Exhibit 10.38
KILROY REALTY, L.P.
MODIFIED NET
INDUSTRIAL BUILDING LEASE
THIS MODIFIED NET INDUSTRIAL BUILDING LEASE (this "Lease") is executed
this ____ day of ____________, 1997, between KILROY REALTY, L.P., a Delaware
Limited Partnership, KILROY REALTY CORPORATION, a Maryland Corporation, General
Partner (hereafter called "Lessor") and HOLLINGSEAD INTERNATIONAL, a California
Corporation (hereinafter called "Lessee").
W I T N E S S E T H:
Lessor hereby leases to Lessee, and Lessee hires from Lessor, that certain
real property ("Real Property") with the improvements comprising approximately
fifty-eight thousand three hundred three (58,303) rentable square feet,
structures, buildings and fixtures located therein or thereon and all
appurtenances thereto (the "Improvements"), with the street address of 12442
Knott Avenue, City of Garden Grove, State of California and more particularly
described on Exhibit "A" attached hereto and by this reference made a part
hereof, subject to governmental regulations and matters of record, for and
during the term of seven (7) years, commencing on November 1, 1997 ("the
Commencement Date") and ending on October 31, 2004. The Real Property and the
Improvements shall sometimes hereinafter be collectively referred to as the
"Premises."
It is further mutually agreed between the parties as follows:
1. RENT. Lessee agrees to pay to Lessor as rent for the Premises, payable at
such place as may be designated by Lessor in writing, in lawful money of the
United States of America, the sum of Thirty-One Thousand Four Hundred
Eighty-Three and 62/100 ($31,483.62) Dollars ($0.54 per rentable square foot)
per month, in advance, on the lst day of each calendar month occurring after the
Commencement Date through April 30, 2001 and the sum of Thirty-Seven Thousand
Six Hundred Five and 44/100 ($37,605.44) per month ($0.645 per rentable square
foot) from May 1, 2001 through October 31, 2004, as said term is fixed under the
preceding paragraph hereof. Lessee's obligation hereunder for the first and last
month shall be prorated on the basis of the commencement and expiration,
respectively, of Lessee's right of occupancy.
2. SECURITY DEPOSIT. Lessee further agrees to pay to Lessor Thirty-One
Thousand Four Hundred Eighty-Three and 62/100 ($31,483.62) Dollars as a security
deposit to be held by Lessor as security for the faithful performance by Lessee
of all the terms, covenants and conditions of this Lease to be kept and
performed by Lessee during the term hereof. If Lessee defaults with respect to
any provision of this Lease, including, but not limited to the provisions
relating to the payment of rent, Lessor may (but shall not be required to) use,
apply or retain all or any part of this security deposit for the payment of rent
or any other sum in default, or for the payment of any amount which Lessor may
spend or become obligated to spend by reason of Lessee's default, or to
compensate Lessor for any other loss or damage which Lessor may suffer by reason
of Lessee's default. If any portion of said deposit is so used or applied,
Lessee shall within ten (10) days after written demand therefor, deposit cash
with Lessor in an amount sufficient to restore the security deposit to its
original amount and Lessee's failure to do so shall be a material breach of
this Lease. Lessor shall not be required to keep this security deposit separate
from its general funds, and Lessee shall not be entitled to interest on such
deposit. If Lessee shall fully and faithfully perform every provision of this
Lease to be performed by it, the security deposit or any balance thereof shall
be
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returned to Lessee or, at Lessee's option, to the last assignee of Lessee's
interest hereunder at the expiration of the Lease term. In the event of
termination of Lessor's interest in this Lease, Lessor shall transfer said
deposit to Lessor's successor-in-interest.
If the monthly rent shall, from time to time, increase during the term of
this Lease, Lessee shall thereupon deposit with Lessor additional security so
that the amount of deposit held by Lessor shall at all times bear the same
proportion to the then current rent as the original security deposit bears to
the original monthly rent set forth in paragraph 1, hereof.
3. USE. The Premises are leased to Lessee for the purpose of conducting
therein light manufacturing, assembly and distribution of avionic equipment and
for any other use which is reasonably comparable and for no other purpose.
Lessee covenants and agrees that it shall not use the Premises in a manner which
would constitute a nuisance or cause an unreasonable annoyance to any other
lessee of Lessor or to Lessor, and that if Lessee violates this covenant, Lessee
shall immediately cease and refrain from engaging in such use upon notice from
Lessor.
4. EARLY/DELAY IN POSSESSION. Lessee shall be permitted early access to the
Premises on October 1, 1997 for the purposes of preparing the building located
thereon for occupancy and use by Lessee, including without limitation the
installation and electrical hookup of machinery and equipment used in Tenant's
business; provided, however, that Lessee's preparation for occupancy and use
shall not unreasonably interfere with any ongoing construction of tenant
improvements in, and/or the refurbishing of, the building comprising a portion
of the Premises. If Lessee occupies the Premises prior to said Commencement
Date, such occupancy shall be subject to all provisions hereof but such
occupancy shall not advance the Commencement Date or the termination date, and
Lessee shall not be required to pay rent for such period of early occupancy.
Notwithstanding said Commencement Date, if for any reason Lessor cannot deliver
possession of the Premises to Lessee on said date, Lessor shall not be subject
to any liability therefor, nor shall such failure affect the validity of this
Lease or the obligations of Lessee hereunder or extend the term hereof, but in
such case, Lessee shall not be obligated to pay rent until possession of the
Premises is tendered to Lessee; provided, however, that if Lessor shall not have
delivered possession of the Premises within one hundred twenty (120) days from
said Commencement Date, Lessee may, at Lessee's option, by notice in writing to
Lessor within thirty (30) days thereafter, but not subsequent to the date
possession of the Premises is tendered to Lessee, cancel this Lease, in which
event the parties shall be discharged from all obligations hereunder; provided
further, however, that if such written notice of Lessee is not received by
Lessor within said thirty (30) day period, Lessee's right to cancel this Lease
hereunder shall terminate and be of no further force or effect.
5. WASTE. Lessee shall not commit, or suffer to be committed, any waste upon
said Premises, or any nuisance, or other act or thing which may disturb the
quiet enjoyment of any other lessee in the building in which the Premises may be
located.
6. COMPLIANCE WITH LAW. Lessor warrants to Lessee that the Premises, in its
state existing on the date that the Lease term commences, but without regard to
the use for which Lessee will use the Premises, does not violate any covenants
or restrictions of record, or any applicable building code, regulation or
ordinance in effect on such Lease term Commencement Date. In the event it is
determined that this warranty has been violated, then after written notice from
Lessee, Lessor's sole obligation with regard to such warranty is to promptly, at
Lessor's sole cost and expense, rectify any such violation. In the event Lessee
does not
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give to Lessor written notice of the violation of this warranty within six (6)
months from the later of (a) Lease Commencement Date, or (b) the date Lessee
takes actual possession of the Premises, the correction of same shall be the
obligation of Lessee at Lessee's sole cost. The warranty contained in this
paragraph shall be of no force or effect if, prior to the date of this Lease,
Lessee was the owner or occupant of the Premises, and, in such event, Lessee
shall correct any such violation at Lessee's sole cost.
Lessee shall at its sole cost, comply with all covenants, conditions and
restrictions of record or later recorded, and all ordinances, statutes, rules
and regulations of any lawful authority (including without limitation the
Americans With Disabilities Act) having jurisdiction over Lessee or the Premises
now in force or which may thereafter be in force, relating to the use, condition
or occupancy of said Premises, 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. If
Lessor gives Lessee notice of Lessee's noncompliance with any of the matters or
requirements set forth in this paragraph, Lessee shall within a reasonable time
period cause said Premises to comply. In the event Lessee does not bring its
use, occupancy or the condition of the Premises into compliance within such
reasonable time period, Lessor reserves the right, at its option, to do so, and
charge the cost and expense thereof to Lessee together with the maximum
permissible interest from the date of Lessor's payments, and Lessee promises to
and agrees to pay the cost and expense thereof.
7. ALTERATIONS. Except in the event of an emergency, Lessee shall not make
or suffer to be made, any alterations, additions or utility installations
("an Alteration") on or about said Premises which violate any ordinance,
statute law, rule or regulation (including without limitation the Americans
With Disabilities Act). Further, any Alteration on or to the Premises shall
not be made without the prior written consent of Lessor. Lessor's prior
written consent shall not be necessary for emergency repairs. Unless
otherwise agreed in writing by Lessor and Lessee, any Alterations of said
Premises, except movable furniture and trade fixtures, shall become at once a
part of the realty and belong to Lessor. Lessor shall have the right to
increase the security deposit under paragraph 2 hereof in an amount
reasonably calculated in good faith by Lessor to cover the cost to repair the
altered portion of the Premises to its original condition, and Lessee
covenants to immediately remit to Lessor such increased security deposit.
