EXHIBIT 10.2
SINGLE TENANT INDUSTRIAL LEASE
THIS SINGLE TENANT INDUSTRIAL LEASE ("Lease") is made and entered into as
of September 1, 1997 by and between Watson Land Company, a California
corporation ("Landlord") and Coastcast Corporation, a California 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: 3025 East Victoria Street, Rancho
Dominguez, California.
1.3 APPROXIMATE BUILDING SQUARE FOOTAGE: 120,000 square feet.
1.4 LEASE TERM: Six (6) years and two (2) months beginning on September
1, 1997 (the "Commencement Date") and ending on October 31, 2003 (the
"Termination Date").
1.5 EXTENSION OPTION: One (1) single period of five (5) years.
1.6 INITIAL MINIMUM RENT: Forty-One Thousand Ninety-Four and 92/100ths
Dollars ($41,094.92).
1.7 PERIODIC RENT ADJUSTMENTS: See Paragraphs 3 and 4 of the attached
Lease Rider.
1.8 ANNUAL TAX BASE AMOUNT: Twenty-Eight Thousand One Hundred Fifty-Eight
and 98/100ths Dollars ($28,158.98).
1.9 ANNUAL INSURANCE BASE AMOUNT: Twenty-Three Thousand Four Hundred
Dollars ($23,400.00).
1.10 INITIAL SECURITY DEPOSIT: Forty-One Thousand Nine-Four and 92/100ths
Dollars ($41,094.92).
1.11 BROKERS: None.
1.12 INITIAL IMPROVEMENT WORK: See Paragraph 1 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 - List of Permitted Materials
Exhibit G - Initial Improvement Work
Exhibit H - Insurance Summary
Lease Rider Number 1
1.14 MAILING ADDRESSES:
Landlord: Watson Land Company
22010 Wilmington Avenue, Suite 400
Carson, California 90745
Tenant: Coastcast Corporation
3025 East Victoria Street
Rancho Dominguez, California 90224
ARTICLE II
CONDITION OF PREMISES
2.1 Tenant acknowledges that Tenant has been in occupancy of the Premises
since November 1, 1988 pursuant to a Lease dated June 20, 1988 (the "Existing
Lease"), and that Tenant is familiar with the condition of the Premises,
including, without limitation, the parking serving the Premises. Tenant
acknowledges that prior to the execution of this Lease, Tenant has been
furnished full access to, and has inspected the Premises. Tenant accepts the
Premises in its present condition, state of repair and operating order and in
present "AS IS" condition. Tenant further acknowledges that neither Landlord
nor any real estate agent or broker representing Landlord or Tenant has made any
representation or warranty as to the present or future suitability of the
Premises, or the parking serving the Premises, for the conduct of Tenant's
business. Landlord and Tenant acknowledge and agree that they have had
discussions and disagreements in the past relating to the parking serving the
Premises. By entering into this Lease, Landlord and Tenant intend to settle
their disagreements relating to the parking serving the Premises and Tenant
agrees that it is waiving and any and all claims against Landlord relating in
any way to the adequacy, sufficiency or availability of parking serving the
Premises and any impact the such parking may have, now or in the future, on
Tenant's business operations on the Premises and on any existing or desired
improvements or alterations on or affecting the Premises. Tenant has advised
Landlord that Tenant has entered into an agreement with an adjacent property
owner to provide additional parking to serve the Premises. The Minimum Rent
established in this Lease has taken into account costs to be incurred by Tenant
for such additional parking, and Landlord shall have no responsibility to
provide or pay for any additional parking for the Premises. Tenant specifically
acknowledges that, except as provided in this Paragraph 2.1, Landlord makes no
representation or warranty with respect to any 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 or
Tenant's use of the Premises, and Tenant shall be responsible for determining
the suitability and conformity of the Premises with respect to such Codes.
