TABLE OF CONTENTS
PAGE
1. PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2. PREMISES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
3. TERM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
4. POSSESSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
5. BASE RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
6. SECURITY DEPOSIT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
7. MAINTENANCE AND REPAIRS . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
8. USE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9. COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10. ALTERATIONS AND ADDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 11
11. SURRENDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
12. LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
13. ASSIGNMENT AND SUBLETTING . . . . . . . . . . . . . . . . . . . . . . . . . . 13
14. HOLD HARMLESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
15. SUBROGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
16. LIABILITY INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
17. UTILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
18. PROPERTY TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
19. RULES AND REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
20. HOLDING OVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
21. ENTRY BY LANDLORD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
22. RECONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
23. DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
24. REMEDIES FOR DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
25. SUCCESSOR LANDLORD'S LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . 34
26. EMINENT DOMAIN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
27. HAZARDOUS MATERIALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
28. OFFSET STATEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
29. TRAFFIC AND ENERGY MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . 39
30. [INTENTIONALLY DELETED.]. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
31. [INTENTIONALLY DELETED.]. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
32. AUTHORITY OF PARTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
33. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
34. BROKERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
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TABLE OF CONTENTS
(CONTINUED)
PAGE
35. QUIET ENJOYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
-ii-
BUILDING LEASE
1. PARTIES. This Building Lease ("Lease"), dated for reference purposes
only, June 11, 1998, is made by and between ALL POST, INC., a California
corporation, herein called "Landlord" and VDI MEDIA, a California corporation,
herein called "Tenant."
2. PREMISES.
2.1 Landlord does hereby lease to Tenant and Tenant hereby leases
from Landlord that certain real property (herein called "Premises") indicated on
EXHIBIT A attached hereto and reference thereto made a part hereof. Said
Premises are commonly known as 1133 North Hollywood Way, Burbank, California
which has been improved with a building of approximately 32,000 square feet
("Building") and that certain real property commonly known as 1122 North
Hollywood Way, Burbank, California, which provides additional parking for the
Building. The Premises are more particularly described in EXHIBIT A hereto.
Any statement of size set forth in this Lease or that may have been used in
calculating rental is an approximation which Tenant and Landlord agree is
reasonable. Notwithstanding the foregoing, the Tenant or Landlord may elect, at
its sole cost, to cause the square footage of the Building to be measured by a
California licensed architect according to the following criteria: (i) the
square footage of each above ground floor shall be based on measurements from
the exterior of all exterior walls; and (ii) the square footage of the basement
area shall be based on measurements from the interior of all basement exterior
walls. When completed, Tenant or Landlord, as the case may be, may deliver its
measurements and calculations to the other and, if within ten (10) business days
of delivery, the other party does not object in writing to the calculated square
footage of the Building, such square footage shall be used to recalculate Base
Rent as provided at Paragraph 5 below. If the other party disagrees in writing
with the calculated square footage within such ten (10) business-day period,
then it may conduct its own calculation thereof in accordance with this
paragraph which shall be completed as soon as reasonably possible. If after the
time periods provided in this paragraph have elapsed and Landlord and
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Tenant are still in disagreement as to the appropriate square footage after the
second calculation, the matter shall be submitted to a California licensed
architect selected by the other two architects and such architect shall
determine which of the two previously made calculations of square footage shall
be used. Such architect's determination shall be binding on Landlord and
Tenant. Notwithstanding anything herein to the contrary, the recalculation of
the square footage of the Building must be commenced by the delivery no later
than August 15, 1998 of the initial recalculation by one party to the other.
Failure to do so shall be deemed both parties' agreement that the Building
contains 32,000 square feet for all purposes under this Lease.
2.2 This Lease is subject to the terms, covenants and conditions
herein set forth and Tenant and Landlord covenant to the other as a material
part of the consideration for this Lease to keep and perform each and all of
said terms, covenants and conditions to be kept and performed by Tenant or
Landlord, as applicable, and that this Lease is made upon the condition of said
performance.
2.3 Landlord shall deliver the Premises to Tenant broom clean and
free of debris and in good operating order, condition and state of repair on the
Commencement Date (as defined below) and, so long as the required service
contracts as described in subparagraph 7.2 below are obtained by Tenant within
thirty (30) days following the Commencement Date warrants that the existing
electrical, plumbing, fire sprinkler, lighting, heating, ventilating and air
condition systems ("HVAC"), loading doors, if any, and all other such elements
in the Premises, other than those constructed by Tenant shall be in good,
operating condition on the Commencement Date and that the structural elements of
the roof, bearing walls and foundation of the Building shall be free of material
defects. If a noncompliance with this warranty exists as of the Commencement
Date, Landlord shall, except as otherwise provided in this Lease, promptly after
receipt of written notice from Tenant setting forth the specificity of the
nature and extent of such noncompliance, rectify the same at Landlord's expense.
If, within six (6) months of the Commencement Date, Tenant does not give
Landlord written notice of any noncompliance with this warranty, correction of
such non-compliance shall be the obligation of Tenant at Tenant's sole cost and
expense.
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2.4 Landlord warrants that the improvements on the Premises
materially comply with all applicable laws, covenants or restrictions of record,
building codes, regulations and ordinances ("Applicable Requirements") in effect
on the Commencement Date. This warranty does not apply to the use to which
Tenant will put the Premises or to any alterations or modifications made or to
be made to the Premises by Tenant. If the Premises do not comply with this
warranty, Landlord shall, except as otherwise provided herein, promptly after
receipt of written notice from Tenant setting forth with specificity the nature
and extent of such noncompliance rectify the same at Landlord's expense if
mandated by the Applicable Requirements (in other words, Landlord shall not be
required to rectify such noncompliance if it is a legal pre-existing condition).
If the Applicable Requirements are hereafter changed (as opposed to being in
existence at the Commencement Date) so as to require during the term of this
Lease construction of an addition to or an alteration of the Building or the
reinforcement or other physical modifications of the Building (each such event
is referred to herein as "Capital Expenditure"), Landlord and Tenant shall
allocate the cost of work as follows:
(a) If such Capital Expenditures are required as a result of
the specific and unique use of the Premises by Tenant as compared with the uses
by tenants in general, Tenant shall be fully responsible for the cost thereof.
(b) If such Capital Expenditure is not the result of the
specific and unique use of the Premises by Tenant (such as, governmentally
mandated seismic modifications) then Landlord shall complete the work and
Landlord and Tenant shall allocate the obligation to pay for such cost as
follows: the cost of the work/modification shall be prorated between Landlord
and Tenant and Tenant shall only be obligated to pay, each month during the
remainder of the Term, on the date Base Rent is due, an amount equal to the
product of multiplying the cost of such work/modification by a fraction, the
numerator of which is one, and the denominator of which is the number of months
of the useful life of such work/modification as such useful life is specified
pursuant to Federal income tax regulations or guidelines for depreciation
thereof (including interest on the unamortized balance as is then commercially
reasonable in the judgment of Landlord's accountants), with Tenant reserving the
right to prepay its obligation at any time. Provided,
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however, (i) in no event shall Tenant be obligated to pay more than One Hundred
Thousand dollars ($100,000) on account of such Capital Expenditure; (ii) if the
total cost of such Capital Expenditure exceeds the then monthly Base Rent
multiplied by twelve (12), Landlord shall have the option to terminate this
Lease upon one hundred eighty (180) days prior written notice to Tenant; and
(iii) if such Capital Expenditure is required during the last two years of this
Lease, Landlord shall have the option to terminate this Lease upon one hundred
eighty (180) days' prior written notice to Tenant. Notwithstanding the
foregoing, in the event Landlord elects to terminate pursuant to
subparagraph 2.4(b)(ii) or (iii), Tenant may notify Landlord, in writing, within
ten (10) days after receipt of Landlord's termination notice that Tenant shall
pay for such Capital Expenditure and in such event this Lease shall not
terminate and Tenant shall pay the entire amount of such Capital Expenditure.
The provisions concerning Capital Expenditures are intended only
to apply to non-voluntary new Applicable Requirements. If the Capital
Expenditures are instead triggered as a result of a Tenant's modification of the
Premises, then, and in that event, Tenant shall be fully responsible for the
cost thereof; provided, however, Tenant may elect not to effect such
modification.
3. TERM.
3.1 The term of this Lease shall be for one hundred twenty (120)
months (the "Term"), commencing on the 11th day of June, 1998 ("Commencement
Date") and ending on the 10th day of June, 2008, subject to extension or
earlier termination as provided herein.
3.2 Landlord hereby grants to Tenant the option to extend the Term
(the "Option") for one 60-month period ("Option Term") commencing when the prior
term expires upon each and all of the following terms and conditions:
(a) In order to exercise the Option, Tenant must give
written notice of such election to Landlord and Landlord must receive the same
at least nine (9) but not more than fifteen (15) months prior to the date that
the option period would commence, time being of the essence. If proper
notification of the exercise of the Option is not given and/or received, the
Option shall automatically expire.
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(b) Tenant shall have no right to exercise the Option,
notwithstanding any provision in the grant of Option to the contrary, (i) during
the period commencing with the giving of any notice of default under Paragraph
23 and continuing until the noticed default is cured; or (ii) during the period
of time any monetary obligation due Landlord from Tenant is unpaid (provided
written notice thereof is given Tenant in accordance with the provisions of this
Lease); or (iii) during the time Tenant is in breach of this Lease. The period
of time within which the Option may be exercised shall not be extended or
enlarged by reason of Tenant's inability to exercise the Option because of the
provisions of subparagraph 3.2(a). All rights of Tenant under the provisions of
the Option shall terminate and be of no further force or effect, notwithstanding
Tenant's due and timely exercise of the Option, (i) if after such exercise and
prior to commencement of the Option Term, Tenant fails to pay to Landlord a
monetary obligation of Tenant for a period of thirty (30) days after such
obligation becomes due (provided written notice thereof to Tenant in accordance
with the provisions of this Lease); or (ii) if Tenant is in breach of this Lease
on the date the Option Term would otherwise commence.
(c) Except for the provisions of this Lease granting the
Option, all of the terms and conditions of this Lease except where specifically
modified by the Option shall apply.
(d) The Option granted to Tenant in this Lease is personal
to the original Tenant named in Paragraph 1 hereof, and cannot be voluntarily or
involuntarily assigned or exercised by any person or entity other than said
original Tenant while the original Tenant is in full and actual possession of
the Premises and without the intention of thereafter assigning or subletting.
The Option, herein granted to Tenant is not assignable, either as a part of an
assignment of this Lease or separately or apart therefrom, and the Option may
not be separated from this Lease in any manner, by reservation or otherwise.