Lessee shall furnish Lessor with plans and specifications or other detailed
information covering such work, and, upon Lessor's written request, furnish
Lessor with a lien and completion bond to insure payment of the costs
thereof. Any and all costs of such Alterations, additions or installation
shall be borne and paid, on or before the due date, by Lessee. Upon the
termination of this Lease for any reason, Lessee shall be required at
Lessor's option (to be exercised at any time) to remove said Alterations from
the Premises and to restore said Premises to their original condition at the
sole cost of Lessee. Upon the failure of Lessee to restore the Premises to
their original condition, Lessor may utilize the security deposit or any
portion thereof to restore the Premises or correct any loss or damage to the
Premises at the sole cost of Lessee. Notwithstanding the foregoing sentence,
if Lessee anticipates that it would prefer to leave in place as a part of the
Premises any Alteration, then concurrently with Lessee's request for approval
of such Alteration, Lessee shall request of Lessor that Lessor consent to
such Alteration remaining as a part of the Premises upon the termination of
this Lease. Lessor may give or withhold such consent, in whole or part,
acting in a commercially reasonable manner. If Lessor does not so consent
then Lessee shall comply with the preceding provisions of this paragraph 7.
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8. FIXTURES. All signs and all trade fixtures and trade equipment which
have been or may be installed, placed or attached in or about the Premises by
Lessee shall always remain the property of Lessee and upon termination by
expiration of time or otherwise of this Lease, or at any prior time, Lessee
shall remove all or any of said signs, trade fixtures and trade equipment so
installed, placed or attached provided, however, that any damage caused to
the Premises by reason of such removal shall be repaired and paid by Lessee.
Lessor may at the termination of this Lease at its option require the removal
by Lessee at the expense of Lessee of any signs, trade fixtures, trade
equipment or other property installed, placed or attached to, in or about the
Premises by Lessee. Any property of Lessee not removed from the said Premises
upon the termination of this Lease or within a reasonable time thereafter
shall at the option of Lessor be deemed abandoned by Lessee and become the
property of Lessor. Any consents to the filing of UCC Financing Statements or
similar security instruments may be unreasonably withheld by Lessor in its
sole discretion. In the event Lessor consents to any such security instrument
being filed with the applicable governmental entity, Lessee shall pay all of
Lessor's legal fees incurred in connection therewith.
9. TAXES AND ASSESSMENTS. In addition to the rental hereinbefore provided to
be paid, Lessee covenants and agrees to timely reimburse Lessor for all taxes
which may be imposed upon the Premises, including the land and improvements
constituting the same. Such payment shall be made by Lessee within thirty (30)
days after receipt of Lessor's written statement setting forth the amount and
the reasonable computation thereof but in no event shall Lessee be required to
tender payment for taxes more than thirty (30) days prior to the due date
therefor. Lessee's obligation hereunder for the first year and the last year
shall be prorated on the basis of the commencement and expiration, respectively,
of Lessee's right of occupancy.
a. The term "real property tax" shall mean and include any form of
assessment, license fee, license tax, business license fee, business license
tax, commercial rental tax, levy, charge, penalty, tax or similar imposition,
imposed by any authority having the direct or indirect power to tax, including
any city, county, state or federal government, or any school, agricultural,
lighting, drainage or other improvement or special assessment district thereof,
as against any legal or equitable interest of Lessor in the Premises, including,
but not limited to, the following: (i) any tax on Lessor's right to rent or
other income from the Premises or against Lessor's business of leasing the
Premises; (ii) any assessment, tax, fee, levy or charge in substitution,
partially or totally of any assessments tax, fee, levy or charge previously
included within the definition of real property tax, it being recognized by
Lessee and Lessor that several modifications of the property law enacted by the
voters of the State of California have restricted revenues raised through the
property tax and that assessments, taxes, fees, levies and charges may be
imposed by governmental agencies for such services as fire protection, street,
sidewalk and road maintenance, refuse removal and for other governmental
services formerly provided without charge to property owners or occupants. It is
the intention of Lessee and Lessor that all new and increased assessments,
taxes, fees, levies and charges and all similar assessments, taxes, fees, levies
and charges be included within the definition of "real property tax" for the
purpose of this Lease; (iii) any assessment, tax, fee, levy or charge allocable
to or measured by the area of the Premises or the rent payable hereunder,
including, without limitation, any tax on Lessor's right to receive, or the
receipt of, rent or income from the Premises or against Lessor's business of
leasing the Premises levied by the state, city or federal government, or any
political subdivision thereof, with respect to the receipt of such rent, or upon
or with respect to the possession, leasing, operating, management, maintenance,
alteration, repair, use or occupancy by
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Lessor or Lessee of the Premises, or any portion thereof; and (iv) any
assessment, tax, fee, levy or charge upon this transaction or any document to
which Lessee is a party, creating or transferring an interest or an estate in
the Premises. "Real Property tax" shall not include Lessor's federal or state
income, franchise, inheritance, gift or estate taxes.
b. If the Premises are not separately assessed, Lessee's liability
shall be an equitable proportion of the real property taxes for all of the land
and improvements included within the tax parcel or other basis assessed, tax
levied or charged, such proportion to be reasonably determined in good faith by
Lessor from the respective valuations assigned in the taxing entity's work
sheets or such other information as may be reasonably available. Lessor's
reasonable determination thereof, in good faith, shall be conclusive.
c. Lessee shall pay prior to delinquency or reimburse Lessor for all
taxes assessed against and levied upon trade fixtures, furnishings, equipment
and all other personal property of Lessee contained in the Premises or
elsewhere, which taxes shall include taxes of every kind and nature levied and
assessed in lieu of, in substitution in whole or in part for, or in addition
to, existing or additional personal property taxes, whether or not now customary
or within the contemplation of the Lessor or the Lessee. When possible, Lessee
shall cause said trade fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of Lessor.
If any of Lessee's said personal property shall be assessed with Lessor's real
property, Lessee shall pay Lessor the taxes attributable to Lessee within ten
(10) days after receipt of a written statement setting forth the taxes
applicable to Lessee's personal property.
10. UTILITIES. Lessee shall pay for all sewer, water, gas, heat, light, power,
telephone and other utilities and services of every kind supplied to the
Premises, together with any taxes thereon. If any such services are not
separately metered to Lessee, Lessee shall pay a reasonable proportion (to be
determined by Lessor) of all charges jointly metered with other Premises.
11. ACCEPTANCE OF PREMISES. Subject to subparagraphs 37a and 37b below, by
entry hereunder, Lessee hereby accepts the Premises in their condition existing
as of the Commencement Date or the date that Lessee takes possession of the
Premises, whichever is earlier, subject to all applicable zoning, municipal,
county and state laws, ordinances and regulations governing and regulating the
use of the Premises, and any covenants or restrictions of record, and accepts
this Lease subject thereto and to all matters disclosed thereby and by any
exhibits attached hereto. Lessee acknowledges that neither Lessor nor Lessor's
agent has made any representation or warranty as to the present or future
suitability of the Premises for the conduct of Lessee's business.
12. MAINTENANCE. Lessee shall at its sole cost keep and maintain the Premises
and appurtenances and every part thereof (except foundations which Lessor agrees
to repair), including windows and skylights, if any, sidewalks adjacent to said
Premises, the exterior roof and exterior walls, and any storefront and interior
of the Premises in good, safe and sanitary order, condition and repair, hereby
waiving all right to make repairs at the expense of Lessor whether or not such
right arises by operation of law or otherwise. In the event it becomes necessary
to repair or replace the exterior roof, any such work shall be performed in
accordance with Lessor's specifications then in effect. Lessor shall have the
responsibility to paint the exterior walls of the Premises, at Lessee's sole
cost and expense, no more often than every five (5) years from the date of the
last such painting. Lessee agrees to promptly reimburse Lessor for all
reasonable costs incurred in connection with such painting activity after Lessor
shall have
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given within notice of such costs to Lessee but in no event shall such
reimbursement be later than the due date of Lessee's next installment of rent.
