Exhibit 10.3
LEASE
(Bondable Triple Net)
ADI COMMUNICATION PARTNERS, L.P.,
a California limited partnership
Landlord
COMSTREAM CORPORATION,
a Delaware corporation
Tenant
LEASE
THIS LEASE ("Lease") is made as of April 23, 1997, by and between ADI
COMMUNICATION PARTNERS, L.P., a California limited partnership ("Landlord"), and
COMSTREAM CORPORATION, a Delaware corporation ("Tenant").
RECITALS AND DEFINITIONS
"Land" means an approximately 9.85 acre-sized portion of a 10.28 acre
parcel of land situated in the City of San Diego, County of San Diego, State of
California as described in more detail in the legal description attached to this
Lease as EXHIBIT "A", and made a part hereof.
"Buildings" means the two (2) two-story, concrete tilt-up commercial
and industrial buildings which shall be constructed on the Land by Landlord in
accordance with the Plans and Specifications, as that term is defined in Section
2.2 below.
"Improvements' means the Buildings and all improvements, machinery,
equipment, fixtures and other property, real, personal or mixed (except Tenant's
trade fixtures, machinery and equipment) installed or constructed on the Land or
in the Buildings by Landlord (including, without limitation, the parking
facility and other site improvements and landscaping), together with all
additions, alterations and replacements thereof. Improvements shall include all
Shell Improvements and Tenant Improvements as those terms are described
elsewhere in this Lease. The Improvements shall include approximately 750
individual parking spaces (3.75 spaces per square foot) for the initial Demised
Premises (e.g. before exercise of the Expansion Option) and approximately 965
individual parking spaces (3.7 spaces per square foot) (e.g. after exercise of
the Expansion Option). It is anticipated, and acknowledged, that no more than
45% of the total overall parking shall be designed for *Compact" vehicles.
"Demised Premises" means the Land and the Improvements.
Landlord, for and in consideration of the rents, covenants and
agreements hereinafter reserved, mentioned and contained on the part of Tenant,
its successors and assigns, to be paid, kept, observed and performed under this
Lease, hereby leases, rents, lots and demises to Tenant, and upon and subject to
the conditions and limitations expressed in this Lease, Tenant takes and hires
from Landlord, the Demised Premises.
ARTICLE I
TERM OF LEASE
1.1 INITIAL TERM. This Lease shall be effective and binding upon the
parties hereto upon mutual execution hereof (the "EFFECTIVE DATE"). The term of
this Lease (the "INITIAL TERM")
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shall commence upon March 2, 1998 and shall end eighty-four (84) months after
March 2, 1998 (as defined below), subject to extension pursuant to Section 1.2,
below. The "COMMENCEMENT DATE" (as that term is used in this Lease) shall mean
the date upon which Substantial Completion (as defined in Section 2.3 below) of
the Improvements occurs. Substantial Completion of the Improvements and March 2,
1998 are currently anticipated to be February 28, 1998 (the "Target Commencement
Date"). Under no circumstances shall March 2, 1998 occur before February 14,
1998. In the event March 2, 1998 is February 28, 1998, the Initial Term of this
Lease will end on February 27, 2005. Within ten (10) business days following the
completion of the Improvements (including the correction of all items which
appear on the Punchlist (as defined in Section 2.3(d) hereof), Tenant and
Landlord shall mutually execute a written document acknowledging (i) the
completion of the Improvements, (ii) the actual Commencement Date and end of the
Initial Term, (iii) the date by which the first Extension Option must be
exercised, (iv) any adjustments in Base Rent pursuant to Section 2.9 hereof, and
(v) the monthly Base Rent (the "Lease Commencement Memorandum").
1.2 OPTION TO EXTEND. Tenant shall have two (2) option(s) to extend
(the "Extension Options") the Initial Term for (a) consecutive five (5) year
period(s) (the foregoing option term(s) shall be referred to hereinafter
sometimes as the "EXTENSION TERM(S)"), by delivering a binding written notice of
exercise to Landlord ("Extension Notice"), so that Landlord receives the
Extension Notice with respect to the Extension Term at least three hundred sixty
(360) days prior to the end of the Term. Tenant may exercise the Extension
Option(s) only if this Lease is in full force and effect and there is no uncured
Event of Default or any breach of Tenant's obligations under this Lease which,
with the passage of time and giving of notice, or both, would constitute an
Event of Default if not cured within any applicable cure period (an "Incipient
Default"), at the time of exercise of the right of renewal or at the time of the
commencement of the Extension Term, but Landlord shall have the right at its
sole discretion to waive the non-default conditions herein; provided, however,
that if an Event of Default or Incipient Default exists at the time Tenant
exercises the Extension Option and Landlord does not elect to waive such Event
of Default or Incipient Default, Landlord shall provide written notice to Tenant
of the existence and nature of such Event of Default and Tenant shall be allowed
an amount of time to cure such Event of Default as is otherwise provided for
curing defaults of that type under this Lease, and, if timely cured, Tenant's
exercise of the Extension Option shall be reinstated effective as of the time of
exercise.
1.3 TERM. As used in this Lease, "Term" shall mean the Initial Term,
together with any Extension Term.
ARTICLE II
CONSTRUCTION OF THE IMPROVEMENTS
2.1 THE IMPROVEMENT Landlord agrees to furnish all of the material,
labor and equipment as may be reasonably necessary for the construction of the
Improvements in a good and workmanlike manner in substantial conformance with
the Plans and Specifications (as defined in
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Section 2.2(a)) and in substantial compliance with all covenants, conditions and
restrictions to which the Land is subject and all applicable building laws,
ordinances, orders, rules, regulations and requirements of all federal, state
and municipal governments with jurisdictional authority over the development of
the Land and the construction of the Improvements (the "APPLICABLE LAND USE LAWS
AND RESTRICTIONS").
2.2 PREPARATION OF PLANS AND SPECIFICATIONS. The Plans and
Specifications for the development of the Property and the construction of the
Improvements shall be developed by Landlord and Tenant in a collaborative effort
conducted as follows:
(a) As used in this Lease, the term *Plans and Specifications" shall
mean collectively the "Preliminary Plans and Specifications,* the "Schematic
Design Drawings," the "Design Development Drawings", the "Construction Drawings"
(all as defined herein), and all related plans, drawings, specifications and
notes developed or prepared in connection therewith.
(b) Landlord and Tenant have agreed on a set of preliminary plans and
specifications for the Improvements dated as of April 9, 1997, which (i)
describe and depict the site plan and interior floor plan configuration for the
Buildings and certain preliminary exterior elevations Improvements, and 00
outline the specifications for the interior and exterior -components of the
Buildings. These preliminary plans and specifications (the "PRELIMINARY PLANS
AND SPECIFICATIONS") are attached to this Lease as Exhibit "B" and Landlord and
Tenant intend that they shall serve as the basis upon which the Plans and
Specifications will be prepared and finalized, in accordance with the provisions
of this Section 2.2.
(c) Prior to the execution of this Lease, Landlord and Tenant have
agreed on schematic design drawings for the Improvements for the Improvements
("SCHEMATIC DESIGN DRAWINGS").
(d) As soon as is reasonably possible following execution of this
Lease, but in no event later than May 2, 1997, Landlord shall submit to Tenant
reasonably detailed preliminary construction drawings for the Improvements
("Design Development Drawings") which have been prepared in substantial
conformance with the Schematic Design Drawings. Within ton (10) business days
after Tenant receives the Design Development Drawings, Tenant shall deliver to
Landlord written notice of Tenant's approval or disapproval of the Design
Development Drawings. Tenant shall not unreasonably withhold its approval of the
Design Development Drawings. If Tenant disapproves any portion of the Design
Development Drawings, then Tenant shall specifically and in writing (a) approve
those portions which are acceptable to Tenant and (b) disapprove those portions
which are not acceptable to Tenant, specifying the reasons for such disapproval
and describing in detail the change Tenant requests for each item disapproved.
The failure of Tenant to disapprove the Design Development Drawings within the
specified time shall be deemed approval thereof. In the event the Design
Development Drawings have-not been fully approved by Tenant, and Tenant and
Landlord are unable to resolve the basis for Tenant's disapproval after good
faith efforts to do so over a period of five (5) business days after delivery of
Tenant's notice disapproving
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the Design Development Drawings, Landlord shall have the right to terminate this
Lease by giving Tenant written notice of its election to do so.
(e) As soon as is reasonably possible following approval of the Design
Development Drawings, but in no event later than June 13, 1997 (as extended by
any number of days more than ten (10) business days following Landlord's
delivery of the Design Development Drawings to Tenant when the Design
Development Drawings are approved by Tenant), Landlord shall submit to Tenant
1/8 or 1/16 scale construction drawings for the Improvements ("Construction
Drawings") which have been prepared in substantial conformance with the approved
Design Development Drawings. These Construction Drawings shall include all
information reasonably necessary to construct the Improvements. Within ten (10)
business days after Tenant receives the Construction Drawings, Tenant shall
deliver to Landlord written notice of Tenant's approval or disapproval of the
Construction Drawings. Tenant shall not unreasonably withhold its approval of
the Construction Drawings. If Tenant disapproves any portion of the Construction
Drawings, then Tenant shall specifically and in writing (a) approve those
portions which are acceptable to Tenant and (b) disapprove those portions which
are not acceptable to Tenant, specifying the reasons for such disapproval and
describing in detail the change Tenant requests for each item disapproved. The
failure of Tenant to disapprove the Construction Drawings within the specified
time shall be deemed approval thereof. In the event the Construction Drawings
have not been fully approved by Tenant, and Tenant and Landlord are unable to
resolve the basis for Tenant's disapproval after good faith efforts to do so
over a period of five (5) business days after delivery of Tenant's notice
disapproving the Construction Drawings, Landlord shall have the right to
terminate this Lease by giving Tenant written notice of its election to do so.
(f) Upon approval of the Construction Drawings, the Plans and
Specifications shall be deemed approved by Landlord and Tenant and shall,
thereafter, be the Plans and Specifications for the construction of the
Improvements. Any delay in Landlord obtaining the Building Permit beyond August
6, 1997, which results from a delay in Tenant's approval of the Plans and
Specifications (other than because of Landlord's failure to meet its obligations
under Section 2.2(d) and (e)) shall be a Tenant-Caused Delay.
(g) In the event Landlord and Tenant are unable to resolve Tenant's
disapproval of a phase of the development of the Plans and Specifications under
subsections (d) or (e), above (a "DESIGN DISPUTE"), they shall resolve those
differences through the binding arbitration of a neutral third-party in
accordance with the following procedure: Landlord and Tenant shall immediately
meet to make a good faith attempt to mutually appoint a single party who shall
be a licensed architect ("ARBITRATING ARCHITECT"), with not less than ten (10)
years experience in commercial and industrial architecture and who is not
employed or otherwise previously affiliated with either party, to arbitrate
their differences and resolve the Design Dispute. If Landlord and Tenant are
unable to agree upon a single Arbitrating Architect, then each shall, within two
(2) business days after the meeting, select an architect that meets the
foregoing qualifications. The two (2) architects so appointed shall, within two
(2) business days after their appointment, appoint a third architect meeting the
foregoing qualifications who shall serve as the Arbitrating Architect. If the
two (2) architects so selected
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cannot agree on the selection of the Arbitrating Architect within the time above
specified, then either party, on behalf of both parties, may request the
appointment of the Arbitrating Architect to the Presiding Judge of the San Diego
County Superior Court. The procedures for arbitrating and resolving the Design
Dispute shall be established by the Arbitrating Architect, provided, however,
that the parties agree to the use of the rules of the American Arbitration
Association regarding resolution of commercial disputes. The determination of
the Arbitrating Architect shall be limited solely to the issue of the Design
Dispute and shall be made within ten (10) business days of its submission by the
parties for arbitration. The decision of the Arbitrating Architect shall be
binding on both parties. The costs of the arbitration, including, without
limitation, attorneys' fees and costs, witness fees, expert witness fees, and
costs of the arbitration proceeding shall be awarded as determined to be
reasonable by the Arbitrating Architect. In the event of any judicial
enforcement or confirmation proceeding relating to an arbitration award, the
prevailing party shall be entitled to recover from the other party all related
costs, including attorneys' fees and costs.