(e) The Base Rent for each month of the Option Term shall be
calculated as follows, using the method(s) indicated below:
(i) On commencement of the Option Term ("Market
Rental Value Adjustment Date"), the Base Rent shall be adjusted to the Market
Rental Value ("MRV") of the Premises as follows:
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(1) Four (4) months prior to the Market
Rental Value Adjustment Date, the parties shall attempt to agree upon what the
new MRV will be on the Market Rental Value Adjustment Date. If agreement cannot
be reached, within thirty days, then:
a. Landlord and Tenant shall
immediately appoint a mutually acceptable appraiser or broker to establish the
new MRV within the next thirty days. Any associated costs will be split equally
between the parties, or
b. Both Landlord and Tenant shall
each immediately make a reasonable determination of the MRV and submit such
determination, in writing, to arbitration in accordance with the following
provisions:
i. Within fifteen (15) days
thereafter, Landlord and Tenant shall each select an appraiser of their choice
to act as an arbitrator. The two arbitrators so appointed shall immediately
select a third mutually acceptable consultant to act as a third arbitrator.
ii. The three (3)
arbitrators shall within thirty (30) days of the appointment of the third
arbitrator reach a decision as to what the actual MRV for the Premises is, and
whether Landlord's or Tenant's submitted MRV is the closest thereto. The
decision of a majority of the arbitrators shall be binding on the parties. The
submitted MRV which is determined to be the closest to the actual MRV shall
thereafter be used by the parties.
iii. If either of the parties
fails to appoint an arbitrator within the specified fifteen (15) days, the
arbitrator timely appointed by one of them shall reach a decision on his or her
own, and said decision shall be binding on the parties.
iv. The entire cost of such
arbitration shall be paid by the party whose submitted MRV is not selected,
i.e., the one that is NOT the closest to the actual MRV.
c. In no event shall any person or
entity, or any affiliate of such person or entity, who or which is entitled to
any commission or fee arising from this Lease or any person or entity who is an
affiliate of either of the parties hereto, or who has provided services to
either party hereto, act as an arbitrator for purposes of establishing MRV.
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(2) Notwithstanding the foregoing, the MRV
shall not be less than the Base Rent payable for the month immediately preceding
the Market Rental Value Adjustment Date multiplied by 1.03.
(ii) Upon the commencement of the Option Term, the
MRV will become the new "Base Rent" for the purpose of calculating any further
adjustments to Base Rent pursuant to Section 5.2.
(f) The new Base Rent (i.e., MRV) in effect on the
commencement of the Option Term is subject to adjustment as provided at
Section 5 and Tenant continues to be responsible for other rental as provided
herein.
4. POSSESSION. Landlord shall deliver possession of the Premises to Tenant
on the Commencement Date.
5. BASE RENT.
5.1 Tenant agrees to pay to Landlord as Base Rent, without prior
notice, offset, deduction or demand, for the Premises the sum of Thirty-two
Thousand Dollars ($32,000) (which equates to One Dollar ($1.00) per square foot
of the Building and which is subject to adjustment as provided at Subparagraph
2. above), in advance, on or before the first day of the first full calendar
month of the term hereof and a like sum on or before the first day of each and
every successive calendar month thereafter during the term hereof, except that
the first month's rent shall be paid upon execution hereof. Base Rent for any
period during the term hereof which is for less than one (1) month shall be a
prorated portion of the monthly installment herein, based upon a thirty (30) day
month. Said rental shall be paid to Landlord in lawful money of the United
States of America, which shall be legal tender at the time of payment, at such
place as Landlord may from time to time designate in writing.
5.2 Notwithstanding anything to the contrary contained in Paragraph
5.1 of this Lease, the Base Rent shall increase annually on the first
anniversary of the first day of the first calendar month
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immediately following the Commencement Date and on the anniversary of such date
thereafter in accordance with Schedule 1 hereto.
6. SECURITY DEPOSIT. Tenant has paid or will pay to Landlord concurrently
with the execution and delivery hereof by Tenant the sum of Thirty-two Thousand
Dollars ($32,000) representing the first full month's Base Rent during the term
of this Lease as security for the full and faithful performance of the terms
hereof by Tenant. Within forty-five (45) days of Landlord's receipt of the
security deposit, Landlord shall place such deposit in an interest-bearing
account mutually acceptable to Landlord and Tenant. The account shall be in
Landlord's name, but Tenant shall be entitled to interest thereon. If Tenant
defaults with respect to any provision of this Lease, including, but not limited
to, the provisions relating to the payment of rent, Landlord may, but shall not
be required to, use, apply or retain all or any part of this security deposit
for the payment of any rent or any other sum in default, or for the payment of
any other amount which Landlord may spend or become obligated to spend by reason
of Tenant's default or to compensate Landlord for any other loss or damage which
Landlord may suffer by reason of Tenant's default, including without limitation,
reasonable costs and attorneys' fees incurred by Landlord to recover possession
of the Premises upon a default by Tenant hereunder. If any portion of said
deposit is so used or applied, Tenant shall, within five (5) days after receipt
of written demand therefor, deposit cash with Landlord in an amount sufficient
to restore the security deposit to its original amount and Tenant's failure to
do so shall constitute a default hereunder by Tenant. If Tenant shall fully and
faithfully perform every provision of this Lease to be performed by it, the
security deposit may be applied against any amounts owed by Tenant to Landlord
at the expiration or termination of this Lease and any balance thereof shall be
returned to Tenant (or, at Landlord's option, upon written notice to Tenant, to
the last assignee of Tenant's interest hereunder) within the time specified in
California Civil Code Section 1950.7. As and when Base Rent increases pursuant
to the provisions of subparagraphs 3.2 or 5.2 above, Tenant shall deposit with
Landlord such additional funds as may be necessary to cause the Security Deposit
then held by Landlord to equal the amount of Base Rent then payable under this
Lease.
Page 8
7. MAINTENANCE AND REPAIRS.
7.1 Subject to Paragraphs 2 and 22 and the provisions of this
subparagraph 7.1, Tenant shall, at Tenant's sole expense, keep the Premises in
good order, condition and repair (whether or not the portion of the Premises
requiring repairs, or the means of repairing the same, are reasonably or readily
accessible to Tenant, and whether or not the need for such repairs occurs as a
result of Tenant's use, any prior use, the elements or the age of such portion
of the Premises), including, but not limited to, all equipment or facilities,
such as plumbing, heating, ventilating, air-conditioning, electrical, lighting
facilities, boilers, pressure vessels, fire protection system, fixtures, walls
(interior and exterior), ceilings, roofs, floors, windows, doors, plate glass,
skylights, landscaping, driveways, parking lots, fences, retaining walls, signs,
sidewalks and parkways located in, on, or adjacent to the Premises. Tenant, in
keeping the Premises in good order, condition and repair, shall exercise and
perform good maintenance practices, specifically including the procurement and
maintenance of the service contracts required by subparagraph 7.2 below.
Tenant's obligations shall include restorations, replacements or renewals when
necessary to keep the following components of the Premises in good order,
condition and state of repair: HVAC, flooring, interior walls, electrical,
plumbing fixtures, signs, landscaping and parking lot surface (including parking
lot ingress and egress and restriping). Tenant shall, during the term of this
Lease, keep the exterior appearance of the Building in a first-class condition
consistent with the exterior appearance of other similar facilities of
comparable age and size in the vicinity, including, when necessary, the exterior
repainting of the Building. Notwithstanding the foregoing, Landlord shall be
responsible for all repair and maintenance, to the extent needed, of the
structural elements of the Building limited to the foundation, the structural
elements of the roof and all load bearing walls. However, Tenant shall be
responsible for any and all regular maintenance of the roof.
7.2 Tenant shall, at Tenant's sole expense, procure and maintain
contracts, with copies to Landlord, in customary form and substance for, and
with contractors specializing and experienced in the maintenance of the
following equipment and improvements, if and when installed on the Premises:
(i) HVAC equipment, (ii) boiler and pressure vessels, (iii) fire extinguishing
systems, including fire alarm
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and/or smoke detection, (iv) landscaping and irrigation systems, (v) roof
covering and drains, (vi) driveways and parking lots, and (vii) elevators.
7.3 Subject to the provisions of subparagraph 7.1 and Paragraphs 2
and 22, it is intended by the parties hereto that Landlord have no obligation,
in any manner whatsoever, to repair and maintain the Premises, or the equipment
therein, all of which obligations are intended to be that of Tenant. It is the
intention of the Landlord and Tenant that the terms of this Lease govern the
respective obligations of the parties as to maintenance and repair of the
Premises, and they expressly waive the benefit of any statute now or hereafter
in effect to the extent it is inconsistent with the terms of this Lease.
7.4 Except as provided in Paragraph 22 hereof, there shall be no
abatement of rent and no liability of Landlord by reason of any injury to or
interference with Tenant's business arising from the making of any repairs,
alterations or improvements in or to any portion of the Building or the Premises
or in or to fixtures, appurtenances and equipment therein. As a material
inducement to Landlord's entering into this Lease, Tenant expressly waives any
right to make repairs at Landlord's expense whether granted by law, statute,
ordinance or otherwise now or hereafter in effect, including but not limited to
California Civil Code Sections 1941, 1941.1 and 1942.
8. USE. Tenant shall use the Premises for video duplication and audio
production services, vault storage of videos, and any ancillary general office
use and shall not use or permit the Premises to be used for any other purpose
without the prior written consent of Landlord, which consent shall not be
unreasonably withheld. Tenant shall not do or permit anything to be done in or
about the Premises, nor bring or keep anything therein, which will in any way
increase the existing rate of, or adversely affect, any fire insurance upon the
Building or any of its contents, or cause cancellation of any insurance policy
covering the Building or any part thereof or any of its contents. Tenant shall
not allow the Premises to be used for any improper, immoral, unlawful or
objectionable purpose, nor shall Tenant cause, maintain or permit any nuisance
in, on or about the Premises. Tenant, its employees, agents and contractors
shall not commit or suffer to be committed any waste in or upon the Premises.
Without limiting the generality of the foregoing, Tenant shall not (i) place a
load upon any floor of the Premises which exceeds the floor
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load per square foot which such floor was designed to carry or (ii) permit any
objectionable sounds or odors to carry outside the Premises.
9. COMPLIANCE WITH LAW. Tenant shall not use the Premises or permit
anything to be done in or about the Premises which will in any way conflict with
any law, statute, ordinance or governmental rule or regulation now in force or
which may hereafter be enacted or promulgated. Tenant shall, at its sole cost
and expense, promptly comply with all laws, statutes, ordinances and
governmental rules, regulations or requirements now in force or which may
hereafter be in force, and with the requirements of any board of fire insurance
underwriters or other similar bodies now or hereafter constituted, relating to,
or affecting the condition use or occupancy of the Premises, excluding
structural changes not related to or affected by Tenant's improvement or acts.
The judgment of any court of competent jurisdiction or the admission of Tenant
in any action against Tenant, whether Landlord be a party thereto or not, that
Tenant has violated any law, statute, ordinance or governmental rule, regulation
or requirement, shall be conclusive of the fact as between the Landlord and
Tenant.
10. ALTERATIONS AND ADDITIONS.
10.1 Only if required by law or government regulations and upon
giving Tenant as much advance notice thereof as is reasonably practical,
Landlord may change the name, number or designation by which the Building is
commonly known. Subject to Landlord's approval, Tenant may, at its own cost and
expense, remove the signage presently on the Building and replace same with its
own signage provided that any and all signage shall be in conformance with
applicable laws. Within five (5) days of expiration of the Term, or sooner as
reasonably requested by the Landlord, Tenant shall remove any and all signage
from the Building at its sole cost and expense.
10.2 Tenant shall not make any alterations, additions or improvements
without the prior written consent of Landlord which shall not be unreasonably
withheld. All such alterations, additions and improvements shall be made in
conformity with plans therefor reasonably approved by Landlord in writing prior
to the commencement of such work and shall be performed by a tenant improvements
contractor
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reasonably approved by Landlord. All such alterations, additions and
improvements (except movable furniture, equipment, furnishings and trade
fixtures) shall become the property of Landlord and shall be surrendered with
the Premises, as a part thereof, at the expiration or earlier termination of the
term hereof. All such alterations, additions or improvements shall, however, be
made by Tenant at Tenant's sole expense. Upon termination of the Lease, Tenant
shall, upon demand by Landlord, at Tenant's sole cost and expense, forthwith
remove any alterations, additions or improvements made by Tenant and designated
by Landlord at the time of Landlord's initial approval to be removed, and repair
and restore the Premises to their original condition, reasonable wear and tear
excepted. Any personal property left on or in the Premises at the expiration or
earlier termination of this Lease may, at the option of Landlord, after fifteen
(15) days' written notice to Tenant, either be deemed abandoned and retained by
Landlord, or be placed in storage at a public warehouse in the name of, for the
account of and at the expense and risk of Tenant or otherwise disposed of by
Landlord in the manner provided by law. Tenant releases Landlord of and from
any and all claims and liability for damage to or destruction or loss of
property left by Tenant upon the Premises at the expiration or other termination
of this Lease. Tenant further waives all claims to all property (and the
proceeds thereof) abandoned by Tenant and retained or disposed of by Landlord.