Except as expressly provided in this Lease, Lessor shall have no duty,
obligation or liability whatsoever to care for or maintain the Premises or
the building of which the Premises may be a portion, including but not
limited to structural or nonstructural portions of the Premises and all
adjacent sidewalks, landscaping maintenance, driveways, parking lots, fences
and signs located in the areas which are adjacent to and included with the
Premises. In the event that by any express provision of this Lease, Lessor
agrees to care for, repair or maintain all, or any part of the Premises or
the building of which it is a part, such agreement on the part of Lessor
shall constitute a covenant only, and no obligation or liability whatsoever
shall exist on the part of Lessor to Lessee or any other person by reason
thereof unless and until Lessee shall have first served upon Lessor
personally a prior thirty (30) day notice in writing specifying with
particularity the provision of this Lease whereunder said duty on the part of
Lessor is claimed to exist, together with the repairs required to be made by
Lessor in the performance of such duty.
In the event Lessor fails to make the repairs required to be made by Lessor
under the terms of this Lease, Lessee may (but shall be under no obligation to
do so) make said repairs and offset the cost thereof against the next
installment of rent together with interest at the rate set forth in paragraph 34
below, from the date of Lessee's payments.
In the event Lessee fails to make the repairs required to be made by Lessee
under the terms of this Lease, Lessor may (but shall be under no obligation to
do so) enter upon the Premises and make said repairs and charge the cost thereof
to Lessee as part of the next installment of rent together with interest at the
rate set forth in paragraph 34 below, from the date of Lessor's payments, and
Lessee promises and agrees to pay the cost thereof.
13. CONDITION UPON TERMINATION. On the last day of the term hereof, or on any
sooner termination, Lessee shall surrender the Premises to Lessor in the same
condition as when received, ordinary wear and tear excepted, clean and free of
debris. Lessee shall repair any damage to the Premises occasioned by the
installation or removal of Lessee's trade fixtures, furnishings and equipment.
Notwithstanding anything to the contrary otherwise stated in this Lease, Lessee
shall leave the air lines, power panels, electrical distribution systems,
lighting fixtures, space heaters, air conditioning, plumbing and fencing on the
Premises in good operating condition.
In the event Lessee terminates this Lease for any reason whatsoever prior
to the expiration of the term hereof, Lessee shall pay Lessor the full cost it
would incur in order to return the Premises to its original condition, including
repainting, replacement of carpeting and other floor surfaces, replacement of
ceiling tile and plumbing fixtures, replacement of landscaping, and any and all
additional replacement costs it would incur in restoring the Premises to its
original condition, ordinary wear and tear excepted. Any decision to replace or
repair any item referenced above shall be made solely at Lessor's reasonable,
good faith discretion.
14. LIENS. Lessee shall keep said Premises free of all liens arising out of
work done for or debts or taxes incurred by or assessed to Lessee and agrees to
hold Lessor harmless therefrom. If Lessor discharges any such lien, Lessee
agrees to save Lessor harmless therefrom and to pay Lessor thereon the cost of
discharging such lien together with interest at the rate set forth in paragraph
34 below, from the date Lessor discharges such lien together with Lessor's costs
and reasonable attorney's fees in
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connection with the settlement, trial or appeal of any such lien matter, which
sum shall be payable with the next installation of rent due.
15. LIABILITY AND INDEMNITY. Lessee covenants and agrees to indemnify, hold
harmless, save and defend Lessor from and against any and all loss, damage,
claim, cost, charge or expense arising or resulting from: (i) Lessee's use of
the Premises; (ii) the conduct of Lessee's business or anything else done or
permitted by Lessee to be done in or about the Premises; (iii) any breach or
default in the performance of Lessee's obligations under this Lease; or (iv)
other acts or omissions of Lessee. Lessee shall defend Lessor against any such
loss, damage, claim, cost, charge or expense at Lessee's sole cost and expense
with counsel reasonably acceptable to Lessor or, at Lessor's election, Lessee
shall reimburse Lessor for any legal fees or costs incurred by Lessor in
connection with any such claim. As a material part of the consideration to be
rendered to Lessor, Lessee hereby assumes all risk of damage to property or
injury to persons in or about the Premises from any cause other than Lessor's
negligence or willful misconduct and Lessee hereby waives all claims against
Lessor and agrees to indemnify Lessor against all claims in respect thereof,
except for any claim arising out of Lessor's negligence or willful misconduct.
Lessee further covenants and agrees to indemnify, hold harmless, save and
defend Lessor from and against any and all claims, liens, liability, loss or
damage, including, but not limited to, costs, expenses, and attorneys' fees
arising out of Lessee's obligations under the California Occupational Safety and
Health Act or any similar laws or statutes pertaining to the provision of a safe
place or safe equipment to employees.
Lessee hereby agrees that Lessor shall not be liable for injury to Lessee's
business or any loss of income therefrom or for damage to the goods, wares,
merchandise or other property of Lessee, Lessee's employees, invitees,
customers, or any other person in or about the Premises, nor shall Lessor be
liable for injury to the person of Lessee, Lessee's employees, agents or
contractors, whether such damage or injury is caused by or results from fire,
steam, electricity, gas, water or rain, or from the breakage, leakage,
obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing,
air conditioning or lighting fixtures, or from any other cause, whether the said
damage or injury results from conditions arising upon the Premises or upon other
portions of the building of which the Premises are a part, or from other sources
or places and regardless of whether the cause of such damage or injury or the
means of repairing the same is inaccessible to Lessee. Lessor shall not be
liable for any damages arising from any act or neglect of any other lessee, if
any, of the building in which the Premises are located.
16. INSURANCE. No use shall be made or permitted to be made of said Premises,
nor acts done, which will increase the existing rate of insurance upon the
building in which said Premises may be located, or cause a cancellation of any
insurance policy covering said building, or any part thereof, nor shall Lessee
sell, or permit to be kept, used or sold, in or about said Premises, any article
which may be prohibited by standard form of fire insurance policies. Lessee
shall at its sole cost assume any increase of fire insurance premiums on the
entire building necessitated by reason of the Lessee's occupancy. Lessee shall,
at its sole cost, comply with any and all requirements pertaining to the use of
said Premises of any insurance organization or company necessary for maintenance
of reasonable fire and public liability insurance, covering said building and
appurtenances.
Lessee hereby waives any and all rights of action or recovery against
Lessor for loss of, damage to or destruction of property of Lessee or property
of others in custody of Lessee on the Premises occasioned by perils insured in
standard fire and extended coverage insurance policies.
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Lessee shall procure and supply to Lessor a written waiver of subrogation
for the benefit of Lessor on all fire and extended coverage insurance policies
carried by Lessee insuring Lessee's property at the Premises.
Lessee agrees to maintain at its sole cost during the term hereof the
following insurance with respect to the Premises and the use thereof, namely:
a. Comprehensive public liability and property damage liability
insurance (including contractual liability insurance for liabilities assumed
under this Lease, and including products and completed operations insurance)
with limits of not less than $1,000,000.00 for injuries to or death to any one
person and $1,000,000.00 for injuries to or deaths arising out of any one
occurrence, and $1,000,000.00 for injury to or destruction of property arising
out of any one occurrence, and $3,000,000.00 cumulative from all events. If such
insurance coverage has a deductible clause, the deductible amount shall not
exceed $10,000.00 per occurrence, and the Lessee shall be liable for such
deductible amount.
b. Fire and extended coverage insurance covering the Premises in the
principal amount of $1,000,000.00. Lessor shall have the option of procuring and
providing this fire and extended coverage insurance by written notification to
Lessee at the time of execution of this Lease or of execution of any extension
thereof in which event Lessee agrees to pay the cost of such insurance in
addition to the rental and other costs and considerations set forth elsewhere in
this Lease. If such insurance coverage has a deductible clause, the deductible
amount shall not exceed $10,000.00 per occurrence, and Lessee shall be liable
for such deductible amount.
c. Rental value insurance with loss payable to Lessor and any
lender(s), insuring the loss of the full rental and other charges payable by
Lessee to Lessor for one (1) year (including all real property taxes, insurance
costs and any scheduled rental increases). Said insurance shall provide for one
(1) full year's loss of rental revenues from the date of any such loss, and the
amount of coverage shall be adjusted annually to reflect the projected rental
income, real property taxes, insurance premium costs and other expenses, if any,
otherwise payable, for the next twelve (12) month period.
d. Boiler and Machinery Insurance in the event pressure vessels are
used on the Premises which do not fall within the scope of the extended coverage
provisions of the fire insurance policy.
Lessor shall have the right to review the amount of insurance coverage
annually and to require a higher principal amount of insurance if such a higher
limit is recommended by the insurance company or required by a lender whose loan
is secured by the Premises.
If Lessee fails to procure or maintain the insurance required of Lessee,
Lessor may obtain such insurance at Lessor's option and charge Lessee the costs
thereof.