Landlord hereby represents to Tenant that, to the current actual knowledge of
Landlord as of the date of this Lease: (i) the Premises has not been cited or
found to be in violation of any Codes currently applicable to the Premises; and
(ii) except for Code requirements relating to parking, Landlord has no current
actual knowledge of any non-compliance of the Premises with any Codes currently
applicable to the Premises. Tenant hereby represents to Landlord that, to the
current actual knowledge of Tenant as of the date of this Lease: (i) the
Premises has not been cited or found to be in violation of any Codes currently
applicable to the Premises; and (ii) except for Code requirements relating to
parking and relating to items which are the responsibility of Tenant pursuant to
items (a) through (d), below, Tenant has no current actual knowledge of any
non-compliance of the Premises with any Codes currently applicable to the
Premises. Tenant shall, at its sole cost and expense, be responsible for any
Code compliance or other requirements arising out of or triggered or imposed as
a result of: (a) the construction by Tenant of any improvements on the Premises
during Tenant's occupancy of the Premises (including, without limitation, any
occupancy under the Existing Lease); (b) the fact that the number of parking
spaces located on the Premises may not comply with applicable zoning ordinances
or other Code requirements; (c) Tenant's specific use, activities or operations
on the Premises; or (d) Tenant's obligations under the provisions of Paragraph
2.2, below. However, in the event of the imposition of any Code compliance
requirement which is the Tenant's responsibility pursuant to the preceding
sentence, Tenant may, at its election, either: (1) undertake the work or
modifications to the Premises as is necessary to comply with any such Code
requirement; or (2) remove from the Premises any improvement or alteration made
to the Premises by Tenant if such removal will satisfy the Code compliance
requirement in question. In the event that modifications or improvements to the
Premises are required as a result of a Code requirement of general application
to the Premises which is not specifically identified as being the obligation of
Tenant as provided in this Paragraph 2.1 or as the obligation of Landlord as
provided in Paragraph 2.2, below, and the cost of such modifications or
improvements is in excess of Two Thousand Five Hundred Dollars ($2,500.00)
("Code Modifications"), then Landlord shall perform the necessary Code
Modifications and Tenant shall be responsible for paying its "Monthly Prorata
Share" (as defined herein) of the cost of any such Code Modifications. If the
cost of such Code Modifications is less than Two Thousand Five Hundred Dollars
($2,500.00) such costs shall be paid by Tenant. Tenant's "Monthly Prorata
Share" of the cost of any such Code Modifications shall be determined by
dividing the cost of such Code Modifications by the number of months of the
estimated useful life of such Code Modifications (as mutually agreed upon by
Landlord and Tenant, acting reasonably and in good faith), and Tenant shall pay
the resulting amount (referred to herein as Tenant's "Monthly Prorata Share")
monthly, as additional rent, for each month of the Lease Term (and any Extended
Term) remaining after the completion of such Code Modifications. If Landlord
and Tenant are unable to mutually agree upon the estimated useful life of any
such Code Modification, the determination of such estimated useful life shall be
determined by a reference procedure pursuant to the provisions of California
Code of Civil Procedure Section 638 ET SEQ., which shall be binding upon the
parties as if tried before a court or jury. Within five (5) business days after
service of a demand by a party hereto, the parties shall agree upon a single
referee who shall review evidence submitted by the parties 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 such judicial reference shall be Los
Angeles County. 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 be borne equally by the parties. However, the prevailing
party in such proceeding shall be entitled to recover its contribution for the
cost of the reference as an item of recoverable costs. 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.
2.2 Landlord agrees that it shall promptly cause the ingress and egress to
the entrances of the Building 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 manufacturing and
distribution facility. Landlord's responsibility for the cost of bringing the
ingress and egress to the entrances of the Building into compliance with such
requirements shall not exceed Twenty Thousand Dollars ($20,000.00). If such
costs exceed Twenty Thousand Dollars ($20,000.00), Tenant shall pay such excess
to Landlord within thirty (30) days following receipt of Landlord's invoice for
such excess costs. Except as specifically provided above, 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. In the event Landlord is required at any time during the term of this
Lease under applicable Codes to perform seismic retrofit work for the Building,
such seismic retrofit work shall be performed by Landlord at Landlord's expense.
