EXHIBIT 10.2
LEASE AGREEMENT
Between
UTFLA LLC
as Lessor
and
POINT.360
as Lessee
TABLE OF CONTENTS
Page
ARTICLE I
Section 1.01. Lease of Premises; Title and Condition......................1
Section 1.02. Use.........................................................1
Section 1.03. Term........................................................1
Section 1.04. Options To Extend the Term..................................2
Section 1.05. Rent........................................................2
Section 1.06. Right of First Refusal......................................4
ARTICLE II
Section 2.01. Maintenance and Repair......................................4
Section 2.02. Alterations, Replacements and Additions.....................5
ARTICLE III
Section 3.01. Severable Property..........................................5
Section 3.02. Removal.....................................................5
ARTICLE IV
Section 4.01. Lessee's Assignment and Subletting..........................6
Section 4.02. Transfer or Pledge by Lessor................................6
ARTICLE V
Section 5.01. Net Lease...................................................6
Section 5.02. Taxes and Assessments; Compliance With Law..................7
Section 5.03. Liens.......................................................9
Section 5.04. Indemnification.............................................9
Section 5.05. Permitted Contests..........................................9
Section 5.06. Environmental Compliance...................................10
ARTICLE VI
Section 6.01. Procedure Upon Purchase....................................12
Section 6.02. Condemnation and Casualty..................................12
Section 6.03. Insurance..................................................14
ARTICLE VII
Section 7.01. Conditional Limitations; Default Provisions................16
Section 7.02. Bankruptcy or Insolvency...................................19
Section 7.03. Additional Rights of Lessor................................19
ARTICLE VIII
Section 8.01. Notices and Other Instruments..............................21
Section 8.02. Estoppel Certificates; Financial Information...............22
ARTICLE IX
Section 9.01. No Merger..................................................23
Section 9.02. Surrender..................................................23
Section 9.03. Assumption.................................................23
Section 9.04. Separability; Binding Effect; Governing Law................23
Section 9.05. Table of Contents and Headings; Internal References........24
Section 9.06. Counterparts...............................................24
Section 9.07. Lessor's Liability.........................................24
Section 9.08. Amendments and Modifications...............................24
Section 9.09. Additional Rent............................................24
Section 9.10. Consent of Lessor..........................................24
Section 9.11. Options....................................................24
Section 9.12. Schedules..................................................25
Section 9.13. Currency...................................................25
THIS LEASE AGREEMENT, dated as of March, 28, 2006 (this "Lease"), is
made between UTFLA LLC, a Delaware limited liability company ("Lessor"), and
POINT.360, a California corporation (herein, together with any corporation
succeeding thereto by consolidation, merger or acquisition of its assets
substantially as an entirety, called "Lessee").
ARTICLE I
Section 1.01. ....Lease of Premises; Title and Condition. In
consideration of the rents and covenants herein stipulated to be paid and
performed by Lessee and upon the terms and conditions herein specified, Lessor
hereby leases to Lessee, and Lessee hereby leases from Lessor, the premises (the
"Premises") consisting of:
(a) that parcel of land located in Los Angeles, California, having an
address of 2701 Media Center Drive and more particularly described in
Schedule A attached hereto and made a part hereof (the "Land");
(b) all of the buildings, structures, fixtures, facilities, installations
and other improvements of every kind and description now or hereafter
in, on, over and under the Land, all plumbing, gas, electrical,
ventilating, lighting and other utility systems, ducts, hot water
heaters, oil burners, domestic water systems, elevators, escalators,
canopies, air conditioning systems and all other building systems and
fixtures attached to or comprising a part of the buildings but excluding
all personal property now or hereafter belonging to Lessee and Severable
Property (as defined in Section 3.01 hereof) (collectively, the
"Improvements"); and
(c) all of Lessor's right, title and interest, if any, in and to all
easements, rights-of-way, appurtenances and other rights and benefits
associated with the Land and to all public or private streets, roads,
avenues, alleys or passways, open or proposed, on or abutting the Land,
including, without limitation, the agreements, if any, set forth in
Schedule A (the "Agreements") (all of the foregoing being included
within the term "Land").
The Premises are leased to Lessee in their present condition without
representation or warranty by Lessor and subject to the rights of parties in
possession, to the existing state of title, to all applicable Legal Requirements
(as defined in Section 5.02(b)) now or hereafter in effect and to Permitted
Exceptions listed in Schedule A. Lessee has examined the Premises and title to
the Premises and has found all of the same satisfactory for all purposes.
Section 1.02. Use. Lessee may use the Premises for any lawful purpose,
provided such use shall not diminish the value of the Premises or constitute a
nuisance.
Section 1.03. Term. This Lease shall be for an Interim Term beginning as
of the date hereof and ending at midnight on the last day of the month including
the date hereof and a Primary Term of fifteen (15) years beginning on April 1,
2006 and ending at midnight on March 31, 2021. The time period during which this
Lease shall actually be in effect, including the Interim Term, the Primary Term
and any Extended Term (as defined in Section 1.04) for which the right to extend
is exercised, as any of the same may be terminated prior to their scheduled
expiration pursuant to the provisions hereof, is sometimes referred to herein as
the "Lease Term."
Section 1.04. Options To Extend the Term. Unless an Event of Default (as
defined herein) has occurred and is continuing at the time any option is
exercised, Lessee shall have the right and option to extend the Lease Term for
four (4) additional periods of five (5) years, commencing at midnight on the day
on which the then existing term of this Lease expires (the "Extended Term"),
unless this Lease shall expire or be terminated pursuant to any provision
hereof. Lessee shall, if at all, exercise its option to extend the Lease Term
for the Extended Term by giving notice of intent to exercise to Lessor at any
time not more than 18 or less than 15 months prior to the expiration of the then
existing Lease Term (which notice of intent will not extend the then existing
Lease Term, but shall obligate the parties to begin the determination of Fair
Market Rental (as defined herein) for the Premises for such Extended Term
pursuant to subsection 1.05(e)) and then by delivering to Lessor a written
instrument of exercise of option no later than 12 months prior to the expiration
of the then existing Lease Term and after the Fair Market Rental for the
Premises for the Extended Term has been determined as provided in subsection
1.05(e), provided that, if such Fair Market Rental value has not been so
determined at least 20 days prior to the date by which Lessee must deliver such
instrument of exercise Lessee shall have an additional 30 days after
determination thereof within which to make such delivery. Upon the delivery of
the written instrument of exercise referred to in the immediately preceding
sentence, as applicable, the Lease Term shall be automatically extended for the
Extended Term on the terms and conditions provided herein.
Section 1.05. Rent.
(a) Lessee shall pay, as basic rent for the Premises, the following (the
"Basic Rent"):
(i) During the Interim Term and the first five (5) years of the
Primary Term, Lessee shall pay the amounts set forth in Schedule
B.
(ii) During years six (6) through fifteen (15) of the Primary Term,
Lessee shall pay the CPI Rentals (as defined below); and
(iii) During any Extended Term, Lessee shall pay an amount per annum
equal to the Fair Market Rental (as hereinafter defined).
(b) Basic Rent shall be paid by wire transfer as directed by Lessor, or to
such other person as Lessor from time to time may designate. Lessor
shall give Lessee not less than 30 days' notice of any change in the
account or the address to which such payments are to be made. Such
annual rentals shall be payable in equal monthly installments in advance
on the first day of each month. Any rental payment made in respect of a
period which is less than one month shall be prorated by multiplying the
then applicable monthly rental by a fraction the numerator of which is
the number of days in such month with respect to which rent is being
paid and the denominator of which is the total number of days in such
month. Lessee shall perform all its obligations under this Lease at its
sole cost and expense and shall pay all Basic Rent, additional rent and
any other sum due hereunder when due and payable, without notice or
demand.
(c) The CPI Rentals, shall be calculated pursuant to the following Rental
Adjustment Formula: Beginning with the first day of the sixtieth (60th)
month after the commencement of the Primary Term and on the first day of
each twelve (12) months thereafter (such dates each being an "Adjustment
Date"), Basic Rent shall be increased by an amount equal to the "Rent
Adjustment." The Rent Adjustment shall be an amount equal to the product
of (i) the percentage change (the "Percentage Change") between the Price
Index (as defined below) for the first month of the Primary Term or the
Price Index used for the immediately preceding Adjustment Date, as
applicable (the "Base Month") and the Price Index for the month two
months prior to the applicable Adjustment Date and (ii) Basic Rent
applicable to the applicable Base Month. "Price Index" shall mean the
CPIU, U.S. City Average, all items (1982-84 = 100), as prepared by the
U. S. Bureau of Labor Statistics. Basic Rent shall in no event be
reduced as a result of the application of the Rental Adjustment Formula
described in this Section 1.05. In the event that the Price Index ceases
to be published, its successor index as published by the same
governmental agency which published the Price Index shall be substituted
and any necessary reasonable adjustments made by Lessor and Lessee in
order to carry out the intent of this section. In the event there is no
successor index, the Lessor shall reasonably select an alternative price
index that will constitute a reasonable substitute for the Price Index.
(d) In no event shall the annual rental for any Extended Term be an amount
less than the rental paid in the final year of the immediately preceding
Term or Extended Term. Such amount shall be payable in equal monthly
installments in advance on the first day of each month during such
Extended Term.
