added to except by an agreement in writing signed by the parties
hereto or their respective successors in interest.
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26.13 NO ACCORD AND SATISFACTION. No payment by Tenant or receipt
by Landlord of a lesser amount than that stipulated herein for Minimum Rent,
additional rent or any other charge shall be deemed to be other than on
account of the earliest stipulated Minimum Rent, additional rent or other
charge then due, nor shall any endorsement or statement on a check or letter
accompanying any check or payment be deemed an accord and satisfaction, and
Landlord may accept such check or payment without prejudice to rights to
recover the balance of such Minimum Rent, additional rent, or other charges
or pursue any other remedy in this Lease, at law or in equity.
26.14 CHOICE OF LAW. This Lease shall be governed by and
construed pursuant to the laws of the State of California.
26.15 NON-DISCRIMINATION. Tenant herein covenants by and for
itself, its heirs, executors, administrators and assigns, and all persons
claiming under or through it; and this Lease is made and accepted upon and
subject to the following conditions: That there shall be no discrimination
against or segregation of any person or group of persons, on account of race,
color, creed, national origin, or ancestry in the leasing, subleasing,
transferring, use, occupancy, tenure or enjoyment of the Premises, nor shall
the Tenant itself, or any person claiming under or through it, establish or
permit any such practice or practices of discrimination or segregation with
reference to the selection, location, number, use or occupancy of Tenant's
lessees, sublessees or vendees on the Premises.
26.16 COUNTERPARTS. This Lease may be executed in several
counterparts, each of which shall constitute an original.
26.17 CORPORATE RESOLUTION. Tenant shall deliver to Landlord,
contemporaneously with delivery of this Lease executed by Tenant, a certified
copy of a resolution of Tenant's Board of Directors authorizing the execution
of this Lease and naming the representatives authorized to execute this Lease
on behalf of Tenant.
26.18 REIMBURSEMENTS TO LANDLORD. If Tenant, or any third party
on behalf of Tenant or with whom Tenant is engaged or contemplates engaging
in business, requests that Landlord review or approve any drawings,
specifications or engineering calculations respecting any improvements Tenant
intends to install in the Premises or execute any agreement or written
instrument; and if Landlord refers such matter to any architect, engineer,
surveyor or other professional or administrative personnel of Landlord or to
legal counsel for review and advice to Landlord, then Tenant agrees to
reimburse Landlord as additional rent for all professional fees and costs
incurred by Landlord at the actual cost thereof for persons not in the direct
employ of Landlord, and at the rate of Fifty Dollars ($50.00) per hour for
all time spent by professional and administrative persons in the direct
employ of Landlord. Notwithstanding the foregoing, Tenant shall not be
responsible for reimbursing Landlord for any such fees or costs relating to
the installation of any of Tenant's improvements which occurs prior to the
expiration of the sixth (6th) month of the Lease Term. If Tenant requests
that Landlord consent to an assumption and/or assignment of this Lease or a
subletting of the Premises to a third party for which Landlord's written
consent is required, Tenant agrees to reimburse Landlord, as additional rent,
for all time spent by Landlord's administrative and professional personnel,
in reviewing the proposed form of all legal documents submitted by Tenant and
preparing necessary additional legal documents, in evaluating the
investigating the credit worthiness of the proposed assignee or subtenant, in
inspecting the Premises to determine if the same is in the condition and
state of repair as required by this Lease, in reviewing drawings and
specifications for any additional improvements to be made to the Premises,
and for any other action
41
required in the reasonable judgment of Landlord. Landlord shall be
reimbursed at the rate of Fifty Dollars ($50.00) per hour for the time spent
by its administrative and professional personnel, and at the actual and
reasonable cost of professional fees and costs incurred by Landlord for
persons not in the direct employ of Landlord, for each such request made by
Tenant. The hourly fee payable to Landlord's administrative and professional
personnel under this Paragraph shall be increased by the percentage increase
in the Consumer Price Index ("all items" index for urban wage earners and
clerical workers, Los Angeles/Anaheim/Riverside area, 1982-84=100) on each
anniversary date of the commencement of the term of this Lease.
26.19 NO GUARD SERVICE. Tenant hereby acknowledges that the rent
payable to Landlord hereunder does not include the cost of guard service or
other security measures, and that Landlord shall have no obligation
whatsoever to provide any such service or measures. Tenant assumes all
responsibility for the protection of Tenant, its agents and invitees from
acts of third parties.