2.3 SUBSTANTIAL COMPLETION OF THE IMPROVEMENTS.
(a) "SUBSTANTIAL COMPLETION" of the Improvements shall be deemed to
have occurred on the earlier to occur of when M (A) the Improvements have been
completed in substantial conformance with the Plans and Specifications, subject
to the completion of "punch-list" items (the "PUNCHLIST") identified by Landlord
and Tenant as described in Section 2.3(c) below, ("punch-list items" being
defined to mean minor items needing correction or repair which do not or will
not materially interfere with the permitted use of the Demised Premises as
described in Section 4.1 hereof, (B) all major systems of the Buildings the
installation of which are Landlord's responsibility are in reasonably good
working order, and (C) Tenant can physically and legally occupy the Demised
Premises (e.g., a permanent certificate of occupancy or temporary certificate of
occupancy which is subsequently converted into or replaced without any lapse by
a permanent certificate of occupancy, or such alternate certificate, license,
permit or other document which is issued by the appropriate agency with legal
authority over the occupancy of commercial or industrial structures in the
jurisdiction in which the Demised Premises are located ("CERTIFICATE OF
OCCUPANCY") has been issued for the Demised Premises, or (ii) the Improvements
would have been so completed and Tenant legally entitled to occupy the Demised
Premises but for any Tenant-Caused Delays.
(b) "TENANT CHANGE ORDER" shall be defined as any change to the Plans
and Specifications which is requested by Tenant, including changes which are
requested by Tenant during the finalization of the Plans and Specifications
which increase the scope of the Improvements from those described in the
Preliminary Plans and Specifications, or changes requested by Tenant in the
Plans and Specifications after their completion, including during construction
of the Improvements.
(c) "TENANT-CAUSED DELAY" shall be defined as a delay resulting
directly from (i) the failure of Tenant, its officers, directors, partners,
agents, employees, or contractors to (A) perform some act or pay some amount
within the time provided in this Lease, or (B) reasonably approve or disapprove
any draft of the Plans and Specifications within the time period specified in
Section 2.2,
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above, or (ii) any other act or omission by Tenant, its officers, directors,
partners, agents, employees, or contractors to the extent it causes a delay in
Substantial Completion or in the issuance of the Certificate of Occupancy,
including, without limitation, a delay caused by (A) delay in finalization of
the Plans and Specifications caused by Tenant, or (B) a Tenant Change Order.
(d) WALK-THROUGH AND PUNCHLIST. On or immediately before March 2, 1998,
Landlord and Tenant shall conduct a walk-through inspection of the Demised
Premises and shall jointly prepare the Punchlist which shall be a list of items
which have not been completed in substantial conformance with the Plans and
Specifications that need to be corrected. Subject to the last sentence of this
subsection (d), Landlord shall cause the Punchlist items to be corrected within
thirty (30) days thereafter. Approximately thirty (30) days -following March 2,
1998, Landlord and Tenant shall again conduct a walk-through inspection to
determine if any remaining Punchlist items require correction, and Landlord
shall cause all such corrective work to be undertaken and completed promptly
thereafter. If by the nature of such Punchlist item, more than thirty (30) days
was required to effect such correction, Landlord shall not be in default
hereunder if such correction has been commenced within thirty (30) days after
the item was identified on the Punchlist and is diligently pursued to
completion; provided that if any item on the Punchlist has not been corrected
within sixty (60) days after such item is identified on the Punchlist, Tenant
may cause such item to be corrected and offset the cost of such correction
against Tenant's Base Rent next due, provided Tenant has given Landlord written
notice of Tenant's intention to do so and Landlord has not corrected such item
within five (5) business days following such notice.
(e) NO RELIEF FROM PAYMENT OF RENT. The failure of Tenant to take
possession of or to occupy the Demised Premises on or after March 2, 1998 shall
not serve to relieve Tenant of its obligations or delay Tenant's obligation to
pay Rent, Additional Rent, or any other amount to be paid by Tenant to Landlord
under this Lease.
2.4 DELAY IN SUBSTANTIAL COMPLETION OR LEASE EXECUTION. Landlord shall
diligently proceed with the construction of the Improvements with the intent of
completing and delivering the same to Tenant on or before the Target
Commencement Date, provided, however, to the extent 0) a Tenant-Caused Delay (as
defined in Section 2.3(b) hereof), or (ii) a Force Majeure (as defined below),
results in a delay in Substantial Completion of the Improvements, the Target
Commencement Date shall be extended for the amount of time the Substantial
Completion of the Improvements is delayed thereby. "FORCE MAJEURE" shall be
defined as any factor or condition which is outside the control of either Tenant
or Landlord and for which neither could have reasonably been anticipated or
expected to plan, including, without limitation, (i) unusually inclement
weather, or inclement weather which occurs at unusual times, (ii) other acts of
God, (iii) labor disputes, (iv) casualties, (v) embargo, (vi) governmental
restrictions, (vii) shortages of fuel, labor, or building materials, (viii)
civil unrest, (ix) action or non-action of public utilities, or of local, state
or federal governments which delay the Substantial Completion of the Demised
Premises, and (x) action or non-action of local, state or federal governments
which prevent, prohibit or stop construction of the Demised Promises. If
Landlord fails to tender possession of the Demised Premises with the
Improvements Substantially Completed within ninety (90) days following the
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Target Commencement Date (as extended by Tenant-Caused Delays and Force-Majeure
Delays), Landlord and Tenant agree Tenant will suffer damages which would be
difficult to ascertain but a reasonable estimate of which would be Two Thousand
Dollars ($2,000.00) per day for each day of delay thereafter. Therefore, in the
event of such delay, and as Tenant's sole and exclusive remedy for such delay,
Landlord agrees to pay Tenant liquidated damages of Two Thousand Dollars
($2,000.00) per day commencing on the Target Commencement Date (as that date may
be extended by Tenant-Caused Delays and Force-Majeure) and continuing on each
day thereafter until March 2, 1998. If March 2, 1998 has not occurred (or been
deemed to have occurred) within ninety (90) days following the Target
Commencement Date (as that date may be extended by Tenant-Caused Delays and
Force-Majeure) Tenant may terminate this Lease.
2.5 BUILDING PERMIT FOR THE IMPROVEMENTS. Landlord shall be responsible
for obtaining from any relevant and jurisdictional governmental authority
necessary (generally an *Authority ), all governmental approvals necessary for
the construction of the Improvements, including a building permit ("Building
Permit"). The cost, including fees and other charges levied by the Authority,
associated with approvals and permits related to the Shell Improvements shall be
Shell Improvements Costs and the responsibility of Landlord. If a change to the
Plans and Specifications is required by the Authority as a condition to
obtaining the Building Permit, such change shall be made to the Plans and
Specifications, subject to Tenant's approval, and the cost associated with any
such change shall be added, as appropriate, to Shell Improvements Costs and
Tenant Improvements Costs. Tenant shall not unreasonably withhold or delay its
consent to any such requested change, provided that Tenant may terminate this
Lease if any such requested change would materially and adversely alter the
utility or functionality of the Demised Premises for Tenant's intended use,
provided that Tenant will not seek to terminate this Lease on that basis without
giving Landlord thirty (30) days written notice of such intention during which
time Landlord may seek to avoid or modify the need for the requested change.
Tenant shall cooperate with Landlord as may be reasonably necessary to obtain
the Building Permit and any and all other permits required to complete the
Improvements.
2.6 CONSTRUCTION WARRANTIES. Landlord shall obtain the manufacturer's
warranties for the elements or systems which are part of the Demised Premises
and which are customarily given by such manufacturers without additional cost to
Landlord and warranties and guaranties from the contractors and subcontractors
with respect to the Improvements and which are customarily given by such
contractors and subcontractors without additional cost to Landlord. Landlord
shall assign to Tenant for the Term of the Lease (or, should Tenant not be
legally capable of doing so itself, at Tenant's expense, prosecute on Tenant's
behalf), on a non-exclusive basis, all statutory and contractual warranties and
guaranties to which Landlord is entitled in connection with the Demised
Premises, express or implied, including, without limitation the warranties
arising under any construction contract between Landlord and Landlord's
contractors and/or subcontractors involved in the construction of the Demised
Premises. Other than the assignment to Tenant of such warranties, or as
otherwise specifically provided in this Lease, Landlord shall have no obligation
or responsibility to Tenant, or its successors, with respect to any condition of
the Improvements. Landlord, at no cost or expense to Landlord, shall cooperate
with Tenant in the enforcement by
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Tenant, at Tenant's sole cost and expense, of any such warranties or guaranties.
2.7 CONDITION OF DEMISED PREMISES: LIMITED WARRANTY. Except as
specifically provided in this Section 2.7, Landlord makes no warranties or
representations with regard to the Demised Promises, or any portion thereof, and
Tenant shall accept the Demised Premises in the condition in which they are
delivered on March 2, 1998, provided that (i) the Demised Promises shall be
constructed in substantial conformance with (A) the Plans and Specifications,
and (B) all Applicable Land Use Laws and Restrictions then in effect and (ii) in
addition to Landlord's responsibility to correct items identified through the
walk-through and Punchlist process established in Section 2.3(d) hereof, the
Improvements shall be free of defects in design and construction which could not
reasonably be discovered and identified by Tenant during that process (i.e. free
of defects in design or construction which remained "latent* as of the
completion of the repairs identified on the Punchlist and the final completion
of the Improvements), and Landlord shall be responsible, at Landlord's sole cost
and expense, for the prompt and diligent repair of any such 'latent" defects
which later manifest themselves during the Term.
2.8 TENANT IMPROVEMENTS ALLOWANCES TENANT RESPONSIBILITY.
(a) Landlord shall be responsible for constructing, entirely at its
expense, subject to the provisions of Section 3.3 of this Lease, the Shell
Improvements (as that term is defined below). The Shell Improvements shall
consist of, and the term "SHELL IMPROVEMENT" shall be used in this Lease to
mean, those components of the Demised Premises which are identified in the
Preliminary Plans and Specifications, which are attached to this Lease, as
elements of the basic Buildings shall or specifically as "SHELL IMPROVEMENTS,"
land, land preparation and landscaping, or as otherwise mutually identified by
Landlord and Tenant, in writing, concurrent with or subsequent to the execution
of this Lease, including all utilities stubbed to the Buildings. The Base Rent
specified in this Lease includes Landlord's obligation to complete and deliver
to Tenant the Shell Improvements in accordance with this Lease. The cost of
constructing the Shell Improvements are referred to in this Lease as the "Shell
Improvements-C-9-U." Shell Improvements Cost shall include a developer fee,
payable to Landlord, or an affiliate of Landlord (with no direct obligation to
Tenant to pay such fee).
(b) Landlord shall be responsible for constructing, subject to the
provisions of this Section 2.8 and 2.9 below, the Tenant Improvements (as that
term is defined below). The Tenant Improvements shall consist of, and the term
"TENANT IMPROVEMENTS" shall be used in this Lease to mean, those portions of the
Demised Premises which are not identified in the Plans and Specifications as
part of the Shell Improvements, or as otherwise mutually identified by Landlord
and Tenant, in writing, concurrent with or subsequent to the execution of this
Lease.
(c) Landlord shall provide an allowance to be applied by Landlord
towards paying the costs of designing and constructing the Tenant Improvements
(the "TENANT IMPROVEMENTS COST"), which shall be comprised of fees and
reimbursables for project programming, design, architecture and engineering,
reimbursables, and the direct construction cost (excluding any overhead or
profit
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to Landlord or any affiliate) of the Tenant Improvements paid to the Contractor
(as defined below) or others performing such work. The allowance shall be in the
amount of Seven Million Dollars ($7,000,000.00) (the "TENANT IMPROVEMENTS
ALLOWANCE"). Shell Improvements shall not include the costs of building signage,
security systems, specialized cabling or Tenant's moving expenses, such items
being Tenant's sole financial responsibility; provided, however, that up to (and
no more than) Three Hundred Thousand Dollars ($300,000) of the Tenant
Improvements Allowance may be utilized to pay the costs of Tenant's (i)
specialized cabling needs, (ii) moving expenses, and (iii) furniture, fixtures
and equipment.
(d) In the event that the Tenant Improvements Allowance is insufficient
in amount to pay the Tenant Improvements Cost, Tenant shall pay such excess to
Landlord pursuant to the procedure set forth in Section 2.9 below.
(e) Attached to this Lease as EXHIBIT "D" is an estimate of the Tenant
Improvements Cost which, based on the Preliminary Plans and Specifications and
the Schematic Design Drawings as of the date of this Lease, Landlord and Tenant
expect to be incurred in connection with the construction of the Demised
Premises (the "TENANT IMPROVEMENTS BUDGET ESTIMATE"). Upon approval of the Plans
and Specifications by both parties, Landlord shall provide Tenant with a final
estimate of the Tenant Improvements Cost. Within fifteen (115) days prior to the
commencement of construction of the Improvements, and no less than monthly
thereafter (but not more than ten (10) days after Landlord learns of a cost
change) during the course of construction of the Improvements, Landlord shall
deliver to Tenant a revised Tenant Improvements Budget Estimate, whether
reflecting an increase or a decrease, together with an explanation in reasonable
detail of the cause of such cost change and an accounting of actual costs to
date ("PERIODIC COST REGION"). Additionally, prior to any Tenant Change Order
being effective, Landlord shall provide Tenant with an estimate of the cost of
said Tenant Change Order.
