EXHIBIT 10.2
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE - GROSS
(DO NOT USE THIS FORM FOR MULTI-TENANT BUILDINGS)
1. Basic Provisions ("Basic Provisions").
1.1 Parties: This Lease ("Lease"), dated for reference purposes
only November 9, 2000, is made by and between Marcel George & Joanne Marie
George, trustees of Marcel George family trusts of September 2, 1982 ("Lessor")
and The Singing Machine Company, Inc., a Florida Corporation ("Lessee"),
(collectively the "Parties" or individually a "Party").
1.2 Premises: That certain real property, including all
improvements therein or to be provided by Lessor under the terms of this Lease,
and commonly known as 967 East Sandhill Avenue, Carson, CA 90746 located in the
County of Los Angeles, state of California, and generally described as (describe
briefly the nature of the property and, if applicable, the "Project". If the
property is located within a Project) the westerly portion of that certain
property known as 967-69 East Sandhill Avenue, Carson, CA as shown an exhibit
"A" attached hereto. The lease premises being approximately 22,950 square feet
of building area plus yard/parking ("Premises"). (See also Paragraph 2).
1.3 Term: 3 years and 1 months ("Original Term") commencing
January 1, 2001 ("Commencement Date") and ending January 31, 2004 ("Expiration
Date"). (See also Paragraph 3)
1.4 Early Possession: X X X ("Early Possession Date"). (See also
Paragraphs 3.2 and 3.3)
1.5 Base Rent: $ 11,500.00 per month ("Base Rent"), payable on the
First day of each month commencing on January 1, 2001. (See also Paragraph 4)[]
If this box is checked, there are provisions in this Lease for the Base Rent
to be adjusted and/or for common area maintenance charges.
1.6 Base Rent Paid Upon Execution: $11,500.00 as Base Rent for the
period of January, 2001.
1.7 Security Deposit: $11,500.00 ("Security Deposit"). (See also
Paragraph 5)
1.8 Agreed Use: warehouse distribution and service of electronic
equipment. (See also Paragraph 6)
1.9 Insuring Party. Lessor is the "Insuring Party". The annual
"Base Premium" is __________. (See also Paragraph 8)
1.10 Real Estate Brokers: (See also Paragraph 15)
(a) Representation: The following real estate brokers
(collectively, the "Brokers") and brokerage relationships exist in this
transaction (check applicable boxes): [X] Hal Thompson Co. represents Lessor
exclusively ("Lessor's Broker"): [X] Collins Commercial Corporation represents
Lessee exclusively ("Lessee's Broker"); or [ ] ___________________________
represents both Lessor and Lessee ("Dual Agency").
(b) Payment to Brokers: Upon execution and delivery of
this Lease by both Parties, Lessor shall pay to the Broker the fee agreed to in
their separate written agreement (or if there is no such agreement, the sum of
_______% of the total Base Rent for the brokerage services rendered by said
Broker).
1
1.11 Guarantor. The obligations of the Lessee under this
Lease are to be guaranteed by ______________________________________
("Guarantor"). (See also Paragraph 37)
1.12 Addenda and Exhibits. Attached hereto is an Addendum
or Addenda consisting of Paragraphs 50 through 51 and Exhibits A all of which
constitute a part of this Lease.
2. Premises.
2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby
leases from Lessor, the Premises, for the term, at the rental, and upon all of
the terms, covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of size set forth in this Lease, or that may have
been used in calculating rental, is an approximation which the Parties agree is
reasonable and the rental based thereon is not subject to revision whether or
not the actual size is more or less.
2.2 Condition. Lessor shall deliver the Premises broom clean and
free of debris on the Commencement Date or ft Early Possession Date, whichever
first occurs ("Start Date"), and warrants that the existing electrical,
plumbing, fire sprinkler, lighting, heating, ventilating and air conditioning
systems ("HVAC"), loading doors, if any, and all other such elements of the
building, in the Premises, other than those constructed by Lessee, shall be in
good operating condition on said date and that the surface and structural
elements of the roof, bearing walls and foundation of any buildings on the
Premises (the "Building") shall be free of material defects. If a non-compliance
with said warranty exists as of the Start Date, Lessor shall, except as
otherwise provided in this Lease, promptly after receipt of written notice from
Lessee setting forth with specificity the nature and extent of such
non-compliance, rectify same at Lessor's expense. If, after the Start Date,
Lessee does not give Lessor written notice of any non-compliance with this
warranty within (i) six (6) months as to the HVAC systems or (ii) thirty (30)
days as to the remaining systems and other elements of the Building, correction
of such non-compliance shall be the obligation of Lessee at Lessee's sole cost
and expense, except for the roof, foundations, and bearing walls which are
handled as provided in paragraph 7.
2.3 Compliance. Lessor warrants that the improvements on the
Premises comply with all applicable laws, covenants or restrictions of record,
building codes, regulations and ordinances ("Applicable Requirements") in effect
on the Start Date. Said warranty does not apply to this use to which Lessee will
put the Premises or to any Alterations or Utility Installations (as defined in
Paragraph 7.3(a)) made or to be made by Lessee. NOTE: Lessee is responsible for
determining whether or not the zoning is appropriate for Lessee's intended use,
and acknowledges that past uses of the Premises may no longer be allowed, if the
Premises do not comply with said warranty, Lessor shall, except as otherwise
provided, promptly after receipt of written notice from Lessee setting forth
with specificity the nature and extent of Such non-compliance, rectify the same
at Lessor's expense. If Lessee does not give Lessor written notice of a
non-compliance with this warranty within six (6) months following the Start
Date, correction of that non-compliance shall be the obligation of Lessee at
Lessee's sole cost and expense. If the Applicable Requirements are hereafter
changed (as opposed to being in existence at the Start Date, which is addressed
in Paragraph 6,2(e) below) so as to require during the term of this Lease the
construction of an addition to or an alteration of the Building, the remediation
of any Hazardous Substance, or the reinforcement or other physical modification
of the Building ("Capital Expenditure"), Lessor and Lessee shall allocate the
cost of such work as follows:
(a) Subject to Paragraph 2.3(c) below, if such Capital
Expenditures are required as a result of the specific and unique use of the
Premises by Lessee as compared with uses by tenants in general, Lessee shall be
fully responsible for the cost thereof, provided, however, that if such
2
Capital Expenditure is required during the last two (2) years of this Lease and
the cost thereof exceeds six (6) months Base Rent, Lessee may instead terminate
this Lease unless Lessor notifies Lessee, in writing, within ten (10) days after
receipt of Lessee's termination notice that Lessor has elected to pay the
difference between the actual cost thereof and the amount equal to six (6)
months' Base Rent if Lessee elects termination, Lessee shall immediately cease
the use of the Premises which requires such Capital Expenditure and deliver to
Lessor written notice specifying a termination date at least ninety (90) days
thereafter. Such termination date shall, however, in no event be earlier than
the last day that Lessee could legally utilize the Premises without commencing
such Capital Expenditure.
(b) If such Capital Expenditure is not the result of the
specific and unique use of the Premises by Lessee (such as, governmentally
mandated seismic modifications), then Lessor and Lessee shall allocate the
obligation to pay for such costs pursuant to the provisions of Paragraph 7.1(c):
provided, however, that if such Capital Expenditure is required during the last
two years of this Lease or if Lessor reasonably determines that it is not
economically feasible to pay its share thereof, Lessor shall have the option to
terminate this Lease upon ninety (90) days prior written notice to Lessee unless
Lessee notifies Lessor, in writing, within ten (10) days after receipt of
Lessor's termination notice that Lessee will pay for such Capital Expenditure.
If Lessor does not elect to terminate, and tails to tender its share of any such
Capital Expenditure, Lessee may advance such funds and deduct same, with
interest, from Pent until Lessor's share of such costs have been fully paid, if
Lessee is unable to finance Lessor's share, or if the balance of the Rent due
and payable for the remainder of this Lease is not sufficient to fully reimburse
Lessee or an offset basis, Lessee shall have the right to terminate this Lease
upon thirty (30) days written notice to Lessor.
(c) Notwithstanding the above, the provisions concerning
Capital Expenditures are intended to apply only to non-voluntary, unexpected,
and new Applicable Requirements. If the Capital Expenditures are instead
triggered by Lessee as a result of an actual or proposed change in use, change
in intensity of use, or modification to the Premises then, and in that event,
Lessee shall be fully responsible for the cost thereof, and Lessee shall not
have any right to terminate this Lease.
2.4 Acknowledgments. Lessee acknowledges that: (a) it has been
advised by Lessor and/or Brokers to satisfy itself with respect to the condition
of the Premises (including but not limited to the electrical, HVAC and fire
sprinkler systems, security, environmental aspects, and compliance with
Applicable Requirements), and their suitability for Lessee's intended use; (b)
Lessee has made such investigation as it deems necessary with reference to such
matters and assumes all responsibility therefor as the same relate to its
occupancy of the Premises; and (c) neither Lessor, Lessors agents, nor any
Broker has made any oral or written representations or warranties with respect
to said matters other than as set forth in this Lease. In addition, Lessor
acknowledges that; (a) Broker has made no representations, promises or
warranties concerning Lessee's ability to honor the Lease or suitability to
occupy the Premises: and (b) it is Lessors sole responsibility to investigate
the financial capability and/or suitability of all proposed tenants.
2.5 Lessee as Prior Owner/Occupant, The warranties made by Lessor
in Paragraph 2 shall be of no force or effect if immediately prior to the Start
Date Lessee was the owner or occupant of the Premises. In such event, Lessee
shall be responsible for any necessary corrective work.
3. Term.
3.1 Term. The Commencement Date, Expiration Date and Original Term
of this Lease are as specified in Paragraph 1.3.
3
3.2 Early Possession. The Lessee totally or partially occupies the
Premises prior to the Commencement Date, the obligation to pay Base Rent shall
be abated for the period of such early possession. All other terms of this Lease
shall, however, be in effect during such period. Any such early possession shall
not affect the Expiration Date.
3.3 Delay In Possession, Lessor agrees to use its best
commercially reasonable efforts to deliver possession of the Premises to Lessee
by the Commencement Date. If, despite said efforts, Lessor is unable to deliver
possession as agreed, Lessor shall not be subject to any liability therefor, nor
shall such failure affect the validity of this Lease. Lessee shall not, however,
be obligated to pay Rent or perform its other obligations until it receives
possession of the Premises. If possession is not delivered within sixty (60)
days after the Commencement Date, Lessee may, at its option, by notice in
writing within ten (10) days after the end of such sixty (60) day period, cancel
this Lease, in which event the Parties shall be discharged from all obligations
hereunder, if such written notice is not received by Lessor within said ten (10)
day period, Lessee's right to cancel shall terminate. Except as otherwise
provided, if possession is not tendered to Lessee by the Start Date and Lessee
does not terminate this Lease, as aforesaid, any period of rent abatement that
Lessee would otherwise have enjoyed shall run from the date of delivery of
possession and continue for a period equal to what Lessee would otherwise have
enjoyed under the terms hereof, but minus any days of delay caused by the acts
or omissions of Lessee. If possession of the Premises is not delivered within
four (4) months after the Commencement Date, this Lease shall terminate unless
other agreements are reached between Lessor and Lessee, in writing.
3.4 Lessee Compliance. Lessor shall not be required to tender
possession of the Premises to Lessee until Lessee complies with its obligation
to provide evidence of insurance (Paragraph 8.5). Pending delivery of such
evidence, Lessee shall be required to perform all of b obligations under this
Lease from and after the Start Date, including the payment of Plant,
notwithstanding Lessor's election to withhold possession pending receipt of such
evidence of insurance. Further, if Lessee is required to perform any other
conditions prior to or concurrent with the Start Date, the Start Date shall
occur but Lessor may elect to withhold possession until such conditions are
satisfied.