(e) The term "Fair Market Rental" as used herein shall mean an amount
equivalent to the then current fair market rate of rentals received in
the general market area in which the Premises are located for similar
buildings of comparable characteristics, including, but not limited to,
comparable lease terms, age, condition and classification, as such
rental shall be adjusted by a reasonable allowance for operating and
maintenance costs (not paid separately by the lessee under such other
lease) of a building of comparable characteristics, leasing commissions,
tenant improvements or allowances or other incentives. Following
delivery of the notice of intent described in Section 1.04 hereof, the
Fair Market Rental shall be determined mutually by Lessor and Lessee
within 30 days after Lessor's receipt of Lessee's notice of intent or,
if no mutual determination is made, by the following procedure: not more
than 40 days after Lessor's receipt of Lessee's notice of intent, the
parties shall attempt to agree upon an appraiser. If the parties agree
upon an appraiser, the appraiser so selected shall appraise the Fair
Market Rental value of the Premises within 30 days after selection. If
the parties fail to so agree upon the selection of one such appraiser
within 40 days after Lessor's receipt of Lessee's notice of intent,
Lessee and Lessor shall each designate, within 10 days from the end of
such 40-day period, one appraiser to determine such Fair Market Rental
value. In the event either party fails to so select its own appraiser,
the other party may obtain court appointment of an appraiser. The two
appraisers so selected shall attempt to agree upon such Fair Market
Rental value of the Premises as at the date of said appraisal. In the
event the two appraisers fail to agree upon the Fair Market Rental value
of the Premises within 90 days after Lessor's receipt of Lessee's notice
of intent, the two appraisers shall meet and select a third appraiser
with in 20 days after the expiration of such 90-day period. In the event
the two appraisers fail to so select a third appraiser, either party may
obtain court appointment of such third appraiser. Within 30 days after
the third appraiser is selected, the three appraisers so selected shall
meet and attempt to agree upon such Fair Market Rental value of the
Premises as at the date of said appraisal. In the event the three
appraisers fail to agree upon the Fair Market Rental value of the
Premises within 140 days after Lessor's receipt of Lessee's notice of
intent, the third appraiser shall independently appraise the Fair Market
Rental value of the Premises, and the arithmetic mean of the three
appraisals will be the Fair Market Rental. All appraisers shall be
members in good standing of the American Institute of Real Estate
Appraisers or any organization succeeding thereto and have had not less
than 10 years' experience with commercial real estate of the type of the
Premises in the general market area where the Premises are located.
Lessee shall pay the cost of all appraisals.
Section 1.06. Right of First Refusal. At any time after the first thirty
six (36) months of the Primary Term if Lessor shall desire to sell the Premises
and shall receive a bona fide written offer from any third party, Lessor shall
by written notice to Lessee, offer to Lessee the right to enter into a contract
for the purchase of the Premises on the terms set forth in such bona fide
written offer and Lessee shall have 10 business days after receipt of such
notice and offer in which to accept in writing such terms and conditions. Upon
any acceptance of such offer by Lessee, Lessor and Lessee shall enter into a
contract for the purchase of the Premises upon the terms and conditions
specified in the notice from Lessor to Lessee. In the event that Lessee shall
fail to accept the terms and conditions of sale by written notification to
Lessor prior to the expiration of such 10-business-day period, Lessor shall
thereafter be free to sell the Premises to any such unaffiliated third party
pursuant to the bona fide written offer for a period of eight months. The right
of first refusal contained in this Section 1.06 shall not apply to a foreclosure
or similar sale of the Premises by any holder of a mortgage on the Premises or
to the granting of a deed in lieu of foreclosure by Lessor to such holder and
shall not apply to the subsequent sale of the Premises by a purchaser of the
Premises at a foreclosure or a similar sale or by the grantee of a deed in lieu
of foreclosure.
ARTICLE II
Section 2.01. Maintenance and Repair.
(a) Lessee acknowledges that it has received the Premises in good order and
repair. Lessee, at its own expense, will maintain all parts of the
Premises in good repair and condition and will take all action and will
make all structural and nonstructural, foreseen and unforeseen and
ordinary and extraordinary changes and repairs which may be required to
keep all parts of the Premises in good repair and condition (including,
but not limited to, all painting, glass, utilities, conduits, fixtures
and equipment, foundation, roof, exterior walls, heating and air
conditioning systems, wiring, plumbing, sprinkler systems and other
utilities, and all paving, sidewalks, roads, parking areas, curbs and
gutters and fences). Lessor shall not be required to maintain, repair or
rebuild all or any part of the Premises. Lessee waives the right to
require Lessor to maintain, repair or rebuild all or any part of the
Premises or make repairs at the expense of Lessor pursuant to any Legal
Requirement, Agreement, contract, covenant, condition or restrictions at
any time.
(b) If all or any part of the Improvements shall encroach upon any property,
street or right-of-way adjoining or adjacent to the Premises, or shall
violate the Agreements or conditions affecting the Premises or any part
thereof, or shall hinder, obstruct or impair any easement or
right-of-way to which the Premises are subject, then, promptly after
written request of Lessor (unless such encroachment, violation,
hindrance, obstruction or impairment is a Permitted Exception) or of any
person so affected, Lessee shall, at its expense, either (i) obtain
valid and effective waivers or settlements of all claims, liabilities
and damages resulting therefrom or (ii) if Lessor consents thereto, make
such changes, including alteration or removal, to the Improvements and
take such other action as shall be necessary to remove or eliminate such
encroachments, violations, hindrances, obstructions or impairments.
Section 2.02. Alterations, Replacements and Additions. Lessee may, at
its expense, make additions to and alterations of the Improvements, and
construct additional Improvements, provided that (i) the fair market value, the
utility, the square footage or the useful life of the Premises shall not be
lessened thereby, (ii) such work shall be expeditiously completed in a good and
workmanlike manner and in compliance with all applicable Legal Requirements and
the requirements of all insurance policies required to be maintained by Lessee
hereunder, (iii) no structural alterations shall be made to the Improvements or
demolitions conducted in connection therewith unless Lessee shall have obtained
Lessor's consent and furnished Lessor with such surety bonds or other security
acceptable to Lessor as shall be necessary in Lessor's opinion to assure
rebuilding of such Improvements and (iv) no additions, replacements or
alterations, other than cosmetic, interior or nonstructural alterations, which
cost in excess of $50,000 shall be made unless Lessor's prior written consent
shall have been obtained. Cosmetic, interior or nonstructural alterations that
cost $50,000 or less shall not require Lessor's prior written consent. All
additions and alterations of the Premises, without consideration by Lessor,
shall be and remain part of the Premises and the property of Lessor and shall be
subject to this Lease.
ARTICLE III
Section 3.01. Severable Property. Lessee may, at its expense, install,
assemble or place on the Premises and remove and substitute any items of
machinery, equipment, furniture, furnishings or other personal property used or
useful in Lessee's business and trade fixtures described in Schedule A
(collectively, the "Severable Property"), and title to same shall remain in
Lessee.
Section 3.02. Removal. Lessee shall remove the Severable Property at the
expiration or prior termination of this Lease. Any of Lessee's Severable
Property not removed by Lessee prior to the expiration of the Lease or 30 days
after an earlier termination shall be considered abandoned by Lessee and may be
appropriated, sold, destroyed or otherwise disposed of by Lessor without
obligation to account therefor. Lessee will repair at its expense all damage to
the Premises necessarily caused by the removal of Lessee's Severable Property,
whether effected by Lessee or by Lessor.
ARTICLE IV
Section 4.01. Lessee's Assignment and Subletting. Unless an Event of
Default shall have occurred and is continuing hereunder, Lessee may, for its own
account, assign this Lease or sublet or license the use of all or any part of
the Premises for the Interim Term, the Primary Term or any Extended Term (with
respect to which such extension has previously been exercised) of this Lease.
Each such assignment or sublease shall expressly be made subject to the
provisions hereof. No such assignment or sublease shall modify or limit any
right or power of Lessor hereunder or affect or reduce any obligation of Lessee
hereunder, and all such obligations shall be those of Lessee and shall continue
in full effect as obligations of a principal and not of a guarantor or surety,
as though no subletting or assignment had been made, such liability of the
Lessee named herein to continue notwithstanding any subsequent modifications or
amendments of this Lease; provided, however, that (other than with respect to
any modifications required by law or on account of bankruptcy or insolvency) if
any modification or amendment is made without the consent of Lessee named herein
(which consent shall not be unreasonably withheld or delayed), such modification
or amendment shall be ineffective as against Lessee named herein to the extent,
and only to the extent, that the same shall materially increase the obligations
of Lessee, it being expressly agreed that (even if any such modification or
amendment shall materially increase the likelihood of a default by Lessee under
this Lease) Lessee named herein shall remain liable to the full extent of this
Lease as if such modification had not been made. Neither this Lease nor the
Lease Term hereby demised shall be mortgaged by Lessee, nor shall Lessee
mortgage or pledge its interest in any sublease of the Premises or the rentals
payable thereunder. Any sublease made otherwise than as expressly permitted by
this Section 4.01 and any assignment of Lessee's interest hereunder made
otherwise than as expressly permitted by this Section 4.01 shall be void. Lessee
shall, within 20 days after the execution of any assignment or sublease, deliver
a conformed copy thereof to Lessor.