All alterations, additions and improvements to the Premises made by
Tenant shall comply with the plans therefor approved in advance by Landlord.
Such plans and any specifications associated therewith shall be prepared by an
architect or interior designer reasonably approved in advance by Landlord. All
such work by Tenant shall comply with all applicable requirements of all
governmental authorities having jurisdiction of the Premises and shall comply
with all reasonable rules and regulations established by Landlord to ensure the
safety, cleanliness and good order of the Building, including but not limited to
those relating to establishment of off-Premises staging areas, disposal of
refuse and the hours of performing operations which result in the creation of
noise, dust and odors. No such alterations, additions or improvements by Tenant
shall incorporate therein any hazardous materials, as defined in Paragraph 27.
Page 12
10.3 No antenna, satellite dish, microwave receiver or other
receiving or transmission equipment shall be installed by Tenant in or on the
roof of the Building or elsewhere at the Premises except with the prior written
consent of Landlord which shall not be unreasonably withheld. Landlord's
consent shall not be withheld unless such installation would materially injure
the Premises. Any such installation by Tenant shall be only the particular
equipment specifically approved by Landlord, shall be limited to the manner and
location approved by Landlord and shall be subject to such terms and conditions
as are provided by Landlord to Tenant at the time Landlord approves such
installation.
11. SURRENDER. Tenant shall surrender the Premises by the end of the Term
or any earlier termination date with all the improvements, parts and services
thereof, broom clean and free of debris, and in good operating order, condition
and state of repair, ordinary wear and tear accepted. "Ordinary wear and tear"
shall not include any damage or deterioration that would have been prevented by
good maintenance practice. Tenant shall repair any damage occasioned by the
installation, maintenance or removal of its trade fixtures, furnishings and
personal property.
12. LIENS. Tenant shall keep the Premises free from any liens arising out
of any work performed, materials furnished or obligations incurred by or for
Tenant. In the event that Tenant shall not, within ten (10) business days
following the imposition of any such lien, cause the same to be released of
record by payment or posting of a proper lien release bond, Landlord shall have,
in addition to all other remedies provided herein and by law, the right, but not
the obligation, to cause the same to be released by such means as it shall deem
reasonably proper, including payment of or defense against the claim giving rise
to such lien. All sums paid by Landlord and all reasonable expenses incurred by
it in connection therewith shall automatically create an obligation of Tenant to
pay an equivalent amount as additional rent, which additional rent shall be
payable by Tenant within five (5) days after Tenant's receipt of Landlord's
demand therefor with interest at the rate of ten percent (10%) per annum
permitted by law to be charged from date of payment by Landlord until paid by
Tenant. Nothing herein shall imply any consent by Landlord to subject
Landlord's estate to liability under any mechanics' or other lien law. Tenant
shall give Landlord
Page 13
adequate opportunity and Landlord shall have the right to post in or on the
Premises such notices of nonresponsibility as are provided for in the mechanics
lien laws of the state of California.
13. ASSIGNMENT AND SUBLETTING.
13.1 Tenant shall not, either voluntarily or involuntarily or by
operation of law, assign, sublet, mortgage or otherwise encumber all or any
portion of its interest in this Lease or in the Premises or permit the Premises
to be occupied by anyone other than Tenant or Tenant's employees without
obtaining the prior written consent of Landlord, which consent shall be subject
to the provisions of subsections 13.2 through 13.8 below. Any such attempted
assignment, subletting, mortgage or other encumbrance without such consent shall
be null and void and of no effect.
13.2 No assignment, subletting, mortgage or other encumbrance of
Tenant's interest in this Lease shall relieve Tenant of its obligation to pay
the rent and to perform all of the other obligations to be performed by Tenant
hereunder. The acceptance of rent by Landlord from any other person shall not
be deemed to be a waiver by Landlord of any provision of this Lease or to be a
consent to any subletting, assignment, mortgage or other encumbrance. Consent
to one sublease, assignment, mortgage or other encumbrance shall not be deemed
to constitute consent to any subsequent attempted subletting, assignment,
mortgage or other encumbrance.
13.3 If Tenant desires at any time to assign this Lease or to sublet
the Premises or any portion thereof, it shall first notify Landlord of its
desire to do so and shall submit in writing to Landlord: (i) the name of the
proposed subtenant or assignee; (ii) the nature of the proposed subtenant's or
assignee's business to be carried on in the Premises; (iii) the terms and
provisions of the proposed sublease or assignment and the proposed effective
date thereof; (iv) such financial information as Landlord may reasonably request
concerning the proposed subtenant or assignee; and (v) the minimum payment of at
least $500.00, required pursuant to subparagraph 13.8 below. The submission
pursuant to clause (iii) shall include a copy of any agreement, escrow
instructions or other document which contains or memorializes the terms and
provisions of the transaction for which Landlord's consent is required.
Page 14
Similarly, if Tenant desires to mortgage or encumber its interest in this Lease,
Tenant shall first supply to Landlord in writing such information as to such
transaction as may be reasonably requested by Landlord.
13.4 [INTENTIONALLY DELETED.]
13.5 At any time within thirty (30) days after Landlord's receipt of
the last of the information specified in subparagraph 13.3 above, Landlord may,
by written notice to Tenant, (i) approve the proposed assignment or sublease; or
(ii) subject to the provisions of subparagraph 13.6 below, reasonably disapprove
the proposed assignment or sublease. If Landlord does not disapprove the
proposed subletting or assignment in writing within said thirty (30) day period,
Tenant may thereafter within ninety (90) days after the expiration of said
thirty (30) day period enter into a valid assignment or sublease of the Premises
or portion thereof, upon the terms and conditions set forth in the information
furnished by Tenant to Landlord pursuant to subparagraph 13.3 above. Provided,
however, that any material change in such terms shall be subject to Landlord's
consent as provided in this Paragraph and, provided further, that any amount to
be paid by Tenant in connection with such subletting or assignment pursuant to
subparagraph 13.3 above shall be paid to Landlord upon and as a condition to
consummation of such transaction.
13.6 Landlord shall have the right to reasonably approve or
disapprove any proposed assignee or sublessee. In exercising such right of
reasonable approval or disapproval, Landlord shall be entitled to take into
account any fact or factor which Landlord reasonably deems relevant to such
decision, including, but not necessarily limited to, the following, all of which
are agreed to be reasonable factors for Landlord's consideration:
(a) The financial strength of the proposed assignee or
subtenant.
(b) The proposed use of the Premises by such proposed
assignee or subtenant and the compatibility of such proposed use with the
Building.
(c) Any materially adverse impact of the proposed use of the
Premises by such proposed assignee or subtenant.
Page 15
(d) Whether there then exists any uncured default by Tenant
pursuant to this Lease or any non-payment or non-performance by Tenant under
this Lease which, with the passage of time and/or the giving of notice, would
constitute a default under this Lease.
(e) Whether the proposed transferee is a public or
governmental agency.
Moreover, Landlord shall be entitled to be reasonably satisfied that each and
every covenant, condition or obligation imposed upon Tenant by this Lease and
each and every right, remedy or benefit afforded Landlord by this Lease is not
impaired or diminished by such assignment or subletting. Landlord and Tenant
acknowledge that the express standards and provisions set forth in this Lease
dealing with assignment and subletting, including those set forth in this
subparagraph 13.6, have been freely negotiated and are reasonable at the date
hereof taking into account Tenant's proposed use of the Premises and the nature
and quality of the Building and the Project. No withholding of consent by
Landlord shall give rise to any claim by Tenant or any proposed assignee or
subtenant or entitle Tenant to terminate this Lease or to any abatement of rent.
Approval of any assignment of Tenant's interest shall, whether or not expressly
so stated, be conditioned upon such assignee assuming in writing all obligations
of Tenant hereunder. In the event Landlord withholds its consent to an
assignment or subletting proposed by Tenant and Tenant believes such withholding
is unreasonable, Tenant may submit such matter to binding arbitration in
accordance with subparagraph 13.10 below.
13.7 All options to extend the Term contained in this Lease are
personal to Tenant. Consent by Landlord to any assignment or subletting shall
not include consent to the assignment or transfer of any such options with
respect to the Premises granted to Tenant by this Lease, any addendum or
amendment hereto or any letter agreement. All such options shall terminate upon
such subletting or assignment unless Landlord specifically grants the same in
writing to such assignee or subtenant.
13.8 The voluntary or other surrender of this Lease by Tenant or a
mutual cancellation hereof shall not work a merger, and shall at the option of
Landlord, terminate all or any existing subleases or subtenancies or shall
operate as an assignment to Landlord of such subleases or subtenancies. If
Tenant is a corporation which is not required under the Securities Exchange Act
of 1934 to file periodic
Page 16
informational reports with the Securities and Exchange Commission, or is an
unincorporated association or partnership, the transfer, assignment or
hypothecation of any stock or interest in such corporation, association or
partnership in the aggregate in excess of twenty-five percent (25%) shall be
deemed an assignment within the meaning and provisions of this Paragraph 13.
Tenant agrees to reimburse Landlord, in no event less than $500.00 for each
proposed transfer, for Landlord's administrative time and reasonable costs and
attorneys' fees incurred in connection with the processing and documentation of
any such requested assignment, subletting, transfer, change of ownership or
hypothecation of this Lease or Tenant's interest in and to the Premises.
13.9 For purposes of this Lease, an assignment or sublease shall
include the merger or consolidation of Tenant. Landlord's consent to such,
merger or consolidation shall not be required where (i) the
transferee/successor-in-interest to Tenant's rights under this Lease has assumed
Tenant's obligations hereunder in writing, (ii) the
transferee/successor-in-interest has provided written notice to Landlord of such
merger or consolidation, and (iii) the shareholders' equity of such
transferee/successor-in-interest immediately after such merger or consolidation
is equal to or greater than the lesser of (y) Tenant's shareholders' equity as
of March 31, 1998 or (z) Tenant's shareholders' equity on the day immediately
preceding such merger or consolidation.
13.10 In the event Tenant believes that Landlord's refusal to consent
to an assignment or subletting is unreasonable, Tenant may submit the matter to
binding arbitration before a single arbitrator appointed by Judicial Arbitration
and Mediation Services (J.A.M.S.). The request for arbitration shall be
submitted by Tenant in writing to J.A.M.S. no later than ten (10) business days
after delivery of Landlord's written notice to Tenant of its refusal to consent.
Tenant's notice to J.A.M.S. shall be sent concurrently to Landlord. Landlord
and Tenant may each supply written briefs to the arbitrator and the other party
within ten (10) days after receipt of written notice of the appointment of the
arbitrator by J.A.M.S. Landlord and Tenant may also deliver written reply
briefs to the arbitrator and the other party within five (5) days after receipt
of the other party's brief. The arbitrator shall render his/her decision, in
writing, as soon as
Page 17
reasonably possible after the last day on which the parties can submit reply
briefs. The cost of the arbitrator shall be shared equally by Landlord and
Tenant.