4. Rent.
4.1. Rent Defined. All monetary obligations of Lessee to Lessor
under the terms of this Lease (except for the Security Deposit) are deemed to be
rent ("Rent").
4.2 Payment. Lessee shall cause payment of Rent to be received by
Lessor in lawful money of the United States, without offset or deduction (except
as specifically permitted in this Lease), on or before the day on which it is
due. Sent for any period during the term hereof which is for less than one (1)
full calendar month shall be prorated based upon the actual number of days of
said month. Payment of Rent shall be made to Lessor at its address stated herein
or to such other persons or place as Lessor may from time to time designate in
writing. Acceptance of a payment which is less than the amount then due shall
not be a waiver of Lessor's rights to the balance of such Rent, regardless of
Lessor's endorsement of any check so stating.
5. Security Deposit. Lessee shall deposit with Lessor upon execution
hereof the Security Deposit as security for Lessee's faithful performance of its
obligations under this Lease. If Lessee fails to pay Plant, or otherwise
Defaults under this Lease, Lessor may use, apply or retain all or any portion of
sold Security Deposit for the payment of any amount due Lessor or to reimburse
or compensate, Lessor for any liability, expense, loss or damage which Lessor
may suffer or incur by reason thereof. If Lessor uses or applies all of or any
portion of said Security Deposit, Lessee shall
4
within ten (10) days after written request therefor deposit monies with Lessor
sufficient to restore said Security Deposit to the full amount required by this
Lease. If the Base Rent increases during the term of this Lease, Lessee shall,
upon written request from Lessor, deposit additional moneys with Lessor so that
the total amount of the Security Deposit shall at all times boor the same
proportion to the increased Base Rent as ft initial Security Deposit bore to the
initial Base Rent. Should the Agreed Use be amended to accommodate a material
change in the business of Less" or to accommodate a sublessee or assignee,
Lessor shall have the right to increase the Security Deposit to the extent
necessary, in Lessor's reasonable judgment, to account for any increased wear
and tear that the Premises may suffer as a result thereof, if a change in
control of Lessee occurs during this Lease and following such change the
financial condition of Lessee is, in Lessor's reasonable judgment, significantly
reduced, Lessee shall deposit such additional monies with Lessor as shall be
sufficient to cause the Security Deposit to be at a commercially reasonable
level based on said change in financial condition. Lessor shall not be required
to keep the Security Deposit separate from its general accounts. Within fourteen
(14) days after the expiration or termination of this Lease, Lessor elects to
apply the Security Deposit only to unpaid Rent, and otherwise within thirty (30)
days after the Premises have been vacated pursuant to Paragraph 7,4(c) below,
Lessor shall return that portion of the Security Deposit not used or applied by
Lessor. No part of the Security Deposit shall be considered to be hold in trust,
to bear interest or to be prepayment for any monies to be paid by Lessee Under
this Lease.
6. Use.
6.11 Use. Lessee shall use and occupy the Premises only for the
Agreed Use, or any other legal use which is reasonably comparable thereto, and
for no other purpose, Lessee shall not use or permit the use of the Premises in
a manner that is unlawful, creates damage, waste or a nuisance, or that disturbs
owners and/or occupants of, or causes damage to neighboring properties. Lessor
shall not unreasonably withhold or delay b consent to any written request for a
modification of the Agreed Use, so long as the same will not Impair the
structural integrity of the improvements on the Premises or the mechanical or
electrical systems therein, or is not significantly more burdensome to the
Premises. If Lessor elects to withhold consent, Lessor shall within five (5)
business days after such request give written notification of same, which notice
shall include an explanation of Lessor's objections to the change in use.
6.2 Hazardous Substances.
(a) Reportable Uses Require Consent. The term "Hazardous
Substance" as used in this Lease shall mean any product, substance, or waste
whose presence, use, manufacture, disposal, transportation, or release, either
by itself or in combination with other materials expected to be on the Premises,
is either: (i) potentially injurious to the public health, safety or welfare,
the environment or the Premises, (ii) regulated or monitored by any governmental
authority, or (111) a basis for potential liability of Lessor to any
governmental agency or third party under any applicable statute or common law
theory, Hazardous Substances shall include, but not be limited to, hydrocarbons,
Petroleum, gasoline, and/or crude oil or Any products, by-products or fractions
thereof. Lessee shall not engage in any activity in or on the Premises which
constitutes a Reportable Use of Hazardous Substances without the express prior
written consent of Lessor and timely compliance (at Lessee's expense) with all
Applicable Requirements. "Reportable Use"shall mean (i) the installation or use
of any above or below ground storage tank, (ii) the generation, possession,
storage, use, transportation, or disposal of a Hazardous Substance that requires
a permit from, or with
5
respect to which a report, notice, registration or business plan is required to
be filed with, any governmental authority, and/or (iii) the presence at the
Premises of a Hazardous Substance with respect to which any Applicable
Requirements requires that a notice be given to persons entering or occupying
the Premises or neighboring properties. Notwithstanding the foregoing, Lessee
may use any ordinary and customary materials reasonably required to be used in
the normal course of the Agreed Use, so long as such use is in compliance with
all Applicable Requirements, is not a Reportable Use, and does not expose the
Premises or neighboring property to any meaningful risk of Contamination or
damage or expose Lessor to any liability therefor, in addition, Lessor may
condition its consent to any Reportable Use upon receiving such additional
assurances at Lessor reasonably deems necessary to protect itself, the public,
the Premises and/or the environment against damage, contamination, injury and/or
liability, Including, but not limited to, the installation (and removal on or
before Lease expiration or termination) of protective modifications (such as
concrete encasements) and/or increasing the Security Deposit.
(b) Duty to Inform Lessor. If Lessee knows, or has
reasonable cause to believe, that a Hazardous Substance has come to be located
in, on, under or about the Premises, other than as previously consented to by
Lessor, Lessee shall immediately give written notice of such fact to Lessor, and
provide Lessor with a copy of any report, notice, claim or other documentation
which it has concerning the presence of such Hazardous Substance.
(c) Lessee Remediation. Lessee shall not cause or permit
any Hazardous Substance to be spilled or released in, on, under, or about the
Premises (including through the plumbing or sanitary sewer system) and shall
promptly, at Lessee's expense, take all investigatory and/or remedial action
reasonably recommended, whether or not formally ordered or required, for the
cleanup of any contamination of, and for the maintenance, security and/or
monitoring of the Premises or neighboring properties, that was caused or
materially contributed to by Lessee, or pertaining to or involving any Hazardous
Substance brought onto the Premises during the term of this Lease, by or for
Lessee, or any third party.
(d) Lessee Indemnification. Lessee shall indemnity,
defend and hold Lessor, its agents, employees, lenders and ground lessor, il
any, harmless from and against any and all loss of rents and/or damages,
liabilities, Judgments, claims, expenses, penalties, and attorneys' and
consultants' fees arising out of or involving any Hazardous Substance brought
onto the Premises by or for Lessee, or any third party (provided, however, that
Lessee shall have no liability under this Lease with respect to underground
migration of any Hazardous Substance under the Premises from adjacent
properties). Lessee's obligations shall include, but not be limited to, the
effects of any contamination or injury to person, property or the environment
created or suffered by Lessee, and the cost of investigation, removal,
remediation, restoration and/or abatement, and shall survive the expiration or
termination of this Lease. No termination, cancellation or release agreement
entered into by Lessor and Lessee shall release Lessee from its obligations
under this Lease with respect to Hazardous Substances, unless specifically so
agreed by Lessor in writing at the time of such agreement.
(e) Lessor Indemnification. Lessor and its successors and
assigns shall indemnify, defend, reimburse and hold Lessee, its employees and
lenders, harmless from and against any and all environmental damages, including
the cost of remediation, which existed as a result of Hazardous Substances on
the Premises prior to the Start Date or which are caused by the gross negligence
or willful misconduct of Lessor, its agents or employees. Lessor's obligations,
as and when required
6
by the Applicable Requirements, shall include, but not be limited to, the cost
of investigation, removal, remediation, restoration and/or abatement, and shall
survive the expiration or termination of this Lease.
(f) Investigations and Remediations. Lessor shall retain
the responsibility and pay for any investigations or remediation measures
required by governmental entities having jurisdiction with respect to the
existence of Hazardous Substances on the Premises prior to the Start Date,
unless such remediation measure is required as a result of Lessee's use
(including alterations) of the Premises. In which event Lessee shall be
responsible for such payment, Lessee shall cooperate fully in any such
activities at the request of Lessor, including allowing Lessor and Lessors
agents to have reasonable access to the Premises at reasonable times in order to
carry out Lessor's investigative and remedial responsibilities.
(g) Lessor Termination Option. If a Hazardous Substance
Condition occurs during the term of this Lease, unless Lessee is legally
responsible therefor (in which case Lessee shall make the investigation and
remediation thereof required by the Applicable Requirements and this Lease shall
continue in full force and effect, but subject to Lessor's rights under
Paragraph 6.2(d) and Paragraph 13). Lessor may, at Lessor's option, either (i)
investigate and remediate such Hazardous Substance Condition if required, as
soon as reasonably possible at Lessor's expense, in which event this Lease shall
continue in full force and effect, or (ii) if the estimated cost to remediate
such condition exceeds twelve (12) times the then monthly Base Rent or $100,000,
whichever is greater, give written notice to Lessee, within thirty (30) days
after receipt by Lessor of knowledge of the occurrence of such Hazardous
Substance Condition, of Lessors desire to terminate this Lease as of the date
sixty (k) days following the date of such notice, in the event Lessor elects to
give a termination notice. Lessee may, within ten (10) days thereafter, give
written notice to Lessor of Lessee's commitment to pay the amount by which the
cost of the remediation of such Hazardous Substance Condition exceeds an amount
equal to twelve (12) times the then monthly Base Rent or $100,000, whichever is
greater. Lessee shall provide Lessor with said funds or satisfactory assurance
thereof within thirty (30) days following such commitment. In such event, this
Lease shall continue in full force and effect, and Lessor shall proceed to make
such remediation as soon as reasonably possible after the required funds are
available. If Lessee does not give such notice and provide the required funds or
assurance thereof within the time provided, this Lease shall terminate as of the
date specified in Lessors notice of termination.
6.3 Lessee's Compliance with Applicable Requirements. Except as
otherwise provided in this Lease, Lessee shall, at Lessee's sole expense, fully,
diligently and in a timely manner, materially comply with all Applicable
Requirements, the requirements of any applicable fire insurance underwriter or
rating bureau, and the recommendations of Lessors engineers and/or consultants
which relate in any manner to the Premises, without regard to whether said
requirements are now in effect or become effective after the Start Date. Lessee
shall, within ten (10) days after receipt of Lessor's written request, provide
Lessor with copies of all permits and other documents, and other information
evidencing Lessee's compliance with any Applicable Requirements specified by
Lessor, and shall immediately upon receipt, notify Lessor in writing (with
copies of any documents involved) of any threatened or actual claim, notice,
citation, warning, complaint or report pertaining to or involving the failure of
Lowe or the Premise* to comply with any Applicable Requirements.