2.9 RESPONSIBILITY FOR EXCESS SHELL COSTS AND EXCESS TENANT
IMPROVEMENTS COST; TENANT IMPROVEMENTS COSTS SAVINGS.
(a) The Base Rent has been determined based on the assumption that (i)
the Plans and Specifications will not vary materially in scope from the
Preliminary Plans and Specifications, (ii) the Plans and Specifications and
Approved Working Drawings, once finalized and approved by Landlord and Tenant,
will not be altered as a result of Tenant Change Orders, and (iii) no Shell
Improvement Cost or Tenant Improvement Cost will be incurred in connection with
the construction of the Demised Premises resulting from Tenant-Caused Delays.
(b) Tenant shall be directly responsible, as Additional Rent, for any
increases in the cost to Landlord of the construction of the Shell Improvements
(including financing costs) ("EXCESS SHELL COSTS"), resulting from (A) Tenant
Change Orders, or (B) Tenant-Caused Delays. Tenant shall pay the Increased Shell
Costs to Landlord, as Additional Rent, UPON THE EARLIER TO OCCUR OF (i)
execution of this Lease if any Excess Shell Costs have been identified by that
date, (ii) funding of Landlord's construction loan, provided that Landlord has
notified Tenant of Excess Shell Costs
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prior thereto, which notification shall be in writing and shall include
reasonably detailed documentation supporting the calculation of such Excess
Shell Costs (an "EXCESS SHELL COST NOTICE"), taking into consideration any
amounts previously paid by Tenant to Landlord under this subsection (b), (iii)
if later, within five (5) business days after delivery of an Excess Shell Cost
Notice to Tenant by Landlord, taking into consideration any amounts previously
paid by Tenant to Landlord under this subsection (b), (iv) within five (5)
business days after the Final Cost Report, if such report includes Increased
Shell Costs which have not been previously paid to Landlord, or (v) as otherwise
required by Landlord's construction Lender (as defined in Section 3.4 hereof).
(c) Tenant shall be responsible, as Additional Rent, for any Tenant
Improvements Costs to the extent they exceed the Tenant Improvements Allowance
("EXCESS TENANT IMPROVEMENTS COSTS"). Tenant shall pay the Excess Tenant
Improvements Costs to Landlord UPON THE EARLIER TO OCCUR OF (i) execution of
this Lease if the Tenant Improvements Budget Estimate at that time reflects that
the Tenant Improvements Allowance will be insufficient to fund all the Tenant
Improvements Costs anticipated to be incurred, (ii) funding of Landlord's
construction loan if the Tenant Improvements Budget Estimate at that time
reflects that the Tenant Improvements Allowance will be insufficient to fund all
the Tenant Improvements Costs anticipated to be incurred, taking into
consideration any amounts previously paid by Tenant to Landlord under this
subsection (c), (iii) within five (5) business days after notification to Tenant
by Landlord that it has determined, in a periodic review of the Tenant
Improvements Costs during construction of the Tenant Improvements, pursuant to
subsection 2.8(e), above, that the Tenant Improvements Allowance will be
insufficient to cover all the Tenant Improvements Costs anticipated to be
incurred, taking into consideration any amounts previously paid by Tenant to
Landlord under this subsection (c), (iv) within five (5) business days after
Landlord has notified Tenant that it has made a final determination, pursuant to
subsection (a), below, that the Tenant Improvements Allowance was insufficient
to cover all the Tenant Improvements Costs which have been incurred, taking into
consideration any amounts previously paid by Tenant to Landlord under this
subsection (c), or M as otherwise required by Landlord's construction Lender.
(d) Landlord shall deposit the funds paid to it by Tenant under
subsections (b) or (c) of this Section 2.9 into a segregated account maintained
with the construction Lender ("EXCESS FUNDS ACCOUNT"), with interest paid on the
balance in the Excess Funds Account at then prevailing money market rates. The
Excess Funds Account shall be subject to a collateral pledge in favor of the
Lender to secure the availability of those funds to pay Excess Shell Costs and
Excess Tenant Improvements Costs. Funds shall be disbursed from the Excess Funds
Account to pay Shell Improvements Costs or Tenant Improvements Costs, as
applicable, only after funds which are identified for those purposes in the
construction loan have been fully disbursed or as otherwise mutually approved by
Landlord and Tenant, which approval will not be unreasonably withheld if an
alternative arrangement is required by Landlord's construction Lender. Any
interest earned on such funds while held in the Excess Funds Account shall be
paid by Landlord to Tenant as earned, but no more often than monthly.
(e) Within ninety (90) days following Substantial Completion of the
10
Improvements, Landlord shall calculate, and report to Tenant, in writing, M the
final Shell Improvements Cost and the final Tenant Improvements Cost, and (ii)
the amount of any Excess Shell Costs or Excess Tenant Improvements Costs (the
"Final Cost Report"). In the event that there is an amount which has not been
paid by Tenant at the time of such final determination (e.g. Excess Shell
Improvements Costs or Excess Tenant Improvements Costs) then Tenant shall pay
such additional amount to Landlord within five (5) business days following such
final determination. Any funds deposited into the Excess Funds Account pursuant
to subsection (d), above, and which are ultimately not needed to fund Excess
Shell Costs and Excess Tenant Improvements Costs shall be repaid to Tenant at
such time as the Lender releases its security interest in that account.
(f) In the event the costs incurred by Landlord in the construction of
the Tenant Improvements is less than the Tenant Improvements Allowance as
indicated by the Final Cost Report, the monthly Base Rent shall be decreased by
an amount equal to (i) the Tenant Improvements Allowance, (ii) minus the actual
Tenant Improvements Cost, up to Four Hundred Thousand Dollars ($400,000), (iii)
multiplied by a percentage factor sufficient to amortize the Tenant Improvements
Allowance over the Initial Term at an annual interest rate of ten percent (10%),
Ov) divided by 12.
(g) All of the Periodic Cost Reports and the Final Cost Report shall
include reasonably detailed supporting explanations and documentation. Landlord
shall maintain accurate and complete books and records of all Shell Improvement
Costs and Tenant Improvements Costs. Tenant shall have the right to inspect,
audit and copy such books and records at Landlord's office in San Diego,
California.
2.10 CONTRACTOR. Reno Contracting, Inc., a California corporation
("Contractor"), shall act as the general contractor for the construction of the
Shell Improvements and the Tenant Improvements. Contractor's contract shall be
on a "cost-plus" basis, with Contractor entitled to M reimbursement for direct
insurance expenses and direct 'G&A" or "General Conditions" expenses, as
provided in the Estimated Budget and (ii) a profit of no more than five percent
(5%). Landlord shall cause the Contractor to bid each component of the
Improvements to at least three (3) qualified subcontractors and, unless Landlord
and Tenant agree otherwise, shall select the lowest qualified bidder. Tenant
shall have the right to approve the list of subcontractors to be solicited for
bids and to designate subcontractors to participate in the bidding process.
Tenant shall also have the right to select subcontractors to perform components
of the Improvements if Tenant agrees to pay any Excess Shell Costs or Excess
Tenant Improvements Costs attributable to such election, provided such
subcontractor is reasonably acceptable to Landlord and Contractor. Landlord
represents to Tenant that Contractor is not an affiliate of Landlord nor will
Landlord receive compensation from Contractor in connection with the
construction of the Improvements.
2.11 RETROFIT ALLOWANCE. Upon the commencement of each Extension Term,
if any, Landlord shall provide Tenant with an allowance of One Million Dollars
($1,000,000) (the "Retrofit Allowance") for the construction of new, remodeled
or retrofitted Tenant Improvements in the Demised Premises (the "RetroWork").
Prior to requesting portion of the Retrofit Allowance,
11
Tenant shall submit to Landlord detailed plans and specifications for the
Retrofit Work for Landlord's approval. The construction of the Retrofit Work
shall be subject to the same terms, conditions and procedures as any Work (as
defined in Section 19.2 hereof) which is proposed to be performed by Tenant
pursuant to Article XIX hereof. The Retrofit Allowance shall be disbursed by
Landlord on the same or similar basis as would a customary "construction fund
control" as expenses related to such Retrofit Work are incurred and within ten
(10) days after (i) Tenant presents Landlord with (A) progress invoices for
completed Retrofit Work, (B) conditional partial or final lien releases or
waivers for such Retrofit Work, and 00 Landlord's reasonable and prompt
determination that the Retrofit Work has been completed (either partially or
completely) in accordance with the plans and specifications for such Retrofit
Work approved by Landlord pursuant to this Section 2.11.
2.12 TENANT'S ENTRY INTO THE BUILDING PRIOR TO SUBSTANTIAL COMPLETION.
Provided that Tenant and its agents, employees and contractors do not materially
interfere with the Contractor's work on the Demised Premises (any such
interference constituting a basis for a Tenant-Caused Delay), Landlord shall
allow and shall require the Contractor to allow, Tenant and Tenant's agent
employees and contractors access to the Building prior to Substantial Completion
of the Improvements so that Tenant may install its furniture, trade fixtures,
data and telecommunications wiring and equipment, photocopy equipment and other
business equipment in the Building. Prior to Tenant's entry into the Building as
permitted by the terms of this Section 2.12, Tenant shall arrange a schedule
with Landlord and the Contractor in order to coordinate the timing of Tenant's
entry with the actions of the Contractor. Prior to any such entry, Tenant or its
agents and contractors (as applicable) shall provide evidence of insurance
reasonably satisfactory to Landlord. Tenant acknowledges that Section 20.3 below
shall apply with respect to any and all claims which may arise as a result of
the entry by Tenant, its agents, employees and contractors on the Demised
Premises in accordance with this Section 2.12. Tenant's responsibilities under
Section 6.1 of this Lease shall commence upon such early occupancy as opposed to
March 2, 1998.
ARTICLE III
RENT
3.1 Base Rent. In consideration of the lease OF the Demised Premises
evidenced by this Lease, Tenant covenants to pay rent to Landlord, without
previous demand therefor and without any right OF set-off or deduction
whatsoever except as expressly provided in this Lease, at the office OF Landlord
at:
ADI Communication Partners, L.P.
c/o The ▇▇▇▇▇ Group
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
or at such other place as Landlord may from time to time designate in writing, a
rental for the Initial
12
Term of this Lease as hereinafter set forth, payable monthly, in advance, in
equal installments as hereinafter set forth, with the first payment due on March
2, 1998, and continuing on the first day of each month thereafter for the
succeeding months during the balance of the Term ("Base Rent"), as follows:
Period Monthly Base Rent Annual Base Rent
------ ----------------- ----------------
Months 1 - 12 $218,000 $2,616,000
Months 12 - 24 $218,000 $2,616,000
Months 25 - 36 $231,080 $2,772,960
Months 37 - 48 $231,080 $2,772,960
Months 49 - 60 $244,995 $2,939,338
Months 61 - 72 $244,995 $2,939,338
Months 73 - 84 $259,641 $3,115,692
In the event March 2, 1998 occurs on other than the first (1st) day of a month,
the Initial Term shall be extended by the number of days remaining in the month
in which March 2, 1998 occurs and the first payment of Base Rent due on March 2,
1998 shall be a sum equal to (i) the monthly Base Rent for the month in which
March 2, 1998 occurs, prorated based on the number of days in the month in which
March 2, 1998 occurs, plus GO the monthly Base Rent for the first full calendar
month of the Initial Term.
3.2 BASE RENT DURING EXTENSION TERM. The Base Rent during the Extension
Term ("Extension Term Base Rent") shall be an amount equal to the greater of (i)
ninety five percent (95%) of the then fair market rental value of the Demised
Promises ("Fair Market Rental Value"), as stated on a monthly basis and
determined pursuant to this Section 3.2 as of the first (1st) day of the
applicable Extension Term, or (ii) the Base Rent during the last month of the
Initial Term (or the prior Extension Term as may be applicable), plus an amount
sufficient for Tenant to fully amortize, over the Extension Term, in equal
monthly installments, the amount of the Retrofit Allowance actually used by
Tenant, plus interest on that amount at the annual rate of ten percent (10%).
Upon receipt by Landlord of Tenant's Extension Notice under Section 1.2, above,
Landlord and Tenant shall meet in an effort to negotiate, in good faith, the
Extension Term Base Rent which shall become effective as of the first day of the
Extension Term ("Extension Term Commencement Date"). The Extension Term Base
Rent shall be increased to an amount equal to 1.06 times the then applicable
Extension Term Base Rent, as may have been previously adjusted pursuant to this
Section 3.2, every twenty-four (24) months during the Extension Term. If
Landlord and Tenant have not agreed upon the Extension Term Base Rent within
thirty (30) days after the delivery of Tenant's Extension Notice, the Extension
Term Base Rent shall be determined as follows:
(a) Landlord and Tenant shall attempt to agree in good faith upon a
single appraiser not later than thirty (30) days after delivery of Tenant's
Extension Notice. If Landlord and Tenant are unable to agree upon a single
appraiser within such time period, then Landlord and Tenant shall each appoint
one appraiser not later than five (5) days after the deadline for selecting a
single appraiser. Landlord and Tenant shall each give written notice to the
other as to the name
13
of the appraiser it has selected, as soon as the selection is made. Within ten
(10) days thereafter, the two appointed appraisers shall appoint a third
appraiser. All appraisers shall be independent from, and disinterested in, both
Landlord and Tenant.