Section 4.02. Transfer or Pledge by Lessor. Lessor shall be free to
transfer its fee interest in the Premises or any part thereof or interest
therein, subject, however, to the terms of this Lease. Any such transfer of a
fee interest shall relieve the transferor of all liability and obligation
hereunder (to the extent of the interest transferred) accruing after the date of
the transfer and any assignee shall be bound by the terms and provisions of this
Lease. Lessor shall be free to pledge or mortgage its interest in the Premises
and this Lease on the condition that either (i) this Lease shall be superior to
such pledge or mortgage or (ii) if Lessor elects to have this Lease be
subordinate to the mortgage of any lender of Lessor, Lessee receives a
nondisturbance agreement reasonably acceptable to Lessee from the holder of such
pledge or mortgage.
ARTICLE V
Section 5.01. Net Lease.
(a) It is expressly understood and agreed by and between the parties that
this Lease is a triple net lease, and the Basic Rent and all other sums
payable hereunder to or on behalf of Lessor shall be paid without notice
or demand and without setoff, counterclaim, abatement, suspension,
deduction or defense.
(b) Except as otherwise expressly provided in the Lease, this Lease shall
not terminate, nor shall Lessee have any right to terminate this Lease
or be entitled to the abatement of any rent or any reduction thereof,
nor shall the obligations hereunder of Lessee be otherwise affected, by
reason of any damage to or destruction of all or any part of the
Premises from whatever cause, the taking of the Premises or any portion
thereof by condemnation or otherwise, the prohibition, limitation or
restriction of Lessee's use of the Premises, or interference with such
use by any private person or corporation, or by reason of any eviction
by paramount title or otherwise, or Lessee's acquisition of ownership of
the Premises otherwise than pursuant to an express provision of this
Lease, or for any other cause whether similar or dissimilar to the
foregoing, any present or future law to the contrary notwithstanding, it
being the intention of the parties hereto that the rent and all other
charges payable hereunder to or on behalf of Lessor shall continue to be
payable in all events and the obligations of Lessee hereunder shall
continue unaffected, unless the requirement to pay or perform the same
shall be terminated pursuant to an express provision of this Lease.
Nothing contained in this Section 5.01 shall be deemed a waiver by
Lessee of any rights that it may have to bring a separate action with
respect to any default by Lessor hereunder or under any other agreement.
(c) Lessee covenants and agrees that it will remain obligated under this
Lease in accordance with its terms, and that Lessee will not take any
action to terminate, rescind or avoid this Lease, notwithstanding the
bankruptcy, insolvency, reorganization, composition, readjustment,
liquidation, dissolution, winding-up or other proceeding affecting
Lessor or any assignee of Lessor in any such proceeding and
notwithstanding any action with respect to this Lease which may be taken
by any trustee or receiver of Lessor or of any assignee of Lessor in any
such proceeding or by any court in any such proceeding.
(d) Lessee waives all rights now or hereafter conferred by law (i) to quit,
terminate or surrender this Lease or the Premises or any part thereof or
(ii) to any abatement, suspension, deferment or reduction of the rent,
or any other sums payable hereunder to or on behalf of Lessor,
regardless of whether such rights shall arise from any present or future
constitution, statute or rule of law.
Section 5.02. Taxes and Assessments; Compliance With Law.
(a) Lessee shall pay, prior to delinquency: (i) all taxes, assessments,
levies, fees, water and sewer rents and charges and all other
governmental charges, general and special, ordinary and extraordinary,
foreseen and unforeseen, which are, at any time prior to or during the
Interim Term, the Primary Term or any Extended Term hereof imposed or
levied upon or assessed against or which arise with respect to (A) the
Premises, (B) any Basic Rent, additional rent or other sums payable
hereunder, (C) this Lease or the leasehold estate hereby created or (D)
the operation, possession or use of the Premises; (ii) all sales taxes,
rent taxes, gross receipts taxes or similar taxes (i.e., taxes based
upon gross income which fail to take into account deductions with
respect to depreciation, interest, taxes or ordinary and necessary
business expenses, in each case relating to the Premises) imposed or
levied upon, assessed against or measured by any Basic Rent, additional
rent or other sums payable hereunder; (iii) all sales, value added, ad
valorem, use and similar taxes at any time levied, assessed or payable
on account of the acquisition, ownership, leasing, operation, possession
or use of the Premises; and (iv) all charges of utilities,
communications and similar services serving the Premises. Lessee shall
not be required to pay any franchise, estate, inheritance, transfer,
income, capital gains or similar tax of Lessor unless such tax is
imposed, levied or assessed in substitution for any other tax,
assessment, charge or levy which Lessee is required to pay pursuant to
this Section 5.02(a); provided, however, that if, at any time during the
Lease Term, the method of taxation shall be such that there shall be
assessed, levied, charged or imposed on Lessor a capital levy or other
tax directly on the rents received therefrom, or upon the value of the
Premises or any present or future improvement or improvements on the
Premises, then all such levies and taxes or the part thereof so measured
or based shall be payable by Lessee, and Lessee shall pay and discharge
the same as herein provided. Lessee will furnish to Lessor, promptly
after demand therefor, proof of payment of all items referred to above
which are payable by Lessee. If any such assessment may legally be paid
in installments, Lessee may pay such assessment in installments; in such
event, Lessee shall be liable only for installments which become due and
payable with respect to any tax period occurring in whole or in part
during the Lease Term hereof; provided, however, that all amounts
referred to in this Section 5.02(a) for the fiscal or tax year in which
the Lease Term shall expire shall be apportioned so that Lessee shall
pay those portions thereof which correspond with the portion of such
year as are within the Lease Term hereby demised.
(b) Lessee shall comply with and cause the Premises to comply with and shall
assume all obligations and liabilities with respect to (i) all laws,
ordinances and regulations and other governmental rules, orders and
determinations presently in effect or hereafter enacted, made or issued,
whether or not presently contemplated (collectively, "Legal
Requirements"), applicable to the Premises or the ownership, operation,
use or possession thereof and (ii) all Agreements, contracts, insurance
policies (including, without limitation, to the extent necessary to
prevent cancellation thereof and to insure full payment of any claims
made under such policies), agreements, covenants, conditions and
restrictions now or hereafter applicable to the Premises or the
ownership, operation, use or possession thereof, including, but not
limited to, all such Legal Requirements, contracts, agreements,
covenants, conditions and restrictions which require structural,
unforeseen or extraordinary changes; provided, however, that, with
respect to any of the obligations of Lessee in clause (ii) above which
are not now in existence, Lessee shall not be required to so comply
unless Lessee is either a party thereto or has given its written consent
thereto, or unless the same is occasioned by Legal Requirements or
Lessee's default (including any failure or omission by Lessee) under
this Lease. Nothing in clause (ii) of the immediately preceding sentence
shall modify the obligations of Lessee under Section 5.04 of this Lease.
(c) Upon the occurrence of an Event of Default (as defined herein) under
Section 7.01(a)(i)(1) or if required by Lessor's mortgagee, if any,
Lessee shall, in addition to and concurrently with the payment of Basic
Rent as required in subsection 1.05(a) hereof, pay one-twelfth of the
amount (as estimated by Lessor) of the annual taxes and assessments
described in subsection 5.02(a) hereof and the annual premiums for
insurance required in Section 6.03 hereof next becoming due and payable
with respect to the Premises, and Lessee shall also pay to Lessor on
demand therefor the amount by which the actual taxes and assessments and
insurance premiums exceed the payment by Lessee required in this
subsection. Any remaining funds held by Lessor at the end of the Lease
Term shall be returned to Lessee.
Section 5.03. Liens. Lessee will remove and discharge any charge, lien,
security interest or encumbrance upon the Premises or upon any Basic Rent,
additional rent or other sums payable hereunder which arises for any reason,
including, without limitation, all liens which arise out of the possession, use,
occupancy, construction, repair or rebuilding of the Premises or by reason of
labor or materials furnished or claimed to have been furnished to Lessee or for
the Premises, but not including (i) the liens and encumbrances set forth in
Schedule A, (ii) this Lease and any assignment hereof or any sublease permitted
hereunder and (iii) any mortgage, charge, lien, security interest or encumbrance
created or caused by Lessor or its agents, employees or representatives without
the consent of Lessee. Lessee may provide a bond or other security acceptable to
Lessor to remove or pay all costs associated with the removal of any such lien,
provided the conditions of Section 5.05 shall be satisfied. Nothing contained in
this Lease shall be construed as constituting the consent or request of Lessor,
express or implied, to or for the performance (on behalf of or for the benefit
of Lessor) by any contractor, laborer, materialman or vendor, of any labor or
services or for the furnishing of any materials for any construction,
alteration, addition, repair or demolition of or to the Premises or any part
thereof. Notice is hereby given that Lessor will not be liable for any labor,
services or materials furnished or to be furnished to Lessee, or to anyone
holding an interest in the Premises or any part thereof through or under Lessee,
and that no mechanic's or other liens for any such labor, services or materials
shall attach to or affect the interest of Lessor in and to the Premises.