7
6.4 Inspection; Compliance. Lessor and Lessor's "Lender' (as
defined in Paragraph 30 Wow) and consultants shall have the right to enter into
Premises at any time, in the case of an emergency, and otherwise at reasonable
times, for the purpose of inspecting the condition of the Premises and for
verifying compliance by Lessee with this Lease. The cost of any such inspections
shall be paid by Lessor, unless a violation of Applicable Requirements, or a
contamination is found to exist or be imminent, or the inspection is requested
or ordered by a governmental authority. In such case, Lessee shall upon request
reimburse Lessor for the cost of such inspections, so long as such inspection is
reasonably related to the violation or contamination. 7. Maintenance; Repairs,
Utility Installations; Trade Fixtures and Alterations
7.1 Lessee's Obligations.
(a) In General. Subject to the provisions of Paragraph
2.2 (Condition), 2.3 (Compliance with Covenants, Restrictions and Building
code), 6.3 (Lessee's Compliance with Applicable Requirements), 7.2 (Lessors
Obligations), 9 (Damage and Destruction), and 14 (Condemnation), Lessee shall,
at Lessee's role expense, keep the Premises, Utility Installations, and
Alterations 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 Lessee, and whether or not the need for such
repairs occurs as a result of Lessees 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,
floors, windows, doors, skylights, landscaping, driveways, parking lots, fences,
signs, sidewalks and parkways located in, on, or adjacent to the Premises.
Lessee is also responsible for keeping the roof and roof drainage clean and free
of debris. Lessor shall keep the surface and structural elements of the roof,
foundations, and bearing walls in good repair (see paragraph 7.2). Lessee, in
keeping the Premises in good order, condition and repair, shall exercise and
perform good maintenance practices. Lessee's obligations shall include
restorations, replacements or renewals when necessary to keep the Premises and
all Improvements thereon or a part thereof in good order, condition and state of
repair. Lessee shall, during the term of this Lease, keep the exterior
appearance of the Building in a first-class condition (including, e.g., graffiti
removal) 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.
(b) Service Contracts. Lessee shall, at Lessee's sole
expense, procure and maintain contracts, with copies to Lessor, in customary
form and substance for, and with contractors specializing and experienced in the
maintenance of the following equipment and Improvements ('Basic Elemental, if
any, if and when installed on the Premises: (i) HVAC equipment, (ii) boiler, and
pressure vessels, (iii) fire extinguishing systems, including fire alarm and/or
smoke detection, (iv) landscaping and irrigation systems, (v) driveways and
parking lots, (vi) clarifiers, (vii) basic utility feed to the perimeter of the
Building, and (viii) any other equipment, if reasonably required by Lessor.
(c) Replacement Subject to Lessee's indemnification of
Lessor as set forth in Paragraph 8,7 below, and without relieving Lessee of
liability resulting from Lessee's failure to exercise and perform good
maintenance practices, if the Basic Elements described in Paragraph 7.1 (b)
cannot be repaired other than at a cost which is in excess of 50% of the cost of
replacing such Basic Elements, then such Basic Elements shall be replaced by
Lessor, and the mat thereof shall be
8
prorated between the Parties and Lessee shall only be obligated to pay, each
month during the remainder of the term of this Lease, on the date on which Base
Rent is due, an amount equal to the product of multiplying the cost of such
replacement by a traction, the numerator of which is one, and the denominator of
which is the number of months of the useful life of such replacement 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 Lessor's
accountants), with Lessee reserving the right to prepay its obligation at any
time.
7.2 Lessor's Obligations. Subject to the provisions of Paragraphs
2.2 (Condition), 2.3 (Compliance with Covenants, Restrictions and Building
Code), 9 (Damage or Destruction) and 14 (Condemnation), it is intended by the
Parties hereto that Lessor 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 the Lessee, except for the surface and
structural elements of the rod, foundations and bearing walls, the repair of
which shall be the responsibility of Lessor upon receipt at written notice that
such a repair is necessary. It is the intention of the Parties 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 affect to the extent it is inconsistent with the terms of
this Lease.
7.3 Utility Installations; Trade Fixtures; Alterations
(a) Definitions; Consent Required. The term "Utility
Installations" refers to all floor and window coverings, air lines, power
panels, electrical distribution, security and fire protection systems and signs,
communication systems, lighting fixtures, HVAC equipment, plumbing, and fencing
in or on the Premises. The term 'Trade Fixtures" shall mean Lessees machinery
and equipment that can be removed without doing material damage to the Premises.
The term "Alterations" shall mean any modification of the improvements, other
than Utility Installations or Trade Fixtures, whether by addition or deletion.
"Lowe Owned Alterations and/or Utility Installations" are defined as Alterations
and/or Utility Installations made by Lessee that are not yet owned by Lessor
pursuant to Paragraph 7.4(a). Lessee shall not make any Alterations or Utility
Installations to the Premises without Lessors prior written consent. Lessee may,
however, make non-structural Utility Installations to the interior of the
Premises (excluding the roof without such consent but upon notice to Lessor, as
long as they are not visible from the outside, do not involve puncturing,
relocating or removing the mot or any existing walls, and the cumulative cost
thereof during this Lease as extended does not exceed $50,000 in the aggregate
or $10,000 in any one year.
(b) Consent. Any Alterations or Utility Installations
that Lessee shall desire to make and which require the consent of the Lessor
shall be presented to Lessor in written form with detailed plans. Consent shall
be deemed conditioned upon Lessee's: (i) acquiring all applicable governmental
permits, (ii) furnishing Lessor with copies of both the permits and the plans
and specifications prior to commencement of the work and (W) compliance with all
conditions of said permits and other Applicable Requirements in a prompt and
expeditious manner, Any Alterations or Utility Installations shall be performed
in a workmanlike manner with good and sufficient materials. Lessee shall
promptly upon completion furnish Lessor with as-built plans and specifications.
For work which costs an amount equal to the greater of one month's Base Rent, or
$10,000, Lessor may condition its consent upon Lessee providing a lien and
completion bond in an
9
amount equal to one and one-half times the estimated cost of such Alteration or
Utility Installation and/or upon Lessee's posting an additional Security Deposit
with Lessor.
(c) Indemnification. Lease shall pay, when due, all
claims for labor or materials furnished or alleged to have been furnished to or
for Lessee at or for use on the Premises, which claims are or may be secured by
any mechanic's or materialmen's lien against the Premises or any interest
therein. Lessee shall give Lessor not less than tan (10) days' notice prior to
the commencement of any work in, on or about the Premises, and Lessor shall have
the right to post notices of non-responsibility. If Lessee shall contest the
validity of any such lien, claim or demand, then Lomas shall, at its sole
expense defend and project itself, Lessor and the Premises against the same and
shall pay and satisfy any such adverse judgment that may be rendered thereon
before the enforcement thereof. If Lessor shall require, Lessee shall furnish a
surety bond in an amount equal to one and one-half times the amount of such
contested lien, claim or demand, indemnifying Lessor against liability for the
same. If Lessor elects to participate in any such action, Lessee shall pay
Lessor's attorneys' fees and Cost.
7.4 Ownership; Removal; Surrender; and Restoration.
(a) Ownership. Subject to Lessor's right to require
removal or elect ownership as hereinafter provided, all Alterations and Utility
Installations made by Leme shall be the property of Loose, but considered a part
of the Premises. Lessor may, at any time, elect in writing to be the owner of
all or any specified part of the Lessee Owned Alterations and Utility
Installations. Unless otherwise instructed per Paragraph 7.4(b) hereof, all
Lessee Owned Alterations and Utility Installations shall, at the expiration or
termination of this Lease, become the property at Lessor and be surrendered by
Lessee with the Premises.
(b) Removal. By delivery to Lessee of written notice from
Lessor not earlier than ninety (90) and not later than thirty (30) days prior to
the and of the term of this Lease, Lessor may require that any or all Lessee
Owned Alterations or Utility Installations be removed by the expiration or
termination of this Lease. Lessor may require the removal at any time of all or
any part of any Lessee Owned Alterations or Utility Installations made without
the required consent.
(c) Surrender/Restoration. Lessee shall surrender the
Premises by the Expiration Date or any earlier termination date, with all of the
improvements, parts and surfaces thereof broom clean and free of debris, and in
good operating order, condition and state of repair, ordinary Wear and tear
excepted. "Ordinary wear and tear" shall not include any damage or deterioration
that would have been prevented by good maintenance practice. Lome "if repair any
damage occasioned by 0* installation, maintenance or removal of Trade Fixtures,
Lessee Owned Alterations and/or Utility Installations, furnishings, and
equipment as well as the removal of any storage tank installed by or for Lessee,
and the removal, replacement, or remediation of any soil, material or
groundwater contaminated by Lessee. Trade Fixtures shall remain the prop" of
Less" and shall be removed by Lessee. The failure by Lessee to timely vacate the
Premises pursuant to this Paragraph 7.4(c) without the express written consent
of Lessor shall constitute a holdover under the provisions of Paragraph 26
below.
8. Insurance Indemnity.
8.1 Payment of Premium Increases.
(a) Lowe shall pay to Lessor any insurance cost increase
(Insurance Cost Increase) occurring during the term of this Lease, 'Insurance
Cost Increase' is defined as any increase in the actual cost of the insurance
required under Paragraph 8.2(b), 8.3(a) and 8.3(b) ("Required
10
Insurance), over and above the Base Premium as hereinafter defined calculated on
an annual basis. "Insurance Cost Increase shall include but not be limited to
increases resulting from the nature of Lessee's occupancy, any act or omission
of Lessee, requirements of the holder of mortgage or deed of trust covering the
Premises, increased valuation of the Premises and/or a premium rate Increase.
The parties are encouraged to fill in the Base Premium in Paragraph 1.9 with a
reasonable premium for the Required Insurance based on the Agreed Use of the
Premises. If the parties fail to insert a dollar amount in Paragraph 1.9, then
the Base Premium shall be the lowest annual premium reasonably obtainable for
the Required Insurance as of the commencement of the Original Term tot the
Agreed Use of the Premises. In no event, however, shall Lessee be responsible
for any portion of the increase in the premium cost attributable to liability
insurance carried by Lessor under Paragraph 8.1 (b) in excess of $2,000,000 per
occurrence.
(b) Lessee shall pay any such Insurance Cost Increase to
Lessor within thirty (30) days after receipt by Lessee of a copy of the premium
statement or other reasonable evidence of the amount due. If the insurance
policies maintained hereunder cover other prop" besides the Premises, Lessor
shall also deliver to Lessee a statement of the amount of such Insurance Cost
Increase attributable only to the Premises showing in reasonable detail the
manner in which such amount was computed, Premiums for policy periods commencing
prior to, or extending beyond the term of this Lease, shall be prorated to
correspond to the term of this Lease.
8.2 Liability Insurance.
(a) Carried by Lessee. Lessee shall obtain and keep in
force a Commercial General Liability Policy of Insurance protecting Lessee and
Lessor against claims for bodily injury, personal injury and property damage
based upon or arising out of the ownership, use, occupancy or maintenance of the
Premises and all areas appurtenant thereto. Such insurance shall be on an
occurrence basis providing single limit coverage in an amount not less than
$2,000,000 per occurrence with an "Additional Insured-Managers or Lessors of
Premises Endorsement" and contain the "Amendment of the Pollution Exclusion
Endorsement" for damage caused by heat, smoke or fumes from a hostile fire. The
Policy shall not contain any intra-insured exclusions as between insured persons
or organizations, but shall include coverage for liability assumed under this
Lease as an "insured contract" for the performance of Lessee's indemnity
obligations under this Lease. The limits of said insurance shall not, however,
limit the liability of Lessee nor relieve Lessee of any obligation hereunder.