26.20 BROKERS. Tenant acknowledges its understanding that
Landlord shall pay all brokerage commissions owing to CB Commercial Realty
Group, Inc. ("Broker") in connection with the transaction contemplated by
this Lease pursuant to a separate agreement. Landlord and Tenant each
represent and warrant to the other that other than the Broker, no broker,
agent, or finder negotiated or was instrumental in negotiating or
consummating this Lease on its behalf and that it knows of no broker, agent,
or finder, other than the Broker, who is, or might be, entitled to a
commission or compensation in connection with this Lease. In the event of
any such claims for additional brokers' or finders' fees or commissions in
connection with the negotiation, execution or consummation of this Lease,
then Landlord shall indemnify, save harmless and defend Tenant from and
against such claims if they shall be based upon any statement, representation
or agreement by Landlord, and Tenant shall indemnify, save harmless and
defend Landlord if such claims shall be based upon any statement,
representation or agreement made by Tenant.
26.21 BROKERAGE COMMISSION. Tenant acknowledges its understanding
that Landlord has paid a real estate brokerage commission for securing
Tenant's tenancy at the Premises for the term of this Lease. If Tenant
defaults under this Lease and discontinues paying the rent specified herein,
Tenant shall, within thirty (30) days of such event, reimburse Landlord for
the unamortized portion of such brokerage commission pursuant to the
following formula:
Total amount of Number of months of
brokerage commission x unexpired lease term.
- ------------------------------------------------------------
Number of months of lease term
Notwithstanding the foregoing, Landlord shall not be entitled to recover such
unamortized portions of the brokerage commission as provided in this
Paragraph 26.21 if, following an uncured default under this Lease by Tenant,
either (a) Landlord elects to pursue its remedy against Tenant pursuant to
California Civil Code Section 1951.4, or (b) Landlord recovers the discounted
present value of all rent payable for the entire term of the Lease pursuant
to California Civil Code Section 1951.2. To the extent Landlord recovers the
discounted present value of some, but not all, of the rent payable following
the termination of this Lease resulting from Tenant's default, the number of
months of such rent so recovered by Landlord shall be subtracted from the
"number of months of unexpired lease term" in the formula set forth above.
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26.22 LIMITATION OF LIABILITY. Tenant hereby agrees that, in the
event of any actual or alleged failure, breach or default hereunder by
Landlord, Tenant's sole and exclusive remedy shall be against and shall be
satisfied from the Landlord's equity interest in the Premises. This
limitation shall not apply to any tort liability of Landlord to Tenant.
Tenant agrees that the obligations of Landlord under this Lease do not
constitute personal obligations of the individual directors, officers or
shareholders of Landlord, and Tenant shall not seek recourse against the
individual directors, officers or shareholders of Landlord or any of their
personal assets for satisfaction of any liability with respect to this Lease.
Notwithstanding the foregoing, in the event Landlord places any mortgages or
deeds of trust (collectively, "encumbrances") against the Premises in an
aggregate amount of greater than eighty percent (80%) of the fair market
value of the Premises, Tenant shall be entitled to proceed against the
general assets of Landlord (but not any director, officer or shareholder of
Landlord) to the extent of the amount by which the encumbrances exceed eighty
percent (80%) of the fair market value of the Premises.
26.23 PARKING. Tenant shall instruct and require that Tenant's
employees, agents, visitors and business invitees park motor vehicles within
the parking areas included on the Premises; and such employees, agents,
visitors and invitees shall not park on the streets within the Watson
Industrial Center. If there is insufficient parking area included on the
Premises for parking of such motor vehicles, Tenant shall use its best
efforts to obtain off-street parking privileges on other properties in the
vicinity of the Premises.
26.24 LEASE REVIEWED. Landlord and Tenant have carefully read and
reviewed this Lease and each term and provision contained herein, and each of
them has referred this Lease to its own legal counsel for review and advice
as to the legal consequences of this Lease. Landlord and Tenant acknowledge
their informed and voluntary consent thereto. Landlord and Tenant further
agree that, at the time this Lease is executed, the terms of this Lease are
commercially reasonable and effectuate the intent and purpose of Landlord and
Tenant with respect to the Premises.