Section 5.04. Indemnification. Except for the gross negligence or the
willful misconduct of any Indemnified Party (as defined herein), Lessee shall
defend all actions against Lessor the holder of any mortgage on the Premises and
any partner, officer, director, member, employee or shareholder of the foregoing
(individually, an "Indemnified Party", and collectively, "Indemnified Parties"),
with respect to, and shall pay, protect, indemnify and save harmless the
Indemnified Parties from and against, any and all liabilities, losses, damages,
costs, expenses (including, without limitation, reasonable attorneys' fees and
expenses), causes of action, suits, claims, demands or judgments of any nature
arising from (i) injury to or death of any person, or damage to or loss of
property, on the Premises or any adjoining sidewalk, streets or right of ways or
connected with the use, condition or occupancy of the Premises, (ii) violation
by Lessee of this Lease, (iii) use, act or omission of Lessee or its agents,
contractors, licensees, sublessees or invitees and (iv) contest referred to in
Section 5.05 of this Lease.
Section 5.05. Permitted Contests. Lessee, at its expense, may contest,
by appropriate legal proceedings conducted in good faith and with due diligence,
any Legal Requirement with which Lessee is required to comply pursuant to
Section 5.02(b), or the amount or validity or application, in whole or in part,
of any tax, assessment or charge which Lessee is obligated to pay or any lien,
encumbrance or charge not permitted by Sections 2.01, 2.02, 5.02(a), 5.03 and
6.02, provided that (i) the commencement of such proceedings shall suspend the
enforcement or collection thereof against or from Lessor and against or from the
Premises, (ii) neither the Premises nor any rent therefrom nor any part thereof
or interest therein would be in any danger of being sold, forfeited, attached or
lost, (iii) Lessee shall have furnished such security, if any, as may be
required in the proceedings and as may be required by Lessor, and (iv) if such
contest be finally resolved against Lessee, Lessee shall promptly pay the amount
required to be paid, together with all interest and penalties accrued thereon.
Lessor, at Lessee's expense, shall execute and deliver to Lessee such
authorizations and other documents as reasonably may be required in any such
contest. Lessee shall indemnify and save Lessor harmless against any cost or
expense of any kind that may be imposed upon Lessor in connection with any such
contest and any loss resulting therefrom. Lessee shall not be in default
hereunder in respect to the compliance with any Legal Requirement with which
Lessee is obligated to comply pursuant to Section 5.02(b) or in respect to the
payment of any tax, assessment or charge which Lessee is obligated to pay or any
lien, encumbrance or charge not permitted by Section 2.01, 2.02, 5.02(a), 5.03
and 6.02 which Lessee is in good faith contesting.
Section 5.06. Environmental Compliance.
(a) For purposes of this Lease:
(i) the term "Environmental Laws" shall mean and include the Resource
Conservation and Recovery Act, as amended by the Hazardous and
Solid Waste Amendments of 1984, the Comprehensive Environmental
Response, Compensation and Liability Act, the Hazardous Materials
Transportation Act, the Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act and all applicable
state and local environmental laws, ordinances, rules,
requirements, regulations and publications, as any of the
foregoing may have been or may be from time to time amended,
supplemented or supplanted and any and all other federal, state
or local laws, ordinances, rules, requirements, regulations and
publications, now or hereafter existing, relating to the
preservation or regulation of the public health, welfare or
environment or the regulation or control of toxic or hazardous
substances or materials; and
(ii) the term "Regulated Substance" shall mean and include any, each
and all substances or materials now or hereafter regulated
pursuant to any Environmental Laws, including, but not limited
to, any such substance or material now or hereafter defined as or
deemed to be a "regulated substance," "pesticide," "hazardous
substance" or "hazardous waste" or included in any similar or
like classification or categorization thereunder.
(b) Lessee shall:
(i) not cause or permit any Regulated Substance to be placed, held,
located, released, transported or disposed of on, under, at or
from the Premises in violation of Environmental Laws;
(ii) contain at or remove from the Premises, or perform any other
necessary remedial action regarding, any Regulated Substance in
any way affecting the Premises if, as and when such containment,
removal or other remedial action is required under any Legal
Requirement and, whether or not so required, shall perform any
containment, removal or remediation of any kind involving any
Regulated Substance in any way adversely affecting the Premises
in compliance with all Legal Requirements and, upon reasonable
request of Lessor after consultation with Lessee (which request
may be given only if Lessor reasonably believes that an
environmental concern exists which may have an adverse effect on
the Premises), shall arrange for phase I environmental audits (as
such term is defined now or hereafter by the environmental
remediation industry), or such other or further testing or
actions as may be required by Legal Requirements or as may be
mutually agreed to by Lessor and Lessee, to be conducted at the
Premises by qualified companies retained by Lessee specializing
in environmental matters and reasonably satisfactory to Lessor in
order to ascertain compliance with all Legal Requirements and the
requirements of this Lease, all of the foregoing to be at
Lessee's sole cost and expense. Further, if the cost of
performing any of the foregoing activities shall exceed $100,000,
Lessee shall, upon the reasonable request of Lessor, provide
Lessor with a bond or letter of credit, in form and substance
satisfactory to Lessor, in an amount sufficient to cover the
aggregate of the foregoing costs;
(iii) provide Lessor with written notice (and a copy as may be
applicable) of any of the following within 10 days of receipt
thereof: (A) Lessee's obtaining knowledge or notice of any kind
of the material presence, or any actual or threatened release, of
any Regulated Substance in any way adversely affecting the
Premises; (B) Lessee's receipt or submission, or Lessee's
obtaining knowledge or notice of any kind, of any report,
citation, notice or other communication from or to any federal,
state or local governmental or quasi-governmental authority
regarding any Regulated Substance in any way adversely affecting
the Premises; or (C) Lessee's obtaining knowledge or notice of
any kind of the incurrence of any cost or expense by any federal,
state or local governmental or quasi-governmental authority or
any private party in connection with the assessment, monitoring,
containment, removal or remediation of any kind of any Regulated
Substance in any way adversely affecting the Premises, or of the
filing or recording of any lien on the Premises or any portion
thereof in connection with any such action or Regulated Substance
in any way adversely affecting the Premises; and
(iv) in addition to the requirements of Section 5.04 hereof, defend
all actions against the Indemnified Parties and pay, protect,
indemnify and save harmless the Indemnified Parties from and
against any and all liabilities, losses, damages, costs, expenses
(including, without limitation, reasonable attorneys' fees and
expenses), causes of action, suits, claims, demands or judgments
of any nature relating to any Environmental Laws, Regulated
Substances or other environmental matters concerning the
Premises. The indemnity contained in this Section 5.06 shall
survive the expiration or earlier termination of this Lease.
ARTICLE VI
Section 6.01. Procedure Upon Purchase.
(a) If Lessee shall purchase the Premises pursuant to Section 6.02 of this
Lease, Lessor shall convey or cause to be conveyed title thereto by
special warranty deed, and subject only to this Lease, the lien of any
taxes, exceptions subject to which the Premises were conveyed to Lessor,
exceptions created or consented to or existing by reason of any action
or inaction by Lessee and all Legal Requirements, except Lessor shall
satisfy any mortgage imposed on the Premises by Lessor.
(b) Upon the date fixed for any purchase of the Premises pursuant to Section
6.02 of this Lease, Lessee shall pay to Lessor the purchase price
therefor specified herein in immediately available funds, together with
all Basic Rent, additional rent and other sums then due and payable
hereunder to and including such date of purchase, and there shall be
delivered to Lessee a special warranty deed, or its equivalent, or other
conveyance of the interests in the Premises then being sold to Lessee
and any other instruments reasonably necessary to evidence the
conveyance of title thereto described in Section 6.01(a) and to assign
any other property then required to be assigned by Lessor pursuant
hereto.
(c) There shall be no adjustments at the closing of a purchase pursuant to
this Section 6.01. Lessee shall pay all charges incident to such
conveyance and assignment, including, without limitation, reasonable
counsel fees, escrow fees, recording fees, title insurance premiums and
all applicable transfer taxes (not including any income, capital gain or
franchise taxes of Lessor) which may be imposed by reason of such
conveyance and assignment and the delivery of said deed or conveyance
and other instruments. Upon the completion of any purchase of the entire
Premises (but not of any lesser interest than the entire Premises) but
not prior thereto (whether or not any delay or failure in the completion
of such purchase shall be the fault of Lessor), this Lease shall
terminate, except with respect to obligations and liabilities of Lessee
hereunder, actual or contingent, which have arisen on or prior to such
completion of purchase.
Section 6.02. Condemnation and Casualty.