All insurance carried by Lessee shall be primary to and not contributory with
any similar insurance carried by Lessor, whose insurance shall be considered
excess insurance only,(b) Carried by Lessor. Lessor shall maintain liability
insurance as described in Paragraph 8.21(a), in addition to, and not in lieu of,
the insurance required to be maintained by Lessee. Lessee shall hot be named as
an additional insured therein.
8.3 Property Insurance - Building, Improvements and Rental Value.
(a) Building and Improvements. The Insuring Patty shall
obtain and keep in force a policy or policies in the name of Lessor with loss
payable to Lessor, any groundlessor, and to Lender(s) insuring loss or damage to
the Premises. The amount of such insurance shall be equal to the full
replacement cost of the Premises, as the same shall exist from time to time, or
the amount required by any Lenders, but in no event more then the commercially
reasonable and available insurable value thereof. If Lessor is the Insuring
Party, however, Lessee Owned Alterations and Utility Installations, Trade
Fixtures, and Lessee's personal property shall be insured by Lessee under
Paragraph 8.4 rather than by Lessor. If the coverage is available and
commercially appropriate, such
11
policy or policies shall insure against all risks of direct physical loss or
damage (except the perils of flood and/or earthquake unless required by a Lender
or included in the Base Premium), including coverage for debris removal and the
enforcement of any Applicable Requirements requiring the upgrading, demolition,
reconstruction or replacement of any portion of the Premises as the result of a
covered loss. Said policy or policies shall also contain an agreed valuation
provision in lieu of any coinsurance clause, waiver of subrogation, and
inflation guard protection causing an increase in the annual property insurance
coverage amount by a factor of not less than the adjusted U.S. Department of
Labor Consumer Price Index for All Urban Consumers for the city neatest to where
the Premises are located.
(b) Rental Value. The Insuring Party shall obtain and
keep in force a policy or policies in the name of Lessor, with loss payable to
Lessor and any Lender, insuring the loss of the full Rent for one (1) year. Said
insurance shall provide that in the event the Lease is terminated by reason of
an insured loss, the period of indemnity for such coverage shall be extended
beyond the date of the completion of repairs or replacement of the Premises, to
provide for one full year's loss of Rent from the date of any such loss. Said
insurance shall contain an agreed valuation provision in lieu of any coinsurance
clause, and the amount of coverage shall be adjusted annually to reflect the
projected Rent otherwise payable by Lessee, for the next twelve (12) month
period.
(c) Adjacent Premises, if the Premises are part of a
larger building, or of a group of buildings owned by Lessor which are adjacent
to the Premises, the Lessee shall pay for any increase in the premiums for the
property insurance of such building or buildings if said increase is caused by
Lessees acts, omissions, use or occupancy of the Premises.
8.4 Lessee's Property/Business Interruption Insurance.
(a) Property Damage. Lessee shall obtain and maintain
insurance coverage on all of Lessee's personal property, Trade Fixtures, and
Lessee Owned Alterations and Utility Installations, Such insurance shall be full
replacement cost coverage with a deductible of not to exceed $1,000 per
occurrence. The proceeds from any such insurance shall be used by Lessee for the
replacement of personal property, Trade Fixtures and Lessee Owned Alterations
and Utility Installations. Lessee shall provide Lessor with written evidence
that such insurance is in force.
(b) Business Interruption. Lessee shall obtain and
maintain loss of income and extra expense insurance in amounts as will reimburse
Lessee for direct or indirect loss of earnings attributable to all perils
commonly insured against by prudent lessees in the business of Lessee or
attributable to prevention of access to the Premises as a result of such perils.
(c) No Representation of Adequate Coverage. Lessor makes
no representation that the limits or forms of coverage of insurance specified
herein are adequate to cower Lessee's property, business operations or
obligations under this Lease.
8.5 Insurance Policies. Insurance required herein shall be by
companies duly licensed or admitted to transact business in the state where the
Premises are located, and maintaining during the policy term a "General
Policyholders Rating" of at least B+, V, as set forth in the most current issue
of "Best's Insurance Guide", or such other rating as may be required by a
Lender. Lessee shall not do or permit to be done anything which invalidates the
required insurance policies. Lessee shall, prior to the Start Date, deliver to
Lessor certified copies of policies of such insurance or certificates evidencing
the existence and amounts of the required insurance. No such policy shall be
cancelable or subject to modification except after thirty (30) days prior
written notice to Lessor. Lessee shall, at least thirty (30) days prior to the
expiration of such policies, furnish Lessor with evidence of
12
renewals or "insurance binders" evidencing renewal thereof, or Lessor may order
such insurance and charge the wit thereof to Lessee, which amount shall be
payable by Lessee to Lessor upon demand. Such policies shall be for a term of at
least one year, or the length of the remaining term of this Lease, whichever is
less. If either Party shall fall to procure and maintain the insurance required
to be carried by it, the other Party may, but shall not be required to, procure
and maintain the same.
8.6 Waiver of Subrogation. Without affecting any other rights or
remedies, Lessee and Lessor each hereby release and relieve the other, and waive
their entire right to recover damages against the other, for loss of or damage
to its property arising out of or incident to the perils required to be insured
against herein. The effect of such releases and waivers is not limited by the
amount of insurance carried or required, or by any deductibles applicable
hereto. The Parties agree to have their respective property damage insurance
carriers waive any right to subrogation that such companies, may have against
Lessor or Lessee, as the case may be so long as the insurance is not invalidated
thereby.
8.7 Indemnity. Except for Lessor's gross negligence or willful
misconduct, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor, partners and
Lenders, from and against any and all claims, loss of rents and/or damages,
Hens, judgments, penalties, attorneys' and consultants' fees, expenses and/or
liabilities arising out of, involving, or in connection with, the use and/or
occupancy of the Premises by Lessee. If any action or proceeding is brought
against Lessor by reason of any of the foregoing matters. Lessee shall upon
notice defend the same at Lessee's expense by counsel reasonably satisfactory to
Lessor and Lessor shall cooperate with Lessee in such defense. Lessor need not
have first paid any such claim in order to be defended or indemnified.
8.8 Exemption of Lessor from Liability. Lessor shall not be liable
for injury or damage to the person or goods, wares, merchandise or other
property of Lessee, Lessee's employees, contractors, invitees, customers, or any
other person in or about the Premises, 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, tire sprinklers,
wires, appliances, plumbing, HVAC or lighting fixtures, or from any other cause,
whether the said injury or damage 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. Lessor shall not be liable for any
damages arising from any act or neglect of any other tenant of Lessor.
Notwithstanding Lessor's negligence or breach of this Lease, Lessor shall under
no circumstances be liable for injury to Lessee's business or for any loss of
income or profit therefrom.
9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Partial Damage" shall mean damage or
destruction to the improvements on the Premises, other than Lessee Owned
Alterations, Utility Installations and Trade Fixtures, which can reasonably be
repaired in six (6) months or less from the date of the damage or destruction.
Lessor shall notify Lessee 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 Lessee Owned Alterations and Utility
Installations and Trade Fixtures, which cannot reasonably be repaired in six (6)
months or less from the date of the damage or destruction,
13
Lessor shall notify Lessee 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 Lessee Owned Alterations and Utility
Installations and Trade Fixtures, which was caused by an event required to be
covered by the insurance described in Paragraph 8.3(a), irrespective of any
deductible amounts or coverage limits involved.
(d) "Replacement Cost"shall mean the cost to repair or
rebuild the improvements owned by Lessor 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.
(e) "Hazardous Substance Condition" shall mean the
occurrence or discovery of a condition involving the presence of, or a
contamination by, a Hazardous Substance as defined in Paragraph 6.2(a), in, on,
or under the Premises.
9.2 Partial Damage - Insured Loss. If a Premises Partial Damage
that is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair
such damage (but not Leme's Trade Fixtures or Lessee Owned Alterations and
Utility Installations) as soon as reasonably possible and this Lease shall
continue in full force and effect: provided, however, that Lessee shall, at
Lessors election, make the repair of any damage or destruction the total cost to
repair of which is $10,000 or less, and, in such event, Lessor shall make any
applicable insurance proceeds available to Lessee on a reasonable basis for that
purpose. Notwithstanding the foregoing, if the required insurance was not in
force or the insurance proceeds are not sufficient to effect such repair, the
Insuring Party 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 unique nature of the improvements, full
replacement cost insurance coverage was not commercially reasonable and
available, Lessor shall have no obligation to pay for the shortage in insurance
proceeds or to fully restore the unique aspects of the Premises unless Lessee
provider, Lessor 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 Lessor receives said funds or adequate assurance thereat
within said ten (10) day period, the party responsible for making the repairs
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. Lessor
may nevertheless elect by written notice to Lessee within ten (10) days
thereafter to: (i) make such restoration and repair as is commercially
reasonable with Lessor 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. Lessee shall not be entitled to reimbursement of any funds
contributed by Lessee to repair any such damage or destruction, Premises Partial
Damage duo to Road or earthquake shall be subject to Paragraph 9.3,
notwithstanding that there may be some insurance coverage, but the not proceeds
of any such insurance shall be made available for the repairs if made by either
Party.
9.3 Partial Damage - Uninsured Loss. If a Premises Partial Damage
that is not an insured Loss occurs, unless caused by a negligent or willful act
of Lessee (in which event Lessee shall make the repairs at Lessee's expense),
Lessor may either: (1) repair such damage as soon as reasonably possible at
Lessors expense, in which event this Lease shall continue in full force and
effect, or (11) terminate this Lease by giving written notice to Lessee within
thirty (30) days after receipt by Lessor of knowledge of the occurrence of such
damage. Such termination shall be effective sixty (60) days
14
following the date of such notice. In the event Lessor elects to terminate this
Lease, Lessee shall have the right within ten (10) days after receipt of the
termination notice to give Written notice to Lessor of Lessee's commitment to
pay for the repair of such damage without reimbursement from Lessor. Lessee
shall provide Lessor with said funds or satisfactory assurance thereof within
thirty (30) days after making such commitment. In such event this Loam shall
continue hi full force and effect, and Lessor shall proceed to make such repairs
as soon as reasonably possible after the required funds are available. If Lessee
does not make the required commitment, this Lease shall terminate as of the date
specified in the termination notice.
9.4 Total Destruction. 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 Lessee. Lessor shall have the right to
recover Lessors damages from Lessee, except as provided in Paragraph 8.6.
9.5 Damage Near End of Term. N 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, Lessor may terminate this
Lease effective sixty (60) days following the date of occurrence of such damage
by giving a written termination notice to Lessee within thirty (30) days after
the date of occurrence of such damage. Notwithstanding the foregoing, if Lessee
at that time has an exercisable option to extend this Lease or to purchase the
Premises, then Lessee may preserve this Lease by, (a) exercising such option and
(b) providing Lessor 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 Lessee's receipt of Lessor's written notice
purporting to terminate this Lease, or (11) the day prior to the date upon which
such option expires, if Lessee duly exercises such option during such period and
provides Lessor with funds (or adequate assurance thereof) to cover any shortage
in insurance proceeds, Lessor shall, at Lessor's commercially reasonable
expense, repair such damage as own as reasonably possible and this Lease shall
continue in full force and effect. If Lessee 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 Lessee's option
shall be extinguished.