(b) The only task which the appraiser(s) shall perform shall be forming
and reporting to Landlord and Tenant an opinion of the Fair Market Rental Value
of the Demised Premises for use in determining the Extension Term Base Rent.
(c) If either Landlord or Tenant fails to appoint its appraiser within
the prescribed time period, the single appraiser appointed shall determine the
Fair Market Rental Value of the Demised Premises. If both parties fail to
appoint appraisers within the prescribed time periods, then the first appraiser
thereafter selected by a party shall determine the Fair Market Rental Value of
the Demised Premises.
(d) Each party shall bear the cost of its own appraiser and the parties
shall share equally the cost of any single or third appraiser, if applicable.
All appraisers so designated herein shall have at least five (5) years'
experience in the appraisal of commercial properties similar to the Demised
Premises in the northern commercial/industrial markets of San Diego County and
shall be members of professional organizations such as MAI or its equivalent.
(e) For the purpose of such appraisal and this subsection (d), the term
"Fair Market Rental Value" shall mean the price that a ready and willing single
tenant would pay, as of the Extension Term Commencement Date, as annual rent to
a ready and willing landlord of a property comparable to the Demised Premises on
the terms of this Lease, if such property were exposed for lease on the open
market for a reasonable period of time. A "comparable property" shall mean an
industrial/commercial two-story concrete tilt-up building located in the
Sorrento Mesa sub-market of San Diego (the "Market Area"), with improvements
similar in age and character to the Demised Premises, which has been improved
with the tenant improvements comparable to those constructed in the Demised
Premises; provided, however, that the appraisal shall disregard the value of the
equipment which Tenant is entitled to remove at the expiration or termination of
the Term of this Lease or the value of the Retrofit Allowance. The appraiser
shall give appropriate consideration to all relevant factors, including, without
limitation, (i) the fact that this Lease is a "triple net" lease, (ii) rental
concessions and tenant improvement allowances generally being offered by
landlords of comparable properties, (iii) the age of the Improvements, (iv) the
condition of the Demised Premises on the assumption that Tenant has complied
with its obligations to maintain and repair the Demised Premises, (v) rental
market conditions then in existence, NO whether Landlord will or will not be
required to pay a real estate brokerage commission in connection with Tenant's
exercise of the Extension Option, and (vii) the fact that the Tenant will be
accepting the Demised Premises in an 'As-is" condition.
(f) If a single appraiser is chosen, then such appraiser shall
determine the Fair Market Rental Value of the Demised Premises. Otherwise, the
Fair Market Rental Value of the
14
Demised Premises shall be the arithmetic average of the two (2) appraisals which
are closest in amount, and the third appraisal shall be disregarded.
(g) Landlord and Tenant shall instruct the appraiser(s), in writing, to
complete their written determination of the Fair Market Rental Value not later
than thirty (30) days after their selection. If the Fair Market Rental Value has
not been determined by such date, then the Fair Market Rental Value shall be
determined thereafter, and if it has not been determined by the Extension Term
Commencement Date, then Tenant shall continue to pay Landlord monthly
installments of Annual Rent in the amount applicable to the Demised Premises
immediately prior to the Extension Term Commencement Date until the Fair Market
Rental Value is determined. When the Fair Market Rental Value of the Demised
Premises is determined, Landlord shall deliver notice thereof to Tenant, and
Tenant shall pay to Landlord, within ten (10) days after receipt of such notice,
the difference between the monthly installments of Base Rent actually paid by
Tenant to Landlord subsequent to the Extension Term Commencement Date and the
new monthly installments of Base Rent which are determined to have been actually
owing during such period in accordance with this Section 3.2.
3.3 ADDITIONAL OBLIGATIONS; ADDITIONAL RENT. The Base Rent shall be
absolutely "net" to Landlord so that this Lease shall yield to Landlord the Base
Rent specified in Section 3.1 and that all Impositions, insurance premiums,
utility charges, maintenance, repair and replacement expenses, all expenses
relating to compliance with all present or future applicable governmental laws,
rules and regulations, and all other costs, fees, charges, expenses,
reimbursements and obligations of every kind and nature whatsoever relating to
the Demised Premises which may arise or become due during the term or by reason
of events occurring during the term of this Lease (all such items being
sometimes referred to as "Additional Obligations") shall be paid or discharged
by Tenant, except to the extent they are expressly the responsibility of
Landlord under this Lease. To the extent the following are the obligations of
Tenant under this Lease, Tenant hereby agrees to indemnify, defend and save
Landlord harmless from and against such Impositions, insurance premiums, utility
charges, maintenance, repair and replacement expenses, all expenses relating to
compliance with all present and future governmental laws, rules and regulations
becoming effective during the Term, and all other costs, fees, charges,
expenses, reimbursements and obligations referred to above. Any amounts referred
to in this Lease as additional rent (including, without limitation, the
Additional Obligations) are referred to collectively as "Additional Rent."
3.4 DELINQUENT RENTAL PAYMENTS. All payments of Base Rent and
Additional Rent shall be payable without previous demand therefor and without
any right of set-off or deduction whatsoever (except as expressly provided in
this Lease), and in case of nonpayment of any item of Additional Rent by Tenant
when the same is due, Landlord shall have, in addition to all its other rights
and remedies, all of the rights and remedies available to Landlord under the
provisions of this Lease or by law in the case of nonpayment of Base Rent. The
performance and observance by Tenant of all the terms, covenants, conditions and
agreements to be performed or observed by Tenant hereunder shall be performed
and observed by Tenant at Tenant's sole cost and expense. Any installment of
Base Rent or Additional Rent or any other charges payable by Tenant under the
15
provisions hereof which shall not be paid- within five (5) days after they are
due shall, (i) be subject to a late charge of five percent (5%) of the amount
due and not timely paid, and 00 bear interest from the date when such payment
was due at the lesser of (A) the default rate of interest under Landlord's most
senior debt obligation encumbering the Demised Premises, or (B) an annual rate
of eighteen percent (18%) per annum, but in no event in excess of the maximum
lawful rate permitted to be charged by Landlord against Tenant. Said rate of
interest is sometimes hereinafter referred to as the "Maximum Rate of Interest.
Notwithstanding the foregoing provisions of this Section 3.4, if any mortgagee
under any mortgage, beneficiary under any deed of trust, or ground lessor under
any ground lease, which encumbers the Land (a "Lender"), imposes fees, charges,
penalties or interest on Landlord for late payments under such instrument which
fees, charges, penalties or interest are less in amount than those described in
this Section 3.4, Landlord will not impose any late payment charge or interest
which is greater than the amounts charged by such Lender.
ARTICLE IV
USE OF DEMISED PREMISES
4.1 PERMITTED USE. Tenant intends to use the Demised Premises primarily
as a corporate headquarters, assembly, warehouse and distribution facility and
related lawful purposes, and they shall be used for no other purpose without
first securing the prior written consent of Landlord, which consent shall not be
unreasonably withheld. Tenant shall not use or occupy the same, or knowingly
permit them to be used or occupied, contrary to any statute, rule, order,
ordinance, requirement or regulation applicable thereto, or in any manner which
would violate any certificate of occupancy affecting the same, or which would
make void or voidable any insurance then in force with respect thereto (provided
Tenant has received a copy of the policy) or which would make it impossible to
obtain fire or other insurance thereon required to be furnished hereunder by
Tenant, or which would cause structural injury to the improvements, or which
would constitute a public or private nuisance or waste, and Tenant agrees that
it will promptly, upon discovery of any such use, take all necessary steps to
compel the discontinuance of such use.
4.2 PRESERVATION OF DEMISED PREMISES. Tenant shall not use, or permit
the Demised Premises, or any portion thereof, to be used by Tenant, any third
party or the public in such manner as might reasonably tend to impair Landlord's
title to the Demised Premises, or any portion thereof, or in such manner as
might reasonably make possible a claim or claims of adverse usage or adverse
possession by the public, as such, or third persons, or of implied dedication of
the Demised Premises, or any portion thereof. Nothing contained in this Lease,
and no action or inaction by Landlord, shall be deemed or construed to mean that
Landlord has granted to Tenant any right, power or permission to do any act or
make any agreement that may create, or give rise to or be the foundation for any
right, title, interest, lien, charge or other encumbrance upon the estate of
Landlord in the Demised Premises other than as expressly set forth in this
Lease.
4.3 HAZARDOUS SUBSTANCES.
16
(a) Subject to Section 4.3(f), Tenant shall at all times and in all
respects comply with all federal, state and local laws, ordinances and
regulations ("HAZARDOUS MATERIALS LAWS") relating to the industrial hygiene,
environmental protection or the use, analysis, generation, manufacture, storage,
presence, disposal or transportation of any oil, flammable explosives, asbestos,
urea formaldehyde, polychlorinated biphenyls, radioactive materials or waste, or
other hazardous, toxic, contaminated or polluting materials, substances or
wastes, including without limitation any "hazardous substances," "hazardous
wastes,"hazardous materials" or toxic substances" under any such laws,
ordinances or regulations (collectively, "Hazardous Materials") at the Demised
Premises.
(b) Subject to Section 4.3(f), Tenant shall at its own expense procure
(other than a certificate of occupancy), maintain in effect and comply with all
conditions of any and all permits, licenses and other governmental and
regulatory approvals required for Tenant's use of the Demised Premises,
including, without limitation, discharge of (appropriately treated) materials or
waste into or through any sanitary sewer system serving the Demised Premises.
Tenant shall in all respects handle, treat, deal with and manage any and all
Hazardous Materials in, on, under or about the Demised Premises in complete
conformity with all applicable Hazardous Materials Laws and prudent industry
practices regarding the management of such Hazardous Materials. Subject to
Section 4.3(f), all reporting obligations imposed by Hazardous Materials Laws
are solely the responsibility of Tenant. Upon expiration or earlier termination
of this Lease and subject to Section 4.3(f), Tenant shall cause all Hazardous
Waste Materials (as defined in 22 CCR 66261.3) to be removed from the Demised
Premises and transported for use, storage or disposal in accordance with and in
complete compliance with all applicable Hazardous Materials Laws. Tenant shall
not take any remedial action in response to the presence of any Hazardous
Materials in, on, about or under the Demised Premises or in any Improvements
situated on the Land other than in the normal course of Tenant's business
operations as now contemplated in accordance with all Hazardous Materials Laws
or as necessitated by emergency considerations in accordance with all applicable
Hazardous Materials Laws, nor enter into any settlement agreement, consent
decree or other compromise in respect to any claims relating to any Hazardous
Materials in any way connected with the Demised Premises or the Improvements on
the Land without first notifying Landlord of Tenant's intention to do so and
affording Landlord ample opportunity to appear, intervene or otherwise
appropriately assert and protect Landlord's interest with respect thereto. In
addition, at Landlord's request, at the expiration of the term of this Lease,
Tenant shall remove all tanks or fixtures which were placed on the Demised
Premises during the term of this Lease and which contain, have contained or are
contaminated with Hazardous Waste Materials.
(c) Tenant shall immediately notify Landlord in writing of (i) any
enforcement, cleanup, removal or other governmental or regulatory action
instituted, completed or threatened pursuant to any Hazardous Materials Laws;
(ii) any claim made or threatened by any person against Landlord or the Demised
Premises relating to damage, contribution, cost recovery, compensation, loss or
injury resulting from or claimed to result from any Hazardous Materials; and
(iii) any non- routine reports made to any environmental agency arising out of
or in connection with any Hazardous Materials in, on or about the Demised
Premises or with respect to any Hazardous Materials removed from the Demised
Premises, including any complaints, notices, warnings, reports or asserted
17
violations in connection therewith. Tenant shall also provide to Landlord, as
promptly as possible, and in any event within five (5) business days after
Tenant first receives or sends the same, copies of all claims, reports,
complaints, notices, warnings or asserted violations from any governmental
agency of any Hazardous Materials Laws relating in any way to the Demised
Premises or Tenant's use thereof. Upon written request of Landlord (to enable
Landlord to defend itself from any claim or charge related to any Hazardous
Materials Laws), Tenant shall promptly deliver to Landlord notices of hazardous
waste manifests reflecting the legal and proper disposal of all such Hazardous
Materials removed from the Demised Premises. Subject to Section 4.3(f), all such
manifests shall list the Tenant or its agent as a responsible party and in no
way shall attribute responsibility for any such Hazardous Materials to Landlord.