(a) General Provisions. Except as provided in Section 6.02(b), Lessee hereby
irrevocably assigns to Lessor any award, compensation or insurance
payment to which Lessee may become entitled by reason of Lessee's
interest in the Premises (i) if the use, occupancy or title of the
Premises or any part thereof is taken, requisitioned or sold in, by or
on account of any actual or threatened eminent domain proceeding or
other action by any person having the power of eminent domain
("Condemnation") or (ii) if the Premises or any part thereof is damaged
or destroyed by fire, flood or other casualty ("Casualty"). All awards,
compensations and insurance payments on account of any Condemnation or
Casualty are herein collectively called "Compensation." Lessor may
appear in any such proceeding or action to negotiate, prosecute and
adjust any claim for any Compensation, and Lessor shall collect any such
Compensation. Lessee shall be entitled to participate in any such
proceeding, action, negotiation, prosecution, appeal or adjustment as
contemplated herein. Notwithstanding anything to the contrary contained
in this Article VI, if permissible under applicable law, any separate
Compensation made to Lessee for its moving and relocation expenses,
anticipated loss of business profits, loss of goodwill or fixtures,
additions (approved by Lessor) and equipment paid for by Lessee and
which are not part of the Premises (including, without limitation, the
Severable Property) or any other claim that Lessee may have under
applicable law that does not diminish the Compensation made to Lessor
shall be paid directly to and shall be retained by Lessee (and shall not
be deemed to be "Compensation"). All Compensation shall be applied
pursuant to this Section 6.02, and all such Compensation (less the
expense of collecting such Compensation) is herein called the "Net
Proceeds."
(b) Substantial Condemnation. If more than 10% of the approximately 64,000
square foot building or more than 25% of that portion of the Premises
not occupied by such building is taken by Condemnation, Lessee, may, not
later than 60 days after a determination has been made as to when
possession of the Premises must be delivered with respect to such
Condemnation, deliver to Lessor (i) notice of its intention ("Notice of
Intention") to terminate this Lease on the next rental payment date
which occurs not less than 60 days after the delivery of such notice
(the "Condemnation Termination Date") and (ii) documentation to the
effect that termination of this Lease will not be in violation of any
agreement in effect as of the Condemnation Termination Date with which
Lessee is obligated to comply pursuant to this Lease. If Lessee delivers
the Notice of Intention in a timely manner, this Lease shall terminate
on the Condemnation Termination Date, except with respect to obligations
and liabilities of Lessee hereunder, actual or contingent, which have
arisen on or prior to the Condemnation Termination Date, upon payment by
Lessee of all Basic Rent, additional rent and other sums due and payable
hereunder to and including the Condemnation Termination Date, and the
Net Proceeds shall belong to Lessor. In the event Lessee does not
deliver the Notice of Intention to Lessor within the timeframe required
herein, this Lease shall remain in full force and effect and Lessor
shall permit so much of the Net Proceeds as may be necessary to be
utilized by Lessee to repair or restore the Premises.
(c) Substantial Casualty During the Last Two Years of the Primary Term or
Any Extended Term. If an insured Casualty shall, in Lessee's good-faith
judgment, affect all or a substantial portion of the Premises during the
last two years of the Primary Term or an Extended Term, if any, and
shall render the Premises unsuitable for restoration for continued use
and occupancy in Lessee's business, then Lessee may, not later than 150
days after such Casualty, deliver to Lessor (i) notice of its intention
to terminate this Lease on the next rental payment date which occurs not
less than 60 days after the delivery of such notice (the "Casualty
Termination Date"), (ii) a certificate of an authorized officer of
Lessee describing the event giving rise to such termination and stating
that Lessee has determined that such Casualty has rendered the Premises
unsuitable for restoration for continued use and occupancy in Lessee's
business, and (iii) documentation to the effect that termination of this
Lease will not be in violation of any agreement then in effect with
which Lessee is obligated to comply pursuant to this Lease. Upon payment
by Lessee of all Basic Rent, additional rent and other sums then due and
payable hereunder to and including the Casualty Termination Date, this
Lease shall terminate on the Casualty Termination Date except with
respect to obligations and liabilities of Lessee hereunder, actual or
contingent, which have arisen on or prior to the Casualty Termination
Date, and the Net Proceeds shall belong to Lessor.
(d) Less Than Substantial Condemnation or Any Casualty During the Interim
Term or the Primary Term. If, after a Condemnation or Casualty, Lessee
does not give or does not have the right to give notice of its intention
to terminate this Lease as provided in subsection 6.02(b) or (c), then
this Lease shall continue in full force and effect and Lessee shall, at
its expense, rebuild, replace or repair the Premises in conformity with
the requirements of Subsections 2.01, 2.02 and 5.03 so as to restore the
Premises (in the case of Condemnation, as nearly as practicable) to the
condition, and character thereof immediately prior to such Casualty or
Condemnation. To the extent the Net Proceeds with respect to any
Casualty are less than $50,000, such amount shall be paid to Lessee to
be used to rebuild, replace or repair the Premises in a lien free and
good and workmanlike manner. To the extent the Net Proceeds from any
Casualty are $50,000 or greater, prior to any such rebuilding,
replacement or repair, Lessee shall determine the maximum cost thereof
(the "Restoration Cost"), which amount shall be acceptable to Lessor.
The Restoration Cost shall be paid first out of Lessee's own funds to
the extent that the Restoration Cost exceeds the Net Proceeds payable in
connection with respect to any occurrence, after which expenditure
Lessee shall be entitled to receive the Net Proceeds, but only against
(i) certificates of Lessee delivered to Lessor from time to time as such
work of rebuilding, replacement and repair progresses, each such
certificate describing the work for which Lessee is requesting payment
and the cost incurred by Lessee in connection therewith and stating that
Lessee has not theretofore received payment for such work and (ii) such
additional documentation as Lessor may reasonably require, including,
but not limited to, copies of all contracts and subcontracts relating to
restoration, architects' certifications, title policy updates and lien
waivers or releases. Any Net Proceeds remaining after final payment has
been made for such work and after Lessee has been reimbursed for any
portions it contributed to the Restoration Cost shall be paid to Lessee.
In the event of any temporary Condemnation, this Lease shall remain in
full effect and Lessee shall be entitled to receive the Net Proceeds
allocable to such temporary Condemnation, except that any portion of the
Net Proceeds allocable to the period after the expiration of the Lease
Term or termination of the Lease shall be paid to Lessor. If the cost of
any rebuilding, replacement or repair required to be made by Lessee
pursuant to this subsection 6.02(d) shall exceed the amount of such Net
Proceeds, the deficiency shall be paid by Lessee.
Section 6.03. Insurance.
(a) Lessee will maintain insurance on the Premises of the
following character:
(i) Insurance against all risks of direct physical loss, including
loss by fire, lightning, and other risks which at the time are
included under "extended coverage" endorsements, in amounts
sufficient to prevent Lessor and Lessee from becoming a coinsurer
of any loss but in any event in amounts not less than 100% of the
actual replacement value of the Improvements, exclusive of
foundations and excavations with a maximum deductible of
$100,000;
(ii) General public liability insurance and/or umbrella liability
insurance against claims for bodily injury, death or property
damage occurring on, in or about the Premises in the minimum
amounts of $5,000,000 for bodily injury or death to any one
person, $10,000,000 for any one accident and $5,000,000 for
property damage to others or in such greater amounts as are then
customary for property similar in use to the Premises;
(iii) Rent loss or business interruption insurance in an amount
sufficient to cover loss of rents from the Premises pursuant to
this Lease for a period of at least one year;
(iv) Worker's compensation insurance (including employers' liability
insurance, if requested by Lessor) to the extent required by the
law of the state in which the Premises are located and to the
extent necessary to protect Lessor and the Premises against
Lessee's workers' compensation claims (to the extent permitted by
applicable law, Lessee may self-insure with respect to worker's
compensation insurance);
(v) Boiler and machinery insurance in respect of any boilers and
similar apparatus located on the Premises in the minimum amount
of $500,000 or in such greater amounts as to adequately insure
the Premises;
(vi) During any period of construction on the Premises, builder's risk
insurance on a completed value, non-reporting basis for the total
cost of such alterations or improvements, and worker compensation
insurance as required by applicable law. This coverage may be
provided by Lessee's all risk property insurance pursuant to
Section 6.03(i) herein; and
(vii) Such other insurance in such amounts and against such risks, as
is commonly obtained in the case of property similar in use to
the Premises and located in the state in which the Premises are
located by prudent owners of such property, including but not
limited to, flood insurance (if the Premises is in a flood plain)
and earthquake insurance.
Such insurance shall be written by companies authorized to do business
in the state where the Premises are located and carrying a claims paying ability
rating of at least AA by Standard & Poor's Ratings Group and with the exception
of workers' compensation insurance and employer's liability insurance, shall
name Lessor as an additional insured as its interest may appear. If the Premises
or any part thereof shall be damaged or destroyed by Casualty, and if the
estimated cost of rebuilding, replacing or repairing the same shall exceed
$50,000, Lessee promptly shall notify Lessor thereof.
(b) Every such policy listed above (other than any workers' compensation
policy and employer's liability insurance) shall bear a mortgagee
endorsement in favor of the mortgagee or beneficiary (whether one or
more, the "Mortgagee") under each mortgage, deed of trust or similar
security instrument creating a lien on the interest of Lessor in the
Premises (whether one or more, the "Mortgage"), and any loss under any
such policy shall be payable to the Mortgagee, which has a first lien on
such interest (if there is more than one first Mortgagee, then to the
trustee for such Mortgagees) to be held and applied by Mortgagee toward
restoration pursuant to Section 6.02. Every policy referred to in
subsection 6.03(a) shall provide that it will not be cancelled or
amended except after 30 days' written notice to Lessor and the Mortgagee
and that it shall not be invalidated by any act or negligence of Lessor,
Lessee or any person or entity having an interest in the Premises, nor
by occupancy or use of the Premises for purposes more hazardous than
permitted by such policy, nor by any foreclosure or other proceedings
relating to the Premises, nor by change in title to or ownership of the
Premises.