14. HOLD HARMLESS.
14.1 Except for Landlord's gross negligence or willful misconduct,
Tenant shall indemnify, protect, defend and hold harmless the Premises, Landlord
and its employees and agents from and against any and all claims, loss of rents
and/or damages, liens, judgments, penalties, attorneys' and consultant's fees,
expenses and/or liabilities arising out of, involving or in connection with, the
use and/or occupancy of the Premises by Tenant and/or Tenant's breach of the
terms of the Lease. If any action or proceeding is brought against Landlord by
reason of any of the foregoing matters, Tenant shall, upon notice, defend the
same at Tenant's expense by counsel reasonably satisfactory to Landlord and
Landlord shall cooperate with Tenant in such defense. Landlord need not have
first paid any such claim in order to be defended or indemnified.
14.2 Landlord shall not be liable for any damage to property of
Tenant entrusted to employees or agents of Landlord, nor for loss or damage to
any property by theft or otherwise, nor for any injury to or damage to persons
or property resulting from fire, explosion, falling plaster, steam, gas,
electricity, water or rain which may leak from any part of the Building, or from
the pipes, appliances or plumbing works therein or from the roof, street or
subsurface or from any other place resulting from dampness or any other cause
whatsoever, unless caused by or due to the gross negligence or willful
misconduct of Landlord, its agents, servants or employees. Landlord or its
agents shall not be liable to Tenant for interference with the light or other
incorporeal hereditaments nor loss of business by Tenant. Landlord or its
agents shall not be liable to Tenant for any damages caused by the act or
neglect of any third party at the Premises. Tenant shall give prompt notice to
Landlord in case of fire or accidents in the Premises or in the Building or of
defects therein or in the fixtures or equipment.
14.3 Except for Tenant's gross negligence or willful misconduct,
Landlord shall indemnify, protect, defend and hold harmless Tenant and its
agents and employees from and against any and all claims, damages, liens,
judgments, penalties, attorneys' and consultant's fees, expenses and/or
liabilities
Page 18
arising out of, involving or in connection with the gross negligence or willful
misconduct of Landlord, its employees and agents in, on or about the Premises
and/or Landlord's breach of the terms of this Lease.
15. SUBROGATION. Landlord and Tenant each hereby waive any and all rights
of recovery against the other, for loss of or damage to such waiving party or
its property or the property of others under its control, arising from any cause
insured against under any policy of property insurance required to be carried by
such waiving party pursuant to the provisions of this Lease (or any other policy
of insurance carried by such waiving party in lieu thereof) at the time of such
loss or damage. Landlord and Tenant shall, upon obtaining the policies of
insurance which they are required to maintain under this Lease, give notice to
their respective insurance carrier(s) that the foregoing mutual waiver of
subrogation is contained in this Lease.
16. LIABILITY INSURANCE.
16.1 At all times during the Term, Tenant shall maintain in effect
policies of fire insurance covering: (i) all leasehold improvements (including
any alterations, additions or improvements as may be made by Tenant pursuant to
provisions of Article 10 hereof) in which Tenant may have an insurable interest;
and (ii) trade fixtures, merchandise and other personal property from time to
time in, on or upon the Premises, in an amount not less than one hundred percent
(100%) of their actual replacement cost from time to time during the term of
this Lease, providing protection against any peril included within the
classification "All-Risk." The proceeds of such insurance shall be used for the
repair or replacement of the property so insured. Upon termination of this
Lease following a casualty as set forth herein, the proceeds under subpart (i)
above shall be paid to Landlord, and the proceeds under subpart (ii) above shall
be paid to Tenant.
16.2 Tenant shall, at all times during the Term and at its own cost
and expense, procure and continue in force comprehensive general liability
insurance for bodily injury and property damage, adequate to protect Landlord
against liability for injury to or death of any person, arising in connection
with the use, operation or condition of the premises or construction of
improvements therein. Such insurance
Page 19
at all times shall be in an amount of not less than a combined single limit of
Two Million Dollars ($2,000,000.00), insuring against any and all liability of
the insured with respect to the Premises or arising out of the use or occupancy
thereof.
16.3 Tenant shall, at all times during the Term and at its own cost
and expense, procure and continue in force worker's compensation coverage as
required by law together with employee's liability coverage.
16.4 If required by Landlord, Tenant shall, at all times during the
term hereof and at its own cost and expense, procure and continue in force
business interruption and/or loss of income insurance in amounts reasonably
satisfactory to Landlord.
16.5 In no event shall the then limits of any policy be considered as
limiting the liability of Tenant under this Lease.
16.6 All insurance required to be carried by Tenant hereunder shall
be issued by responsible insurance companies, qualified to do business in the
State of California, rated A + XII or better in the current Bests' Insurance
Guide. Each insurance policy required to be maintained by Tenant hereunder
pursuant to subparagraphs 16.1 and 16.2 shall name Landlord, its officers,
agents, and employees, and at Landlord's request any mortgagee of Landlord, as
additional insureds, as their respective interests may appear, and copies of all
policies or certificates evidencing the existence and amounts of such insurance
shall be delivered to Landlord by Tenant prior to Tenant's occupancy of the
Premises. No such policy shall be cancelable or materially reduced except after
thirty (30) days prior written notice to Landlord. Tenant shall furnish
Landlord with renewals or "binders" of any such policy at least thirty (30) days
prior to the expiration thereof. Tenant agrees that if Tenant does not take out
and maintain such insurance, Landlord may (but shall not be required to), after
fifteen (15) days notice to Tenant, procure said insurance on Tenant's behalf
and charge the Tenant the premium, payable upon demand. Tenant shall have the
right to provide such insurance coverage pursuant to blanket policies obtained
by the tenant provided such blanket policies expressly afford coverage to the
Premises and to Tenant as required by this Lease.
Page 20
16.7 All insurance required to be carried by Tenant hereunder shall
also contain an inflation guard protection causing an increase in the annual
property insurance coverage amount and liability insurance coverage amount by a
factor not less than the adjusted U.S. Department of Labor Consumer Price Index
for All Urban Consumers for the Los Angeles-Anaheim-Riverside Statistical Area.
16.8 At all times during the Term, Landlord shall maintain in effect
a policy or policies of property insurance covering the Building in an amount
not less than the replacement cost thereof, providing protection against any
peril included within the classification "All Risk," excluding coverage for
flood or earthquake (unless Landlord in its sole discretion elects to obtain
endorsements for flood or earthquake).
16.9 [INTENTIONALLY DELETED.]
16.10 Tenant shall pay for all insurance required under this Paragraph
16. To the extent insurance is maintained by Landlord pursuant to this
Paragraph 16, Tenant shall pay the cost thereof to Landlord within ten (10) days
following receipt of an invoice therefor with any premiums for policy periods
commencing prior to or extending beyond the Term prorated to correspond with the
Term.
17. UTILITIES. Tenant shall pay for all water, gas, heat, light power,
telephone, trash disposal and other utilities and services supplied to the
Premises, together with any taxes thereon. If such services are not separately
metered to Tenant, Tenant shall pay a reasonable proportion, to be determined by
Landlord, of all charges jointly metered.
18. PROPERTY TAXES.
18.1 Tenant shall be liable for and shall pay thirty (30) days before
delinquency all taxes, levies and assessments levied against any personal
property or trade fixtures placed by Tenant in or about the Premises, and, when
possible, Tenant shall cause such personal property and trade fixtures to be
assessed and billed separately from the Building and the Premises. If any such
taxes, levies and assessments on Tenant's personal property or trade fixtures
are levied against Landlord or Landlord's property, or if the assessed value of
the Building or the Project is increased by the inclusion therein of a
Page 21
value placed upon such personal property or trade fixtures of Tenant, and if
Landlord pays the taxes, levies and assessments based upon such increased
assessment, which Landlord shall have the right to do regardless of the validity
thereof, but only under proper protest if requested by Tenant, Tenant shall
repay to Landlord upon demand, as additional rent, the taxes, levies and
assessments so levied against Landlord, or the proportion of such taxes, levies
and assessments resulting from such increase in the assessment, together with
interest thereon from the date of payment by Landlord to the date of
reimbursement by Tenant at the rate of ten percent (10%) per year. Provided,
however, that in any such event Tenant shall have the right, in the name of
Landlord and with Landlord's full cooperation but without any cost to Landlord,
to bring suit in any court of competent jurisdiction to recover the amount of
any such taxes, levies and assessments so paid under protest, any amount so
recovered to belong to Tenant.
18.2 If the tenant improvements in the Premises, whether installed
and/or paid for by Landlord or Tenant, and whether or not affixed to the real
property so as to become a part thereof, are assessed for real property tax
purposes at a valuation higher than the valuation at which tenant improvements
conforming to Landlord's "building standard" for the Building are assessed, then
the Real Property Taxes levied against Landlord or the Premises by reason of
such excess assessed valuation shall be deemed to be taxes levied against
personal property of Tenant and shall be governed by the provisions of
subparagraph 18.1 above. If the records of the County Assessor are available
and sufficiently detailed to serve as a basis for determining whether said
tenant improvements are assessed at a higher valuation than Landlord's "building
standard," such records shall be binding on both Landlord and Tenant; otherwise
the actual cost of construction shall be the basis for such determination.
18.3 As used herein, the term "Real Property Taxes" shall include any
form of assessment; real estate, general, special, ordinary or extraordinary, or
rental levy or tax (other than inheritance, personal income or estate taxes);
improvement bond; and/or license fee imposed upon or levied against any legal or
equitable interest of Landlord in the Premises, Landlord's right to other income
therefrom, and/or Landlord's business of leasing, by any authority having the
direct or indirect power to tax and where the funds are generated with reference
to the Building address and where the proceeds so
Page 22
generated are to be applied by the city, county or other local taxing authority
of a jurisdiction within which the Premises are located. The term "Real
Property Taxes" shall also include any tax, fee, levy, assessment or charge, or
any increase therein, imposed by reason of events occurring during the term of
this Lease, including but not limited to, a change of ownership of the Premises
pursuant to California Revenue and Taxation Code Section 61 ET SEQ. or
otherwise.
18.4 Tenant shall pay the Real Property taxes applicable to the
Premises during the term of this Lease. Subject to the subparagraph 18.5, all
such payments shall be made at least ten (10) days prior to any delinquency
date. Tenant shall promptly furnish Landlord with satisfactory evidence that
such taxes have been paid upon request by Landlord. If any such taxes shall
cover any period of time prior to or after the expiration or termination of this
Lease, Tenant's share of such taxes shall be prorated to cover only that portion
of the tax bill applicable to the period that this Lease is in effect, and
Landlord shall reimburse Tenant for any overpayment. If Tenant shall fail to
pay any required Real Property Taxes, Landlord shall have the right to pay the
same, and Tenant shall reimburse Landlord therefor upon demand.
18.5 In the event Tenant incurs a late charge on any rent payment,
Landlord may, at Landlord's option, estimate the current Real Property Taxes and
premiums for insurance to be carried by Landlord pursuant to Paragraph 16 above,
and require that such taxes and premiums be paid in advance to Landlord by
Tenant, either (i) in a lump sum amount equal to the installment due, at least
twenty (20) days prior to the applicable delinquency date, or (ii) monthly in
advance with the payment of the Base Rent. If Landlord elects to require
payment monthly in advance, the monthly payment shall be an amount equal to the
amount of the estimated installment of Real Property Taxes and insurance
premiums divided by the number of months remaining before the month in which
said installment becomes delinquent. When the actual amount of the applicable
tax bill and insurance premium is known, the amount of such equal monthly
advance payments shall be adjusted as required to provide the funds needed to
pay the applicable taxes and insurance premiums. If the amount collected by
Landlord is insufficient to pay such Real Property Taxes and insurance premiums
when due, Tenant shall pay Landlord, upon demand, such
Page 23
additional sums as are necessary to pay such obligations. All moneys paid to
Landlord under this subparagraph may be intermingled with other moneys of
Landlord and shall not bear interest. In the event of a default by Tenant in
the performance of its obligations under this Lease, then any balance of funds
paid to Landlord under the provisions of this subparagraph 18.5 may at the
option of Landlord, be treated as an additional security deposit.