Each policy of insurance to be obtained by Lessee shall be placed with a
company reasonably acceptable to Lessor and shall provide that Lessor is a named
insured, and no such policy may be cancelled or coverage reduced without thirty
(30) days prior written notice to Lessor and Lessee. Lessee shall furnish
Lessor with written evidence satisfactory to Lessor of such insurance prior to
occupancy of the Premises and shall deliver to Lessor a renewal certificate of
such insurance on or before fifteen (15) days prior to its expiration.
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17. WAIVER OF SUBROGATION. Lessee and Lessor each hereby release and relieve
the other, and waive their entire right of recovery against the other for loss
or damage arising out of or incident to the perils insured against under this
Agreement, which perils occur in, on or about the Premises, whether due to the
negligence of Lessor or Lessee or their agents, employees, contractors and/or
invitees. Lessee and Lessor shall, upon obtaining the policies of insurance
required hereunder, give notice to the insurance carrier or carriers that the
foregoing mutual waiver of subrogation is contained in this Lease.
18. LESSOR'S RIGHT OF ENTRY. Lessee shall permit Lessor and its agents to enter
into and upon said Premises at all reasonable times to show said Premises to
prospective purchasers, lenders or lessees or for the purpose of inspecting the
same or for the purpose of maintaining the building in which said Premises are
situated, or for the purpose of making repairs, alterations or additions to any
other portion of said building, including the erection and maintenance of such
scaffolding, canopies, fences and props as may be required, or for the purpose
of posting notices of non-liability for alterations, additions, or repairs, or
for the purpose of placing upon the property in which the said Premises are
located any usual or ordinary "for sale" signs, without any abatement of rent
and without any liability to Lessee for any loss of occupation or quiet
enjoyment of the Premises thereby occasioned; and shall permit Lessor, at any
time within one hundred eighty (180) days prior to the expiration of this Lease,
to place upon said Premises any usual or ordinary "to let" or "to lease" signs,
also without abatement of rent or liability to Lessee.
19. SIGNS. Lessor has reserved the exclusive right to the exterior front walls,
sidewalls, rear walls, and roof of said Premises, and Lessee shall not place or
permit to be placed upon said sidewalls, real wall, or roof, any sign,
advertisement, or notice without the prior written consent of Lessor, in its
sole but reasonable discretion.
20. ABANDONMENT. Lessee shall not vacate or abandon the Premises at any time
during the term hereof.
21. PARTIAL AND TOTAL DESTRUCTION. In the event of (i) a partial destruction of
said Premises or the building containing same during said term which requires
repairs to either said Premises or said building, or (ii) said Premises or said
building being declared unsafe or unfit for occupancy by any authorized public
authority for any reason other than Lessee's act, use or occupation, which
declaration requires repairs to either said Premises or said building, Lessor
shall forthwith make such repairs required, provided such repairs can be made
within one hundred twenty (120) days under the laws and regulations of
authorized public authorities, but such partial destruction (including any
destruction necessary in order to make repairs required by any such declaration)
shall in no way annul or void this Lease, except that Lessee shall be entitled
to a proportionate reduction of the rent while such repairs are being made, such
proportionate reduction to be based upon the extent to which the making of such
repairs shall reasonably interfere with the business carried on by Lessee in
said Premises. If such repairs cannot be made within one hundred twenty (120)
days, Lessor may, at its option, make same within a reasonable time, this Lease
continuing in full force and effect and the rent to be proportionately abated,
as in this paragraph provided. In the event that Lessor does not so elect to
make such repairs which cannot be made within one hundred twenty (120) days, or
such repairs cannot be made under such laws and regulations, this Lease may be
terminated at the option of either party. In respect to any partial destruction
(including any destruction necessary in order to make repairs required by any
such declaration) which Lessor is obligated to repair or may elect to repair
under the terms of this paragraph, the provision of Section 1932,
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Subdivision (2), and Section 1933, Subdivision (4) of the Civil Code of the
State of California are waived by Lessee. In the event said destruction or
damage is substantial and occurs during the last six (6) months of the term of
this Lease, Lessor, at its option, may terminate and cancel this Lease. A total
destruction (including any destruction required by an authorized public
authority) of either said Premises or said building shall terminate this Lease.
22. CONDEMNATION. If said Premises or any part thereof are taken under the
power of eminent domain, this Lease shall terminate as to the part so taken as
of the date the condemning authority takes possession thereof. In such event the
rent shall be reduced in the proportion that the floor area taken relates to the
total floor area prior to the taking. If more than ten (10%) percent of the
floor area of the building located on said Premises or more than fifteen (15%)
percent of the area leased hereunder but not occupied by any building is taken
by condemnation only then, may Lessee, at Lessee's option, terminate this Lease
as of the date the condemning authority takes possession of said condemned
portion by giving written notice of termination to Lessor within ten (10) days
after receiving notice from Lessor that the condemning authority is taking such
possession. If Lessee does not terminate this Lease as hereinabove immediately
provided, then the rent payable shall be reduced as set forth above. Any
compensation awarded as damages for the taking of said Premises or the
appurtenances thereto together with any severance damages shall be the sole
property of Lessor, except to the extent that any award is made for trade
fixtures or equipment of Lessee which are not part of said real property and
except to the extent that Lessee may be paid for moving costs.
23. ASSIGNMENT OR SUBLETTING. Lessee shall not, voluntarily or by operation of
law, assign, transfer, mortgage, sublet, or otherwise transfer or encumber all
or any part of Lessee's interest in this Lease or in the Premises, or suffer any
other person (with the exception of the agents, employees and business invitees
of Lessee) to occupy or use the Premises, or any portion thereof, without the
prior written consent of Lessor, which consent Lessor may not unreasonably
withhold. Any attempted assignment, transfer, mortgage, encumbrance, subletting,
occupation or use without such consent first had and obtained, shall be void and
shall, at the option of Lessor, terminate this Lease. Any cumulative transfer
of, in excess of twenty percent (20%) of interests in the partnership, if Lessee
is a partnership, or in excess of fifty percent (50%) of the voting power of the
corporation, if Lessee is a corporation, shall constitute a transfer for the
purpose of this paragraph. Except that in the event that the assignee under an
assignment approved by Lessor and/or such assignee's guarantor, is equally
financially responsible as Lessee and the Guarantor of this Lease, and such
assignee assumes the covenants and conditions of Lessee pursuant to this Lease,
then Lessor shall release Lessee and the Guarantor of Lessee's obligations
hereunder of their obligations hereunder and under such guaranty. Lessee shall
remain obligated under the covenants and conditions of this Lease
notwithstanding any such assignment or subletting.
A consent to one assignment, transfer, encumbrance, or subletting to, or
occupation or use by one person, is not deemed to be a consent to any subsequent
assignment, transfer, encumbrance, subletting, occupation or use.
Any assignment, transfer, mortgage, encumbrance, or subletting, occupation
or use, whether with or without the consent of Lessor, shall automatically
terminate any option to extend this Lease, whether or not such option shall have
been exercised at the date of such assignment, transfer, mortgage, encumbrance,
subletting, occupation or use, provided the extended term resulting from the
exercise of such option shall not already have commenced.
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Lessor and Lessee hereby acknowledge that this Lease shall only confer
upon Lessee the right to possess the Premises in accordance with the terms and
conditions of this Lease and that Lessee shall not be entitled to any extra
rents, charges, profits or other compensation for the assignment upon an
assignment or subletting of Lessee's interest in the Premises. Any extra rents,
charges, profits, or other compensation for the assignment payable by an
assignee or subtenant of Lessee, or of Lessee's successor, shall become the
property of, and be payable to, Lessor; but only in the event that the
obligations of Lessee hereunder are released by Lessor and Lessee shall no
longer be obligated under the covenants and conditions of this Lease.
If Lessee shall request the consent of Lessor for any assignment,
encumbrance, or subletting or any act Lessee proposes to do, and Lessor in its
sole discretion deems it necessary to consult legal counsel in connection
therewith, then Lessee shall pay all of Lessor's reasonable attorney's fees
actually incurred and paid in connection therewith.