(c) Lessee shall deliver to Lessor and Mortgagee upon request (i) copies of
the applicable insurance policies and (ii) original or duplicate
certificates of insurance, satisfactory to Lessor and Mortgagee
evidencing the existence of all insurance which is required to be
maintained by Lessee hereunder and payment of all premiums therefor,
such delivery to be made (i) upon the execution and delivery hereof and
(ii) at least 10 days prior to the expiration of any such insurance.
Lessee shall not obtain or carry separate insurance concurrent in form
or contributing in the event of loss with that required by this Section
6.03 unless Lessor is named an additional insured therein and unless
there is a mortgagee endorsement in favor of Mortgagee with loss payable
as provided herein. Lessee shall immediately notify Lessor whenever any
such separate insurance is obtained and shall deliver to Lessor and
Mortgagee the policies or certificates evidencing the same. Any
insurance required hereunder may be provided under blanket policies,
provided that the Premises are specified therein.
(d) The requirements of this Section 6.03 shall not be construed to negate
or modify Lessee's obligations under Section 5.04.
ARTICLE VII
Section 7.01. Conditional Limitations; Default Provisions.
(a) Any of the following occurrences or acts shall constitute an Event of
Default under this Lease:
(i) If Lessee shall (1) fail to pay any Basic Rent, additional rent
or other sum as and when required to be paid by Lessee hereunder
or (2) fail to observe or perform any other provision hereof and
such nonmonetary failure shall continue for 30 days after written
notice to Lessee of such failure (provided that, in the case of
any such failure which cannot be cured by the payment of money
and cannot with diligence be cured within such 30-day period, if
Lessee shall commence promptly to cure the same and thereafter
prosecute the curing thereof with diligence, the time within
which such failure may be cured shall be extended for such period
not to exceed 180 days as is necessary to complete the curing
thereof with diligence);
(ii) If any representation or warranty of Lessee set forth in any
certificate provided by Lessee pursuant to this Lease, shall
prove to be incorrect in any material adverse respect as of the
time when the same shall have been made in a way adverse to
Lessor and Lessor shall suffer a loss or detriment as a result
thereof, including, without limitation, the taking of any action
(including, without limitation, the demise of the Premises to
Lessee herein) in reliance upon such representation or warranty
and, in each case, the facts shall not be conformed to the
representation and warranty as soon as practicable in the
circumstances (but in no event to exceed 30 days) after written
notice to Lessee from Lessor of such inaccuracy and Lessor
restored to the position it would have enjoyed had such
representation or warranty been accurate at the time it was made;
(iii) If Lessee shall file a petition in bankruptcy or for
reorganization or for an arrangement pursuant to any federal or
state law or shall be adjudicated a bankrupt or become insolvent
or shall make an assignment for the benefit of creditors, or if a
petition proposing the adjudication of Lessee as a bankrupt or
its reorganization pursuant to any federal or state bankruptcy
law or any similar federal or state law shall be filed in any
court and Lessee shall consent to or acquiesce in the filing
thereof or such petition shall not be discharged or denied within
90 days after the filing thereof;
(iv) If a receiver, trustee or conservator of Lessee, or of all or
substantially all of the assets of Lessee, or of the Premises or
Lessee's estate therein shall be appointed in any proceeding
brought by Lessee, or if any such receiver, trustee or
conservator shall be appointed in any proceeding brought against
Lessee and shall not be discharged within 90 days after such
appointment, or if Lessee shall consent to or acquiesce in such
appointment;
(v) If the Premises shall have been abandoned and not maintained or
secured in the manner required hereunder for a period of 30
consecutive days after written notice of such from Lessor to
Lessee.
(b) If an Event of Default shall have happened and be continuing, Lessor
shall have the right to give Lessee notice of Lessor's termination of
the Lease Term. Upon the giving of such notice, the Lease Term and the
estate hereby granted shall expire and terminate on such date as fully
and completely and with the same effect as if such date were the date
herein fixed for the expiration of the Lease Term, and all rights of
Lessee hereunder shall expire and terminate, but Lessee shall remain
liable as hereinafter provided.
(c) If an Event of Default shall have happened and be continuing, Lessor
shall have the immediate right, whether or not the Lease Term shall have
been terminated pursuant to subsection 7.01(b), to reenter and repossess
the Premises and the right to remove all persons and property (subject
to Section 3.02) therefrom by summary proceedings, ejectment or any
other legal action or in any lawful manner Lessor determines to be
necessary or desirable. Lessor shall be under no liability by reason of
any such reentry, repossession or removal. No such reentry, repossession
or removal shall be construed as an election by Lessor to terminate the
Lease Term unless a notice of such termination is given to Lessee
pursuant to subsection 7.01(b) or unless such termination is decreed by
a court.
(d) At any time or from time to time after a reentry, repossession or
removal pursuant to subsection 7.01(c), whether or not the Lease Term
shall have been terminated pursuant to subsection 7.01(b) Lessor may
(but shall be under no obligation to), relet the Premises for the
account of Lessee, in the name of Lessee or Lessor or otherwise, without
notice to Lessee, for such term or terms and on such conditions and for
such uses as Lessor, in its absolute discretion, may determine. Lessor
may collect any rents payable by reason of such reletting. Lessor shall
not be liable for any failure to relet the Premises or for any failure
to collect any rent due upon any such reletting.
(e) No expiration or termination of the Lease Term pursuant to subsection
7.01(b), by operation of law or otherwise, and no reentry, repossession
or removal pursuant to subsection 7.01(c) or otherwise, and no reletting
of the Premises pursuant to subsection 7.01(d) or otherwise, shall
relieve Lessee of its liabilities and obligations hereunder, all of
which shall survive such expiration, termination, reentry, repossession,
removal or reletting.
(f) In the event of any expiration or termination of the Lease Term or
reentry or repossession of the Premises or removal of persons or
property therefrom by reason of the occurrence of an Event of Default,
Lessee shall pay to Lessor all Basic Rent, additional rent and other
sums required to be paid by Lessee, in each case to and including the
date of such expiration, termination, reentry, repossession or removal,
and, thereafter, Lessee shall, until the end of what would have been the
Lease Term in the absence of such expiration, termination, reentry,
repossession or removal and whether or not the Premises shall have been
relet, be liable to Lessor for, and shall pay to Lessor, as liquidated
and agreed current damages: (i) all Basic Rent, all additional rent and
other sums which would be payable under this Lease by Lessee in the
absence of any such expiration, termination, reentry, repossession or
removal, together with all expenses of Lessor in connection with such
reletting (including, without limitation, all repossession costs,
brokerage commissions, reasonable attorneys' fees and expenses
(including, without limitation, fees and expenses of appellate
proceedings), employee's expenses, alteration costs and expenses of
necessary preparation for such reletting), less (ii) the net proceeds,
if any, of any reletting effected for the account of Lessee pursuant to
subsection 7.01(d). Lessee shall pay such liquidated and agreed current
damages on the dates on which rent would be payable under this Lease in
the absence of such expiration, termination, reentry, repossession or
removal, and Lessor shall be entitled to recover the same from Lessee on
each such date.
(g) At any time after any such expiration or termination of the Lease Term
or reentry or repossession of the Premises or removal of persons or
property therefrom by reason of the occurrence of an Event of Default,
whether or not Lessor shall have collected any liquidated and agreed
current damages pursuant to subsection 7.01(f), Lessor shall be entitled
to recover from Lessee, and Lessee shall pay to Lessor on demand, as and
for liquidated and agreed final damages for Lessee's default and in lieu
of all liquidated and agreed current damages beyond the date of such
demand (it being agreed that it would be impracticable or extremely
difficult to fix the actual damages), an amount equal to the excess, if
any, of (a) the aggregate of all Basic Rent, additional rent and other
sums which would be payable under this Lease, in each case from the date
of such demand (or, if it be earlier, to date to which Lessee shall have
satisfied in full its obligations under subsection 7.01(f) to pay
liquidated and agreed current damages) for what would be the then
unexpired Lease Term in the absence of such expiration, termination,
reentry, repossession or removal, discounted at the rate of 6% per
annum, over (b) the then fair rental value of the Premises, discounted
at the rate of 6% per annum for the same period. If any law shall limit
the amount of liquidated final damages to less than the amount above
agreed upon, Lessor shall be entitled to the maximum amount allowable
under such law.
Section 7.02. Bankruptcy or Insolvency.
(a) If Lessee shall become a debtor in a case filed under Chapter 7 or
Chapter 11 of the Bankruptcy Code and Lessee or Lessee's trustee shall
fail to elect to assume this Lease within 60 days after the filing of
such petition or such additional time as provided by the court within
such 60-day period, this Lease shall be deemed to have been rejected.