18.6 If the Premises are not separately assessed, Tenant's liability
shall be an equitable proportion of the Real Property Taxes for all of the land
and improvements included within the tax parcel assessed, such proportion to be
conclusively determined by Landlord from the respective valuations assigned in
the assessor's work sheets or such other information as may be reasonably
available.
18.7 Payments by Tenant hereunder in addition to Base Rent, which
payments include but are not limited to insurance premiums payable to Landlord
and Real Property Taxes, are referred to herein as "Additional Rent."
19. RULES AND REGULATIONS. Tenant agrees to abide by all rules and
regulations of the Premises imposed by Landlord as set forth in EXHIBIT B
attached hereto, as the same may be reasonably changed from time to time by
Landlord upon reasonable notice to Tenant. Any such change shall be effective
upon delivery of a copy thereof to Tenant. These rules and regulations are
imposed for the cleanliness, good appearance, proper maintenance, good order and
reasonable use of the Premises and the Building.
20. HOLDING OVER. If Tenant remains in possession of the Premises or any
part thereof after the expiration of the term hereof, with the express written
consent of Landlord, such occupancy shall be a tenancy from month to month at a
rental in the amount of the last monthly rental, plus all other charges payable
hereunder, and upon all the terms hereof applicable to a month to month tenancy.
Any holding over without the express written consent obtained from Landlord by
Tenant shall not constitute a renewal or extension hereof or give Tenant any
rights under this Lease. If Tenant shall hold over without the express written
consent of Landlord, Landlord may, at its option treat Tenant as a tenant at
sufferance only and subject to all of the terms and conditions herein contained,
except that the monthly rental shall
Page 24
be one-hundred fifty percent (150%) of the total monthly rental applicable at
the date of expiration plus all other charges payable hereunder, or at
Landlord's then published rent for the Premises without regard to any tenant
concessions, whichever is greater. If Tenant fails to surrender the Premises
upon the expiration of this Lease, Tenant shall indemnify and hold Landlord
harmless from all loss or liability, including without limitation, any claims
made by any succeeding tenant founded on or resulting from such failure to
surrender. Acceptance by Landlord of rent after such expiration or earlier
termination shall not constitute a consent to a holdover hereunder or result in
a renewal of this Lease.
21. ENTRY BY LANDLORD. Landlord reserves, and shall at reasonable times
upon twenty-four (24) hours prior notice (except in the case of an emergency
when prior notice will not be required) have, the right to enter the Premises,
inspect the same, provide any and all services which are to be provided by
Landlord to Tenant hereunder, to submit said Premises to prospective purchasers
or tenants, to post notices of non-responsibility and to alter, improve or
repair the Premises and any portion thereof that Landlord may deem necessary or
desirable and may for that purpose erect scaffolding and other necessary
structures where reasonably required by the character of the work to be
performed without abatement of rent so long as access to and use of the Premises
shall not be blocked or prevented thereby and further providing that the
business of Tenant shall not be interfered with unreasonably. So long as access
to and use of the Premises is not blocked or prevented by Landlord's actions
contemplated by the immediately preceding sentence, Tenant shall have no claim
for damages or for any injury or inconvenience to or interference with Tenant's
business occasioned thereby. For each of the aforesaid purposes, Landlord shall
at all times have and retain a key with which to unlock all of the doors in,
upon and about the Premises, excluding Tenant's vaults, safes and files, and
Landlord shall have the right to use any and all means which Landlord may deem
proper to open said doors in an emergency, in order to obtain entry to the
Premises without liability to Tenant except for any failure to exercise due care
for Tenant's property. Any entry to the Premises obtained by Landlord by any of
said means or otherwise shall not under any circumstances be construed or deemed
to be a forcible or unlawful entry into, or a detainer of, the Premises or an
eviction of Tenant from the Premises or any portion thereof.
Page 25
22. RECONSTRUCTION.
22.1 For purposes of this Paragraph 22, the following terms shall
have the following meanings:
(a) "PREMISES PARTIAL DAMAGE" shall mean damage or
destruction to the improvements on the Premises, other than improvements
installed by and/or paid for by Tenant, which can reasonably be repaired in six
(6) months or less from the date of the damage or destruction. Landlord shall
notify Tenant in writing within thirty (30) days from the date of the damage or
destruction as to whether or not the damage is Partial or Total.
(b) "PREMISES TOTAL DESTRUCTION" shall mean damage or
destruction to the Premises, other than improvements installed by and/or paid
for by Tenant, which cannot reasonably be repaired in six (6) months or less
from the date of the damage or destruction. Landlord shall notify Tenant in
writing within thirty (30) days from the date of the damage or destruction as to
whether or not the damage is Partial or Total.
(c) "INSURED LOSS" shall mean damage or destruction to
improvements on the Premises, other than improvement installed by and/or paid
for by Tenant, which was caused by an event required to be covered by the
insurance described in Paragraph 16, irrespective of any deductible amounts or
coverage limits involved.
(d) "REPLACEMENT COST" shall mean the cost to repair or
rebuild the improvements owned by Landlord at the time of the occurrence to
their condition existing immediately prior thereto, including demolition, debris
removal and upgrading required by the operation of Applicable Requirements, and
without deduction for depreciation.
22.2 If a Premises Partial Damage that is an Insured Loss occurs,
then Landlord shall, at Landlord's expense, repair such damage (but not
improvements installed by and/or paid for by Tenant) as soon as reasonably
possible and this Lease shall continue in full force and effect.
Notwithstanding the foregoing, if the required insurance was not in force, the
party required to maintain the insurance as required by this Lease shall
promptly contribute the shortage in proceeds as and when required to complete
said repairs. In the event, however, such shortage was due to the fact that, by
reason of the
Page 26
unique nature of the improvements, full replacement cost insurance coverage was
not commercially reasonable and available, Landlord shall have no obligation to
pay for the shortage in insurance proceeds or to fully restore the unique
aspects of the Premises unless Tenant provides Landlord with the funds to cover
same, or adequate assurance thereof, within ten (10) days following receipt of
written notice of such shortage and request therefor. If Landlord receives said
funds or adequate assurance thereof within said ten (10) day period, Landlord
shall complete them as soon as reasonably possible and this Lease shall remain
in full force and effect. If such funds or assurance are not received, Landlord
may nevertheless elect by written notice to Tenant within ten (10) days
thereafter to: (i) make such restoration and repair as is commercially
reasonable with Landlord paying any shortage in proceeds, in which case this
Lease shall remain in full force and effect, or (ii) have this Lease terminate
thirty (30) days thereafter. Tenant shall not be entitled to reimbursement of
any funds contributed by Tenant to repair any such damage or destruction.
Premises Partial Damage due to flood or earthquake shall be subject to
Paragraph 22.3, notwithstanding that there may be some insurance coverage, but
the net proceeds of any such insurance shall be made available for the repairs
if made by either party.
22.3 If a Premises Partial Damage that is not an Insured Loss occurs,
unless caused by a grossly negligent or willful act of Tenant (in which event
Tenant shall make the repairs at Tenant's expense), Landlord may either: (i)
repair such damage as soon as reasonably possible at Landlord's expense, in
which event this Lease shall continue in full force and effect, or (ii)
terminate this Lease by giving written notice to Tenant within thirty (30) days
after receipt by Landlord of knowledge of the occurrence of such damage. Such
termination shall be effective sixty (60) days following the date of such
notice. In the event Landlord elects to terminate this Lease, Tenant shall have
the right within ten (10) days after receipt of the termination notice to give
written notice to Landlord of Tenant's commitment to pay for the repair of such
damage without reimbursement from Landlord. Tenant shall provide Landlord with
said funds or satisfactory assurance thereof within thirty (30) days after
making such commitment. In such event this Lease shall continue in full force
and effect, and Landlord shall proceed to make such
Page 27
repairs as soon as reasonably possible after the required funds are available.
If Tenant does not make the required commitment, this Lease shall terminate as
of the date specified in the termination notice.
22.4 Notwithstanding any other provision hereof, if a Premises Total
Destruction occurs, this Lease shall terminate sixty (60) days following such
destruction. If the damage or destruction was caused by the gross negligence or
willful misconduct of Tenant, Landlord shall have the right to recover
Landlord's damages from Tenant, except to the extent covered by insurance.
22.5 If at any time during the last six (6) months of this Lease
there is damage for which the cost to repair exceeds one (1) month's Base Rent,
whether or not an Insured Loss, Landlord may terminate this Lease effective
sixty (60) days following the date of occurrence of such damage by giving a
written termination notice to Tenant within thirty (30) days after the date of
occurrence of such damage. Notwithstanding the foregoing, if Tenant at that
time has an exercisable option to extend this Lease, then Tenant may preserve
this Lease by: (a) exercising such option and (b) providing Landlord with any
shortage in insurance proceeds (or adequate assurance thereof) needed to make
the repairs on or before the earlier of (i) the date which is ten days after
Tenant's receipt of Landlord's written notice purporting to terminate this
Lease, or (ii) the day prior to the date upon which such option expires. If
Tenant duly exercises such option during such period and provides Landlord with
funds (or adequate assurance thereof) to cover any shortage in insurance
proceeds, Landlord shall, at Landlord's commercially reasonable expense, repair
such damage as soon as reasonably possible and this Lease shall continue in full
force and effect. If Tenant fails to exercise such option and provide such
funds or assurance during such period, then this Lease shall terminate on the
date specified in the termination notice and Tenant's option shall be
extinguished.
22.6 In the event of Premises Partial Damage or Premises Total
Destruction for which Tenant is not responsible under this Lease, the Rent
payable by Tenant for the period required for the repair, remediation or
restoration of such damage shall be abated in proportion to the degree to which
Tenant's use of the Premises is impaired. All other obligations of Tenant
hereunder shall be performed by Tenant,
Page 28
and Landlord shall have no liability for any such damage, destruction,
remediation, repair or restoration as provided herein.
22.7 If Landlord shall be obligated to repair or restore the Premises
and does not commence, in a substantial and meaningful way, such repair or
restoration within ninety (90) days after such obligation shall accrue, Tenant
may, at any time prior to the commencement of such repair or restoration, give
written notice to Landlord and to any lenders of Landlord of which Tenant has
actual notice, of Tenant's election to terminate this Lease on a date not less
than sixty (60) days following the giving of such notice. If Tenant gives such
notice and such repair or restoration is not commenced within thirty (30) days
thereafter, this Lease shall terminate as of the date specified in said notice.
If the repair or restoration is commenced within said thirty (30) days, this
Lease shall continue in full force and effect. If the repair or restoration of
the Premises is not substantially completed within two hundred seventy (270)
days after the date of the damage or destruction, Tenant may, at any time prior
to the substantial completion of such repair or restoration, terminate this
Lease on written notice to Landlord. "COMMENCE" shall mean either the
unconditional authorization of the preparation of the required plans, or the
beginning of the actual work on the Premises, whichever first occurs.
22.8 Landlord and Tenant agree that the terms of this Lease shall
govern the effect of any damage to or destruction of the Premises with respect
to the termination of this Lease and hereby waive the provisions of any present
or future statute to the extent inconsistent herewith.