24. LESSEE'S BREACH. The occurrence of any one or more of the following events
shall constitute a material default and breach of this Lease by Lessee:
a. The abandonment of the Premises by Lessee;
b. The failure by Lessee to make any payment of rent or any other
payment required to be made by Lessee hereunder, as and when due, where such
failure shall continue for a period of ten (10) days after written notice
thereof from Lessor to Lessee. In the event that Lessor serves Lessee with a
Notice to Pay Rent or Quit pursuant to applicable Unlawful Detainer statutes
such Notice to Pay Rent or Quit shall also constitute the notice required by
this subparagraph;
c. The failure by Lessee to observe or perform any of the covenants,
conditions or provisions of this Lease to be observed or performed by Lessee,
other than described in paragraph b above, where such failure shall continue for
a period of thirty (30) days after written notice hereof from Lessor to Lessee;
provided, however that if the nature of Lessee's default is such that more than
thirty (30) days are reasonably required for its cure, then Lessee shall not
deemed to be in default if Lessee commenced such cure within said thirty (30)
day period and thereafter diligently prosecutes such cure to completion;
d. (i) the making by Lessee of any general arrangement or assignment
for the benefit of creditors; (ii) Lessee becomes a "debtor" as defined in 11
U.S.C. Section 101 or any successor statute thereto (unless, in the case of a
petition filed against Lessee, the same is dismissed within sixty (60) days);
(iii) the appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where possession is not restored to Lessee within thirty
(30) days; or (iv) the attachment, execution or other judicial seizure of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where such seizure is not discharged within thirty (30)
days. Provided, however, in the event that any provision of this paragraph is
contrary to any applicable law, such provision shall be of no force or effect.
e. The discovery by Lessor that any financial statement given to
Lessor by Lessee, or any guarantor of Lessee's obligation hereunder was
materially false.
In the event of any breach by Lessee in the payment of rent or any material
breach of any other covenant or condition of this Lease by Lessee not cured
prior to the expiration of any applicable cure period, then Lessor besides other
rights or remedies it may have, shall have the immediate right of reentry
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and may remove all personal property from the Premises; such property to be
removed and stored in a public warehouse or elsewhere at the cost of, and for
the account of, Lessee. Should Lessor elect to reenter, as herein provided, or
should it take possession pursuant to legal proceedings or pursuant to any
notice provided for by law, it may either terminate this Lease or it may from
time to time, without terminating this Lease, relet said Premises or any part
thereof for such term or terms and at such rental or rentals and upon such other
terms and conditions as Lessor in its sole discretion may deem advisable with
the right to make alterations and repairs to said Premises. Rental received by
Lessor from such reletting shall be applied: first, to the payment of any cost
of such reletting; second, to the payment of the cost of any necessary
alterations and repairs to the Premises; third, to the payment of any
indebtedness other than rent due hereunder from Lessee to Lessor; fourth, to the
payment of any rent due and unpaid hereunder; and the residue, if any, shall be
held by Lessor and applied in payment of future rent as the same may become due
and payable hereunder. Should such rentals received from such reletting during
any month be less than that agreed to be paid during that month by Lessee
hereunder, then Lessee shall pay such deficiency to Lessor. Such deficiency
shall be calculated and paid monthly. Lessee shall also pay to Lessor, as soon
as ascertained, the costs and expenses incurred by Lessor in such reletting or
in making such alterations and repairs. No such reentry or taking possession of
said Premises by Lessor shall be construed as an election on its part to
terminate this Lease unless a written notice of such intention be given to
Lessee or unless a termination thereof be decreed by a court of competent
jurisdiction. Notwithstanding any such reletting without termination, Lessor may
at any time thereafter elect to terminate this Lease for any breach in the
payment of rent and any material breach of any other covenant or condition of
this Lease which is not cured prior to the expiration of any applicable cure
period. In addition to any other remedy Lessor may have, if Lessee breaches this
Lease and abandons the Premises before the end of the term, or if Lessee's right
to possession is terminated by Lessor because of a breach in the payment of rent
and any material breach of any other covenant or condition of this Lease which
is not cured prior to the expiration of any applicable cure period, then in
either such case Lessor may recover from Lessee all damages suffered by Lessor
as the result of Lessee's failure to perform its obligations hereunder,
including but not limited to the cost of recovering the Premises, and the worth
at the time of the award (computed in accordance with paragraph (b) of Section
1951.2 of the California Civil Code) of the amount by which the rent then unpaid
hereunder for the balance of the Lease term exceeds the amount of such rental
loss for the same period which Lessee proves, could be reasonably avoided by
Lessor. The remedies given Lessor under the terms of this Lease shall be
cumulative and in addition to any other rights or remedies which Lessor may have
at law or otherwise.
Lessor reserves the right to continue this Lease in effect for so long as
Lessor does not terminate Lessee's right to possession and to enforce all its
rights and remedies under this Lease including the right to recover the rent as
it becomes due under this Lease in accordance with the provisions of Section
1951.4 of the Civil Code.
25. SUBORDINATION, NONDISTURBANCE AND ATTORNMENT. This Lease is subject and
subordinate to:
a. The lien of any mortgages, deeds of trust, or other encumbrances
("Encumbrances") of the Improvements and Property;
b. All renewals, extensions, modifications, consolidations and
replacements of the Encumbrances; and
c. All advances made or hereafter to be made on the security of the
Encumbrances.
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Despite any other provision of this paragraph 25, any Encumbrance
holder may elect that this Lease shall be senior to and have priority over that
Encumbrance whether this Lease is dated before or after the date of the
Encumbrance. However, no such subordination shall be effective unless and until
Lessor obtains from the holder of the Encumbrance placed against the Premises a
nondisturbance agreement in recordable form, providing that in the event of any
foreclosure, sale under a power of sale, ground or master lease termination, or
transfer in lieu of any of the foregoing, or the exercise of any other remedy
under any such Encumbrance:
(i) Lessee's use, possession and enjoyment of the Premises shall
not be disturbed and this Lease shall continue in full force and effect as long
as Lessee is not in default; and
(ii) this Lease shall automatically become a lease directly
between any successor to Lessor's interest, as Lessor, and Lessee, as if that
successor were the Lessor originally named in the Lease.
d. If Lessee has received the nondisturbance agreement referred to
in the paragraph immediately following 25c, above, Lessee shall, within ten (10)
business days after Lessor's request, execute any further instruments or
assurances in recordable form that Lessor reasonably considers necessary to
evidence or confirm the subordination or superiority of this Lease to any such
Encumbrances. Such subordination instrument(s) shall be strictly limited to
matters contained in the nondisturbance agreement, and no such instrument may
materially increase any of Lessee's obligations or materially decrease any
Lessee's rights under this Lease. Lessee's failure to execute and deliver such
instrument(s) shall constitute a default under this Lease only if Lessor has
first delivered the nondisturbance agreement to Lessee. Lessee covenants and
agrees to attorn to the transferee of Lessor's interest in the Premises by
foreclosure, deed in lieu of foreclosure, exercise of any remedy provided in any
Encumbrance, or operation of law (without any deductions or setoffs) except as
expressly provided in this Lease or in any nondisturbance agreement, if
requested to do so by the transferee, and to recognize the transferee as the
Lessor under this Lease. The transferee shall not be liable for:
(i) any acts, omissions, or defaults of Lessor that occurred
before the sale or conveyance; or
(ii) the return of any security deposit except for deposits
actually paid to the transferee and except as expressly provided in this Lease
or in any nondisturbance agreement.
f. Lessee agrees to give written notice of any default by Lessor to
the holder of any Encumbrance. Lessee agrees that, before it exercises any
rights or remedies under the Lease, the lienholder or successorlessor shall have
the right, but not the obligation, to cure the default within the same time, if
any, given to Lessor to cure the default, plus an additional thirty (30) days.
Lessee agrees that this cure period shall be extended by the time necessary for
the lienholder to begin foreclosure proceedings and to obtain possession of the
building or Premises, as applicable.
26. SURRENDER. The voluntary or other surrender of this Lease by Lessee, or a
mutual cancellation thereof, shall not work a merger, and shall, at the option
of Lessor, terminate all or any existing sublease or subtenancies or may, at the
option of Lessor, operate as an assignment to Lessor of any or all of such
subleases or subtenancies.
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27. ATTORNEYS' FEES. If either party to this Lease brings an action to enforce
the terms hereof or declare rights hereunder the prevailing party in any such
action shall be entitled to reasonable attorneys' fees as fixed by the Court
incurred in the trial or appeal of such matter.