(d) Subject to Section 4.3(f), Tenant shall indemnify, defend (with
counsel reasonably acceptable to Landlord), protect and hold Landlord and each
of Landlord's officers, directors, partners, shareholders, affiliates,
employees, agents, attorneys, successors and assigns free and harmless from and
against any and all claims, liabilities, damages, costs, penalties, forfeitures,
losses or expenses (including attorneys' fees) for death or injury to any person
or damage to any property whatsoever (including water tables and atmosphere) to
the extent arising or resulting in whole or in part, directly or indirectly,
from the presence or discharge of Hazardous Materials in, on, under, upon or
from the Demised Premises or the Improvements located thereon or from the
transportation or disposal of Hazardous Materials to or from the Demised
Premises, to the extent brought onto the Demised Premises by Tenant whether
knowingly or unknowingly, the standard herein being one of strict liability. For
purposes of the indemnity provided herein, any act or omission of Tenant or its
agents, employees, contractors or subcontractors (whether or not they are
negligent, intentional, willful or unlawful) shall be strictly attributable to
Tenant. Subject to Section 4.3(f), Tenant's obligations hereunder shall include,
without limitation, and whether foreseeable or unforeseeable, all costs of any
required or necessary repairs, clean-up or detoxification or decontamination of
the Demised Premises or the Improvements, and the presence and implementation of
any closure, remedial action or other required plans in connection therewith,
and shall survive the expiration of or early termination of the term of this
Lease. For purposes of the indemnity provided herein, any acts or omissions of
Tenant or its employees, agents, customers, sublessees, assignees, contractors
or subcontractors (whether or not they are negligent, intentional, willful or
unlawful) shall be strictly attributable to Tenant. Nothing in this Section 4.3
shall cause Tenant to be responsible for be for liabilities caused by Hazardous
Materials which migrate onto the Demised Premises from neighboring properties.
(e) Landlord may, at its expense, commission an environmental audit of
the Demised Premises at any time after prior written notice thereof to Tenant;
provided that such environmental audit does not unreasonably interfere with
Tenant's use of the Demised Premises, or any portion thereof, and provided
further that Landlord indemnifies, defends and holds harmless Tenant and its
officers, agents, employees and customers from and against any loss, liabilities
or damages to Tenant's machinery, equipment, fixtures and personal property, and
all liability, loss or damage arising from an injury to the property of Tenant,
or its officers, agents, employees or customers, and any death or personal
injury to any person or persons to the extent arising out of such
18
environmental audit except for liability, loss or damage caused by Tenant's
gross negligence or willful misconduct. However, should Tenant materially breach
any of its obligations set forth in this Section 4.3 in a manner that may expose
Landlord to material liability, then Landlord shall have the right to require
Tenant to undertake and submit to Landlord an environmental audit from an
environmental company reasonably acceptable to Landlord, which audit shall
evidence Tenant's compliance with this Section 4.3.
(f) Landlord represents and warrants that, as of the date of this
Lease, and limited to Landlord's actual knowledge, there are, and as of March 2,
1998 there will be, no Hazardous Materials located on the Demised Premises,
other than an as required for the normal operation of the Demised Premises and
in accordance with all Hazardous Materials Laws. Landlord shall indemnify,
defend (with counsel reasonably acceptable to Tenant), protect and hold Tenant
and each of Tenant's officers, directors, partners, shareholders, affiliates,
employees, agents, attorneys, successors and assigns free and harmless from and
against any and all claims, liabilities, damages, costs, penalties, forfeitures,
losses or expenses (including attorneys' fees) for death or injury to any person
or damage to any property whatsoever (including water tables and atmosphere)
arising or resulting in whole or in part, directly or indirectly, from the
presence of Hazardous Materials in, on, under, upon or from the Demised Premises
or the Improvements located thereon prior to March 2, 1998, or from the
transportation or disposal of Hazardous Materials to or from the Demised
Premises to the extent caused by Landlord whether knowingly or unknowingly, the
standard being one of strict liability.
(g) For purposes of the indemnity provided herein, any act or omission
of Landlord or its agents, employees, contractors or subcontractors (whether or
not they are negligent, intentional, willful or unlawful) shall be strictly
attributable to, Landlord. Subject to Section 4.3(f), Landlord's obligations
hereunder shall include, without limitation, and whether foreseeable or
unforeseeable, all costs of any required or necessary repairs, clean-up or
detoxification or decontamination of the Demised Promises or the Improvements,
and the presence and implementation of any closure, remedial action or other
required plans in connection therewith, and shall survive the expiration of or
early termination of the term of this Lease.
(h) The obligations of Landlord and Tenant under this Section 4.3 shall
survive the expiration or earlier termination of this Lease.
ARTICLE V
PAYMENT OF TAXES, ASSESSMENTS, ETC.
5.1 PAYMENT OF IMPOSITIONS.
(a) Except as provided to the contrary in this Section 5.1 below,
Tenant covenants and agrees to pay during the Term of this Lease, as Additional
Rent, and before any fine, penalty, interest or cost may be added thereto for
the nonpayment thereof, all real estate taxes, regular or special assessments,
water rates and charges, sewer rates and charges, including any sum or sums
19
payable for present or future sewer or water capacity, (except as set forth in
Section 2.5 above) charges for public utilities, street lighting, excise levies,
licenses, permits, inspection fees, other governmental charges and all other
charges or burdens of whatsoever kind and nature (including costs, fees and
expenses of complying with any restrictive covenants or similar agreements (e.g.
CC&R's, private assessment districts or owners' associations) to which the Land
is subject as of the date of March 2, 1998), incurred in the use, occupancy,
ownership, operation, leasing or possession of the Demised Premises, without
particularizing by any known name or by whatever name hereafter called, and
whether any of the foregoing be general or special, ordinary or extraordinary,
foreseen or unforeseen (all of which are sometimes herein referred to as
"Impositions"), which at any time during the Term may have been or may be
assessed or levied on the Demised Promises or any portion thereof or any
appurtenance thereto, rents or income therefrom, and such easements or rights as
may now or hereafter be appurtenant or appertain to the use of the Demised
Premises. Tenant shall pay the current portions of all special (or similar)
assessments which during the Term of this Lease shall be laid, assessed, levied
or imposed upon or become payable or become a lien upon the Demised Premises or
any portion thereof; provided, however, that if by law any special assessment is
payable (without default) or, at the option of the owner, may be paid (without
default) in installments (whether or not interest shall accrue on the unpaid
balance of such special assessment), Tenant may (and shall only be obligated to)
pay the same, in installments as the same respectively become payable and before
any fine, penalty, interest or cost may be added thereto for the nonpayment of
any such installment and the interest thereon.
(b) Tenant shall pay all Impositions whether heretofore or hereafter
levied or assessed upon the Demised Premises or any portion thereof, which are
due and payable for periods during the Term of this Lease, including any
Extension Term. Landlord shall pay all Impositions which are payable for periods
prior to March 2, 1998 and after the termination date of the Term of this Lease.
Provisions herein to the contrary notwithstanding, Landlord shall pay that
portion of the Impositions and installments of special assessments due and
payable in respect to the Demised Premises during the year in which the Initial
Term commences and the year in which the Term ends which the number of days in
said year not within the Term of this Lease bears to 365, and Tenant shall pay
the balance of said current Impositions and current installments of special
assessments during said years.
(c) Notwithstanding the foregoing provisions of Section 5.1 (a) and
(b), Tenant shall not be responsible for (and Landlord shall pay prior to
delinquency) any increase in ad valorem property taxes which might result from
the sale of the Demised Premises during the Term of the Lease to the extent such
property taxes result from the fact that the assessed value of the Demised
Premises exceeds the total cost (including the cost of the Land, Shell
Improvements, Tenant Improvements, "soft" costs, permits, site improvements,
etc.) of the Demised Premises.
5.2 TENANT'S RIGHT TO CONTEST IMPOSITIONS. Tenant shall have the right
at its own expense to contest the amount or validity, in whole or in part, of
any Imposition by appropriate proceedings diligently conducted in good faith;
provided, however, if the payment of such Imposition is necessary to properly
appeal such Imposition, Tenant shall pay such imposition before
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delinquency; and, provided further, if there is then an uncured Event of Default
hereunder, Tenant shall have first deposited with Landlord cash or a certificate
of deposit payable to Landlord issued by a national bank or federal savings and
loan association in the amount of the Imposition so contested and unpaid,
together with all interest and penalties which may accrue in Landlord's
reasonable judgment in connection therewith, and all charges that may or might
be assessed against or become a charge on the Demised Premises or any portion
thereof during the pendency of such proceedings. If there is then in an uncured
Event of Default hereunder and if during the continuance of such proceedings,
Landlord shall, from time to time, reasonably deem the amount deposited, as
aforesaid, insufficient, Tenant shall, upon demand of Landlord, make additional
deposits of such additional sums of money or such additional certificates of
deposit as Landlord may reasonably request. If Tenant is required to make such
additional deposits hereunder and Tenant fails to make same, the amount
theretofore deposited may be applied by Landlord to the payment, removal and
discharge of such Imposition, and the interest, fines and penalties in
connection therewith, and any costs, fees (including attorneys' fees) and other
liability (including costs incurred by Landlord) accruing in any such
proceedings. Upon the termination of any such proceedings, Tenant shall pay the
amount of such Imposition or part thereof, if any, as finally determined in such
proceedings, the payment of which may have been deferred during the prosecution
of such proceedings, together with any costs, fees, including attorneys' fees,
interest, penalties, fines and other liability in connection therewith, and upon
such payment, if Landlord had previously received any amounts or certificates as
a deposit, Landlord shall return all amounts or certificates deposited with it
with respect to the contest of such Imposition, as aforesaid, or, at the written
direction of Tenant, Landlord shall make such payment out of the funds on
deposit with Landlord and the balance, if any, shall be returned to Tenant.
Tenant shall be entitled to the refund of any Imposition, penalty, fine and
interest thereon received by Landlord which has been paid by Tenant or which has
been paid by Landlord but for which Landlord has been previously reimbursed in
full by Tenant. Landlord shall not be required to join in any proceedings
referred to in this Section 5.2 unless the provisions of any law, rule or
regulation at the time in effect shall require that such proceedings be brought
by or in the name of Landlord, in which event Landlord shall join in such
proceedings or permit the same to be brought in Landlord's name upon compliance
with such conditions as Landlord may reasonably require. Landlord shall not
ultimately be subject to any liability for the payment of any fees, including
attorneys' fees, costs and expenses in connection with such proceedings. Tenant
agrees to pay all such fees (including reasonable attorneys' fees), costs and
expenses or, on demand, to make reimbursement to Landlord for such payment for
fees reasonably incurred by Landlord in connection with such proceedings as
provided above.
5.3 LEVIES AND OTHER TAXES. If, at any time during the Term of this
Lease, any method of taxation shall be such that there shall be levied, assessed
or imposed on Landlord, or on the Base Rent or Additional Rent, or on the
Demised Premises, or any portion thereof, a capital levy, gross receipts tax,
transaction privilege tax or other tax on the rents received therefrom or a
franchise tax, or an assessment, levy or charge measured by or based in whole or
in part upon such rents, Tenant covenants to pay and discharge the same, it
being the intention of the parties hereto that the rent to be paid hereunder,
shall be paid to Landlord absolutely net, without deduction or charge of any
nature whatsoever, foreseeable or unforeseeable, ordinary or extraordinary, or
of any nature, kind
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or description, except as in this Lease otherwise expressly provided. Nothing in
this Lease contained shall require Tenant to pay any municipal, state or federal
net income, franchise, or excess profits taxes assessed against Landlord, or any
municipal, state or federal capital levy, estate, succession, inheritance or
transfer taxes of Landlord, or corporation franchise taxes imposed upon any
corporate owner of the fee of the Demised Premises nor shall anything in this
Lease require Tenant to pay any income tax of Landlord or any tax in the nature
of income and/or franchise tax or in lieu of income tax.
5.4 EVIDENCE OF PAYMENT. Tenant covenants to furnish Landlord, within
thirty (30) days after Landlord requests the same, official receipts of the
appropriate taxing authority, or other appropriate proof reasonably satisfactory
to Landlord, evidencing the payment of the same. The certificate, advice or ▇▇▇▇
of the appropriate official designated by law to make or issue the same or to
receive payment of any Imposition or other tax, assessment, levy or charge may
be relied upon by Landlord as sufficient evidence that such Imposition or other
tax, assessment, levy or charge is due and unpaid at the time of the making or
issuance of such certificate, advice or ▇▇▇▇.