23. DEFAULT. The occurrence of any of the following shall constitute a
material default and breach of this Lease by Tenant:
23.1 Any failure by Tenant to pay the rent or to make any other
payment required to be made by Tenant hereunder at the time specified for
payment. Landlord shall give Tenant three (3) days' written notice of default,
which notice shall be in lieu of, and not in addition to, any notice required
under Section 1161 et seq. of the California Code of Civil Procedure, as
amended.
23.2 The abandonment of the Premises by Tenant. Abandonment is
herein defined to include, but is not limited to, any absence by Tenant from the
Premises for thirty (30) days or longer, except where
Page 29
Tenant has advised Landlord in writing that Tenant has not abandoned the
Premises and Tenant continues during such absence to perform all of its
obligations under this Lease.
23.3 Any failure by Tenant to observe and perform any other provision
of this Lease to be observed or performed by Tenant, where such failure
continues for thirty (30) days (except where a different period of time is
specified in this Lease) after written notice by Landlord to Tenant; provided,
however, that any such notice shall be in lieu of, and not in addition to, any
notice required under Section 1161 et seq. of the California Code of Civil
Procedure, as amended. If the nature of such default is such that the same
cannot reasonably be cured within such thirty (30) day period Tenant shall not
be deemed to be in default if Tenant shall commence such cure within such period
and thereafter diligently prosecute the same to completion.
23.4 Tenant makes or has made or furnishes or has furnished any
warranty, representation or statement to Landlord in connection with this Lease,
or any other agreement to which Tenant and Landlord are parties, which is or was
false or misleading in any material respect when made or furnished.
23.5 [INTENTIONALLY DELETED.]
23.6 The making by Tenant of any general assignment for the benefit
of creditors; the filing by or against Tenant of a petition to have Tenant
adjudged a bankrupt or of a petition for reorganization or arrangement under any
law relating to bankruptcy (unless, in the case of a petition filed against
Tenant, the same is dismissed within sixty (60) days); the appointment of a
trustee or receiver to take possession of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in this Lease, where possession
is not restored to Tenant within sixty (60) days; the attachment, execution or
other judicial seizure of substantially all of Tenant's assets located at the
Premises or of Tenant's interest in this Lease, where such seizure is not
discharged within sixty (60) days; or Tenant's convening of a meeting of its
creditors or any class thereof for the purpose of effecting a moratorium upon or
composition of its debts.
24. REMEDIES FOR DEFAULT.
24.1 In the event of any default by Tenant pursuant to Paragraph 23
above, then in addition to any other remedies available to Landlord at law or in
equity, Landlord shall have the immediate option to
Page 30
terminate this Lease and all rights of Tenant hereunder by giving written notice
of such intention to terminate. In the event that Landlord shall elect to so
terminate this Lease then Landlord may recover from Tenant:
(a) The worth at the time of award of any unpaid rent which
had been earned at the time of such termination; plus
(b) The worth at the time of award of the amount by which
the unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss which Tenant proves reasonably
could have been avoided; plus
(c) The worth at the time of award of the amount by which
the unpaid rent for the balance of the term of this Lease after the time of
award exceeds the amount of such rental loss that Tenant proves reasonably could
be avoided; plus
(d) Any other amount necessary to compensate Landlord for
all the detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including without limitation the unamortized balance
of any tenant improvement allowance provided to Tenant by Landlord or of any
tenant improvements constructed or paid for by Landlord at the commencement of
the term hereof, which amount shall be deemed Additional Rent automatically due
and payable hereunder upon the occurrence of an event of default by Tenant and
shall be recoverable as rent in any unlawful detainer or other action arising
out of or pertaining to such default, whether or not specified in any notice
given by Landlord as a condition or prior to the commencement of any such
action; and at Landlord's election, such other amounts in addition to or in lieu
of the foregoing as may be permitted from time to time by applicable California
law.
24.2 As used in subparagraphs 24.1(a) and (b) above, the "worth at
the time of award" is computed by allowing interest at the rate of ten percent
(10%) per annum. As used in subparagraphs 24.1(c), the "worth at the time of
award" is computed by discounting such amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of the award plus one percent.
Page 31
24.3 In the event of any such default by Tenant, Landlord shall also
have the right, with or without terminating this Lease, to re-enter the Premises
and remove all persons and property from the Premises; such property may be
removed and stored in a public warehouse or elsewhere at the cost of and for the
account of Tenant.
24.4 In the event of the vacation or abandonment of the Premises by
Tenant or in the event that Landlord shall elect to re-enter as provided above
or shall take possession of the Premises pursuant to legal proceedings or
pursuant to any notice provided by law, then if Landlord does not elect to
terminate this Lease as provided in this Paragraph 24, Landlord may from time to
time, without terminating this Lease, either recover all rental as it becomes
due or relet the Premises or any part thereof for such term or terms and at such
rental or rentals and upon such other terms and conditions as Landlord in its
sole discretion may deem advisable, with the right to make alterations and
repairs to the Premises. Election by Landlord to proceed pursuant to this
subparagraph shall be made upon written notice to Tenant and shall be deemed an
election of the remedy described in California Civil Code Section 1951.4 and,
unless Landlord re-lets the Premises, Tenant shall have the right to sublet or
assign subject to the prior written consent of Landlord. Such consent shall not
be unreasonably withheld and shall be subject to all of the terms and provisions
of Paragraph 13.
24.5 In the event that Landlord shall elect to so relet, then rentals
received by Landlord from such reletting shall be applied: first, to the payment
of any indebtedness other than rent due hereunder from Tenant to Landlord;
second, to the payment of any reasonable cost of such reletting; third, to the
payment of the cost of any repairs to the Premises necessitated by Tenant's use;
fourth, to the payment of rent due and unpaid hereunder; and the residue if any,
shall be held by Landlord and applied in payment of future amounts as the same
may become due and payable hereunder. Should the rent for such reletting,
during any month for which the payment of rent is required hereunder, be less
than the rent payable during that month by Tenant hereunder, then Tenant shall
pay such deficiency to Landlord immediately upon demand therefor by Landlord.
Such deficiency shall be calculated and paid monthly. Tenant shall also pay to
Landlord as soon as ascertained, any reasonable costs and expenses incurred
Page 32
by Landlord in such reletting or in making such repairs not covered by the
rentals received from such reletting.
24.6 No re-entry or taking possession of the Premises by Landlord
pursuant to this Paragraph 24 shall be construed as an election to terminate
this Lease unless a written notice of such intention be given to Tenant or
unless the termination thereof be decreed by a court of competent jurisdiction.
Notwithstanding any reletting without termination by Landlord because of any
default by Tenant, Landlord may at any time after such reletting elect to
terminate this Lease for any such default.
24.7 In any action for unlawful detainer commenced by Landlord
against Tenant by reason of any default hereunder, the reasonable rental value
of the Premises for the period of the unlawful detainer shall be the amount of
rent reserved in this Lease for such period. The rights and remedies reserved
to Landlord herein, including those not specifically described, shall be
cumulative and, except as otherwise provided by California statutory law in
effect at the time, Landlord may pursue any or all of such rights and remedies,
at the same time or otherwise.
24.8 All covenants and agreements to be performed by Tenant under
this Lease shall be performed by Tenant at Tenant's sole cost and expense and
without any abatement of rent. If Tenant fails to pay any sum of money, other
than rent, required to be paid by it or fails to perform any other act on its
part to be performed, and such failure continues beyond any applicable grace
period set forth in the Paragraph providing for such obligation (or if no grace
period is set forth in such Paragraph, then the applicable grace period pursuant
to Paragraph 23), then in addition to any other remedies provided herein
Landlord may, but shall not be obligated so to do, without waiving or releasing
Tenant from any obligations of Tenant, make any such payment or perform any such
other act on Tenant's part, including the removal of any offending signs.
Landlord's election to make any such payment or perform any such act on Tenant's
part shall not give rise to any responsibility of Landlord to continue making
the same or similar payments or performing the same or similar acts. Tenant
shall, within ten (10) days after written demand therefor by Landlord, reimburse
Landlord for all sums so paid by Landlord and all necessary incidental costs,
together with interest thereon at the rate of ten percent (10%) per annum,
accruing from
Page 33
the date of such payment by Landlord, and Landlord shall have the same rights
and remedies in the event of failure by Tenant to pay such amounts as Landlord
would have in the event of a default by Tenant in payment of rent.
25. SUCCESSOR LANDLORD'S LIABILITY. The liability of any
successor-in-interest to Landlord under this Lease ("Successor Landlord") shall
be limited to the Successor Landlord's estate in the Premises.
26. EMINENT DOMAIN. If the whole of the Premises shall be taken, or such
part thereof shall be taken as shall substantially interfere with Tenant's use
and occupancy of the balance thereof, under power of eminent domain, or sold,
transferred, or conveyed in lieu thereof, either Tenant or Landlord may
terminate this Lease as of the date of such condemnation or as of the date
possession is taken by the condemning authority, whichever date occurs later.
If any part of the Premises shall be so taken, sold, transferred or conveyed in
lieu thereof, which does not substantially interfere with Tenant's use and
occupancy of the balance thereof, this Lease shall not terminate but Landlord's
and Tenant's rights shall be as set forth below. No award for any partial or
entire taking shall be apportioned, and Tenant hereby assigns to Landlord any
award which may be made in such taking or condemnation, together with any and
all rights of Tenant now or hereafter arising in or to the same or any part
thereof; provided, however, that nothing contained herein shall be deemed to
give Landlord any interest in or require Tenant to assign to Landlord any award
made to Tenant for the taking of personal property and fixtures belonging to
Tenant and removable by Tenant at the expiration of the term hereof, as provided
hereunder, or for the interruption of, or damage to Tenant's business or for
relocation expenses recovered against the condemning authority. In the event of
a partial taking, or a sale, transfer, or conveyance in lieu thereof, which does
not result in a termination of this Lease, Landlord shall, to the extent of any
funds received from the condemning authority for repair or restoration, restore
the Premises substantially to their condition prior to such partial taking, and
thereafter Base Rent shall be abated in the proportion which the square footage
of the part of the Premises so made unusable bears to the amount of area rented
immediately prior to the taking. No taking for a period of less than thirty
(30) days of all or a part of the
Page 34
Premises shall give Tenant any right to terminate this Lease, but Tenant shall
receive an abatement of Base Rent.
27. HAZARDOUS MATERIALS.
27.1 Without limiting the generality of Paragraphs 8 and 9 of this
Lease, Tenant covenants and agrees that Tenant, its employees, agents and other
third parties entering upon the Premises at the request or invitation of Tenant
shall not bring into, maintain upon, generate, produce, use, store, dispose of
or release or discharge in or about the Premises any hazardous or toxic
substances or hazardous waste, as more fully defined below (collectively,
"hazardous materials"). The foregoing covenant shall not extend to substances
typically found or used in applications of the type permitted by this Lease so
long as: (a) such substances are maintained only in such quantities as are
reasonably necessary for Tenant's operations in the Premises; (b) such
substances and all equipment which generates such substances are used strictly
in accordance with the manufacturers' instructions therefor; (c) such substances
are not disposed of in or about the Premises in a manner which would constitute
a release or discharge thereof; and (d) all such substances and all equipment
which generates such substances are removed from the Premises by Tenant upon the
expiration or earlier termination of this Lease. Any introduction, use,
storage, generation, maintenance, production, disposal, release or discharge by
Tenant of hazardous materials in or about the Premises as is permitted pursuant
to this Paragraph shall be carried out in compliance with all applicable
federal, state and local laws, ordinances, rules and regulations. Moreover, no
hazardous waste resulting from any operations by Tenant shall be stored or
maintained by Tenant in or about the Premises for more than thirty (30) days
prior to removal by Tenant. In no event shall Tenant install any chemical
storage tank in or about the Premises. Tenant shall, annually within thirty
(30) days after Tenant's receipt of Landlord's written request therefor, provide
to Landlord a written list identifying any hazardous materials then maintained
by Tenant in the Premises, the use of each such hazardous material and the
approximate quantity of each such hazardous material so maintained by Tenant,
together
Page 35
with written certification by Tenant stating, in substance, that neither Tenant
nor any person for whom Tenant is responsible has released or discharged any
hazardous materials in or about the Premises.