Tenant agrees to cooperate with Landlord as is reasonably necessary to
facilitate any such ADA compliance work or seismic retrofit work.
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. Effective upon the Commencement Date, this
Lease shall supersede the Existing Lease and the term of the Existing Lease
shall be deemed to have terminated as of the Commencement Date.
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, 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. Concurrently with the
execution and delivery of this Lease, Tenant shall deliver to Landlord an
additional rent payment in the amount of Two Hundred Fifty-Nine Thousand Four
Hundred Eighty-One and 17/100ths Dollars ($259,481.17), representing a
negotiated settlement amount for rent payable under the Existing Lease. 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 seven (7) days after
receipt of Landlord's invoice therefor, but in no event later than ten (10) days
before the delinquency date for payment of such taxes and assessments. Landlord
agrees, in turn, to promptly pay such taxes and assessments to the appropriate
taxing authority. If any lender whose loan is secured in whole or in part by a
lien upon the Premises ("Landlord's Lender") requires Landlord to impound real
estate taxes and/or assessments on a periodic basis, then Tenant agrees, upon
receipt of written notice from Landlord, to pay to Landlord on a periodic basis
the sum required to satisfy the tax impound requirement of Landlord's Lender.
Landlord shall impound the tax payments received from Tenant in accordance with
the requirements of Landlord's Lender.
5.3 Tenant shall pay prior to delinquency all taxes assessed against and
levied upon trade fixtures, furnishings, equipment and all other personal
property of Tenant contained in the Premises or elsewhere. Whenever possible,
Tenant shall cause said trade fixtures, furnishings, equipment and all other
personal property to be assessed and billed separately from the real property of
Landlord. If any of Tenant's said personal property shall be assessed with
Landlord's real property, Tenant shall pay to Landlord the taxes attributable to
Tenant within ten (10) days after receipt of a written statement from Landlord
setting forth the taxes applicable to Tenant's property.
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. 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 as a result of a transfer, either
partial or total, of Landlord's interest in the Premises or which is added to a
tax or charge previously included within the definition of real property tax by
reason of such transfer; or (v) which is imposed by reasons of this transaction,
any modifications or changes hereto, or any transfers hereof.
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, water, 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 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.
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 hereby
releases 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 solely from
the gross negligence or willful misconduct of Landlord.
ARTICLE VIII
INSURANCE
8.1 Landlord shall, throughout the Lease Term, keep all buildings and
improvements which may from time to time be upon or a part of the Premises (but
not Tenant's personal property, fixtures or equipment) insured against all risks
(as the term "all risk" is used in the insurance industry), and against
earthquake and flood risks, in such form and with such policy limits as Landlord
may determine from time to time, so as to provide adequate 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 which becomes commercially unreasonable
for landlords to carry, in the Southern California insurance marketplace. In
the event of any insured loss, Tenant shall be liable to Landlord for any
deductible (Exhibit H) or coinsurance amount claimed by the insurance carrier.
Landlord shall also obtain and maintain "rental value insurance" covering one
year's rent (Minimum Rent, real estate taxes, insurance premiums and landscape
maintenance charges) payable under this Lease. 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 this Paragraph 8.1
exceed 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 fiften (15)
days after receipt by Tenant of Landlord's statement of the cost thereof. In
the insurance policy year in which the Lease Term shall commence and in the
insurance 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.
If Landlord's Lender requires the impounding of insurance premiums on a periodic
basis, Tenant shall pay the cost thereof to Landlord on a periodic basis as
required by Landlord's Lender. Such insurance shall have attached thereto such
form of lender's loss payable endorsement as Landlord's Lender may require.
8.2 Landlord and Tenant agree that if the building and improvements at any
time forming a part of the Premises 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.