5.5 ESCROW FOR TAXES AND ASSESSMENTS. At Landlord's written demand
after any Event of Default (as hereinafter defined) and for as long as such
Event of Default is uncured, Tenant shall pay to Landlord the known or estimated
yearly real estate taxes and assessments payable with respect to the Demised
Premises in monthly payments equal to one-twelfth (11 /12) of the known or
estimated yearly real estate taxes and assessments next payable with respect to
the Demised Premises. From time to time, Landlord may re-estimate the amount of
real estate taxes and assessments, and in such event Landlord shall notify
Tenant, in writing, of such re-estimate and fix future monthly installments for
the remaining period prior to the next tax and assessment due date in an amount
sufficient to pay the re-estimated amount over the balance of such period after
giving credit for payments made by Tenant on the previous estimate. If the total
monthly payments made by Tenant pursuant to this Section 5.5 shall exceed the
amount of payments necessary for said taxes and assessments, such excess shall
be credited on subsequent monthly payments of the same nature; but if the total
of such monthly payments so made under this paragraph shall be insufficient to
pay such taxes and assessments when due, then Tenant shall pay to Landlord such
amount as may be necessary to make up the deficiency. Payment by Tenant of real
estate taxes and assessments under this Section 5.5 shall be considered as
performance of such obligation under the provisions of Section 5.1 hereof.
5.6 LANDLORD'S RIGHT TO CONTEST IMPOSITIONS. In addition to the right
of Tenant under Section 5.2 to contest the amount or validity of Impositions,
Landlord shall also have the right, but not the obligation, to contest the
amount or validity, in whole or in part, of any Impositions not contested by
Tenant, by appropriate proceedings conducted in the name of Landlord or in the
name of Landlord and Tenant. If Landlord elects to contest the amount or
validity, in whole or in part, of any Impositions, such contests by Landlord
shall be at Landlord's expense; provided, however, that if the amounts payable
by Tenant for Impositions are reduced (or if a proposed increase in such amounts
is avoided or reduced) by reason of Landlord's contest of Impositions, Tenant
shall reimburse Landlord for the costs reasonably incurred by Landlord in
contesting such Impositions,
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but such reimbursements shall not be in excess of the amount saved by Tenant.
ARTICLE VI
INSURANCE
6.1 CASUALTY INSURANCE. Tenant, at its sole cost and expense, shall
obtain and continuously maintain in full force and effect during the Term of
this Lease (including any Extension Term), commencing with March 2, 1998,
policies of insurance covering the Demised Premises, including, without
limitation, any Buildings constructed, installed or located on the Demised
Premises, naming Landlord as an additional insured, against (a) loss or damage
by fire; (b) loss or damage from such other risks or hazards now or hereafter
embraced by an "Extended Coverage Endorsement, including, but not limited to,
windstorm, hail, explosion, vandalism, riot and civil commotion, damage from
vehicles, smoke damage, water damage and debris removal; W loss for flood if the
Demised Premises are in a designated flood or flood insurance area, (d) loss or
damage caused by earthquake, subject to standard deductibles (provided, however,
that (i) Tenant shall not be required to maintain earthquake insurance if it is
not reasonably obtainable and (ii) Tenant's financial responsibility for the
premium associated with earthquake insurance shall not exceed $75,000 per year
during the Initial Term or any Option Term, with Landlord having the option of
paying any excess premium); and (e) loss or damage from such other risks or
hazards of a similar or dissimilar nature which are now or may hereafter be
customarily insured against with respect to improvements similar in
construction, design, general location, use and occupancy to the Demised
Premises or which may be required by Landlord's Lender. At all times, such
insurance coverage shall be in an amount equal to one hundred percent (100%) of
the then "Full Replacement Cost" of the Improvements. "Full Replacement Cost"
shall be interpreted to mean the cost of replacing the Improvements, without
deduction for depreciation or wear and tear, including costs attributable to
improvements or upgrades to the Improvements required by changes in laws and
regulations governing zoning, public access and accommodation, workplace
conditions, public health or safety or similar matter, and it shall include, to
the extent reasonably obtainable, a reasonable sum for architectural,
engineering, legal, administrative and supervisory fees connected with the
restoration or replacement of the Improvements in the event of damage thereto or
destruction thereof. If a sprinkler system shall be located in the Improvements,
sprinkler leakage insurance shall be procured and continuously maintained by
Tenant at Tenant's sole cost and expense. Any deductible, self- insured
retention or similar limitation on coverage shall be submitted to Landlord for
its prior written approval, which shall be granted or withheld in Landlord's
reasonable discretion.
6.2 PUBLIC LIABILITY INSURANCE. From and after March 2, 1998 and
through the entire Term (including any Extension Term), Tenant, at its sole cost
and expense, shall obtain and continuously maintain in full force and effect
comprehensive general liability insurance against any loss, liability or damage
on, about or relating to the Demised Premises, or any portion thereof, with
limits of not less than Three Million Dollars ($3,000,000) in the event of
injury to one person, Five Million Dollars ($5,000,000) in respect of any one
accident or occurrence, and One Million Dollars $1,000,000) for property damage.
Any such insurance obtained and maintained by Tenant shall
23
name Landlord as an additional insured therein or shall include a "loss payee"
endorsement in favor of Landlord, and shall be obtained and maintained from and
with a reputable and financially sound insurance company authorized to issue
such insurance in the state in which the Demised Premises are located. Such
insurance shall to the extent reasonably obtainable specifically insure (by
contractual liability endorsement) Tenant's obligations under Section 20.3 of
this Lease.
6.3 OTHER INSURANCE.
(a) During the Term of this Lease, commencing with ▇▇▇▇▇ ▇, ▇▇▇▇,
▇▇▇▇▇▇, at its sole cost and expense, shall obtain and continuously maintain in
full force and effect boiler and pressure vessel (including, but not limited to,
pressure pipes, steam pipes and condensation return pipes) insurance, provided
the Buildings contains a boiler or other pressure vessel or pressure pipes.
Landlord shall be named as an additional insured "or loss payee in such policy
or policies of insurance.
(b) During the Term of this Lease commencing with ▇▇▇▇▇ ▇, ▇▇▇▇,
▇▇▇▇▇▇, at its sole cost and expense, shall obtain and continuously maintain, in
full force and effect, loss of use and business interruption or rental
interruption coverage for the payment for no less than one (1) year of (i) the
Base Rent and 00 those Impositions which will continue to be payable even during
a period when the Demised Premises are not operational.
(c) During the Term of this Lease, Tenant, at its sole cost and
expenses shall obtain and continuously maintain in full force and effect such
other insurance in such amounts against other insurable hazards which at the
time are commonly insured against in the case of promises and/or buildings or
improvements similar in construction, design, general location, use and
occupancy to the Demised Premises if required by Landlord's construction or
permanent lenders.
6.4 ADDITIONAL INSURANCE PROVISIONS. All policies of insurance required
by this Article VI shall comply with the following requirements:
(a) They shall be payable to Landlord and, if Landlord so requests
shall also be payable to any contract purchaser of the Demised Premises and/or
the holder of any mortgages now or hereafter becoming a lien on the fee of the
Demised Premises, or any portion thereof, as the interest of such purchaser or
holder appears pursuant to a standard named insured or mortgagee clause or as an
additional insured.
(b) They shall be maintained on an "occurrences" basis.
(c) They shall contain deductibles, self-insured retentions or similar
limitations on coverage only if previously submitted to Landlord for its prior
written approval, which shall be granted or withheld in Landlord's reasonable
discretion, subject at all times to the requirements of Landlord's Lender, whose
prior written approval shall also be required. In any event, such deductibles,
self-insured retentions or similar limitations on coverage shall no higher than
those
24
which are customarily maintained for such insurance (casualty or liability) in
connection with facilities similar to the Demised Premises.
(d) Tenant shall not, on Tenant's own initiative or pursuant to request
or requirement of any third party, take out separate insurance concurrent in
form or contributing in the event of loss with that required in this Section,
unless the requirements of subsection (a) above are satisfied. Tenant shall
immediately notify Landlord whenever any such separate insurance is taken out
and shall deliver to Landlord original certificates evidencing the same.
(e) Each policy required under this Article VI shall have attached
thereto (a) an endorsement that such policy shall not be cancelled and that the
coverage under such policy will not be materially changed without at least
thirty (30) days prior written notice to Landlord or any mortgagee, and (b) to
the extent reasonably obtainable an endorsement to the effect that the insurance
as to the interest of Landlord or any mortgagee shall not be invalidated by any
act or neglect of Landlord or Tenant.
(f) They shall be written with companies reasonably satisfactory to
Landlord and licensed in the state in which the Demised Promises are located.
Such certificates of insurance shall be in a form reasonably acceptable to
Landlord and shall be delivered to Landlord no fewer than thirty (30) days prior
to March 2, 1998 (or such earlier date as Landlord's Lender may require) and,
prior to expiration of such policy, new certificates of insurance shall be
delivered to Landlord not less than sixty (60) days prior to the expiration of
the then current policy term.
(g) They shall be obtained from companies duly licensed to transact
business in the state of California, and maintaining during the policy term a
"General Policyholders Rating' of at least "A" and financial category rating of
"Class W in "Best's Insurance Guide.'
6.5 WAIVER OF SUBROGATION. Landlord and Tenant hereby mutually waive
any and all rights of recovery against one another for real or personal property
loss or damage occurring to the Demised Premises, or any part thereof, or any
personal property therein from perils insured against under the insurance
maintained hereunder for the benefit of the respective parties, and to the
extent the proceeds of such insurance are actually recovered, and each shall use
commercially reasonable efforts to assure that such insurance permits waiver of
liability and contains a waiver of subrogation.
6.6 TENANT'S INDEMNIFICATION OF LANDLORD. Tenant may maintain insurance
coverage upon all personal property of Tenant or the personal property of others
kept, stored or maintained on the Demised Premises against loss or damage by
fire, windstorm or other casualties or causes for such amount as Tenant may
desire. To the extent Tenant maintains such insurance, Tenant agrees that such
policies shall, to the extent obtainable, name Landlord as an "additional
insured" and contain a waiver of subrogation clause as to Landlord.
6.7 UNEARNED PREMIUMS. Upon expiration or other termination of the Term
of this
25
Lease, the unearned premiums upon any insurance policies or certificates thereof
lodged with Landlord by Tenant shall, subject to the provisions of Article XIII
hereof, be payable to Tenant, provided that an Event of Default does not then
exist (or if an Event of Default does then exist, any excess over the amount
required to cure such default shall be so payable to Tenant).
6.8 BLANKET INSURANCE COVERAGE. Nothing in this Article VI shall
prevent Tenant from taking out insurance of the kind and in the amount provided
for under the preceding paragraphs of this Article VI under a blanket insurance
policy or policies (and certificates thereof reasonably satisfactory to Landlord
shall be delivered to Landlord) which may cover other properties owned, leased
or operated by Tenant as well as the Demised Premises; provided, however, that
any such policy of blanket insurance of the kind provided for shall (a) specify
therein the amounts thereof exclusively allocated to the Demised Premises (or
Tenant shall furnish Landlord and the holder of any fee mortgage with a written
statement from the insurers under such policies specifying the amounts of the
total insurance exclusively allocated to the Demised Promises), and M not
contain any clause which would result in the insured thereunder being required
to carry any insurance with respect to the property covered thereby in an amount
not less than any specific percentage of the Full Replacement Cost of such
property in order to prevent the insured therein named from becoming a
co-insurer of any loss with the insurer under such policy; and further provided,
however, that such policies of blanket insurance shall, as respects the Demised
Premises, contain the various provisions required of such an insurance policy by
the foregoing provisions of this Article VI.
ARTICLE VII
UTILITIES
7.1 PAYMENT OF UTILITIES. During the Term of this Lease, Tenant shall
pay, when due, all charges of every nature, kind or description for utilities
furnished to the Demised Premises or chargeable against the Demised Premises,
including, without limitation, all charges for water, sewage, heat, gas, light,
garbage, electricity, telephone, steam, power, or other public or private
utility services.
7.2 ADDITIONAL CHARGES. In the event that any charge or fee is required
after March 2, 1998 by the state in which the Demised Premises are located, or
by any agency, subdivision or instrumentality thereof, or by any utility company
furnishing services or utilities to the Demised Premises, or by any private
association or organization with jurisdiction over the Demised Promises, as a
condition precedent to furnishing or continuing to furnish utilities or services
to the Demised Promises, such charge or fee shall be deemed to be a utility
charge payable by Tenant. The provisions of this Section 7.2 shall include, but
not be limited to, any charges or fees for future water or sewer capacity to
serve the Demised Premises, any charges for the underground installation of gas
or other utilities or services subsequent to the installation thereof, and other
charges relating to the extension of or change in the facilities necessary to
provide the Demised Premises with adequate utility services. In the event that
Landlord has paid any such charge or fee after March 2, 1998, Tenant shall
reimburse Landlord for such utility charge.
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7.3 LANDLORD'S RESPONSIBILITY UTILITY HOOK-UP CHARGES AND FEES.