Immediately thereupon, Lessor shall be entitled to possession of the
Premises without further obligation to Lessee or Lessee's trustee, and
this Lease, upon the election of Lessor, shall terminate, but Lessor's
right to be compensated for damages (including, without limitation,
liquidated damages pursuant to any provision hereof) or the exercise of
any other remedies in any such proceeding shall survive, whether or not
this Lease shall be terminated.
(b) Neither the whole nor any portion of Lessee's interest in this Lease or
its estate in the Premises shall pass to any trustee, receiver,
conservator, assignee for the benefit of creditors or any other person
or entity, by operation of law or otherwise under the laws of any state
having jurisdiction of the person or property of Lessee, unless Lessor
shall have consented to such transfer. No acceptance by Lessor of rent
or any other payments from any such trustee, receiver, assignee, person
or other entity shall be deemed to constitute such consent by Lessor nor
shall it be deemed a waiver of Lessor's right to terminate this Lease
for any transfer of Lessee's interest under this Lease without such
consent.
(c) In the event of an assignment of Lessee's interests pursuant to this
Section 7.02, the right of any assignee to extend the Lease Term for an
Extended Term beyond the Primary Term or the then Extended Term of this
Lease shall be extinguished.
Section 7.03. Additional Rights of Lessor.
(a) No right or remedy hereunder shall be exclusive of any other right or
remedy, but shall be cumulative and in addition to any other right or
remedy hereunder or now or hereafter existing. Failure to insist upon
the strict performance of any provision hereof or to exercise any
option, right, power or remedy contained herein shall not constitute a
waiver or relinquishment thereof for the future. Receipt by Lessor of
any Basic Rent, additional rent or other sums payable hereunder with
knowledge of the breach of any provision hereof shall not constitute
waiver of such breach, and no waiver by Lessor of any provision hereof
shall be deemed to have been made unless made in writing. Lessor shall
be entitled to injunctive relief in case of the violation, or attempted
or threatened violation, of any of the provisions hereof, or to a decree
compelling performance of any of the provisions hereof, or to any other
remedy allowed to Lessor by law or equity.
(b) Lessee hereby waives and surrenders for itself and all those claiming
under it, including creditors of all kinds, (i) any right and privilege
which it or any of them may have to redeem the Premises or to have a
continuance of this Lease after termination of Lessee's right of
occupancy by order or judgment of any court or by any legal process or
writ, or under the terms of this Lease, or after the termination of the
Lease Term as herein provided, (ii) the benefits of any law which
exempts property from liability for debt and (iii) Lessee specifically
waives any rights of redemption or reinstatement available by law or any
successor law.
(c) If an Event of Default on the part of Lessee shall have occurred
hereunder and be continuing, then, without thereby waiving such default,
Lessor may, but shall be under no obligation to, take all action,
including, without limitation, entry upon the Premises, to perform the
obligation of Lessee hereunder immediately and without notice in the
case of any emergency as may be reasonably determined by Lessor and upon
five business days' notice to Lessee in other cases. All reasonable
expenses incurred by Lessor in connection therewith, including, without
limitation, attorneys' fees and expenses (including, without limitation,
those incurred in connection with any appellate proceedings), shall
constitute additional rent under this Lease and shall be paid by Lessee
to Lessor upon demand.
(d) If Lessee shall be in default in the performance of any of its
obligations under this Lease beyond any applicable grace or cure period
hereunder, Lessee shall pay to Lessor, on demand, all expenses incurred
by Lessor as a result thereof, including, without limitation, reasonable
attorneys' fees and expenses (including, without limitation, those
incurred in connection with any appellate proceedings). If Lessor shall
be made a party to any litigation commenced against Lessee and Lessee
shall fail to provide Lessor with counsel approved by Lessor and pay the
expenses thereof, Lessee shall pay all costs and reasonable attorneys'
fees and expenses in connection with such litigation (including, without
limitation, fees and expenses incurred in connection with any appellate
proceedings).
(e) If Lessee shall fail to pay when due any Basic Rent, additional rent or
other sum required to be paid by Lessee hereunder, Lessor shall be
entitled to collect from Lessee as additional rent and Lessee shall pay
to Lessor, in addition to such Basic Rent, additional rent or other sum,
a late payment charge on the delinquency equal to the Late Rate. The
Late Rate shall be the lesser of (i) that per annum rate of interest
which exceeds by two (2) percentage points the base rate most recently
announced in the Wall Street Journal (or a comparable publication if the
Wall Street Journal ever shall cease publication), as the Prime rate or
(ii) the maximum rate permitted by applicable law. In addition to all
other remedies Lessor has hereunder, if Lessee shall fail to pay any
Basic Rent, additional rent or other sum, as and when required to be
paid by Lessee hereunder prior to the expiration for the period of
payment pursuant to subsection 7.01(a)(i)(1), Lessor shall be entitled
to collect from Lessee, and Lessee shall pay to Lessor, as additional
rent, an amount equal to 1% of the amount shown in the notice as unpaid.
ARTICLE VIII
Section 8.01. Notices and Other Instruments. All notices, offers,
consents and other instruments given pursuant to this Lease shall be in writing
and shall be validly given when hand delivered or sent by a courier or express
service guaranteeing overnight delivery or by telecopy, with original being
promptly sent as otherwise provided above, addressed as follows:
If to Lessor: c/o United Trust Fund, Inc.
Suite 1300
701 Brickell Avenue
Miami, FL 33131
Attention: Sidney Domb, President
Facsimile: (305) 358-4002
With a copy to: Kutak Rock LLP
The Omaha Building
1650 Farnam Street
Omaha, NE 68102
Attention: Walter L. Griffiths, Esq.
Facsimile: (402) 346-1148
If to Lessee: Point.360
2777 N. Ontario Street
Burbank, CA 91504
Attention: Chief Financial Officer
Facsimile: 818-847-2503
With a copy to: Point.360
2777 N. Ontario Street
Burbank, CA 91504
Attention: General Counsel
Facsimile: 818-847-2503
Lessor and Lessee each may from time to time specify, by giving 15 days'
notice to each other party, (i) any other address in the United States as its
address for purposes of this Lease and (ii) any other person or entity in the
United States that is to receive copies of notices, offers, consents and other
instruments hereunder. Notices given in accordance with this Section 8.01 shall
be deemed delivered on the day after they are sent.
Section 8.02. Estoppel Certificates; Financial Information.
(a) Lessee will, upon 10 days' written notice at the request of Lessor,
execute, acknowledge and deliver to Lessor, a certificate of Lessee,
which states that this Lease is unmodified and in full force and effect
(or, if there have been modifications, that this Lease is in full force
and effect as modified, and setting forth such modifications) as well as
the dates to which Basic Rent, additional rent and other sums payable
hereunder have been paid and either stating that to the knowledge of
Lessee no default exists hereunder or specifying each such default of
which Lessee has knowledge and whether or not Lessee is still occupying
and operating the Premises. Any such certificate may be relied upon by
any actual or prospective mortgagee or purchaser of the Premises. Lessor
will, upon 10 days' written notice at the request of Lessee, execute,
acknowledge and deliver to Lessee a certificate of Lessor, stating that
this Lease is unmodified and in full force and effect (or, if there have
been modifications, that this Lease is in full force and effect as
modified, and setting forth such modifications) and the dates to which
Basic Rent, additional rent and other sums payable hereunder have been
paid, and either stating that to the knowledge of Lessor no default
exists hereunder or specifying each such default of which Lessor has
knowledge. Any such certificate may be relied upon by Lessee or any
actual or prospective assignee or sublessee of the Premises.
(b) To the extent not available on the website of the Securities and
Exchange Commission (the "SEC") Lessee will deliver to Lessor within 30
days (except as set forth below) of filing, sending or otherwise making
public, copies of all periodic reports filed by Lessee with the SEC
(including, without limitation, all 8-K, 10-K and 10-Q reports pursuant
to Section 13(a) of the Securities Act of 1934, as amended (the "1934
Act") and all proxy statements of Lessee to its stockholders; provided,
however, that, if such statements and reports are not required to be
filed or do not include the following information, Lessee will deliver
to Lessor with respect to Lessee the following:
(i) within seven days after filing with the SEC but in no event more
than 120 days after the end of each fiscal year of Lessee, (1) a
balance sheet of Lessee and its consolidated subsidiaries as of
the end of such year, (2) a statement of profits and losses of
Lessee and its consolidated subsidiaries for such year and (3) a
statement of cash flows of Lessee and its consolidated
subsidiaries for such year, setting forth in each of (1), (2) and
(3) above, in comparative form, the corresponding figures for the
preceding fiscal year in reasonable detail and scope and
certified by independent certified public accountants of
recognized national standing selected by Lessee, and within 60
days after the end of each fiscal quarter of Lessee a balance
sheet of Lessee and its consolidated subsidiaries as of the end
of such quarter and statements of profits and losses of Lessee
and its consolidated subsidiaries for such quarter, setting forth
in each case, in comparative form, the corresponding figures for
the similar quarter of the preceding year, in reasonable detail
and scope, and certified by an officer of Lessee, all of the
foregoing financial statements being prepared in accordance with
generally accepted accounting principles, consistently applied,
except as otherwise indicated in such statements; and
(ii) Upon request of Lessor, with reasonable promptness, such
additional financial statements and information (including,
without limitation, copies of public reports filed by Lessee or
financial statements and information delivered by Lessee to its
shareholders or lenders and, if Lessee is part of a consolidated
group, its financial statement consolidating entries in
reasonable detail) regarding the business affairs and financial
condition of Lessee as Lessor may reasonably request.