28. NOTICES. All notices shall be in writing. Notice shall be sufficiently
given for all purposes as follows:
a. When personally delivered to the recipient, notice is effective
on delivery.
b. When mailed by certified mail with return receipt requested,
notice is effective on receipt if delivery is confirmed by a return receipt.
c. When delivered by overnight delivery Federal
Express/Airborne/United Parcel Service/DHL Worldwide Express or other commercial
delivery service, with charges prepaid or charged to the sender's account,
notice is effective on delivery if delivery is confirmed by the delivery
service.
d. When sent by telex or fax or electronic mail (also known as
E-mail, and only available if the recipient has an E-mail address) to the last
telex or fax or E-mail number of the recipient known to the party giving notice,
notice is effective on receipt as long as (i) a duplicate copy of the notice is
promptly given by certified mail or by overnight delivery or (ii) the receiving
party or the sending equipment delivers a written confirmation of receipt. Any
notice given by telex, fax number or E-mail shall be considered to have been
received on the next business day if it is received after 5:00 p.m. (recipient's
time) or on a nonbusiness day.
e. Any correctly addressed notice that is refused, unclaimed or
undeliverable because of an act or omission of the party to be notified shall be
considered to be effective as of the first date that the notice was refused,
unclaimed or considered undeliverable by the postal authorities, messenger or
overnight delivery service.
f. Addresses for purposes of giving notice are set forth at the end
of this Lease opposite the signatories of the parties hereto. Either party may
change its address or telex, fax number, or E-mail address by giving the other
party notice of the change in any manner permitted by this paragraph 28.
29. SECURITY. If any security be given by Lessee to secure the faithful
performance Of all or any of the covenants of this Lease on the part of Lessee,
Lessor may transfer and/or deliver the security, as such, to the purchaser of
the reversion, in the event that the reversion be sold, and Lessor shall be
discharged from any further liability in reference there to upon such
transferees written assumption of liability therefor.
30. WAIVER. The waiver by Lessor or Lessee of any breach of any term, covenant
or condition herein contained shall not be deemed to be a waiver of such term,
covenant or condition or any subsequent breach of the same or any other term,
covenant or condition herein contained.
31. AUCTIONS. Lessee shall not conduct or cause to be conducted any auction,
fire, closing out, going out of, business or bankruptcy sale on said Premises or
the appurtenances thereto without the prior written consent of Lessor.
32. BINDING, MODIFICATION, ETC. This Lease shall inure to the benefit of and be
binding upon the parties hereto, their heirs, executors, administrators,
successors and assigns; provided that no assignee for the benefit of creditors,
trustee, receiver or
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referee in bankruptcy shall acquire any rights under this Lease by virtue of
this paragraph; this Lease may be modified in writing only. This Lease
constitutes the entire agreement of the parties who acknowledge that no oral or
other representations have been made by themselves or any agent of either of
them with respect to the condition of said Premises or any obligation of the
Lessor hereunder or otherwise. The parties agree to execute any documents
necessary to carry this Lease into effect.
33. OVERDUE RENT. Lessee hereby acknowledges that late payment by Lessee to
Lessor of rent and other sums due hereunder will cause Lessor 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 on Lessor by the
term of any mortgage or trust deed covering the Premises. Accordingly, if any
installment of rent or any other sum due from Lessee shall not be received by
Lessor or Lessor's designee within ten (10) days after such amount shall be due,
then, without any requirement for notice to Lessee, Lessee shall pay to Lessor a
late charge equal to six percent (6%) of such overdue amount. The parties hereby
agree that such late charge represents a fair and reasonable estimate of the
costs Lessor will incur by reason of late payment by Lessee. Acceptance of such
late charge by Lessor shall in no event constitute a waiver of Lessee's default
with respect to such overdue amount, nor prevent Lessor from exercising any of
the other rights and remedies granted hereunder. In the event that a late charge
is payable hereunder, whether or not collected, for three (3) consecutive
installments of rent, then rent shall automatically become due and payable
quarterly in advance, rather than monthly, notwithstanding any other provision
of this Lease to the contrary.
34. INTEREST ON PAST DUE OBLIGATIONS. Any amount owed by Lessee to Lessor which
is not paid when due shall bear interest at the rate of twelve percent (12%) per
annum from the due date of such amount. However, interest shall not be payable
on late charges to be paid by Lessee under this Lease. The payment of interest
on such past due obligations shall not excuse or cure any default by Lessee
under this Lease. In the event the interest rate specified in this Lease is
greater than the rate permitted by law, then the interest rate is hereby
decreased to the maximum legal interest rate permitted by law.
35. ESTOPPEL CERTIFICATE.
a. Lessee shall at any time upon not less than ten (10) days' prior
written notice from Lessor execute, acknowledge and deliver to Lessor a
statement in writing (i) 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 rent and other charges are paid in advance, if any, (ii)
acknowledging that there are not, to Lessee's knowledge, any uncured defaults on
the part of Lessee or Lessor hereunder, or specifying such defaults if any are
claimed; and (iii) such other information reasonably requested by Lessor or a
lender to or purchaser from Lessor. Any such statement may be conclusively
relied upon by any prospective purchaser or encumbrancer of the Premises.
b. If Lessee fails to deliver such statement within such time, such
failure shall be conclusive upon Lessee (i) that this Lease is in full force and
effect, without modification except as may be represented by Lessor, (ii) that
there are no uncured defaults in Lessor's performance, and (iii) that not more
than one (1) month's rent has been paid in advance.
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c. If Lessor desires to finance, refinance or sell the Premises, or
any part thereof, Lessee hereby agrees to deliver to any lender or purchaser
designated by Lessor such financial statements of Lessee as may be reasonably
required by such lender or purchaser. Such statements shall include the past
three (3) years' financial statements of Lessee. All such financial statements
shall be received by Lessor and such lender or purchaser in confidence and shall
be used only for the purposes herein set forth.
d. Lessee shall be responsible for any and all damages Lessor can
reasonably show were caused by or related to Lessee's failure to comply with the
time periods set forth in this paragraph 35.
36. UNDERGROUND TANKS. Lessor represents to Lessee that to the best of Lessor's
actual knowledge without independent investigation or inquiry, as of the date of
this Lease, there are no underground storage tanks upon the Property.
Notwithstanding anything to the contrary set forth herein, Lessee shall not
install underground or above ground storage tanks as defined by any and all
applicable laws of any size or shape in the Premises without the prior consent
of Lessor. Lessor shall have the right to condition its consent upon Lessee
giving Lessor such assurances that Lessor, in its absolute discretion, deems
reasonably necessary to protect itself against potential problems concerning the
installation, use, removal and contamination of the Premises as a result of the
installation and/or use of said tanks. Upon termination of this Lease, Lessee
shall at its sole cost and expenses, remove the tanks from the Premises, remove
and replace any contaminated soil (and compact the same as then required by law)
and repair any damage to the Premises caused by said installation and/or
removal, pursuant to all applicable laws, and the supervisions and approval of
Lessor.
37. HAZARDOUS WASTE; ENVIRONMENTAL AND RELATED MATTERS.
a. Lessor shall promptly furnish or shall have furnished to Lessee
prior to the date hereof copies of any and all environmental site assessments or
hazardous substance reports of the Premises prepared by or for Lessor or others
within the possession of control of Lessor (the "Reports"). Notwithstanding any
of the foregoing, Lessee's obligations hereunder shall be contingent upon
Lessee's satisfaction with and approval of the Reports and the environmental
condition of the Premises as described in the Reports. If Lessee shall fail to
disapprove the Reports and the Premises in writing to be delivered to Lessor
within the latter to occur of ten (10) days of the receipt by Lessee of the
Reports, or July 11, 1997, then Lessee conclusively shall have been deemed to
have approved the Reports and the Premises, and this Lease shall be and remain
in full force and effect. If Lessee shall, within the latter of said time
periods to disapprove the Reports or the environmental condition of the Premises
as described in the Reports, by notice in writing to Lessor, then this Lease
shall immediately terminate and neither party shall have any further obligation
or liability to the other party hereunder.
b. During Lessee's inspection of the Premises prior to the date of
execution of this Lease, an objectionable odor existed near the street in front
of the building. Representatives of the City of Garden Grove performed
maintenance work to the storm drain in front of the building and within the
street right of way and a missing cover to a sewer line was installed. Lessee
shall have until on or before July 11, 1997 within which to satisfy itself that
the objectionable odor problem has been corrected to the satisfaction of Lessee.