Notwithstanding anything contained in this Article VII to the contrary, (a) as
of March 2, 1998, all utilities contemplated by the Improvements shall be
hooked-up and fully operational and functional to the Demised Premises and all
capacity, hookup and similar charges shall have been paid by Landlord, except to
the extent they constitute Excess Shell Costs or Excess Tenant Improvement
Costs; and (b) if any utility or service charge or fee related to capital
improvements made during the Term of this Lease, whose tax depreciable life
extends beyond the termination date of this Lease, Tenant shall only pay the pro
rata portion of such charge or fee to the extent that such tax depreciable life
is within the Term of this Lease.
ARTICLE VIII
REPAIRS AND MAINTENANCE OF DEMISED PREMISES
8.1 TENANT'S RESPONSIBILITIES. Tenant shall, at its own expense, keep
the Demised Premises, and every part thereof, including, but not limited to, the
grounds, landscaped areas, truck parking and loading and dock areas, the roof
surface and roof membrane, drainage ▇▇▇▇▇▇, gutters, downspouts, glass, interior
and exterior portions of the Buildings, and the plumbing, heating,
air-conditioning, wiring, elevators and other mechanical systems therein, the
facilities thereof and all sidewalks, parking areas, driveways, passageways and
alleys adjacent thereto and other appurtenances thereunto belonging, in good
order, appearance, condition and repair, free of obstructions, dirt, rubbish,
snow and debris and so as to comply fully and at all times with all present and
future applicable governmental laws, rules and regulations, and covenants,
conditions and restrictions to which the Demised Premises are subject as of
March 2, 1998, and consistent with other comparable properties in the Market
Area. Tenant agrees to make all replacements and repairs to the Demised Premises
necessary to maintain the Demised Premises in the condition described in the
preceding sentence. Tenant, at its own expense, shall also seal (paint) the
exterior of the Buildings periodically during the Term (including any Extension
Term) of this Lease in accordance with the recommendations of the manufacturer
of the material used for the exterior of said Buildings. Tenant shall maintain
regular service contracts for all of the Demised Premises' (i) mechanical
systems (including HVAC), (ii) roof surface and membrane, and (iii) elevator(s),
and shall, upon Landlord's request, provide Landlord copies of such contracts or
any other maintenance or service contracts maintained by Tenant with respect to
the Demised Premises. Any such contract shall be terminable by Tenant (or its
successors, including Landlord or a Lender) on not less than thirty (30) days
notice to the contractor or shall provide that it does not bind a Lender. All
repairs, replacements and renewals shall be at least equal in quality and class
to the original work. Because Tenant is undertaking the responsibility for most
aspects of the ongoing maintenance of the Demised Promises, and because this
Lease contains specifically negotiated "self-help" provisions which allow
Tenant, under certain circumstances, to effect repairs which are Landlord's
responsibility and offset the cost of those repairs against Bass Rent, Tenant
waives any provisions of California law with respect to Landlord's obligations
for tenantability of the Demised Premises and Tenant's right to make repairs and
deduct the expenses of such repairs from Rent. When used in this Article VIII,
"repairs" shall include all necessary replacements, renewals, alterations,
additions and betterments.
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8.2 LANDLORD'S RESPONSIBILITIES; MANAGEMENT FEE. Landlord shall, at its
own expense; maintain and keep in good order, condition and repair (i) the
structural elements of the roof, (ii) exterior and load-bearing walls (except
for painting which shall be Tenant's responsibility), (iii) the Buildings
foundations and all underground utilities in good order, condition and repair,
except to the extent of damage or failure caused by Tenant (e.g. malfunction of
utilities caused by Tenant's use). In consideration of Landlord's
responsibilities under this Section 8.2, Tenant shall pay Landlord, as
Additional Rent, a monthly management fee equal to one percent (1%) of the then
applicable monthly Base Rent, which payment shall be due with each monthly
payment of Base Rent. In the event Landlord fails to maintain and keep in good
order, condition and repair the above- referenced items, and if such failure
continues for ten (10) business days following delivery of written notice by
Tenant to Landlord (or such longer period as may be required to complete such
repair if it is diligently and continuously pursued), Tenant may cause such item
or repair or maintenance to be made and offset the cost thereof against the Base
Rent next due.
8.3 SHARING OF EXPENSES OF CAPITAL ITEMS. Certain items of ongoing
repair and maintenance which are Tenant's responsibility under Section 8.1, may,
under generally acceptable accounting principles consistently applied, be
considered to have a reasonable useful life which would extend beyond the end of
the Term (a "Capital Item"). Landlord and Tenant shall share the expenses
associated with such Capital Items, as follows:
(a) Tenant shall pay all expenses related to Capital Items.
(b) At any time Tenant intends to incur an expense related to a Capital
Item, Tenant shall notify Landlord, in writing, and Landlord shall approve or
disapprove such expenditure, which approval shall not be unreasonably withheld
or delayed. Landlord shall not be required to approve any expenditure which is
not required for the maintenance and operation of the Demised Promises.
(c) At that time, Landlord and Tenant shall also agree on the "useful"
life of the Capital Item and, shall determine a level per-year useful life
allocation (the "Useful Life Allocation") of financial responsibility for that
Capital Item. By way of example only, financial responsibility for a Capital
Item which requires the expenditure of $50,000 and which has a five-year
"useful" life would be assigned a $10,000 per year Useful Life Allocation.
(d) The Useful Life Allocation shall be applied to the item of expense
related to the Capital Item, until the full amount of such expense has been
amortized, although Tenant shall have the responsibility for paying all expenses
related to Capital Items when incurred.
(e) If, at the end of the Term of Lease, including any Extension Term,
there remains any unamortized Useful Life Allocation(s), Landlord shall, within
thirty (30) days after the end of the Term, refund to Tenant, such unamortized
Useful Life Allocations, in cash.
8.4 TENANT'S WAIVER OF CLAIMS AGAINST LANDLORD. Except as otherwise
provided
28
in this Lease, Landlord shall not be required to furnish any services or
facilities or to make any repairs or alterations in, about or to the Demised
Premises or any improvements hereafter erected thereon and, subject to the same
limitations, Tenant hereby assumes the full and sole responsibility for the
condition, operation, repair, replacement, maintenance and management of the
Demised Promises and all improvements hereafter erected thereon.
8.5 PROHIBITION AGAINST WASTE. Tenant shall not do or suffer any waste,
damage, disfigurement or injury to the Demised Promises, or any improvements
hereafter erected thereon, or to the fixtures or equipment therein, or permit or
suffer any overloading of the floors or other use of the Improvements that would
place an undue stress on the same or any portion thereof beyond that for which
the same was designed.
ARTICLE IX
COMPLIANCE WITH APPLICABLE LAWS AND RESTRICTIONS
9.1 COMPLIANCE WITH APPLICABLE LAWS AND RESTRICTIONS. Throughout the
Term of this Lease, and at Tenant's sole cost and expense, Tenant shall promptly
comply or cause compliance with or remove or cure any violation caused by Tenant
of any and all present and future laws, rules and regulations applicable to the
Demised Premises and the appropriate departments, commissions, boards,
associations and officers enforcing them, and the orders, rules and regulations
of the Board of Fire Underwriters where the Demised Premises are situated, or
any other governmental body now or hereafter constituted exercising lawful or
valid authority over the Demised Premises, or any portion thereof, or exercising
authority with respect to the use or manner of use of the Demised Premises,
whether or not the compliance, curing or removal of any such violation and the
costs and expenses necessitated thereby shall have been foreseen or unforeseen,
ordinary or extraordinary, and whether or not the same shall be presently within
the contemplation of Landlord or Tenant or shall involve any change of
governmental policy or require structural or extraordinary repairs, alterations
or additions by Tenant and irrespective of the costs thereof. Tenant shall also
comply with, observe and perform all provisions and requirements of all policies
of insurance at any time in force with respect to the Demised Premises and
required to be obtained and maintained under the terms of Article VI hereof, and
Tenant shall comply with all development permits issued by governmental
authorities issued in connection with development of the Demised Premises,
copies of which shall be supplied to Tenant by Landlord promptly after issuance.
Tenant acknowledges that the Land, and thereby the Demised Premises, are or
shall be subject to the following additional covenants, restrictions and
conditions with which Tenant shall comply throughout the term of this Lease to
the same extent as provided above with the covenants, conditions, restrictions,
easements and other matters of record as of the date of this Lease. Furthermore,
Tenant acknowledges that after the execution of this Lease it is Landlord's
intention to allow the Land to be included within the Sorrento Rim Business Park
(the "Business Park") and an association of owners of nearby property which is
currently expected to be known as the "Sorrento Rim Owner's Association" (the
"Association"). Tenant has previously reviewed drafts of the Articles of
Incorporation and Bylaws of the Association and a draft of the Declaration of
Covenants,
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Conditions and Restrictions for the Business Park and hereby agrees that this
Lease shall be subject to covenants, conditions and restrictions on
substantially the same terms as the CC&R's and will execute such documents as
may be reasonably necessary to subject this Lease thereto.
9.2 TENANT'S OBLIGATIONS. Notwithstanding that it may be usual and
customary for Landlord to assume responsibility and performance of any or all of
the obligations set forth in this Article IX, and notwithstanding any order,
rule or regulation directed to Landlord to perform, Tenant hereby assumes such
obligations because, by nature of this Lease, or as expressly provided under any
other provision hereof, the rents and income derived from this Lease by Landlord
are "net" rentals not to be diminished by any expense incident to the ownership,
occupancy, use, leasing or possession of the Demised Premises or any portion
thereof (except as expressly provided in this Lease).
9.3 TENANT'S RIGHT TO CONTEST LAWS AND ORDINANCES. After prior written
notice to Landlord, Tenant, at its sole cost and expense and without cost or
expense to Landlord, shall have the right to contest the validity or application
of any Applicable Laws or Restrictions in the name of Tenant or Landlord, or
both, by appropriate legal proceedings diligently conducted but only if
compliance with the terms of any such law or ordinance pending the prosecution
of any such proceeding, may legally be delayed without incurring of any material
lien, charge or liability of any kind against the Demised Premises, or any
portion thereof, and without subjecting Landlord or Tenant to any material
liability, civil or criminal, for failure so to comply therewith until the final
determination of such proceeding; provided, however, if any lien, charge or
civil liability would be incurred by reason of any such delay, Tenant
nevertheless, on the prior written consent of Landlord, which consent shall not
be unreasonably withheld, may contest as aforesaid and delay as aforesaid,
provided that such delay would not subject Tenant or Landlord to criminal
liability and Tenant (a) furnishes Landlord security, reasonably satisfactory to
Landlord, against any loss or injury by reason of any such contest or delay, (b)
prosecutes the contest with due diligence and in good faith, and (c) agrees to
indemnify, defend and hold harmless Landlord and the Demised Premises from any
charge, liability or expense whatsoever. The security furnished to Landlord by
Tenant shall be in the form of a cash deposit or a Certificate of Deposit issued
by a national bank or federal savings and loan association payable to Landlord.
Said deposit shall be held, administered and distributed in accordance with the
provisions of Section 5.2 hereof relating to the contest of the amount or
validity of any Imposition. If necessary or proper to permit Tenant so to
contest the validity or application of any such law or ordinance, Landlord
shall, at Tenant's sole cost and expense, including reasonable attorneys' fees
incurred by Landlord, execute and deliver any appropriate papers or other
documents; provided, however, that Landlord shall not be required to execute any
document or consent to any proceeding which would result in the imposition of
any cost, charge, expense or penalty on Landlord or the Demised Premises.
ARTICLE X
MECHANIC'S LIENS AND OTHER LIENS
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10.1 MECHANIC'S LIENS.
(a) Tenant shall keep the Demised Premises free from any liens arising
out of work performed, materials furnished and obligations incurred by Tenant.
Tenant covenants and agrees that any mechanic's lien filed against the Demised
Premises for work claimed to have been done for, or materials claimed to have
been furnished to, Tenant shall be discharged by Tenant, by bond or otherwise,
within thirty (30) days after the filing thereof, at the sole cost and expense
of Tenant. This provision does not apply to any claim or lien arising out of the
original construction of the Demised Premises by Landlord pursuant to this
Lease.
(b) Tenant shall have the right to contest with due diligence the
validity or amount of any lien or claimed lien created by Tenant if Tenant shall
give to Landlord such security as Landlord may reasonably require to insure
payment thereof and prevent any sale, foreclosure or forfeiture of the Demised
Premises or any portion thereof by reason of such nonpayment. On final
determination of the lien or claim for lien, Tenant shall immediately pay any
judgment rendered with all proper costs and charges and shall have the lien
released or judgment satisfied at Tenant's own expense, and if Tenant shall fail
to do so, Landlord may at its option, pay any such final judgment and clear the
Demised Premises therefrom. If Tenant shall fail to contest with due diligence
the validity or amount of any such lien or claimed lien created by Tenant, or to
give Landlord security as hereinabove provided, Landlord may, but shall not be
required to, contest the validity or amount of any such lien or claimed lien or
settle or compromise the same without inquiring into the validity of the claim
or the reasonableness of the amount thereof. Should any lien be filed against
the Demised Premises or should any action of any character affecting the title
thereto be commenced, Tenant shall give to Landlord written notice thereof as
soon as notice of such lien or action comes to the knowledge of Tenant.