9.6 Abatement of Rent; Lessee's Remedies.
(a) Abatement. In the event at Premises Partial Damage or
Premises Total Destruction or a Hazardous Substance Condition for which Lessee
is not responsible under this Lease, the Rent payable by Lessee for the period
required for the repair, remediation or restoration of such damage shall be
abated in proportion to the degree to which Lessee's use of the Premises is
impaired, but not to exceed the proceeds received from the Rental Value
insurance. All other obligations of Lessee hereunder shell be performed by
Lessee, and Lessor shall have no liability for any such damage, destruction,
remediation, repair or restoration except as provided herein.
(b) Remedies. If Lessor 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, Lessee may, at any time prior to the commencement of such repair or
restoration, give written notice to Lessor and to ally Lenders of which Lessee
has actual notice, of Lessee's election to terminate this Lease on a date not
less than sixty (60) days following the giving of such notice. If Lessee 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
15
continue in full force and effect. "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.
9.7 termination-Advance Payments. Upon termination of this Lease
pursuant to Paragraph 6.2(g) or Paragraph 9, an equitable adjustment shall be
made concerning advance Base Rent and any other advance payments made by Lessee
to Lessor. Lessor shall, in addition, return to Lessee so much of Lessee's
Security Deposit as has not been, or is not then required to be, used by Lessor.
9.8 Waive Statutes. Lessor and Lessee 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 Went inconsistent herewith.
10. Real Property Taxes.
10.1 Definition of "Real Property Tam," As used herein, the term
"Real Property Taxes' shall include any form at 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 Lessor in
the Premises, Lessor's right to other income therefrom, and/or Lessor'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 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 in the ownership
of the Premises.
10.2
(a) Payment of Taxes. Lessor shall pay the Real Property
Taxes applicable to the Premises provided, however, that Lessee shall pay to
Lessor the amount, if any, by which Real Property Taxes applicable to the
Premises increase over the fiscal tax year during which the Commencement Date
occurs ("Tax Increase"). Subject to Paragraph 10.2(b), payment of any such Tax
Increase shall be made by Lessee to Lessor within thirty (30) days after receipt
of Lessor's written statement setting forth the amount due and the computation
thereof. If any such taxes shall cover any period of time prior to or after the
expiration or termination of this Lease. Lessee'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.
(b) Advance Payment, in the event Lessee incurs a late
charge on any Rent payment, Lessor may, at Lessor's option, estimate the current
Real Property Taxes, and require that the Tax Increase be paid in advance to
Lessor by Lessee, either: (i) in a lump sum amount equal to the amount 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 Lessor elects to require
payment monthly in advance, the monthly payment shall be an amount equal to the
amount of the estimated installment of the Tax Increase divided by the number of
months remaining before the month in which said installment becomes delinquent.
When the actual amount of the applicable Tax Increase is known, the amount of
such equal monthly advance payments shall be adjusted as required to provide the
funds needed to pay the applicable Tax Increase. If the amount collected by
Lessor is insufficient to pay the Tax Increase when due, Lessee shall pay
Lessor, upon demand, such additional sums as
16
are necessary to pay ouch obligations. All moneys paid to Lessor under this
Paragraph may be intermingled with other moneys of Lessor and shall not bear
interest. In the event of a Breach by Lessee in the performance of its
obligations under this Lease, then any balance of funds paid to Lessor under the
provisions of this Paragraph may at the option of Lessor, be treated as an
additional Security Deposit.
(c) Additional Improvements. Notwithstanding anything to
the contrary in this Paragraph 10.2, Lessee shall pay to Lessor upon demand
therefor the entirety of any increase in Real Property Taxes assessed by reason
of Alterations or Utility Installations placed upon the Premises by Lessee or at
Lessee's request.
10.3 Joint Amusement. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the Tax Increase for all
of the land and improvements included within the tax parcel assessed, such
proportion to be conclusively determined by Lessor from the respective
valuations assigned in the assessor's work sheets or such other information as
may be reasonably available.
10.4 Personal Property Taxes. Lessee shall pay, prior to
delinquency, all taxes assessed against and levied upon Lessee Owned
Alterations, Utility Installations, Trade Fixtures, furnishings, equipment and
all personal property of Lessee. When possible, Lessee shall cause such 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's property within ten
(10) days after receipt of a written statement. 11. Utilities. Lessee 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 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.
12. Assignment and Subletting.
12.1 Lessor's Consent Required.
(a) Lessee shall not voluntarily or by operation of law
assign, transfer, mortgage or encumber (collectively, "assign or assignment") or
sublet all or any part of Lessee's interest in this Lease or in the Premises
without Lessor's prior written consent.
(b) A change in the control of Lessee shall constitute an
assignment requiring consent. The transfer, on a cumulative basis, of
twenty-five percent (25%) or more of the voting control of Lessee shall
constitute a change in control for this purpose.
(c) Thu involvement of Lessee or its assets in any
transaction, or series of transactions (by way of merger, sale, acquisition,
financing, transfer, leveraged buy-out or otherwise), whether or not a formal
assignment or hypothecation of this Lease or Lessee's assets occurs, which
results or will result in a reduction of the Net Worth of Lessee by an amount
greater than twenty-five percent (25%) of such Not Worth as it was represented
at the time of the execution of this Lease or at the time of the most recent
assignment to which Lessor has consented, or is it exists immediately prior to
said transaction or transactions constituting such reduction, whichever was or
is greater, shall be considered an assignment of this Lease to which Lessor may
withhold its consent. "Not Worth of Lessee" shall mean the net worth of Lessee
(excluding any guarantors) established under generally accepted accounting
principles.
(d) An assignment or subletting without consent shall, at
Lessor`5 option, be a Default curable after notice per Paragraph 13.1 (c), or a
noncurable Breach without the necessity of
17
any notice and grace period. If Lessor elects to treat such unapproved
assignment or subletting as a noncurable Breach, Lessor may either; (i)
terminate this Lease, or (R) upon thirty (30) days written notice, increase the
monthly Base Rent to one hundred ter percent (110%) of the Base Rent then in
effect. Further, in the event of such Breach and rental adjustment, (1) the
purchase price of any option to purchase the Premises hold by Lessee shall be
subject to similar adjustment to one hundred ten percent (11 MI.) of the price
previously in affect, and (ii) all fixed and non-fixed rental adjustments
scheduled during the remainder of the Lease term shall be increased to One
Hundred Ten Percent (110%) of the scheduled adjusted rent.
(e) Lessee's remedy for any breach of Paragraph 12.1 by
Lessor shall be limited to compensatory damages and/or injunctive relief.
12.2 Terms and Conditions Applicable to Assignment and Subletting.
(a) Regardless of Lessors consent, any assignment or
subletting shall not: (i) be effective without the express written assumption by
such assignee or sublessee of the obligations of Lessee under this Lease; (4)
release Lessee of any obligations hereunder: or (N) after the primary liability
of Lessee for the payment of Rent or for the performance of any other
obligations to be performed by Lessee.
(b) Lessor may accept Rent or Performance of Lessee's
obligations from any person other than Lessee pending approval or disapproval of
an assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of Rent or performance shall constitute a waiver or estoppel
of Lessor's right to exercise Re remedies for Lessees Default or Breach.
(c) Lessors consent to any assignment or subletting shall
not constitute a consent to any subsequent assignment or subletting.
(d) In the event of any Default or Breach by Lessee,
Lessor may proceed directly against Lessee, any Guarantors or anyone else
responsible for the performance of Lessee's obligations under this Lease,
including any assignee or sublessee, without first exhausting Lessor's remedies
against any other person or entity responsible therefore to Lessor, or any
security held by Lessor.
(e) Each request for consent to an assignment or
subletting shall be in writing, accompanied by information relevant to Lessors
determination as to the financial and operational responsibility and
appropriateness of the proposed assignee or sublessee, including but not limited
to the intended use and for required modification of the Premises, it any
together with a fee of $1,000 or ten percent (10%) of the current monthly Base
Rent applicable to the portion of the Premises which is the subject of the
proposed assignment or sublease, whichever is greater, as consideration for
Lessors considering and processing said request, Lessee agrees to provide Lessor
with such other or additional information and/or documentation as may be
reasonably requested. M Any assignee of, or sublessee under, this Lease shall,
by reason of accepting such assignment or entering into such sublease, be deemed
to haw assumed and agreed to conform and comply with each and every term,
covenant, condition and obligation herein to be observed or performed by Lessee
during the term of said assignment or sublease, other than such obligations as
are contrary to or inconsistent with provisions of an assignment or sublease to
which Lessor has specifically consented to in writing.
18
12.3 Additional Terms and Conditions Applicable to Subletting. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether Or hot expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of
Lessee's interest in all Rent payable on any sublease, and Lessor may collect
such Rent and apply same toward Lessee's obligations under this Lease: provided,
however, that until a Breach shall occur in the performance of Lessee's
obligations, Lessee may collect said Rent. Lessor shall not, by reason of the
foregoing or any assignment of such sublease, nor by reason of the collection of
Rent, be deemed liable to the sublessee for any failure of Lessee to perform and
comply with any of Lessee's obligations to such sublessee. Lessee hereby
irrevocably authorizes and directs any such sublessee, upon receipt of a written
notice from Lessor stating that a Breach exists in the performance of Lessee's
obligations under this Lease, to pay to Lessor all Rent due and to become due
under the sublease. Sublessee shall rely upon any such notice from Lessor and
shall pay all Rents to Lessor without any obligation or right to inquire as to
whether such Breach exists, notwithstanding any claim from Lessee to the
contrary.
(b) In the event of a Breach by Lessee, Lessor may, at
its option, require sublessee to attorn to Lessor, in which event Lessor shall
undertake the obligations of the sublessor under such sublease from ft time of
the exercise of said option to the expiration of such sublease: provided,
however, Lessor shall not be liable for any prepaid rents or security deposit
paid by such sublessee to such sublessor or for any prior Defaults or Breaches
of such sublessor.
(c) Any matter requiring the consent of the sublessor
under a sublease shall also require the consent of Lessor.
(d) No sublessee shall further assign or sublet all or
any part of the Premises without Lessor's prior written consent.
(e) Lessor shall deliver a copy of any notice of Default
or Breach by Lessee to he sublessee, who shall have the right to cure the
Default of Lessee within the grace period, if any, specified in such notice. The
sublessee shall have a right of reimbursement and offset from and against Lessee
for any such Defaults cured by the sublessee.
13. Default, Breach; Remedies.
13.1 Default; Breach. A "Default" is defined as a failure by the
Lessee to comply with or perform any of the terms, covenants, conditions or
rules under this Lease. A "Breach" is defined as the occurrence of one or more
of the following Defaults, and the failure of Lessee to cure such Default within
any applicable grace period:
(a) The abandonment of the Premises: or the vacating of
the Premises without providing a commercially reasonable level of security,
and/or Security Deposit or where the coverage of the property insurance
described in Paragraph 6.3 is jeopardized as a result thereof, or without
providing reasonable assurances to minimize potential vandalism.
(b) The failure of Lessee to make any payment of Rent
or any Security Deposit required to be made by Lessee hereunder, whether to
Lessor or to a third party, when due, to provide reasonable evidence of
insurance or surety bond, or to fulfill any obligation under this Lease which
endangers or threatens life or property, where such failure continues for a
period of three (3) business days following written notice to Lessee.
(c) The failure by Lessee to provide (i) reasonable
written evidence of compliance with Applicable Requirements, (ii) the service
"tracts, (iii) the rescission of an unauthorized
19
assignment or subletting, (iv) a Estoppel Certificate, (v) a requested
subordination, (vi) evidence concerning any guaranty and/or Guarantor, (vii) any
document requested under Paragraph 42 (easements), or (viii) any other
documentation or information which Lessor may reasonably require of Lessee under
the terms of this Lease, where any such failure continues for a period of ten
(10) days following written notice to Lessee.