27.2 In the event that Tenant proposes to conduct any use or to
operate or store any equipment which will or may utilize or generate a hazardous
material other than as specified in subparagraph 27.1, Tenant shall first submit
in writing such use, storage or equipment proposal to Landlord for approval. No
approval by Landlord shall relieve Tenant of any obligation of Tenant pursuant
to this Paragraph, including the removal, clean-up and indemnification
obligations imposed upon Tenant by this Paragraph. Tenant shall, within five
(5) days after receipt thereof, furnish to Landlord copies of all notices or
other communications received by Tenant with respect to any actual or alleged
release or discharge of any hazardous material in or about the Premises and
shall, whether or not Tenant receives any such notice or communication, notify
Landlord in writing of any discharge or release of hazardous material in or
about the Premises.
27.3 Upon any violation of the foregoing covenants, Tenant shall be
obligated, at Tenant's sole cost, to clean-up and remove from the Premises all
hazardous materials introduced into the Premises by Tenant or any third party
for whom Tenant is responsible. Such clean-up and removal shall include all
testing and investigation required by any governmental authorities having
jurisdiction and preparation and implementation of any remedial action plan
required by any governmental authorities having jurisdiction. All such clean-up
and removal activities of Tenant shall, in each instance, be conducted to the
reasonable satisfaction of Landlord and all governmental authorities having
jurisdiction. Landlord's right of entry pursuant to Paragraph 21 shall include
the right to enter and inspect the Premises for violations of Tenant's covenants
herein.
27.4 Tenant shall indemnify, defend (with counsel approved by
Landlord) and hold harmless Landlord, its partners, directors, officers,
employees, agents, lenders and attorneys and their respective successors and
assigns from and against any and all claims, liabilities, losses, actions, costs
and expenses (including attorneys' fees and costs of defense) incurred by such
indemnified persons, or any of them, as the result of: (i) the introduction of
any hazardous materials into or about the Premises by
Page 36
Tenant, its employees, agents or contractors; (ii) the usage, storage,
maintenance, generation, production, disposal, release or discharge of hazardous
materials in or about the Premises by Tenant, its employees, agents or
contractors; (iii) any injury to or death of persons or damage to or destruction
of property resulting from the use, introduction, maintenance, production,
storage, generation, disposal, disposition, release or discharge of hazardous
materials in or about the Premises by Tenant, its employees, agents or
contractors; and/or (iv) any failure of Tenant, its employees, agents or
contractors to observe the covenants of this Paragraph 27. Payment shall not be
a condition precedent to enforcement of the foregoing indemnification provision.
If any claim for indemnification is made by Landlord hereunder, or if Tenant is
required hereunder to perform any remedial activity pursuant to this Paragraph,
Landlord agrees to grant to Tenant such access to portions of the Premises as is
reasonably necessary for the purpose of effecting a remediation of the
occurrence giving rise to such claim for indemnification or duty of remediation.
27.5 In the event that Tenant is required by any governmental
authority to maintain any hazardous materials license or permit in connection
with any use conducted by Tenant or any equipment operated by Tenant in, on or
about the Premises, copies of such license or permit, each renewal or revocation
thereof, and any communication relating to suspension, renewal or revocation
thereof shall be furnished to Landlord within five (5) days after receipt
thereof by Tenant. Compliance by Tenant with the provisions of this
subparagraph and the second subparagraph of this Paragraph 27 shall not relieve
Tenant of any other obligation of Tenant pursuant to this Paragraph.
27.6 Upon any violation of the foregoing covenants Landlord shall be
entitled to exercise all remedies available to a landlord against a defaulting
tenant, including, but not limited to these set forth in Paragraph 24. Without
limiting the generality of the foregoing, Tenant expressly agrees that upon any
such violation Landlord may, at its option, (i) immediately terminate this
Lease, or (ii) continue this Lease in effect until compliance by Tenant with its
clean-up and removal covenant notwithstanding any earlier expiration date of the
term of this Lease. No action by Landlord hereunder shall impair the
obligations of Tenant pursuant to this Paragraph.
Page 37
27.7 As used in this Paragraph 27, the term "hazardous materials"
shall mean any hazardous materials, hazardous wastes or hazardous or toxic
substances as defined by Environmental Laws. As used in this Paragraph 27,
"Environmental Laws" means the Resource Conservation and Liability Act, and
Superfund Amendments and Reauthorization Act, the Federal Water Pollution
Control Act, the Safe Drinking Water Act, the Clean Air Act, the toxic
Substances Control Act, the Atomic Energy Act, the Endangered Species Act,
California Health and Safety Code Section 25316 , and any similar laws affecting
the Premises or the use thereof, and any amendments to any of the foregoing.
27.8 Landlord represents and warrants that, as of the Commencement
Date, the Premises are in compliance with the applicable environmental laws,
rules, regulations, directives or orders of any governmental authority relating
to the protection of human health or the environment, relating to the injury or
damage to, or restoration or replacement of, natural resources, or relating to
land reclamation, including, but not limited to, to the extent applicable,
requirements under Environmental Laws. To Landlord's knowledge as of the
Commencement Date, there has not been any notice, written or oral, provided to
Landlord by any governmental agency or authority, or by any previous tenant or
owner, or any other party of any violation, alleging violation, of, or
investigation relating to, any Environmental Law. To Landlord's knowledge as of
the Commencement Date, there is no legal, administrative, investigatory or other
proceedings, pending or threatened against Landlord which relate to any
violation of Environmental Law. These representations and warranties, and the
indemnification obligations set forth below, shall survive the termination or
expiration of the Lease until the lapse of all applicable statutes of
limitations, if any. Landlord hereby agrees to indemnify and hold Tenant
(including its officers, directors, employees, agents, successors and assigns)
harmless from any damages, losses, costs or expenses, suffered or paid as a
result of any and all claims, damages, suits, causes of action, proceedings,
judgments, liabilities, penalties, interest, losses, damages, costs or expenses,
including reasonable attorney's fees incurred in litigation or otherwise,
assessed, incurred or sustained by or against Tenant with respect to or arising
out of the failure or breach of any representation or warranty contained herein
and made by Landlord with respect to Environmental Laws or hazardous materials,
or the use, production, storage,
Page 38
maintenance, generation, disposal, release or discharge of any hazardous
materials into the environment from or at the Premises or from materials which
Landlord or any prior tenant or owner of the Premises disposed of or arranged
for the disposal of offsite, or any adverse effect or potential adverse effect
on humans or the environment deriving therefrom.
27.9 Attached to this Lease at EXHIBIT "C" is a true copy of
Environmental Audit Report for the Premises prepared by Ralph Stone and Company,
Inc.
28. OFFSET STATEMENT. Tenant shall at any time and from time to time upon
not less ten (10) days' prior written notice from Landlord execute, acknowledge
and deliver to Landlord a statement in writing, (a) certifying that this Lease
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) and the date to which the rental and other charges are paid in
advance, if any, and (b) acknowledging that there are not, to Tenant's
knowledge, any uncured defaults if any are claimed. Any such statement may be
relied upon by any prospective purchaser or encumbrancer of all or any portion
of the real property of which the Premises are a part. In the event Tenant does
not provide Landlord with an offset statement as required in this paragraph
within the ten (10) day period mentioned therein, Tenant shall be deemed to have
acknowledged all of the matters set forth herein.
29. TRAFFIC AND ENERGY MANAGEMENT.
29.1 Tenant agrees to cooperate and use reasonable efforts to
participate in governmentally mandated traffic management programs generally
applicable to businesses located in Burbank, California or to the Premises.
Neither this Paragraph nor any other provision in this Lease, however, is
intended to or shall create any rights or benefits in any other person, firm,
company, governmental entity or the public.
29.2 Tenant agrees to cooperate and use reasonable efforts to comply
with any and all mandatory guidelines or controls imposed upon either Landlord
or Tenant by federal or state governmental organizations or by any energy
conservation association to which Landlord is a party concerning energy
management.
Page 39
29.3 [INTENTIONALLY DELETED.]
30. [INTENTIONALLY DELETED.]
31. [INTENTIONALLY DELETED.]
32. AUTHORITY OF PARTIES. Each individual executing this Lease on behalf of
Landlord and Tenant represents and warrants that the execution and delivery of
this Lease on behalf of the party for whom such person is executing is duly
authorized, that he or she is authorized to execute and deliver this Lease and
that this Lease is binding upon such party in accordance with its terms. If
Tenant is a corporation, Tenant shall, within ten (10) days after execution of
this Lease, deliver to Landlord a certified copy of a resolution of the Board of
Directors of Tenant, or any executive committee thereof, authorizing or
ratifying the execution of this Lease. Failure of Tenant to provided such
resolution shall not, however, relieve Tenant of its obligations pursuant to
this Lease.
33. GENERAL PROVISIONS.
33.1 CLAUSES, PLATS AND RIDERS. Clauses, plats, and riders, if any,
signed by the Landlord and the Tenant and endorsed on or affixed to this Lease
are a part hereof.
33.2 WAIVER. No waiver by Landlord of any provision of this Lease or
of any breach by Tenant hereunder shall be deemed to be a waiver of any other
provision hereof, or of any subsequent breach by Tenant of the same or any other
provision. Landlord's consent to or approval of any act by Tenant requiring
Landlord's consent or approval shall not be deemed to render unnecessary the
obtaining of Landlord's consent to or approval of any subsequent act of Tenant.
No act or thing done by Landlord or Landlord's agents during the term of this
Lease shall be deemed an acceptance of a surrender of the Premises, unless done
in a writing signed by Landlord. Tenant's delivery of keys to any employee or
agent of Landlord shall not operate as a termination of this Lease or a
surrender of the Premises unless done pursuant to a written agreement to such
effect executed by Landlord. The acceptance of any rent by Landlord following a
breach of this Lease by Tenant shall not constitute a waiver by Landlord of such
Page 40
breach (other than the failure to pay the particular rent so accepted) or any
other breach unless such waiver is expressly stated in a writing signed by
Landlord. The acceptance of any payment from a debtor in possession, a trustee,
a receiver or any other person acting on behalf of Tenant or Tenant's estate
shall not waive or cure a default under Paragraph 23.6 or waive the provisions
of Paragraph 13.
33.3 NOTICES. All notices and demands which may or are to be
required or permitted to be given by either party to the other hereunder shall
be in writing. All notices and demands by the Landlord to the Tenant shall be
personally served on Tenant at the Premises or shall be sent by United States
certified mail, return receipt requested, postage prepaid, addressed to the
Tenant at the Premises, or to such other place as Tenant may from time to time
designate in a notice to the Landlord. All notices and demands by the Tenant to
the Landlord shall be personally served on Landlord at the office of the
Building or shall be sent by United States certified mail, return receipt
requested, postage prepaid, addressed to the Landlord in care of John B. Miles,
Esq., McDermott, Will & Emery at 1301 Dove Street, Suite 500, Newport Beach,
California 92660, or to such other person or place as the Landlord may from time
to time designate in a notice to the Tenant. All notices shall be deemed
effective upon receipt. If personally delivered, notices shall be deemed
received at the time of delivery. If any notice is sent by mail, the same shall
be deemed delivered and received on the date of receipt, refusal or nondelivery
indicated on the return receipt. Any notice provided for herein may also be
sent by facsimile transmission or by any reputable overnight courier so long as
written confirmation of delivery of such notice is obtained by the sender.