8.3 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 Umbrella 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. The limits of said policies shall not limit the liability of Tenant
under 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.
8.4 All of the insurance provided by Tenant under this Article VIII and
all renewals thereof shall be issued by such good, responsible and standard
companies rated at least A:Class XII in the current edition of Best's Insurance
Guide, and authorized to do business in California. The policy or policies of
insurance provided for in Paragraph 8.1 hereof shall be payable to Landlord, 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 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 canceled or altered 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, Tenant shall reproduce and forward to Landlord a true copy of any
insurance policy described in this Lease and obtained by Tenant. Tenant shall
obtain such fire insurance and other insurance on Tenant's machinery, fixtures,
furniture and other property, real or personal, 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, exterior walls,
exterior paint, roof, asphalt paving and concrete paving of the Premises at its
own cost and expense, provided, however, that if any maintenance or repair work
for the foundation, exterior walls, exterior paint, roof, asphalt paving and
concrete paving 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. 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 the
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. Landlord and Tenant
further agree that, except for Tenant's obligations relating to Hazardous
Materials as provided in this Article IX, Tenant shall not have any other
obligations to repair or restore the Premises or to paint the exterior of the
Building pursuant to the surrender provisions of the Existing Lease. Except as
provided above, Tenant shall promptly replace any portion of the Premises or
system or equipment in the Premises which cannot be fully repaired, regardless
of whether the benefit of such replacement extends beyond the Lease Term or any
Extended Term. 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 Annual Landscape Base Amount of Five Thousand Seven
Hundred Sixty Dollars ($5,760.00) shall be paid by Tenant to Landlord as
additional rent. Such payments shall be made by Tenant within ten (10) 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, roof, asphalt paving and concrete paving of the Premises,
Landlord shall have no obligation to repair or maintain the Premises, the
improvements or any areas adjacent thereto. Tenant waives the provisions of any
law permitting Tenant to make repairs at Landlord's expense.
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 forty-eight (48) hours of receipt of such notice
Landlord may enter the Premises and perform any such work on behalf of Tenant.
Notwithstanding the foregoing, no 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 26.25, 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. Any design or construction work undertaken by or at
the direction of Tenant which affects the Premises or any improvements located
on the Premises (including, without limitation, any repair work, maintenance
work, tenant improvement work or restoration work) shall be performed by duly
qualified and properly licensed and insured design professionals or contractors
(as the case may be) reasonably satisfactory to Landlord. Tenant shall submit
the names of any such design professionals and contractors to Landlord prior to
the commencement of any construction work on the Premises. If Landlord, acting
reasonably and in good faith, disapproves of any design professional or
contractor selected by Tenant, Tenant shall select a new design professional or
contractor reasonably satisfactory to Landlord.
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 it
existed as of the date of this Lease, 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 could have
been prevented by good maintenance practices. In addition, except for "Exempt
Alterations" (as defined in Paragraph 9.4, below, Landlord may require Tenant to
remove any alterations, additions or improvements (whether or not made with
Landlord's consent) made by Tenant at any time after the date of this Lease and
to restore the Premises to its prior condition, or Landlord may perform such
removals and restorations itself, all at Tenant's expense. 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. 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. Notwithstanding the foregoing, Tenant shall not be required to
obtain Landlord's prior consent for any non-structural alterations to the
interior of the Premises with a cost of less than Fifty Thousand Dollars
($50,000), so long as such alterations do not adversely affect any mechanical,
electrical, plumbing or HVAC system serving the Premises or affect the exterior
appearance of the Premises, but Tenant shall attempt to provide Landlord with at
least ten (10) days prior written notice of any such alterations in order to
provide Landlord with an opportunity to post and record appropriate notices of
non-responsibility. Any request for approval of additions, alterations, changes
or improvements shall be presented to Landlord in writing, accompanied by
detailed drawings and specifications. 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. 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 when installed; 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. If Tenant so
desires, Tenant may, prior to making any additions, alterations, changes or
improvements to the Premises (regardless of whether Landlord's consent to such
additions, alterations, change or improvements is required), request Landlord to
notify Tenant as to whether Landlord will require the removal of such items and
restoration of the Premises to the condition which existed prior to the
performance of any such additions, alterations, changes or improvements. Any
such items for which Landlord so notifies Tenant, in writing, that Landlord will
not require to be removed are referred to herein as "Exempt Alterations." If
Landlord has initially indicated to Tenant that Landlord will require removal of
an alteration, addition or improvement, but Landlord subsequently determines
that it will not require removal and so advises Tenant, then Tenant shall not be
required to remove such alteration, addition or improvement. Tenant shall
furnish Landlord with a set of "as built" drawings which accurately set forth
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 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. 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
manner 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 Premises and perform such act or
obligation. In that event, 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 2.2, 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. 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.