(d) A Default by Lessee as to the terms, covenants,
conditions or provisions of this Lease, or of the rules adopted under Paragraph
40 hereof, other than those described in subparagraphs 13A (a), (b) or (c),
above, where such Default continues for a period of thirty (30) days after
written notice; 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
d shall not be deemed to be a Breach if Lessee commences such cure within said
thirty (30) day period and thereafter diligently prosecutes such cure to
completion.
(e) The occurrence of any of the following events: (i)
the making of any general arrangement or assignment for the benefit of
creditors; (ii) becoming a "debtor" as defined in 11 U.S.C. ss. 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 subparagraph (a) is contrary to any applicable
law, such provision shall be of no force or effect, and not affect the validity
of the remaining provisions.
(f) The discovery that any financial statement of Lessee
or of any Guarantor given to Lessor was materially false.
(g) If the performance of Lessee's obligations under this
Low is guaranteed (i) the death of a Guarantor: (m) the termination of a
Guarantor's liability with respect to this Lease other than in accordance with
the terms of such guaranty; (iii) a Guarantor's becoming insolvent or the
subject of a bankruptcy filing; (lv) a Guarantor's refusal to honor the
guaranty; or (v) a Guarantor's breach of its guaranty obligation on an
anticipatory basis, and Lessee',% failure, within sixty (60) days following
written notice of any such event, to provide written alternative assurance or
security which, when coupled with the then existing resources of Lessee, equals
or exceeds the combined financial resources of Lessee and the Guarantors that
existed at the time of execution of this Lease.
13.2 Remedies. If Lessee falls to perform any of its affirmative
duties or obligations, within ten (10) days after written notice (or in case of
an emergency, without notice), Lessor may, at its option, perform such duty or
obligation on Lessee's behalf, including but not limited to the obtaining of
reasonably required bonds, insurance policies, or governmental licenses, permits
or approvals. The costs and expenses of any such performance by Lessor shall be
due and payable by Lessee upon receipt of invoice therefor. If any check given
to Lessor by Lessee shall not be honored by the bank upon which it is drawn,
Lessor, at ft option, may require all future payments to Us made by Lessee to be
by cashier's check. In the event of a Breach, Lessor may, with or without
further notice or demand, and without limiting Lessor in the exercise of any
right or remedy which Lessor may have by reason of such Breach:
20
(a) Terminate Lessee's right to possession of the
Premises by any lawful means, in which case this Lease shall terminate and
Lessee shall immediately surrender possession to Lessor. In such event Lessor
shall be entitled to recover from Lessee (i) the unpaid Rent which had been
earned at the time of termination; (ii) 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 that the Lessee proves
could have been reasonably avoided; (iii) the worth at the time of award of the
amount by which the unpaid rent for the balance of the term after the time of
award exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and that
portion of any leasing commission paid by Lessor in connection with this Lease
applicable to the unexpired term of this Lease. The worth at the time of award
of the amount referred to in provision (iii) of the immediately preceding
sentence shall be computed by discounting such amount at the discount rate of
the Federal Reserve Bank of the District within which the Premises are located
at the time of award plus one percent (1%). Efforts by Lessor to mitigate
damages caused by Lessee's Breach of this Lease shall not waive Lessor's right
to recover damages under Paragraph 12. If termination of this Lease is obtained
through the provisional remedy of unlawful detainer. Lessor shall have the right
to recover in such proceeding any unpaid Rent and damages as are recoverable
therein, or Lessor may reserve the right to recover all or any part thereof in a
separate suit. If a notice and grace period required under Paragraph 13.1 was
not previously given, a notice to pay rent or quit, or to perform or quit given
to Lessee under the unlawful detainer statute "I also constitute the notice
required by Paragraph 13,11. In such case, the applicable grace period required
by Paragraph 13.1 and the unlawful detainer statute shall run concurrently, and
the failure of Lessee to cure the Default within the greater of the two such
grace periods shall constitute both an unlawful detainer and a Breach of this
Lane entitling Lessor to the remedies provided for in this Lease and/or by said
statute.
(b) Continue this Lease and Lessees right to possession
and recover the Rent as it becomes due, in which event Lessee may sublet or
assign, subject only to reasonable limitations. Acts of maintenance, efforts to
relet, and/or the appointment of a receiver to protect the Lessor's interests,
shall not constitute a termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available
under the laws or judicial decisions of the stale wherein the Premises are
located. The expiration or termination of this Lease and/or the termination of
Lessee's fight to possession shall not relieve Lessee from liability under any
indemnity provisions of this Lease as to matters occurring or accruing during
the term hereof or by reason of Lessee's occupancy of the Premises.
13.3 Inducement Recapture. Any agreement for free or abated rent or
other charges, or for the giving at paying by Lessor to or for Lessee of any
cash or other bonus, inducement or consideration for Lessee's entering into this
Lease, all of which concessions are hereinafter referred to as "Inducement
Provisions" shall be deemed conditioned upon Lessee's full and faithful
performance of all of the terms, covenants and conditions; of this Lease. Upon
Breach of this Lease by Lessee, any such Inducement Provision shall
automatically be deemed deleted from this Lease and of no further force or
effect, and any rent, other charge, bonus, inducement or consideration
21
theretofore abated, given or paid by Lessor under such an Inducement Provision
shall be immediately due and payable by Lessee to Lessor, notwithstanding any
subsequent cure of said Breach by Lessee. The acceptance by Lessor of rent or
the cure of the breach which initiated the operation of this paragraph shall not
be deemed a waiver by Lessor of the provisions of this paragraph Unless
specifically so stated in writing by Lessor at the time of such acceptance.
13.4 Late Charges. Lessee hereby acknowledges that late payment by
Lessee of Rent 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 upon Lessor by any Lender. Accordingly, if any Rent
shall not be received by Lessor within _______ days after such amount shall be
due, then, without any requirement for notice to Lessee, Lessee shall pay to
Lessor a one-time late charge equal to one percent (10%) of each 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 such late
payment. Acceptance of such late charge by Lessor shall in no event constitute a
waiver of Lessee's Default or Breach with respect to such overdue amount, nor
prevent the exercise of 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 Base Rent, then notwithstanding any
provision of this Lessee to the contrary, Base Rent shall, at Lessors option,
become due and payable quarterly in advance.
13.5 Interest. Any monetary payment due Lessor hereunder, other
than late charges, not received by Lessor, when due as to scheduled payments
(such as Base Rent) or within thirty (30) days following the date am which it
was due for non-scheduled payment, shall bear interest from the date when due,
as to scheduled payments, or the thirty-first (31st) day after it was due as to
non-scheduled payments. The Interest ("Interest") charged shall be equal to the
prime rate reported in the Wall Street Journal as published closest prior to the
date when due plus 4%, but shall not exceed the maximum rate allowed by law.
Interest is payable in addition to the potential late charge provided for in
Paragraph 13.4.
13.6 Breach by Lessor.
(a) Notice of Breach. Lessor shall not be deemed in
breach of this Lease unless Lessor fails within a reasonable time to perform an
obligation required to be performed by Lessor. For purposes of this Paragraph, a
reasonable time shall in no event be less than thirty (30) days after receipt by
Lessor, and any Lender whose name and address shall have been furnished Lessee
in writing for such purpose, of written notice specifying wherein such
obligation of Lessor has not been performance provided, however, that if the
nature of Lessor's obligation is such that more than thirty (30) days are
reasonably required for its performance, then Lessor shall not be in breach if
performance is commenced within such thirty (30) day period and thereafter
diligently pursued to completion.
(b) Performance by Lessee on Behalf of Lessor. In the
event that neither Lessor nor Lender cures said breach within thirty (30) days
after receipt of said written notice, or if having commenced said cure they do
not diligently pursue it to completion, then Lessee may elect to cure said
breach at Lessee's expense and offset from Point an amount equal to the greater
of one month's Base Rent or the Security Deposit, and to pay an excess of such
expense under protest, reserving Lessee's right to reimbursement from Lessor,
Lessee shall document the cost of said cure and supply said documentation to
Lessor.
22
14. Condemnation. If the Premises or any portion thereof are taken under
the power of eminent domain or sold under the threat of the exercise of said
power (collectively "Condemnation"), this Lease shall terminate as to the part
taken as of the date the condemning authority takes title or possession,
whichever first occurs. If more than ten percent (10%) of any building portion
of the premises, or more than twenty-five percent (25%) of the land area portion
of the premises not occupied by any building, is taken by Condemnation. Lessee
may, at Lessee's option, to be exercised in writing within ten (10) days after
Lessor shall have given Lessee written notice of such taking (or in the absence
of such notice, within ten (10) days after the condemning authority shall have
taken possession) terminate this Lease as of the date the condemning authority
takes such possession. If Lessee does not terminate this Lease in accordance
with the foregoing, this Lease shall remain in full force and effect as to the
portion of the Premises remaining, except that the Base Rent shall be reduced in
proportion to the reduction in utility of the Premises caused by such
Condemnation. Condemnation awards and/or payments shall be the property of
Lessor, whether such award shall be made as compensation for diminution in value
of the leasehold, the value of the part taken, or for severance damages;
provided, however, that Lessee shall be entitled to any compensation for
Lessee's relocation expenses, loss of business goodwill and/or Trade Fixtures,
without regard to whether or not this Lease is terminated pursuant to the
provisions of this Paragraph. All Alterations and Utility Installations made to
the Premises by Lessee, for purposes of Condemnation only, shall be considered
the property of the Lessee and Lessee shall be entitled to any and all
compensation which is payable therefor. In the event that this Lease is not
terminated by reason of the Condemnation, Lessor shall repair any damage to the
Premises caused by such Condemnation.
15. Brokers' Fee.
15.1 Additional Commission. In addition to the payments owed
pursuant to Paragraph 1,10 above, and unless Lessor and the Brokers otherwise
agree in writing. Lessor agrees that: (a) if Lessee exercises any Option: (b) if
Lessee acquires any rights to the Premises or other Premises owned by Lessor and
located within the some Project, if any, within which the Premises is located;
(c) if Lessee remains in possession of the Premises, with the consent of Lessor,
after the expiration of this Lease; or (d) if Base Rent is increased, whether by
agreement or operation of an escalation clause herein, then, Lessor shall pay
Brokers a fee in accordance with the schedule of said Brokers in effect at the
time of the execution of this Lease.
15.2 Assumption of Obligations. Any buyer or transferee of Lessor's
interest in this Lease shall be deemed to have assumed Lessor's obligation
hereunder. Each Broker shall be a third party beneficiary of the provisions of
Paragraphs 1.10, 15. 22 and 31. If Lessor falls to Pay to a Broker any amounts
due as and for commissions pertaining to this Lease when due, then such amounts
shall accrue interest, in addition, if Lessor fails to pay any amounts to
Lessee's Broker when due, Lessee's Broker may send written notice to Lessor and
Lessee of such failure and if Lessor fails to pay such amounts within ten (10)
days after said notice, Lessee shall pay said monies to its Broker and offset
such amounts against Rent. In addition, Lessee's Broker shall be deemed to be a
third party beneficiary of any commission agreement entered into by and/or
between Lessor and Lessor's Broker.
15.3 Representations and indemnities of Broker Relationships.
Lessee and Lessor each represent and warrant to the other that it has had no
dealings with any person, firm, broker or finder (other than the Brokers, R any)
in connection with this Loose, and that no one other than said named Brokers is
entitled to any commission or finder's fee in connection herewith. Lessee and
Lessor do
23
each hereby agree to indemnity, protect, defend and hold the other harmless from
and against liability for compensation or charges which may be claimed by any
such unnamed broker, finder or other similar party by reason of any dealings or
actions of the indemnifying Party including any costs, expenses, attorneys' fees
reasonably incurred with respect thereto. 16. Estoppel Certificates.