26.25 FINANCIAL STATEMENTS. As a material inducement to
Landlord's execution of this Lease, Tenant hereby represents and warrants
that Tenant has furnished to Landlord the most current audited financial
statements of Tenant prepared in accordance with generally accepted
accounting principles in a manner consistently applied in each case.
Throughout the Lease Term, Tenant shall, within ten (10) days following
Landlord's request, provide Landlord with Tenant's then-current financial
statements. Landlord shall maintain such financial statements in confidence,
except for disclosure to prospective purchasers of the Premises and
prospective lenders who are in serious negotiations with Landlord and whose
loans would be secured in whole or in part by this Lease or the Premises. If
at the time Landlord requests such financial statements, Tenant's stock is
not traded on a public stock exchange, Tenant may require that the recipients
of such financial statements execute a confidentiality agreement in
substantially the same form as is attached hereto as Exhibit H.
26.26 LEASE INTEREST RATE. As used in this Lease, the "Lease
Interest Rate" shall be a rate equal to two percent (2%) per year in excess
of the "Reference Rate" most recently announced by Bank of America, Los
Angeles from time to time, provided however that if Bank of America ceases to
announce such Reference Rate, then such rate shall be a rate comparable to
such Reference Rate; and provided further, however, that in no event shall
the Lease Interest Rate exceed the highest lawful rate of interest
permissible by law.
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26.27 TENANT'S SELF-INSURANCE. So long as the tenant under this
Lease is Leiner Health Products Inc., Tenant shall be entitled to self-insure
for business interruption losses and losses to Tenant's personal property,
but in no event shall Tenant be permitted to self-insure for general
liability risks for property insurance for the Premises. Any self-insurance
shall be deemed to contain all of the terms and conditions applicable to such
insurance as required in Article VIII including, without limitation, a full
waiver of subrogation. If Tenant elects to so self-insure, then with respect
to any claims which may result from incidents occurring during the Term, such
self-insurance obligations shall survive the expiration or earlier
termination of this Lease to the same extent as the insurance required would
survive.
26.28 LANDLORD BANKRUPTCY PROCEEDING. If ownership of the
Premises has been conveyed to a person other than: (a) a lender pursuant to
foreclosure of acceptance of a deed in lieu of foreclosure; (b) an
institutional owner, such as a pension trust fund, life insurance company or
commercial bank; or (c) a non-institutional owner headquartered in the state
of California, then in the event that the obligations of Landlord under this
Lease are not performed during the pendency of a bankruptcy or insolvency
proceeding involving the Landlord as the debtor, or following the rejection
of this Lease in accordance with Section 365 of the United States Bankruptcy
Code and the election of the Tenant to remain the possession of the Premises
in a bankruptcy or insolvency proceeding involving the Landlord as the
debtor, then notwithstanding any provision of this Lease to the contrary,
Tenant shall have the right to set off against Rents next due and owing under
this Lease (i) any and all damages that it demonstrates to the Bankruptcy
Court were caused by such nonperformance of the Landlord's obligation under
this Lease by Landlord, debtor-in-possession, or the bankruptcy trustee, and
(ii) any and all damages caused by the nonperformance of Landlord's
obligations under this Lease following any rejection of this Lease in
accordance with Section 365 of the United States Bankruptcy Code.
26.29 WAIVER OF REDEMPTION BY TENANT; HOLDING OVER. Tenant hereby
waives for Tenant and all those claiming under Tenant any right now or
hereafter existing to redeem the Premises after termination of Tenant's right
of occupancy by order or judgment of any court or by any legal process or
writ pursuant to the California Code of Civil Procedure Section 729.010
through 729.090, but nothing in this Lease shall be deemed to constitute
Tenant's waiver of its right to petition for relief from a forfeiture
pursuant to California Code of Civil Procedure Section 1179 or California
Civil Code Section 3275.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as
of the day and year first above written.
"LANDLORD" "TENANT"
WATSON LAND COMPANY, LEINER HEALTH PRODUCTS INC.,
a California corporation a Delaware corporation
By: By: /s/ Giffen H. Ott
----------------------- --------------------------
Its: Its: Vice President
------------------
By: /s/ Kevin J. Lanigan
--------------------------
Its: Executive V.P./C.O.O.
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