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 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, subject to Landlord's obligations for ADA compliance
work and seismic retrofit work as provided in Paragraph 2.2, above, 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, 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), Tenant shall be responsible 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. Tenant agrees
not to commit or permit waste upon the Premises.
9.8 Except for the materials listed in the attached Exhibit F, Tenant
shall 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 period of Tenant's occupancy of the
Premises (including any period of occupancy under the Existing Lease), without
the prior written consent of Landlord. If Tenant breaches the obligations
stated in the preceding sentence, or if any Hazardous Material used on the
Premises during the period of Tenant's occupancy of the Premises (including any
period of occupancy under the Existing Lease) 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, diminution in value
of the Premises and/or adjacent property, damages for the loss or restriction on
use of rentable or usable space or of any amenity of the Premises and/or
adjacent property, damages arising from any adverse impact on marketing of the
Premises and/or adjacent property, and sums paid in settlement of claims,
attorneys' fees, consultant fees and expert fees) which arise 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 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, and, if requested by Landlord, Tenant
shall cause a properly licensed and qualified environmental consultant
reasonably acceptable to Landlord to conduct an environmental audit of the
Premises, and to deliver a copy of the completed environmental audit to
Landlord. 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, at Tenant's expense. In the event Tenant shall fail to so deliver
the Hazardous Material Certificate or to conduct such an environmental audit,
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. 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 period of Tenant's occupancy of the
Premises (including any period of occupancy under the Existing Lease), Landlord
may require Tenant, at Tenant's sole cost and expense, to conduct an
environmental audit (in accordance with the above described criteria) to
evaluate the presence of any Hazardous Materials on the Premises and to cleanup,
remediate, and otherwise mitigate the effects of the presence of any such
Hazardous
Materials on the Premises, 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 and any 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 survive the
expiration or earlier termination of this Lease and Tenant's surrender of the
Premises to Landlord.
9.9 On or before the fifteenth (15th) day of each calendar year during the
Lease Term (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 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.
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 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 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, 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 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 buildings or other structures on the Premises are
damaged or destroyed, then so long as the cost of repairing such damage or
destruction is fully covered by insurance policies carried by the Landlord
(except for deductible amounts, which shall be paid by Tenant), Landlord shall
promptly repair and restore the improvements then owned by Landlord (but not any
of Tenant's trade fixtures, furnishings or equipment) to their 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." The proceeds of insurance maintained
pursuant to Paragraph 8.1 may be used to pay the cost and expense of repairing
and rebuilding the Premises.