(a) Each Party (as "Responding Party") shall within ten
(10) days after written notice from the other Party (the "Requesting Party")
execute, acknowledge and deliver to the Requesting Party a statement in writing
in form similar to the then most current "Estoppel Certificate" form published
by the American industrial Real Estate Association, plus such additional
information, confirmation and/or statements as may be reasonably requested by
the Requesting Patty.
(b) If the Responding Party shall fall to execute or
deliver the Estoppel Certificate within such ten day period, the Requesting
Party may execute an Estoppel Certificate stating that: (1) the Lease is in full
force and effect without modification except as may be represented by the
Requesting Party; (ii) there are no uncured defaults in the Requesting Party's
performance: and (iii) if Lessor is the Requesting Party, not more than one
month's rent has been paid in advance. Prospective purchasers and encumbrancers
may rely upon the Requesting Party's Estoppel Certificate, and the Responding
Party shall be estopped from denying the truth of the facts contained in said
Certificate.
(c) If Lessor desires to finance, refinance, or sell the
Premises, or any part thereof, Lessee and all Guarantors shall deliver to any
potential lender or purchaser designated by Lessor such financial statements as
may be reasonably required by such lender or purchaser, including but not
limited to Lome's financial statements for the past three (3) years, All such
financial statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes heroin set forth.
17. Definition of Lessor. The term "Lessor" as used herein "I mean the
owner or owners at the time in question of the fee title to the Premises, or, if
this is a sublease, of the Lessee's interest in the prior lease. In the event of
a transfer of Lessors title or interest in the Premises or this Lease, Lessor
shall deliver to the transferee or assignee (in cash or by credit any unused
Security Deposit held by Lessor. Except as provided in Paragraph 15, upon such
transfer or assignment and delivery of the Security Deposit, as aforesaid, the
prior Lessor shall be relieved of all liability with respect to the obligations
and/or covenants under this Lease thereafter to be performed by the Lessor,
Subject to the foregoing, the obligations and/or covenants in this Lease to be
performed by the Lessor shall be binding only upon the Lessor as hereinabove
defined. Notwithstanding the above, and subject to the provisions of Paragraph
20 below, the original Lessor under this Lease, and all subsequent holders of
the Lessor's interest in this Lease shall remain liable and responsible, with
regard to the potential duties and liabilities of Lessor pertaining to Hazardous
Substances as outlined in Paragraph 6 above.
18. Severability. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
19. Days. Unless otherwise specifically indicated to the contrary, the word
"days"as used in this Lease shall mean and refer to calendar days.
20. Limitation on Liability. Subject to the provisions of Paragraph 17
above, the obligations of Lessor under this Lease shall not constitute personal
obligations of Lessor, the individual partners of Lessor or its or their
individual partners, directors, officers or shareholders, and Lessee shall look
to the Premises, and to no other assets of Lessor, for the satisfaction of any
liability of Lessor with respect to this Lease, and shall not seek recourse
against the individual partners of Lessor, or its or
24
their individual partners, directors, officers or shareholders, or any of their
personal assets for such satisfaction.
21. Time of Essence. Time is of the essence with respect to the performance
of all obligations to be performed or observed by the Parties under this Lease.
22. No Prior or Other Agreements: Broker Disclaimer. This Lease contains
all agreements between the Parties with respect to any matter mentioned herein,
and no other prior or contemporaneous agreement or understanding shall be
effective. Lessor and Lessee each represents and warrants to the Brokers that 4
has made, and is relying solely upon, its own investigation as to the nature,
quality, character and financial responsibility of the other Party to this Lease
and as to the nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party. The liability (including court costs and Attorneys'
fees), of any Broker with respect to negotiation, execution, delivery or
performance by either Lessor or Lessee under this Lease or any amendment or
modification hereto shall be limited to an amount up to the fee received by such
Broker pursuant to this Lease; provided, however, that the foregoing limitation
on each Broker's liability shall not be applicable to any gross negligence or
willful misconduct of such Broker.
23. Notices.
23.1 Notice Requirements. All notices required or permitted by this
Lease shall be in writing and may be delivered in person (by hand or by courier)
or may be sent by regular, certified or registered mail or U.S. Postal Service
Express Mail, with postage prepaid, or by facsimile transmission, and shall be
deemed sufficiently given if served in a manner specified in this Paragraph 23.
The addresses noted adjacent to a Party's signature on this Lease shall be that
Party's address for delivery or mailing of notices. Either Party may by written
notice to the other specify a different address for notice, except that upon
Lessee's taking possession of the Premises, the Premises shall constitute
Lessee's address for notice. A copy of all notices to Lessor shall be
concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate in writing.
23.2 Date of Notice. Any notice sent by registered or certified
mail, return receipt requested, shall be deemed given on the date of delivery
shown on the receipt card, or if no delivery date is shown, the postmark
thereon. If sent by regular mail the notice shall be deemed given forty-eight
(48) hours after the same is addressed as required herein and mailed with
postage prepaid. Notices delivered by United States Express Mail or overnight
courier that guarantee next day delivery shall be deemed given twenty-four (24)
hours after delivery of the same to the Postal Service or courier. Notices
transmitted by facsimile transmission or similar means shall be deemed delivered
upon telephone confirmation of receipt, provided a copy is also delivered via
delivery or mail. If notice is received on a Saturday, Sunday or legal holiday,
it shall be deemed received on the next business day.
24. Waivers. No waiver by Lessor of the Default or Breach of any
term, covenant or condition hereof by Lessee, shall be deemed a waiver of any
other term, covenant or condition hereof, or of any subsequent Default or breach
by Lessee of the same or of any other term, covenant or condition hereof.
Lessor's consent to, or approval of, any W shall not be deemed to render
unnecessary the obtaining of Lessors consent to, or approval of, any subsequent
or similar act by Lessee, or be construed as the basis of an estoppel to enforce
the provision or provisions of this Lease requiring such consent. The acceptance
of Rent by Lessor shall not be a waiver of any Default or Breach by
25
Lessee. Any payment by Lessee may be accepted by Lessor on account of moneys or
damages due Lessor, notwithstanding any qualifying statements or conditions made
by Lessee in connection therewith, which such statements and/or conditions shall
be of no force or effect whatsoever unless specifically agreed to in writing by
Lessor at or before the time of deposit of such payment.
25. Recording. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees applicable thereto.
26. No Right to Holdover. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or termination of this Lease.
In the event that Lessee holds over, then the Same Rent shall be increased to
one hundred fifty percent (150%) of the Base Rent applicable during the month
immediately preceding the expiration or termination. Nothing contained herein
shall be construed as consent by Lessor to any holding over by Lessee.
27. 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.
28. Covenants; and Conditions; Construction of Agreement. All provisions of
this Lease to be observed or performed by Lessee are both covenants and
conditions. In construing this Lease, all headings and tides are for the
convenience of the parties only and shall not be considered a part of this
Lease. Whenever required by the context, the singular shall include the plural
and vice versa. This Lease shall not be construed as if prepared by one of the
parties, but rather according to its fair meaning as a whole, as if both parties
had prepared it.
29. Binding Effect; Choice of Low. This Lease "I be binding upon the
parties, their personal representatives, successors and assigns and be governed
by the laws of the State in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.
30. Subordination, Attornment; Non-Disturbance.
30.1 Subordination. This Lease and any Option granted hereby shall
be subject and subordinate to any ground lease, mortgage, deed of trust, or
other hypothecation or security device (collectively, "Security Device"), now or
hereafter placed upon the Premises, to any and all advances made on the security
thereof, and to all renewals, modifications, and extensions thereof. Lessee
agrees that the holders of any such Security Devices (in this Lease together
referred to as "Lender") shall have no liability or obligation to perform any of
the obligations of Lessor under this Lease. Any Lender may elect to have this
Lease and/or any Option granted hereby superior to the lien of its Security
Device by giving written notice thereof to Lessee whereupon this Lease and such
Options shall be deemed prior to such Security Device, notwithstanding the
relative dates of the documentation or recordation thereof.
30.2 Attornment. Subject to the non-disturbance provisions of
Paragraph 30.3. Lessee agrees to attorn to it Lender or any other party who
acquires ownership of the Premises by reason of a foreclosure of a Security
Device, and that in the event of such foreclosure, such now owner shall not: (i)
be liable for any act or omission of any prior lessor or with respect to events
occurring prior to acquisition of ownership: (ii) be subject to any offsets or
defenses which Lessee might have against any prior lessor; or (ill) be bound by
prepayment of more than one (1) month's rent.
30.3 Non-Disturbance. With respect to Security Devices entered into
by Lessor after the execution of this Lease, Lessee's subordination of this
Lease shall be subject to receiving a commercially reasonable non-disturbance
agreement (a "Non-Disturbance Agreement") from the
26
Lender which Non-Disturbance Agreement provides that Lessee's possession of the
Premises, and this Lease, including any options to extend the term hereof, will
not be disturbed so long as Lessee is not in breach hereof and attorns to the
record owner of the Premises. Further, within sixty (60) days after the
execution of this Lease, Lessor shall use its commercially reasonable efforts to
obtain a Non-Disturbance Agreement from the holder of any pre-existing Security
Device which is secured by the Premises. In the event that Lessor is unable to
provide the Non-Disturbance Agreement within said sixty (60) days, then Lessee
may, at Lessee's option, directly contact Lessor's lender and attempt to
negotiate for the execution and delivery of a Non-Disturbance Agreement.
30.4 Self-Executing. The agreements contained in this Paragraph 30
shall be effective without the execution of any further documents: provided,
however, that, upon written request from Lessor or a Lender in connection with a
sale, financing or refinancing of the Premises, Lessee and Lessor shall execute
such further writings as may be reasonably required to separately document any
subordination, attornment and/or Non-Disturbance Agreement provided for herein.
31. Attorneys' Fees. If any Party or broker brings an action or proceeding
involving the Premises to enforce the terms hereof or to declare rights
hereunder, the Prevailing Party (as hereafter defined) in any such proceeding,
action, or appeal thereon, shall be entitled to reasonable attorneys' fees. Such
fees may be awarded in the same suit or recovered in a separate suit, whether or
not such action or proceeding is pursued to decision or judgment. The term,
"Prevailing Party" shall include, without limitation, a Party or Broker who
substantially obtains or defeats the relief sought, as the case may be, whether
by compromise, settlement, judgment, or the abandonment by the other Party or
Broker of its claim or defense, The attorneys' fees award shall not be computed
in accordance with any court fee schedule, but shall be such as to fully
reimburse all attorneys' fees reasonably incurred. In addition, Lessor shall be
entitled to attorneys' fees, costs and expenses incurred in the preparation and
service of notices of Default and consultations in connection therewith, whether
or not a legal action is subsequently commenced in connection with such Default
or resulting Breach.
32. Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the same
to prospective purchasers, lenders, or lessees, and making such alterations,
repair, improvements or additions to the Premises as Lessor may deem necessary.
All such activities shall be without abatement of rent or liability to Lessee.
Lessor may at any time place on the Premises any ordinary "For SeV signs and
Lessor rray during the last six (6) months of the term hereof place on the
Premises any ordinary "For Lease" signs. Lessee may at any time place on or
about the Premises any ordinary "For Sublease" sign.