If Lessee shall fail to disapprove the status of the correction to the odor
problem in writing to be delivered to Lessor no later than July 11, 1997, then
Lessee conclusively shall have been deemed to have approved the status of the
correction of the odor problem, and this Lease shall be and
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remain in full force and effect. If Lessee shall, on or before July 11, 1997
disapprove the status of correction of the odor problem, by notice in writing to
Lessor, then this Lease shall immediately terminate and neither party shall have
any further obligation or liability to the other party hereunder. Lessee shall
cooperate with Lessor and Lessor shall use Lessor's commercially reasonable best
efforts to cause the City of Garden Grove to take such action as may be
necessary to correct the said odor problem.
c. Lessor warrants and represents to Lessee that, to the best of
Lessor's actual knowledge without independent investigation or inquiry, as of
the date of this Lease:
(i) there has been no release onto our under the Premises or
the building of any Hazardous Materials (as defined below) in violation of
any Environmental Law;
(ii) the Improvements contain no PCBs, PCB-contaminated
electrical equipment, or asbestos-containing materials;
(iii) Lessor has received no notice that the Premises or the
Improvements are in violation of any Environmental Law.
d. Lessee, at Lessee's sole cost and expense, shall comply with, and
shall not use the Premises or suffer or permit anything to be done in, on, or
about the Premises which will in any way conflict with any applicable federal,
state and local laws, regulations, ordinances, orders or requirements pertaining
to Hazardous Materials, waste disposal, air or water quality, and other
environmental and health and safety matters (collectively, "Hazardous Materials
Laws"). For purposes of this Lease, the term "Hazardous Materials" means any
substance, material, waste, contaminant or pollutant (i) determined by any
federal, state or local government agency, court, judicial or quasi-judicial
body or legislative or quasi-legislative body to be hazardous, toxic,
infectious, radioactive, persistent or bioaccumulative, or to require removal,
treatment or remediation; (ii) which results in liability to any person or
entity for exposure to or discharge of such substance; or (iii) which becomes
subject to any Hazardous Materials Law.
e. Lessee shall not cause, suffer or permit any Hazardous Materials
to be brought upon, stored, used, generated, released into the environment or
disposed of on, under, from, or about the Premises (which for purposes of the
Lease includes, but is not limited to, subsurface soil and groundwater), without
the prior written consent of Lessor. Excluded from the prohibition contained in
this subparagraph are such Hazardous Materials as are necessary or useful to
Lessee's business, provided that such Hazardous Materials are generated, stored,
used and disposed of in compliance with all applicable Hazardous Materials Laws.
f. Promptly upon request therefor, Lessee will provide Lessor with
true, correct, complete and legible copies of any environmental site assessments
pertaining to the Premises prepared by or on behalf of Lessee; reports filed
pursuant to self-reporting requirements under any Hazardous Materials Laws;
permits, permit applications, monitoring reports, workplace exposure and
community exposure warnings or notices reports, plans or documents in Lessee's
possession or control relating to Hazardous Materials on, under or about the
Premises.
g. Lessee shall notify Lessor in writing immediately upon becoming
aware of: (i) any enforcement, cleanup, remediation or other action threatened,
instituted or completed by anyone with respect to Hazardous Materials on, under
or about the Premises; (ii) any claim threatened or made by any person against
Lessee for
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personal injury, property damage, other losses, contribution, cost recovery,
compensation or any other matter relating to Hazardous Materials and the
Premises; or (iii) any spilling, leaking, dumping or releasing of Hazardous
Materials in, on, under or about the Premises that triggers reporting,
disclosure, investigation or cleanup obligations under any Hazardous Materials
Law. Lessee shall provide to Lessor as promptly as possible, and in any event
within five (5) business days after Lessee first receive or sends the same,
copies of all claims, reports, complaints, notices, warnings, correspondence or
other documents relating in any way to the foregoing.
h. If Hazardous Materials contamination caused, suffered or
permitted by Lessee is discovered on, under or about the Premises, Lessee shall,
as its sole cost and expense, promptly (i) notify Lessor; (ii) undertake site
investigation activities necessary to characterize the nature and extent of such
contamination; (iii) prepare and provide to Lessor a cleanup plan to remove or
remediate the contamination; and (iv) upon Lessor's approval (and upon the
approval of any governmental or regulatory agency overseeing the site
investigation or cleanup activities), promptly implement the cleanup plan in
accordance with applicable Hazardous Materials Laws. In the event that Lessee
fails, after reasonable notice and request therefor by Lessor, to take any of
the actions required hereunder Lessor may itself take such action and Lessee
shall promptly reimburse Lessor for all costs and expenses Lessor incurs in
connection with such action.
i. To the fullest extent permitted by law, Lessee will indemnify,
hold harmless, protect and defend (with attorneys acceptable to Lessor) Lessor
and Lessor's officers, directors, shareholders, employees and agents, and any
successors to all or any portion of Lessor's interest in the Premises and their
directors, officers, partners, employees, authorized agents, representatives,
affiliates and mortgagees, from and against any and all liabilities, losses,
damages (including, without limitation, damages for the loss or restriction on
use of rentable or usable space or any amenity of the Premises or damages
arising from any adverse impact on marketing of space in the Premises),
diminution in the value of the Premises, judgments, fines, demands, claims,
recoveries, deficiencies, costs and expenses (including, but not limited to,
reasonable attorneys' fees and disbursements and court costs and all other
professional or consultant's expenses), whether foreseeable or unforeseeable,
arising directly or indirectly out of the presence, use, generation, storage,
treatment, on or off-site disposal, or transportation of Hazardous Materials on,
into, from, under, or about the Premises by Lessee, its agents, employees,
contractors, licensees or invitees.
j. To the fullest extent permitted by law, Lessor will indemnify,
hold harmless, protect and defend (with attorneys acceptable to Lessee) Lessee
and Lessee's officers, directors, shareholders, employees and agents, and any
successors to all or any portion of Lessee's interest in the Premises and their
directors, officers, partners, employees, authorized agents, representatives,
affiliates and mortgagees, from and against any and all liabilities, losses,
damages, judgments, fines, demands, claims, recoveries, deficiencies, costs and
expenses (including, but not limited to, reasonable attorneys' fees and
disbursements and court costs and all other professional or consultants'
expenses), whether foreseeable or unforeseeable, arising directly or indirectly
out of the breach of the warranty and representation set forth in paragraph 37a,
above, or the presence, prior to the date of this Lease of hazardous substances
upon or under the Premises.
k. Upon the expiration or termination of this Lease, Lessee shall
cause to be removed from the Premises all Hazardous Materials brought upon,
used, kept or stored in, on, under or about the Premises by Lessee, as well as
all receptacles or
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containers therefor, and shall cause such Hazardous Materials and such
receptacles or containers to be stored, treated, transported and/or disposed of
in compliance with all applicable Hazardous Materials Laws. Lessee shall, at its
sole cost and expense, repair any damage to the Premises resulting from
Lessee's removal of such Hazardous Materials and receptacle or containers
therefor. Lessee's obligation to pay rent shall continue until such removal by
Lessee has been completed to Lessor's satisfaction, notwithstanding the
expiration or early termination or cancellation of the term of this Lease. To
ensure performance of Lessee's obligations hereunder, Lessor may, at any time
within one (1) year of the expiration of this Lease, or upon the occurrence of a
material default under this Lease by Lessee, require that Lessee promptly
commence and diligently prosecute to completion an environmental evaluation of
the Premises. In connection therewith, Lessor may require Lessee, at Lessee's
sole cost and expense, to hire an outside consultant satisfactory to Lessor to
perform a complete environmental audit of the Premises, an executed copy of
which audit shall be delivered to Lessor within thirty (30) days after Lessor's
request therefor. If Lessee or the environmental audit discloses the existence
of Hazardous Materials on, under, or about the Premises, Lessee will, at
Lessor's request, prepare and submit to Lessor within thirty (30) days after
such request a comprehensive clean-up plan, subject to Lessor's approval,
specifying the actions to be taken by Lessee to return the Premises to the
condition existing prior to the introduction of such Hazardous Materials. Upon
Lessor's approval of such clean-up plan, Lessee will, at Lessee's sole cost and
expense, without limitation on any rights and remedies of Lessor under this
Lease, immediately implement such plan and proceed to clean up such Hazardous
Materials in accordance with all Hazardous Materials Laws as required by such
plan and this Lease.
l. The obligations in this paragraph 37 shall survive the expiration
or earlier termination of this Lease. No termination, cancellation or release
agreement entered into by Lessor and Lessee shall release Lessee from its
obligations hereunder unless it specifically states Lessor's intentions to
release Lessee with respect thereto.
38. RECORDATION OF SHORT FORM. Either party may record a short form of this
Lease stating only that the Premises have been leased on the date hereof and
that any subsequent purchaser of the Premises or any part thereof shall be bound
by all the terms hereof.
39. GOVERNING LAW. This Lease shall be governed by and enforced in accordance
with the laws of the State of California.
40. HEADINGS. Paragraph headings are not a part of this Lease.
41. LESSEE'S BUILDING IMPROVEMENTS PROVIDED BY LESSOR
a. Lessor agrees, at Lessor's expense, as soon as practical after
executing this Lease, to cause the preparation of construction drawings and
specifications, to secure requisite building permits, and to construct the
following tenant improvements:
(i) Enclosed and air-condition the warehouse area under and
above the mezzanine by constructing a dry wall at and above the
mezzanine line, across the entire width of the building. Said wall to
provide for appropriate man door access and interior windows at
mutually agreeable locations. Interior walls and t-bar ceiling of
these areas to be painted white. First floor area to be dust sealed
and second floor area to be covered with industrial grade tile.