12.2 In the event the Building is damaged or destroyed, and the cost of
repairing such damage or destruction is not fully covered by insurance policies
carried by Landlord (an "Uninsured Loss"), then so long as the portion of the
cost of repairing such damage or destruction which is not covered by the
insurance policies carried by Landlord does not exceed One Hundred Fifty
Thousand Dollars ($150,000) (the "Cap Amount"), then Landlord shall promptly
repair such damage or destruction to the Building and Landlord and Tenant shall
each contribute one-half of the portion of the cost of repairing such damage or
destruction which is not covered by the insurance policies carried by Landlord
(up to a maximum contribution amount of Seventy-Five Thousand Dollars ($75,000)
each for Landlord and Tenant). Landlord shall repair and restore the
improvements then owned by Landlord (but not any of Tenant's trade fixtures,
furnishings or equipment) to their condition existing prior to said damage or
destruction, and this Lease shall continue in full force and effect. In the
event of an Uninsured Loss in which the portion of the cost of repairing such
damage or destruction which is not covered by insurance policies carried by
Landlord 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 the non-terminating party's share
of the Cap Amount) the entire amount by which the cost of repairing such
Uninsured Loss exceeds the Cap Amount.
12.3 The Minimum Rent payable by Tenant pursuant to the provisions of
Paragraph 4.1, together with Tenant's payment obligations for real estate taxes,
insurance premiums and landscaping expenses, 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 Premises. Except for abatement of such Minimum Rent
and payment obligations for real estate taxes, insurance premiums and
landscaping expenses, if any, Tenant shall have no claim against Landlord by
reason of any damage, destruction, repair or rebuilding of the Premises.
12.4 If the Premises are materially damaged or destroyed during the last
year of the Lease Term, either 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 (the
Damage Notice"). However, if Tenant possesses an option to extend the Lease
Term and the time within which Tenant may exercise such option has not expired,
and if Tenant validly exercises such option within twenty (20) days after
Tenant's receipt of the Damage Notice, then Landlord's election to terminate
this Lease pursuant to this Paragraph 12.4 shall be void and of no effect. In
such event, the repair and restoration of the Premises shall be governed by the
other applicable provisions of this Article XII. For the purposes of this
Paragraph 12.4, the Premises shall be deemed to have been "materially damaged"
if, in Landlord's reasonable judgment, the cost to repair such damage is greater
than One Hundred Thousand Dollars ($100,000).
12.5 Tenant waives the provisions of any statutes which relate to
termination of leases when the 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.
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 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, but at a cost to Landlord not to exceed the
condemnation award received by Landlord. 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.
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 operating an
investment casting foundry for the production of golf club heads 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
or for any other use not specifically permitted pursuant to this Paragraph 14.1.
Tenant shall not conduct nor permit to be conducted any auction or auction sale
at the Premises.
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.
If Tenant is a corporation, unincorporated association, trust or partnership,
the sale, assignment, transfer or hypothecation of any stock or other ownership
interest of such entity which from time to time in the aggregate exceeds
twenty-five percent (25%) shall be deemed an assignment subject to the
provisions of this Article XIV, but a public offering of Tenant's stock, or the
sale of Tenant's stock on a recognized stock exchange shall not be deemed a
"Transfer" requiring Landlord's consent.
Landlord agrees that, in the event of a proposed Transfer to an "Affiliate" (as
defined herein), Landlord 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. 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, (i) it shall not be
unreasonable for Landlord to withhold its consent to any Transfer if a proposed
Transferee's anticipated or proposed use of the Premises involves the
generation, storage, use, treatment or disposal of any Hazardous Material; and
(ii) that 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;
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.
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 and shall, at the
option of Landlord exercisable by notice to Tenant, terminate this Lease.
14.4 Should Tenant desire to make a Transfer of the Premises, Tenant shall
give not less than ninety (90) 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 eighty percent
(80%) of all "Transfer Consideration" (as defined herein) received or to be
received, directly or indirectly, by Tenant on account of such subletting or
assignment. For the mutual benefit of Landlord and Tenant, Tenant shall use
reasonable and good faith efforts to secure Transfer Consideration from any such
assignee, sublessee or transferee which would be generally equivalent to
then-current market rent, but 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),
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
thereunder 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, Landlord shall have the option, in the event of any
proposed Transfer, to cancel this Lease as to the affected portion of the
Premises as of the effective date of the Transfer set forth in Tenant's notice.