(c) Upon two business days' prior written notice, Lessor and its agents and
designees may enter upon and examine the Premises and show the Premises
to prospective mortgagees and/or purchasers. Lessee will provide, upon
Lessor's request, all information regarding the Premises, including, but
not limited to, a current rent roll, an operating statement reflecting
all income from subleases and all operating expenses for the Premises.
An appropriate officer of Lessee will certify all such information. In
addition, upon the reasonable request of Lessor, Lessee will make
available at Lessee's selection officers, managers or employees of
Lessee to discuss with Lessor the business affairs of Lessee.
ARTICLE IX
Section 9.01. No Merger. There shall be no merger of this Lease or of
the leasehold estate hereby created with the fee estate in the Premises by
reason of the fact that the same person acquires or holds, directly or
indirectly, this Lease or the leasehold estate hereby created or any interest
herein or in such leasehold estate, as well as the fee estate in the Premises or
any interest in such fee estate.
Section 9.02. Surrender. Upon the expiration or termination of this
Lease, Lessee shall surrender the Premises to Lessor in good repair and
condition except for any damage resulting from Condemnation or Casualty or
normal wear and tear not required to be repaired by Lessee. The provisions of
this Section and Article III shall survive the expiration or other termination
of this Lease.
Section 9.03. Assumption. It shall be a condition precedent to the
consolidation of Lessee with one or more Persons and to the sale or other
disposition of all or substantially all of the assets of Lessee to one or more
Persons that the surviving entity or transferee of assets, as the case may be,
shall deliver to Lessor, and any assignee of any interest of Lessor, an
acknowledged instrument assuming all obligations, covenants and responsibilities
of Lessee hereunder.
Section 9.04. Separability; Binding Effect; Governing Law. Each
provision hereof shall be separate and independent, and the breach of any
provision by Lessor shall not discharge or relieve Lessee from any of its
obligations hereunder. Each provision hereof shall be valid and shall be
enforceable to the extent not prohibited by law. If any provision hereof or the
application thereof to any person or circumstance shall to any extent be invalid
or unenforceable, the remaining provisions hereof, or the application of such
provision to persons or circumstances other than those as to which it is invalid
or unenforceable, shall not be affected thereby. All provisions contained in
this Lease shall be binding upon, inure to the benefit of and be enforceable by
the successors and assigns of Lessor to the same extent as if each such
successor and assign were named as a party hereto. All provisions contained in
this Lease shall be binding upon the successors and assigns of Lessee and shall
inure to the benefit of and be enforceable by the permitted successors and
assigns of Lessee in each case to the same extent as if each successor and
assign were named as a party hereto. This Lease shall be governed by and
interpreted in accordance with the laws of the state in which the Premises are
located.
Section 9.05. Table of Contents and Headings; Internal References. The
table of contents and the headings of the various paragraphs and schedules of
this Lease have been inserted for reference only and shall not to any extent
have the effect of modifying the express terms and provisions of this Lease.
Unless stated to the contrary, any references to any Section, subsection,
Schedule and the like contained herein are to the respective Section,
subsection, Schedule and the like of this Lease.
Section 9.06. Counterparts. This Lease may be executed in two or more
counterparts and shall be deemed to have become effective when and only when one
or more of such counterparts shall have been executed by or on behalf of each of
the parties hereto (although it shall not be necessary that any single
counterpart be executed by or on behalf of each of the parties hereto, and all
such counterparts shall be deemed to constitute but one and the same instrument)
and shall have been delivered by each of the parties to the other.
Section 9.07. Lessor's Liability. Notwithstanding anything to the
contrary provided in this Lease, it is specifically understood and agreed, such
agreement being a primary consideration for the execution of this Lease by
Lessor, that there shall be absolutely no personal liability on the part of any
partner, director, member, officer or shareholder of Lessor, its successors or
assigns with respect to any of the terms, covenants and conditions of this
Lease, and any liability on the part of Lessor shall be limited solely to the
Premises, such exculpation of liability to be absolute and without any exception
whatsoever.
Section 9.08. Amendments and Modifications. Except as expressly provided
herein, this Lease may not be modified or terminated except by a writing signed
by Lessor and Lessee.
Section 9.09. Additional Rent. All amounts other than Basic Rent which
Lessee is required to pay or discharge pursuant to this Lease, including the
charge provided for by Section 7.03(e) hereof, shall constitute additional rent.
Section 9.10. Consent of Lessor. Except as specifically set forth in
this Lease, all consents and approvals to be granted by Lessor shall not be
unreasonably withheld or delayed, and Lessee's sole remedy against Lessor for
the failure to grant any consent shall be to seek injunctive relief. If Lessor
withholds a consent or approval, Lessor shall provide Lessee with a written
statement detailing the reasons for such denial within five (5) business days of
the date of the denial. In no circumstance will Lessee be entitled to damages
with respect to the failure to grant any consent or approval.
Section 9.11. Options. The options to extend the Primary Term or any
existing Extended Term created in this Lease are exercisable only as long as
this Lease is in effect and has not expired or been terminated.
Section 9.12. Schedules. Attached hereto are Schedules A and B referred
to in this Lease, which Schedules are hereby incorporated by reference herein.
Section 9.13. Currency. All references in this Lease to money shall be
to the currency of the United States of America.
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be
executed as of the date first above written.
UTFLA LLC, a Delaware limited liability company
By: UTFJV, LLC, a Delaware limited
liability company, its managing member
By: UTFJV Managing Member, LLC, a
Delaware limited liability company,
its managing member
By: United Trust Fund Limited
Partnership, a Delaware limited
partnership, its sole member
By: United Trust Fund, Inc., a Florida
corporation, its sole general partner
By: /s/ Fred Berliner
--------------------------------------
Fred Berliner
Senior Vice President
POINT.360, a California corporation
By: /s/ Alan Steel
--------------------------------------
Alan Steel
Chief Financial Officer
SCHEDULE A
PART I
LEGAL DESCRIPTION
LOT 3 OF TRACT NO. 53696-01, IN THE CITY OF LOS ANGELES, COUNTY OF LOS ANGELES,
STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 1282, PAGES 41 TO 43 INCLUSIVE
OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
SCHEDULE A
PART II
AGREEMENTS
SCHEDULE A
PART III
PERMITTED EXCEPTIONS
PART IV
SEVERABLE PROPERTY
All apparatus, personal property, trade fixtures, inventory, equipment,
machinery, fittings, furniture, furnishings, chattel, materials and supplies
located on and used in, or related to Lessee's business, including, but not
limited to, overhead cranes mainframe computers, kitchen equipment and telephone
and similar systems and articles of personal property of every kind and nature
whatsoever, and any additions, replacements, accessions and substitutions
thereto or therefor, and all proceeds of all of the foregoing, or any part of
the foregoing used or usable in connection with any present or future operation
or letting (or subletting) of the Premises or the activities at any time
conducted thereon and now or hereafter owned by Lessee or by any sublessee or
other person or entity using all or any part of the Premises by, through, or
under (or with the express or implied consent of) Lessee.
SCHEDULE B
PART I
THE PRIMARY TERM AND EXTENDED TERMS
Commencement Expiration
Primary Term: April 1, 2006 March 31, 2021
Extended Terms:
1st Extended Term: April 1, 2021 March 31, 2026
2nd Extended Term: April 1, 2026 March 31, 2031
3rd Extended Term: April 1, 2031 March 31, 2036
4th Extended Term: April 1, 2036 March 31, 2041
PART II
BASIC RENT
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Years Annual Rental Payments
- -------------------------- ---------------------------
- -------------------------- ---------------------------
1 $1,111,000
- -------------------------- ---------------------------
- -------------------------- ---------------------------
2 $1,111,000
- -------------------------- ---------------------------
- -------------------------- ---------------------------
3 $1,111,000
- -------------------------- ---------------------------
- -------------------------- ---------------------------
4 $1,111,000
- -------------------------- ---------------------------
- -------------------------- ---------------------------
5 $1,111,000
- -------------------------- ---------------------------
- -------------------------- ---------------------------
6-15 Basic Rent as determined
pursuant to Section 1.05
of the Lease Agreement
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- ------------------------------------------------------
Options
- ------------------------------------------------------
- -------------------------- ---------------------------
16-20 Basic Rent as determined
pursuant to Section 1.05
of the Lease Agreement
- -------------------------- ---------------------------
- -------------------------- ---------------------------
21-25 Basic Rent as determined
pursuant to Section 1.05
of the Lease Agreement
- -------------------------- ---------------------------
- -------------------------- ---------------------------
26-30 Basic Rent as determined
pursuant to Section 1.05
of the Lease Agreement
- -------------------------- ---------------------------
- -------------------------- ---------------------------
31-35 Basic Rent as determined
pursuant to Section 1.05
of the Lease Agreement
- -------------------------- ---------------------------