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(ii) Refurbish existing office area including:
1. New carpet and tile. (Lessee's choice of color)
2. New paint. (Lessee's choice of color)
3. Repair or replace damaged ceiling tiles and vents where
necessary; but the replacement or repair of individual
tiles will not result in a color mismatch between
existing and new or replaced tiles.
(iii) Duplicate existing restroom in warehouse area as shown on
the attached Exhibit "A."
b. Lessor agrees to pursue such construction diligently to
completion but shall be under no liability for damage, costs or expense
resulting from delays occasioned by acts of God, of the government, of the
elements, public enemy, or by fire, flood, storm, earthquake, freight embargoes,
inability to obtain labor or materials, strikes, boycotts, delays by contractors
or subcontractors for any of the above or any other causes, delays by Lessee in
approving either materials or colors which Lessee has the right to approve, or
by other causes beyond Lessor's control.
c. Upon the termination or cancellation of this Lease for any
reason, expiration, failure to extend or default by Lessee, the building
improvements shall remain the property of Lessor and Lessee shall not be
obligated or entitled to remove them unless notified, in writing prior to
construction, by Lessor to the contrary.
42. OPTION TO EXTEND LEASE. In the event that Lessee shall not be in default in
the performance of any term or condition of this Lease, then upon the expiration
of the Lease term, Lessee shall have the option to extend the Lease for an
additional term of five (5) years. Lessee's rights to exercise the option are
contingent upon Lessee not being in default in the performance of any term or
condition of this Lease or if in default, Lessee shall have cured the same prior
to the deadline for exercising the extension option. During the extension
period, all the terms and conditions of this Lease shall remain in effect except
that the base rental for the extension period will be determined as set forth in
paragraph 43, entitled "Rent Determination for Extended Period," and the rental
commencing on the thirty-first (31st) month of the extended period will be
adjusted as provided in paragraph 44, entitled "Rental Escalations."
The option must be exercised by Lessee, if at all, prior to a date which
shall be six (6) months prior to the expiration of the Lease term, by notice to
Lessor stating that Lessee is exercising its option to extend. Such exercise of
the option shall automatically extend the term of the Lease upon the terms and
conditions herein set forth, and no further writing need be executed by Lessee
or Lessor, except that no term extension shall occur or take effect if, prior to
its commencement, Lessee shall have assigned or sublet (by operation of law or
otherwise and with or without Lessor's consent) this Lease or the Premises. Once
exercised, Lessee shall not have the right to revoke its election to exercise
the option. In the event that the option is not exercised as provided for herein
within the time provided for, the option shall expire, and Lessee shall have no
further right to renew or extend the Lease.
43. REM DETERMINATION FOR EXTENDED PERIOD. Prior to the commencement of the
extended period, the base rental initially payable for such period shall be
determined as follows:
a. Lessee shall, not less than six (6) months nor more than one (1)
year before expiration of the initial term, give Lessor written notice of its
desire to determine Rent for the
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extended period. Lessor and Lessee shall have thirty (30) days after Lessor
receives such notice to agree in writing to said Rent, which writing signed by
each party shall constitute an amendment to this Lease determining the Rent and
extending the term in conformity with this Lease.
b. If Lessor and Lessee shall fail to reach an agreement as provided
in subparagraph 43a, the option to extend shall terminate unless within ten (10)
business days after the expiration of the thirty (30) day notice specified in
paragraph 43a, Lessee shall give Lessor a notice of its desire to determine the
such Rent by appraisement, designating a qualified appraiser for the purpose.
Unless, within ten (10) business days after receipt of such notice, Lessor shall
designate a qualified appraiser, it shall be deemed to have accepted the
qualified appraiser designated by Lessee. For purposes hereof, the term
"qualified appraiser" shall mean a Member of the Appraisal Institute with not
less than five (5) years' experience in appraising commercial rental properties
in Orange County in the State of California and without financial, family, or
business connections with either Lessor or Lessee, or any affiliate of Lessor or
Lessee, or the officers, directors or employees of any of them.
The appraiser or appraisers so appointed shall, within forty-five (45) days
of his appointment or of the later of the appointments, submit to Lessor and
Lessee appraisal(s) of the Rent for the Extended Term, expressed in terms of a
fair monthly rental value in the context of a five (5) year lease, on
substantially the terms made herein applicable to the extended term for the then
use of the Premises.
The Rent for the Extended Term shall be either (i) the amount of the
appraisal of the single appraiser; or (ii) where there are two appraisers, the
agreed appraisal, if both appraisers are in agreement, or, if they are not in
agreement, the average of the two appraisals if the higher does not exceed the
lower by more than five percentage (5%) of the lower. If the appraisals
determined by the two appraisers hereinbefore appointed differ by more than five
percent (5%), then the two appraisers shall appoint a third qualified appraiser
who shall submit to Lessor and Lessee within the next ensuing forty-five (45)
days an appraisal of the fair rental value of the Premises. The Rent for the
Extended Term shall be the average of all three appraisals, unless one appraisal
exceeds or is less than an average of the two closer appraisals by more than ten
percent (10%), in which case such appraisal will be discarded and the Rent for
the Extended Term shall be the average of the two closer appraisals.
c. When the Rent for the Extended Term shall have been determined as
aforesaid, the Lease shall be amended to reflect said monthly rent payable for
the extended term.
d. The cost of the appraisal procedure shall be divided equally
between the parties.
e. Time is of the essence as to the exercise of the extension option
by Lessee and of the appraisal procedures specified in this paragraph 43; any
failure by Lessee to meet the deadlines herein specified, unless the delay shall
have been contributed to by Lessor's actions or omissions, shall terminate this
option to extend.
f. In no event shall such adjusted monthly rent be less than the
rent payable for the month immediately preceding the date of such rent
adjustment.
44. RENTAL ESCALATIONS. The amount of the rental payable during the extension
period of this Lease shall be subject to adjustment effective the first day of
the thirty-first (31st) month of the
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extension period. Such adjustment will be made by dividing the amount of monthly
rental payable on the first day of the extension period by the figure shown in
the Consumer's Price Index for All Urban Consumers for the Los
Angeles-Anaheim-Riverside area (1982-84 = 100), published monthly in the Monthly
Labor Review of the Bureau of Labor Statistics of the United States Department
of Labor (or the successor which most closely resemble such Index) for the third
month prior to the month in which the extension period commenced, and
multiplying the result by the corresponding Index figure for the third month
prior to the thirty-first (31st) month of such term or period; provided,
however, no reduction in the amount of rent then in effect resulting from such
calculation shall occur; provided, however, that the excalated rent shall not be
less than four percent (4%) and not greater than eight percent (8%) more than
the rent for the first thirty (30) months of the extended term, determined in
accordance with paragraph 43, above.
45. HOLDING OVER. Any holding over after the expiration of the initial term,
with the consent of Lessor, shall be construed to be a tenancy from month to
month, at a rental of Fifty-Six Thousand Four Hundred Eight and 16/100
($56,408.16) Dollars per month and shall otherwise be on the terms and
conditions herein specified so far as applicable. Any holding over at the end of
the extended term, if applicable, shall be subject to the same provisions,
except that the hold over rental shall be increased by twenty-five percent (25%)
over the rent immediately prior to the hold over.
46. COUNTERPARTS. This Lease may be executed in multiple counterparts, each of
which shall be an original and all of which, taken together, shall constitute
one and the same instrument.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease on the date
set forth opposite their signatures.
Dated: 20 June 1997 KILROY REALTY, L.P.,
----------------------- A Delaware Limited Partnership
ADDRESS FOR NOTICES: By: KILROY REALTY CORPORATION,
A Maryland Corporation,
2250 E. Imperial Highway General Partner
Suite 1200
El Segundo, CA 90245
Telex: By: /s/ Illegible
----------------------- --------------------------
Fax: (310) 322-5981
-----------------------
E-mail: Title: EVP-COO
----------------------- -----------------------
with a copy to: "LESSOR"
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- ------------------------------
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Dated: HOLLINGSEAD INTERNATIONAL,
----------------------- A California Corporation
Address for Notices:
2361 Rosecrans Avenue By: /s/ RJ MacDonald
Suite 180 ------------------------
El Segundo, CA 90245 Title: Vice-Chairman
Telex: ----------------------
------------------------
Fax: (310) 643-0746 "LESSEE"
-------------------------
E-mail:
----------------------
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