The option shall be exercised, if at all, by Landlord giving Tenant written
notice thereof within sixty (60) days following Landlord's receipt of Tenant's
written request. 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 that portion of any obligations, costs or charges which are the
responsibility of Tenant under this Lease and allocable to the affected portion
of the Premises. 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). Without limitation, Landlord may lease the affected
portion of the Premises to the prospective Transferee, without liability to the
Tenant. Landlord's failure to exercise said cancellation right as herein
provided shall not be construed as Landlord's consent to the proposed Transfer.
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 further 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.
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 three (3) 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; 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.
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 cost of recovering
possession of the Premises, expenses of reletting including 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 Landlord'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 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 from the
Premises any such Hazardous Materials used by Tenant during the period of
Tenant's occupancy of the Premises (including any period of occupancy under the
Existing Lease) 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 restore the Premises to their condition as existed when the
Lease Term commenced. 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 thirty (30) days. Tenant shall pay Minimum Rent and items
designated in this Lease as additional rent to Landlord on a per diem basis
during the time such removal is taking place.
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.
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.
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 because of the breach of any covenant, 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 attorneys' fees and costs of such action or proceeding which shall
be enforceable whether or not such action or proceeding, is prosecuted to final
judgment, and including an allowance for attorneys' fees for appeals and
rehearings. 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 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 attorneys' fees of Landlord. As used here, the term "attorneys'
fees" means the full costs of legal services performed in connection with the
matters involved, calculated on the basis of usual fees charged by an attorney
performing those services, and not limited to "reasonable attorneys' fees" as
defined in any statute or rule of the court.
ARTICLE XIX
STATEMENT OF LEASE
19.1 Tenant shall, at any time and from time to time during the Lease Term
(or any Extended Term), upon not less than five (5) 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 Premises are a part), 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
material default under this Lease, and in any event, shall be conclusive and
binding upon Tenant that: (a) this Lease is in full force and effect, without
modification, except as may be represented by Landlord; (b) there are no uncured
defaults in Landlord's performance and that Tenant has no right of offset,
counterclaim or deduction against Minimum Rent or other payment obligations
under this Lease; and (c) no more than one (1) months' Minimum Rent or other
payment obligations under this Lease has been paid in advance.
19.4 Landlord is hereby irrevocably appointed and authorized as agent and
attorney-in-fact of Tenant to execute and deliver any such certificate or
statement in the event that Tenant fails or refuses to execute and deliver such
certificate or statement within five (5) days after notice from Landlord
requesting execution and delivery thereof.
19.5 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 designated by Landlord such
financial statements and other documents and instruments of Tenant as may be
reasonably required by any such lender or purchaser. 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 (except for disclosures to auditors and
regulatory authorities, and except for other disclosures required by law), and
shall be used only for the purposes herein set forth.
19.6 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. Tenant shall be responsible for and shall indemnify and hold
Landlord harmless from any and all liability, loss, cost, damage and expense,
including, without limitation, attorneys' fees, which Landlord may incur in
connection with Tenant's failure or delay in executing, acknowledging and
delivering such certificates and statements, or which may be incurred as a
result of Tenant's breach of any other covenant or agreement embodied in this
Lease that results in the delay, impairment, loss or cancellation of any
transaction, event or occurrence for which such certificates or statements are
requested.
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 for
itself or to give easements to others 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.
ARTICLE XXI
COVENANT OF QUIET ENJOYMENT
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, Tenant shall be solely
responsible for any documentary transfer taxes or other taxes relating to or
arising out of any such recordation.
ARTICLE XXIII
SUBORDINATION
23.1 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 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. No
indemnification obligation of Landlord under this Lease shall be assumed by or
binding upon any such Mortgage holder. 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. If Landlord has made an assignment of
rents and leases to the Mortgage holder, Tenant agrees to be comply with any
provisions of such assignment requiring the payment of rents to the Mortgage
holder.