33.4 [INTENTIONALLY DELETED.]
33.5 MARGINAL HEADINGS. The marginal headings and Paragraph titles
to the Paragraphs of this Lease are not a part of this Lease and shall have no
effect upon the construction or interpretation of any part hereof.
33.6 TIME. Time is of the essence of this Lease and of each and all
of its provisions in which performance is a factor.
Page 41
33.7 SUCCESSORS AND ASSIGNS. The covenants and conditions herein
contained, subject to the provisions as to assignment, apply to and bind the
heirs, successors, executors, administrators and assigns of the parties hereto.
33.8 LATE CHARGES. Tenant hereby acknowledges that late payment by
Tenant to Landlord of rent or other sums due hereunder will cause Landlord to
incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed upon
Landlord by terms of any mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or of sum due from Tenant shall not be
received by Landlord or Landlord's designee within five (5) days after said
amount is due, then Tenant shall pay to Landlord a late charge equal to three
percent (3%) of such overdue amount for the first late payment during any twelve
(12) month period and six percent (6%) of such overdue amount for any other late
payment during such twelve (12) month period. In addition, any amount not paid
when due shall bear interest at the rate of ten percent (10%) per year from the
due date until paid. The parties hereby agree that such late charges and
interest represent a fair and reasonable estimate of the cost that Landlord will
incur by reason of the late payment by Tenant. Acceptance of such late charges
and interest by the Landlord shall in no event constitute a waiver of Tenant's
default with respect to such overdue amount, nor prevent Landlord from
exercising any of the other rights and remedies granted hereunder regardless of
any indication to the contrary on the check cashed. In the event that any check
or other payment device for rent, or any other charge hereunder, is returned due
to insufficient funds or any other reason, the foregoing late payment and
interest charges shall apply and Landlord may require all further payments to be
made by money order, cashier's check or in cash.
33.9 PRIOR AGREEMENTS. This Lease and the Exhibits hereto contain
all of the agreements of the parties hereto with respect to any matter covered
or mentioned in this Lease, and no prior agreements or understanding pertaining
to any such matters 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
Page 42
their respective successors in interest. This Lease shall not be effective or
binding on any party until fully executed by both parties hereto.
33.10 INABILITY TO PERFORM. This Lease and the obligations of each
party hereunder shall not be affected or impaired because the other party is
unable to fulfill any of its obligations hereunder or is delayed in doing so, if
such liability or delay is caused by reason of strike, labor troubles, acts of
God, or any other cause beyond the reasonable control of such other party.
33.11 ATTORNEYS' FEES. In the event of any action or proceeding
brought by either party against the other under this Lease the prevailing party
shall be entitled to recover all costs and expenses including the fees of its
attorneys in such action or proceeding in such amount as the court may adjudge
reasonable as attorneys' fees. If Landlord is involuntarily made a party
defendant to any litigation concerning this Lease or the Premises by reason of
any act or omission of Tenant, then Tenant shall hold Landlord harmless from all
costs, liabilities, damages and expenses by reason thereof, including attorneys'
fees and all costs incurred by Landlord in such litigation.
33.12 SALE OF PREMISES BY LANDLORD. In the event of any sale of the
Building, Landlord shall be and is hereby entirely freed and relieved of all
liability under any and all of its covenants and obligations contained in or
derived from this Lease arising out of any act, occurrence or omission occurring
after the consummation of such sale; and the purchaser, at such sale or any
subsequent sale of the Premises shall be deemed, without any further agreement
between the parties or their successors in interest or between the parties and
any such purchaser, to have assumed and agreed to carry out any and all of the
covenants and obligations of the Landlord under this Lease arising out of any
act, occurrence or omission occurring after the consummation of such sale.
33.13 SUBORDINATION, ATTORNMENT. Without the necessity of any
additional documents being executed by Tenant for the purpose of effecting a
subordination and at the election of Landlord or any mortgagees with a lien on
the Building or ground lessor with respect to Building, this Lease is subject
and subordinate to any and all ground or underlying leases, mortgages or deeds
of trust which may hereafter be executed covering the Premises, the Building and
the real property of which it is a part, or any
Page 43
renewals, modifications, consolidations, replacements or extensions thereof, for
the full amount of all advances made or to be made thereunder and without regard
to the time or character of such advances, together with interest thereon and
subject to all the terms and provisions thereof. Notwithstanding the foregoing,
Tenant agrees, within ten (10) days after Landlord's written request therefor,
to: (a) execute, acknowledge and deliver any and all documents or instruments
requested by Landlord, or that are necessary or proper to assure the
subordination of this Lease to any such mortgages, deeds of trust, or leasehold
estates; and (b) supply such financial information concerning Tenant as may be
requested by any ground lessor or lender. Notwithstanding such subordination,
Tenant's quiet enjoyment of the Premises will not be disturbed so long as Tenant
pays rent and observes and performs all of the provisions of this Lease to be
observed and performed by Tenant. Notwithstanding anything to the contrary set
forth in this Paragraph, Tenant hereby attorns and agrees to attorn to (at the
option of) any person, firm, or corporation purchasing or otherwise acquiring
the building and the real property of which it is a part, at any sale or other
proceeding or pursuant to the exercise of any other rights, powers, or remedies
under such mortgages, or deeds of trust, or ground or underlying leases, as if
such person, firm or corporation had been named as Landlord herein, provided
that such person, firm, or corporation shall accept the Premises subject to this
Lease. Tenant hereby appoints Landlord the attorney-in-fact of Tenant,
irrevocably, to execute and deliver any documents provided for herein for and in
the name of Tenant; such power, being coupled with an interest, being
irrevocable. The provisions of this Paragraph to the contrary notwithstanding,
and so long as Tenant is not in default hereunder, this Lease shall remain in
full force and affect for the full term hereof.
33.14 NAME. Tenant shall not use the name of the Building or of the
Project for any purpose other than as an address of the business to be conducted
by the Tenant in the Premises.
33.15 SEPARABILITY. Any provision of this Lease which shall prove to
be invalid, void or illegal shall in no way affect, impair or invalidate any
other provision hereof and such other provision shall remain in full force and
affect.
Page 44
33.16 CUMULATIVE REMEDIES. No remedy or election hereunder shall be
deemed exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.
33.17 CHOICE OF LAW. This Lease shall be governed by the laws of the
State of California.
33.18 AUCTIONS. Tenant shall not conduct any auction on the Premises
without Landlord's prior written consent.
33.19 [INTENTIONALLY DELETED.]
33.20 NEGOTIATED TRANSACTION. This Lease has been negotiated at arm's
length. Accordingly, the provisions of this Lease shall be deemed to have been
drafted by all of the parties and any rule of law that would require
interpretation of this Lease against the party that has drafted it is not
applicable and is waived.
33.21 [INTENTIONALLY DELETED.]
33.22 QUITCLAIM OF INTEREST. At the expiration or earlier termination
of this Lease, Tenant shall execute, acknowledge and deliver to Landlord, within
five (5) days after written demand from Landlord to Tenant, any quitclaim deed
or other document which may be reasonably requested by any reputable title
insurance company to remove this Lease as a matter affecting title to the
Premises on a preliminary title report or title policy issued with respect to
the Premises.
33.23 [INTENTIONALLY DELETED.]
33.24 SURVIVAL OF INDEMNITIES. The obligations of the indemnifying
party under each and every indemnification and hold harmless provision in this
Lease shall survive the expiration or earlier termination of this Lease to and
until the last to occur of: (a) the last date permitted by law for the
bringing of any claim or action with respect to which indemnification may be
claimed by the indemnified party against the indemnifying party under such
provisions, or (b) the date on which any claim or action for which
indemnification may be claimed under such provision is fully and finally
resolved and, if applicable, any compromise thereof or judgment or award thereon
is paid in full by the indemnifying party and the indemnified party is
reimbursed by the indemnifying party for any amounts paid by the indemnified
party in compromise thereof or upon a judgment or award thereon and in defense
of such action or claim,
Page 45
including reasonable attorneys' fees incurred. Notwithstanding anything to the
contrary in that certain Asset Purchase Agreement or Secured Indemnity
Agreement, each dated approximately of even date herewith and executed by
Landlord and Tenant, or that certain Deed of Trust, dated approximately of even
date herewith and executed by Landlord, as trustor, in favor of Tenant, as
beneficiary, none of the representations, warranties, or other covenants or
obligations herein are secured by such Deed of Trust.
33.25 NO REPRESENTATION BY LANDLORD. In no event shall the review,
approval, inspection or examination by Landlord of any item to be reviewed,
approved, inspected or examined by Landlord under the terms of this Lease be
deemed to be an approval of, or representation or warranty as to, the adequacy,
accuracy, sufficiency or soundness of any such item or the quality or
suitability of such item for its intended use. Any such review, approval,
inspection or examination by Landlord shall be for the sole purpose of
protecting Landlord's interests in the Building and the Project under this
Lease, and no third parties shall have any rights pursuant thereto.
34. BROKERS. Tenant warrants that it has had no dealings with any real
estate broker or agents in connection with the negotiation of this Lease and it
knows of no other real estate broker or agent who is entitled to a commission in
connection with this Lease.
35. QUIET ENJOYMENT. Upon the payment by Tenant of Base Rent, Additional
Rent and all other sums to be paid hereunder by Tenant and the observance and
performance of all covenants, conditions and provisions on Tenant's part to be
observed and performed under this Lease, Tenant shall have quiet possession of
the Premises for the entire Term subject to all of the provisions of this Lease.
Page 46
The parties hereto have executed this Lease at the place and on the
dates specified immediately adjacent to their respective signatures.
ALL POST, INC., a California corporation
By:
-----------------------------------
By:
-----------------------------------
Address Execution Date:
----------------------------- ----------------------
- ------------------------------------- "Landlord"
VDI MEDIA, a California corporation
By:
-----------------------------------
By:
-----------------------------------
Address Execution Date:
----------------------------- ----------------------
- ------------------------------------- "Tenant"
Page 47
SCHEDULE 1
BASE RENT
Adjustment Date Base Rent Per Month
- --------------- -------------------
First Adjustment Date $40,000.00
Second Adjustment Date $41,200.00
Third Adjustment Date $42,436.00
Fourth Adjustment Date $43,709.08
Fifth Adjustment Date $45,020.35
Sixth Adjustment Date $46,370.96
Seventh Adjustment Date $47,762.09
Eighth Adjustment Date $49,194.95
Ninth Adjustment Date $50,670.80
SCHEDULE 1
EXHIBIT A
PREMISES DESCRIPTION
That certain real property situated in the City of Burbank, County of Los
Angeles, State of California, more particularly described as:
Lots 185, 187, 189, 191 and the North one-half of Lot 293 of Tract 7383, as per
map recorded in Book 84, Pages 20 and 21 of Maps, in the office of the County
Recorder of said County.
EXHIBIT A
EXHIBIT B
BUILDING RULES AND REGULATIONS
[To be mutually agreed upon by Tenant and Landlord,
such agreement not to be unreasonably withheld or delayed]
EXHIBIT B
EXHIBIT C
ENVIRONMENTAL AUDIT REPORT
EXHIBIT C