33. Auction. Lessee shall not conduct, nor permit to be conducted, any
auction upon the Premises without Lessor's prior written consent. Lessor shall
not be obligated to exercise any standard of reasonableness in determining
whether to permit an auction.
34. Signs. Except for ordinary "For Sublease" signs, Lessee shall not place
any sign upon the Premises without Lessors prior written consent. All signs must
comply with all Applicable Requirements.
35. Termination; Merger. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, that Lessor may elect to continue any one or all
existing subtenancies. Lessors failure within ten (10) days following any such
event to elect to the
27
contrary by written notice to the holder of any such lesser interest, shall
constitute Lessor's election to have such event constitute the termination of
such interest.
36. Consents. Except as otherwise provided herein, wherever in this Lease
the consent of a Party is required to an act by or for the other Party, such
consent shall not be unreasonably withheld or delayed. Lessor's actual
reasonable costs and expenses (including but not limited to architects',
attorneys', engineers' and other consultants' fees) incurred in the
consideration of, or response to, a request by Lessee for any Lessor consent,
including but not limited to consents to an assignment, a subletting or the
presence or use of a Hazardous Substance, shall be paid by Lessee upon receipt
of an invoice and supporting documentation therefor. Lessors consent to any act,
assignment or subletting shall not constitute an acknowledgment that no Default
or Breach by Lessee of this Lease exists, nor shall such consent be deemed a
waiver of any then existing Default or Breach, except as may be otherwise
specifically stated in writing by Lessor at the time of such consent. The
failure to specify herein any particular condition to Lessor's consent shall not
preclude the imposition by Lessor at the time of consent of such further or
other conditions as are then reasonable with reference to the particular matter
for which consent is being given, in the event that either Party disagrees with
any determination made by the other hereunder and reasonably requests the
reasons for such determination, the determining party shall furnish its reasons
in writing and in reasonable detail within ten (10) business days following such
request.
37. Guarantor.
37.1 Execution. The Guarantors, if any, shall each execute a
guaranty in the form most recently published by the American Industrial Real
Estate Association, and each such Guarantor shall have the same obligations as
Lessee under this Lease.
37.2 Default. It shall constitute a Default of the Lessee if any
Guarantor fails or refuses, upon request to provide: (a) evidence of the
execution of the guaranty, including the authority of the party signing on
Guarantor's behalf to obligate Guarantor, and in the case of a corporate
Guarantor, a certified copy of a resolution of its board of directors
authorizing the making of such guaranty, (b) current financial statements, (c) a
Estoppel Certificate, or (d) written confirmation that the guaranty is still in
effect.
38. Quiet Possession. Subject to payment by Lessee of the Rent and
performance of all of the covenants, conditions and provisions on Lessee's part
to be observed and performed under this Lease, Lessee shall have quiet
possession and quiet enjoyment of the Premises during the term hereof.
39. Options.
39.1 Definition. "Option" shall mean: (a) the right to extend the
term of or renew this Lease or to extend or renew any lease that Lessee has on
other property of Lessor; (b) the right of first refusal or first offer to lease
either the Premises or other property of Lessor; (c) the right to purchase or
the right of first refusal to purchase the Premises or other property of Lessor.
39.2 Options Personal To Original Lessee. Each Option granted to
Lessee in this Lease is personal to the original Lessee, and cannot be assigned
or exercised by anyone other than said original Lessee and only while the
original Lessee is in full possession of the Premises and, if requested by
Lessor, with Lessee certifying that Lessee has no intention of thereafter
assigning or subletting.
28
39.3 Multiple Options. In the event that Lessee has any multiple
Options to extend or renew this Lease, a later Option cannot be exercised unless
the prior Options have been validly, exercised.
39.4 Effect of Default an Options.
(a) Lessee shall have no right to exercise an Option: (i)
during the period commencing with the giving of any notice of Default and
continuing until said Default is cured: (ii) during the period of time any Rent
is unpaid (without regard to whether notice thereof is given Lessee); (iii)
during the time Lessee is in Breach of this Lease; or (iv) in the event that
Lessee has been given three (3) or more notices of separate Default, whether or
not the Defaults are cured, during the twelve (12) month period Immediately
preceding the exercise of the Option.
(b) The period of time within which an Option may be
exercised shall not be extended or enlarged by reason of Lessee's inability to
exercise an Option because of the provisions of Paragraph 39.4(a).
(c) An Option shall terminate and be of no further force
or effect, notwithstanding Lessees due and timely exercise of the Option, if,
after such exercise and prior to the commencement of the extended term, (i)
Lessee falls to pay Rent for a period of thirty (30) days after such Rent
becomes due (without any necessity of Lessor to give notice thereof), (0) Lessor
gives to Lessee three (3) or more notices of separate Default during any twelve
(12) month period, whether or not the Defaults are cured, or (iii) if Lessee
commits a Breach of this Lease.
40. Multiple Buildings. If the Premises are a part of a group of buildings
controlled by Lessor, Lessee agrees that it will observe all reasonable rules
and regulations which Lessor may make from time to time for the management,
safety, and care of said properties, including the care and cleanliness of the
grounds and including the parking, loading and unloading of vehicles, and that
Lessee will pay its fair share of common expenses incurred in connection
therewith.
41. Security Measures. Lessee hereby acknowledges that the rental payable
to Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same,
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.
42. Reservation. Lessor reserves to itself the right, from time to time, to
grant, without the consent or joinder of Lessee, such easements, rights and
dedications that Lessor deems necessary, and to cause the recordation of parcel
maps and restrictions, so long as such easements, rights, dedications, maps and
restrictions do not unreasonably interfere with the use of the Premises by
Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to
effectuate any such easement rights, dedication, map or restrictions.
43. Performance Under Protest. If at any time a dispute shall arise as to
any amount or sum of money to be paid by one Party to the other under the
provisions hereof, the Party against whom the obligation to pay the money is
asserted shall have the right to make payment "under protest and such payment
shall not be regarded as a voluntary payment and there shall survive the right
on the part of said Party to institute suit for recovery of such sum. If it
shall be adjudged that there was no legal obligation or: the part of said Party
to pay such sum or any part thereof, said Party she)! be entitled to recover
such sum or so much thereof as it was not legally required to pay
44. Authority. If either Party hereto is a corporation, trust, limited
liability company, partnership, or similar entity, each individual executing
this Lease on behalf of such entity represents and warrants that he or she is
duly authorized to execute and deliver this Lease on its behalf, Each party
29
shall, within thirty (30) days after request, deliver to the other party
satisfactory evidence of such authority.
45. Conflict. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the typewritten
or handwritten provisions.
46. Offer. Preparation of this Lease by either Party or their agent and
submission of same to the other Party shall not be deemed an offer to lease to
the other Party. This Lease is not intended to be binding until executed and
delivered by all Parties hereto.
47. Amendments. This Lease may be modified only in writing, signed by the
Parties in interest at the time of the modification. As long as they do not
materially change Lessee's obligations hereunder, Lose a agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by a Lender in connection with the obtaining of normal financing or
refinancing of the Premises.
48. Multiple Parties. If more than one person or entity is nomad herein as
either Lessor or Lessee, such multiple Parties shall have joint and several
responsibility to comply with the terms of this Lease.
49. Mediation and Arbitration of Disputes. An Addendum requiring the
Mediation and/or the Arbitration of all disputes between the Parties and/or
Brokers arising out of this Lease [ ] is [ ] is not attached to this Lease.
50. The Month of February, 2001 shall be rent free.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. TIME PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED. THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN
INDUSTRIAL REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY,
LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT
RELATES. THE PARTIES ARE URGED TO:
1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF
THIS LEASE.
2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE
CONDITION OF THE PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT
NOT BE LIMITED TO: THE POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES,
THE ZONING OF THE PREMISES, THE STRUCTURAL INTEGRITY, THE
CONDITION OF THE ROOF AND OPERATING SYSTEMS, AND THE SUITABILITY
OF THE PREMISES FOR LESSEE'S INTENDED USE.
WARNING: IF THE PREMISES IS LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN
PROVISIONS OF THE LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE
STATE IN WHICH THE PREMISES IS LOCATED.
30
The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.
Executed at: Executed at:
---------------------------- --------------------------
on: on:
----------------------------------- ---------------------------------
By LESSOR: By LESSEE:
Marcel George & Joanne Marie George, The Singing Machine Company, Inc.,
trusts of Marcel George Family Trusts a Florida corporation
By: By: /s/ John F. Klecha
----------------------------------- -----------------------------------
Name Printed: Name Printed: John F. Klecha
--------------------------
Title: Title: Chief Operating Officer
---------------------------------
By: By:
----------------------------------- ------------------------------------
Name Printed: Name Printed:
--------------------------- ----------------------------
Title: Title:
--------------------------------- ---------------------------------
Address: 630 Tigertail Road Address: 6601 Lyons Road, Building A-7
Los Angeles, CA 90049 Coconut Creek, FL 33073
Telephone: (310) 472-3552 Telephone:
-----------------------------
Facsimile: (310) 398-0784 Facsimile:
------------------------------
Federal ID No: Federal ID No:
------------------------- -------------------------
NOTE: These forms are often modified to meet changing requirements of law and
industry needs. Always write or call to make sure you are utilizing the
most current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700 So.
Flower Street, Suite 600, Los Angeles, California 90017. (213)
687-8777. Fax No. (213) 687-8618
32
ADDENDUM TO
STANDARD LEASE
Dated November 9, 2000
By and between: George-Singing Machine
51 RENT ESCALATIONS
(a) On January 1, 2002 and each consecutive 12 months thereafter,
the monthly rent payable under paragraph 4 of the attached Lease shall be
adjusted by the increase, if any, f rom the date this Lease commenced, in the
Consumer Price Index of the Bureau of Labor Statistics of the U.S. Department of
Labor for Urban Wage Earners and Clerical Workers, Los Angeles-Long Beach
Anaheim, California (1967=100), "All Items", herein referred to as "C.P.I."
(b) The monthly rent payable in accordance with paragraph (a) of
this Addendum shall be calculated as follows: the rent payable for the first
month of the term of this Lease, as set forth in paragraph 4 of the attached
Lease, shall be multiplied by a fraction the numerator of which shall be the
C.P.I. of the calendar month during which the adjustment is to take effect, and
the denominator of which shall be the C.P.I. for the calendar month in which the
original Lease term commences. The sum so calculated shall constitute the new
monthly rent hereunder, but in no event, shall such new monthly rent be less
than the rent payable for the month immediately preceding the date for rent
adjustment.
(c) Pending receipt of the required C.P.I. and determination of
the actual adjustment, Lessee Shall pay an estimated adjusted rental, as
reasonably determined by Lessor by reference to the then available C.P.I. so
information. Upon notification of the actual adjustment after publication of the
required C.P.I., any overpayment shall be credited against the next installment
of rent due, and any underpayment shall be immediately due and payable by
Lessee. Lessor's failure to request payment of an estimated or actual rent
adjustment shall not constitute a waiver of the right to any adjustment provided
for in the Lease or this addendum.
(d) In the event the compilation and/or publication of the
C.P.I. shall be transferred to any other governmental department or bureau or
agency or shall be discontinued, then the index most nearly the same as the
C.P.I. shall be used to make such calculation. In the event that Lessor and
Lessee cannot agree on such alternative index. then the matter shall be
submitted for decision to the American Arbitration Z Association in accordance
with the then rules of said association and the decision of the arbitrators
shall be binding upon the parties. The cost of said Arbitrators shall be paid
equally by Lessor and Lessee.
33