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 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 attorns to such holder in accordance with such holder's
requirements. Except for making such written request, Landlord will be under no
duty or obligation hereunder, nor will the failure or refusal of such holder to
grant a non-disturbance agreement render Landlord liable to Tenant, or affect
this Lease in any manner. Tenant will bear all costs and expenses (including
attorneys' fees) of such Mortgage holder in connection with any such
non-disturbance agreement.
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. If the Minimum Rent
shall, from time to time, increase during the term of this Lease, Tenant shall
thereupon deposit with Landlord additional security deposit so that the amount
of security deposit held by Landlord shall at all times bear the same proportion
to current Minimum Rent as the original security deposit bears to the original
Minimum Rent set forth in Item 1.6 of the Basic Lease Provisions. 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 the greater of: (a) Minimum Rent set
forth in Item 1.6 of the Basic Lease Provisions, plus a percentage of such rent
equal to the percentage change in the CPI between the Commencement Date of this
Lease and the period of holding over; or (b) 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 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. If any check
tendered by Tenant is dishonored by the drawee bank, then the checks for all
payment obligations of Tenant under this Lease for the next twelve months shall
be in the form of cashiers' checks drawn on a major bank with offices located
throughout the state of California.
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 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 AND IMPOUNDS. 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 (i) rent shall automatically become due
and payable quarterly in advance, rather than monthly, notwithstanding Paragraph
4.1 or any other provision of this Lease to the contrary; and (ii) if requested
by Landlord, Tenant shall furnish to Landlord Tenant's latest financial
statements covering at least the past two fiscal years and any interim
statements covering the current fiscal year.
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 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 covenant, term, condition or provision hereof.
26.10 REASONABLE CONSENT. Unless otherwise provided in this Lease, whenever
the consent or approval of Landlord or Tenant is required by the provisions of
this Lease, such consent or approval shall not be unreasonably withheld or
delayed.
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.
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. If Tenant is a corporation, 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 Seventy-Five
Dollars ($75.00) per hour for all time spent by professional and administrative
persons in the direct employ of Landlord. 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 required in
the reasonable judgment of Landlord. Landlord shall be reimbursed at the rate
of Seventy-Five Dollars ($75.00) per hour for the time spent by its
administrative and professional personnel, (or in the amount of One Thousand
Dollars ($1,000.00), whichever is greater), and at the actual 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 ten percent (10%) 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 represents and warrants to Landlord that Tenant has
had no dealings with any real estate broker, finder or other person with respect
to this Lease in any manner. Tenant hereby indemnifies and holds Landlord
harmless from any liability or claim that may be asserted against Landlord by
any broker, finder or person with whom Tenant has purportedly dealt.
26.21 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. 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.
26.22 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.
26.23 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.
26.24 FINANCIAL STATEMENTS. As a material inducement to Landlord's
execution of this Lease, Tenant hereby represents and warrants that Tenant has
furnished to Landlord true, complete, current and unqualified audited financial
statements of Tenant and any guarantor of Tenant for the last three (3) years
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 whose loans would be secured
in whole or in part by this Lease or the Premises. Throughout the Lease Term,
Tenant will furnish to Landlord prompt notice of (i) any material obligation or
material adverse development with respect to the business, financial condition
or results of operations of Tenant; and (ii) any default under this Lease or any
event, the occurrence or nonoccurrence of which constitutes, or which with the
giving of notice or the passage of time or both would constitute, a default
under Lease.
26.25 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.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the
day and year first above written.
"LANDLORD" "TENANT"
WATSON LAND COMPANY, COASTCAST CORPORATION,
a California corporation a California corporation
/s/ Richard M. Cannon /s/ Richard W. Mora
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RICHARD M. CANNON, Signature
President and Chief Executive Officer President and Chief Operating Officer
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Title
Executed this day of Richard W. Mora
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, 1997 Printed Name
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September 16, 1997
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Date