(c) Should Tenant fail to discharge any such lien, Landlord may, at
Landlord's election, pay such claim or post a bond or otherwise provide security
to eliminate the lien as a claim against title, and the cost thereof shall be
immediately due from Tenant as Additional Rent. Tenant shall not suffer or
permit any mechanic's lien or other lien to be filed against the Demised
Premises, or any portion thereof, by reason of work, labor, skill, services,
equipment or materials supplied or claimed to have been supplied to the Demised
Premises at the request of Tenant, or anyone holding the Demised Premises, or
any portion thereof, through or under Tenant.
(d) All materialmen, contractors, artisans, mechanics, laborers and any
other person now or hereafter furnishing any labor, services, materials,
supplies or equipment to Tenant with respect to the Demised Premises, or any
portion thereof, are hereby charged with notice that they must look exclusively
to Tenant to obtain payment for the same. Notice is hereby given that Landlord
shall not be liable for any labor, services, materials, supplies, skill,
machinery, fixtures or equipment furnished or to be furnished to Tenant upon
credit, and that no mechanic's lien or other lien for any such labor, services,
materials, supplies, machinery, fixtures or equipment shall attach to or affect
the estate or interest of Landlord in and to the Demised Promises or any portion
thereof.
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10.2 LANDLORD'S INDEMNIFICATION. The provisions of Section 10. 1 above
shall not apply to any mechanic's lien or other lien for labor, services,
materials, supplies, machinery, fixtures or equipment furnished to the Demised
Premises in the performance of Landlord's obligations to construct the
Improvements required by the provisions of Article 11 hereof or in the
performance of Landlord's other obligations under this Lease, and Landlord does
hereby agree to indemnify and defend Tenant against and save Tenant and the
Demised Premises and any portion thereof harmless from all losses, costs,
damages, expenses, liabilities and obligations, including, without limitation,
reasonable attorneys' fees resulting from the assertion, filing, foreclosure or
other legal proceedings with respect to any such mechanic's lien or other lien.
10.3 REMOVAL OF LIENS. Except as otherwise provided for in this Article
X, Tenant shall not create, permit or suffer, and shall promptly discharge and
satisfy of record, any other lien, encumbrance, charge, security interest or
other right or interest which shall be or become a lien, encumbrance, charge or
security interest upon the Demised Premises, or any portion thereof, or the
income therefrom, or on the interest of Landlord or Tenant in the Demised
Premises, or any portion thereof, if such lien, encumbrance, charge, security
interest or other right or interest shall result from the actions of Tenant or
others acting on the behalf of or for Tenant (other than Landlord).
ARTICLE XI
LANDLORD'S PERFORMANCE OF TENANT'S OBLIGATIONS
In the event Tenant fails to pay or discharge any Additional
Obligation, Landlord may, but shall not be obligated to, in addition to its
remedies in an Event of Default, provide a factually correct written notice of
such failure, and if Tenant still fails to cure such failure within ten (10)
days after Tenant's receipt of such notice, Landlord may pay or perform the
same, and in that event Tenant shall within ten (10) days after invoice
reimburse Landlord therefor (together with interest at the Maximum Rate of
Interest from the date Landlord made such payment), which amount shall be deemed
Additional Rent; provided, however, that Landlord shall be entitled to pay such
amount without prior notice to Tenant if Landlord reasonably believes that any
further delay would expose Landlord or the Demised Premises to (i) substantial
civil or criminal penalties, (ii) a potential default under a mortgage, deed of
trust or similar obligation, or (iii) lack of insurance coverage as required
hereunder, or is otherwise an emergency. Nothing herein contained shall be
deemed as a waiver or release of Tenant from any obligation of Tenant contained
in this Lease.
ARTICLE XII
DEFAULTS OF TENANT
12.1 EVENTS OF DEFAULT. Any one or more of the following events shall
be an event of default by Tenant ("Event of Default") under this Lease:
(a) Tenant fails to pay any Base Rent or Additional Rent or any other
sum
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required by this Lease to be paid by Tenant when the same becomes due and
payable and five (5) days has elapsed following written notice from Landlord of
such failure to pay; or
(b) Tenant fails to perform or comply with any other term hereof, and
such failure shall continue for more than ten (10) days after notice thereof
from Landlord, and Tenant shall not within such period commence with due
diligence and dispatch the curing of such default, or, having so commenced,
shall thereafter fail or neglect to prosecute or complete with due diligence and
dispatch the curing of such default; or
(c) Tenant makes a general assignment for the benefit of creditors or
admits in writing its inability to pay its debts as they become due or files a
petition in bankruptcy, or is adjudicated a bankrupt or insolvent, or files a
petition seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future statute,
law, or regulation, or files an answer admitting or fails to reasonably contest
the material allegations of a petition filed against it in any such proceeding,
or seeks or consents to or acquiesce in the appointment of any trustee, receiver
or liquidator of Tenant or any material part of its properties; or
(d) Within ninety (90) days after the commencement of any proceeding
against Tenant seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, such proceeding has not been dismissed, or
if, within ninety (90) days after the appointment without the consent or
acquiescence of Tenant, of any trustee, receiver or liquidator of Tenant or of
any material part of its properties, such appointment has not been vacated; or
(e) Tenant permits the abandonment or non-occupancy of the Demised
Premises; or
(f) Tenant sublets, assigns, mortgages, pledges, transfers or otherwise
encumbers or disposes of its interest in the Demised Premises or this Lease, in
whole or in part, in violation of Section 15.1 hereof; or
(g) Any default under any Guaranty delivered to Landlord hereunder.
12.2 LANDLORD'S REMEDIES. Upon the occurrence of an Event of Default,
Landlord, at its option, without further notice or demand to Tenant, shall have,
in addition to all other rights and remedies provided in this Lease, at law or
in equity, the option to pursue any one or more of the following remedies, each
and all of which shall be cumulative and nonexclusive, without any notice or
demand whatsoever:
(a) Terminate this Lease, in which event Tenant shall immediately
surrender the Demised Promises to Landlord, and if Tenant fails to do so,
Landlord may, without prejudice to any other remedy which it may have for
possession or arrearages in Base Rent or Additional Rent, enter
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upon and take possession of the Demised Premises and expel or remove Tenant and
any other person who may be occupying the Demised Premises or any part thereof,
without being liable for prosecution or any claim or damages therefor; and
Landlord may recover from Tenant the following:
(i) The worth at the time of award of any unpaid Base Rent and
Additional Rent which has been earned at the time of such termination; plus
(ii) The worth at the time of award of the amount by which the
unpaid Base Rent and Additional Rent which would have been earned after
termination until the time of award exceeds the amount of such rental loss that
Tenant proves could have been reasonably avoided; plus
(iii) The worth at the time of award of the amount by which the
unpaid Base Rent and Additional Rent for the balance of the Lease Term after the
time of award exceeds the amount of such rental loss that Tenant proves could
have been reasonably avoided; plus
(iv) Any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its obligations
under this Lease or which in the ordinary course of things would be likely to
result therefrom; and
(v) Such other amounts in addition to or in lieu of the foregoing
as may be permitted from time to time by applicable law.
(b) If Landlord does not elect to terminate this Lease on account of
any default by Tenant, Landlord may, from time to time, without terminating this
Lease, enforce all of its rights and remedies under this Lease, including the
right to recover all Base Rent and Additional Rent as they become due.
(c) The term "Rent" as used in this Section 12.2 shall be deemed to be
and to mean all sums of every nature required to be paid by Tenant pursuant to
the terms of this Lease, whether to Landlord or to others. As used in
subsections (i) and (ii), above, the "worth at the time of award' shall be
computed at the Maximum Rate of Interest. As used in subsection (iii), above,
the "worth at the time of award" shall be computed by discounting such amount at
the discount rate of the Federal Reserve Bank of San Francisco at the time of
award plus one percent (1%). Nothing herein shall be deemed to relieve Landlord
of its obligation to mitigate its damages following an Event of Default.
12.3 NEW LEASE FOLLOWING TERMINATION. In the event Landlord elects to
terminate this Lease and relet the Premises, it may execute any new lease in its
own name. Tenant hereunder shall have no right or authority whatsoever to
collect any Base Rent, Additional Rent or other sums from such tenant. The
proceeds of any such reletting shall be applied as follows:
(a) First, to the payment of any indebtedness other than Base Rent or
Additional
34
Rent due hereunder from Tenant to Landlord, including but not limited to storage
charges or brokerage commissions owing from Tenant to Landlord as the result of
such reletting;
(b) Second, to the payment of the costs and expenses of reletting the
Premises, including alterations and repairs which Landlord deems reasonably
necessary and advisable, and reasonable attorneys' fees incurred by Landlord in
connection with the retaking of the Demised Premises and such reletting;
(c) Third, to the payment of Base Rent, Additional Rent and other
charges due and unpaid hereunder; and
(d) Fourth, to the payment of future Base Rent, Additional Charges and
other damages payable by Tenant under this Lease.
12.4 CUMULATIVE RIGHTS; NO WAIVER. All rights, options and remedies of
Landlord contained in this Lease shall be construed and held to be non-exclusive
and cumulative. Landlord shall have the right to pursue any or all of such
remedies or any other remedy or relief which may be provided by law, whether or
not stated in this Lease. No waiver of any Event of Default of Tenant hereunder
shall be implied from the acceptance by Lender of any payments due hereunder
(except with respect to the amount so collected) or any omission by Landlord
party to take any action on account of such Event of Default if such Event of
Default persists or is repeated, and no express waiver shall affect defaults
other than as specified in said waiver.
12.5 SURRENDER OF DEMISED PREMISES. Upon any expiration or termination
of this Lease, Tenant shall quit and peaceably surrender the Demised Premises
and all portions thereof to Landlord, and Landlord may, upon or at any time
after any such expiration or termination and without further notice, enter upon
and reenter the Demised Premises and all portions thereof and possess and
repossess itself thereof by force, summary proceeding, ejectment or otherwise,
and may dispossess Tenant and remove Tenant and all other persons and property
from the Demised Premises and all portions thereof and may have, hold and enjoy
the Demised Premises and the right to receive all rental and other income of and
from the same.
12.6 INTEREST ON UNPAID AMOUNTS. If Tenant shall commit an Event of
Default, Landlord may cure the same, but shall not be required to do so, and in
exercising any such right, may employ counsel and pay necessary and incidental
costs and expenses, including reasonable attorneys' fees. All reasonable sums so
paid by Landlord, and all reasonable and necessary costs and expenses, including
reasonable attorneys' fees, in connection with the performance of any such act
by Landlord, together with interest thereon at the Maximum Rate of Interest from
the date of making such expenditure by Landlord, shall be deemed Additional Rent
hereunder and, except as is otherwise expressly provided herein, shall be
payable to Landlord within ten (10) days after written demand, and Tenant
covenants to pay any such sum or sums, with interest as aforesaid, and Landlord
shall have, in addition to any other right or remedy of Landlord, the same
rights and remedies in the event of nonpayment thereof by Tenant as in the case
of default by Tenant in the payment of monthly Base.
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Rent. Landlord shall not be limited in the proof of any damages which Landlord
may claim against Tenant arising out of or by reason of Tenant's failure to
provide and keep in force insurance as aforesaid, to the amount of the insurance
premium or premiums not paid or not incurred by Tenant, and which would have
been payable upon such insurance, but Landlord shall also be entitled to recover
as damages for such breach the uninsured amount of any loss (to the extent of
any deficiency between the dollar limits of insurance required by the provisions
of this Lease and the dollar limits of the insurance actually carried by Tenant)
and reasonable costs and expenses, including reasonable attorneys' fees,
suffered or incurred by reason thereof occurring during any period when Tenant
shall have failed or neglected to provide insurance as aforesaid.
ARTICLE XIII
DESTRUCTION AND RESTORATION
13.1 DESTRUCTION AND RESTORATION.
(a) Tenant covenants and agrees that, in case of damage to or
destruction of the Improvements during the Term, whether by fire or otherwise,
subject to the provisions of subsection (b), below, Tenant shall make sufficient
funds available to Landlord, and subject to Tenant providing such sufficient
funds, Landlord shall promptly restore, repair, replace and rebuild the same as
nearly as possible to the condition that the same were in immediately prior to
such damage or destruction with such changes or alterations as may be reasonably
acceptable to Landlord and Tenant or required by Applicable Land Use Laws and
Restrictions then in effect. Tenant shall immediately give Landlord written
notice of such damage or destruction upon Tenant's or any assignee's or
subtenant's knowledge of the occurrence thereof and specify in such notice, in
reasonable detail, the extent thereof. Such restorations, repairs, replacements,
rebuilding, changes and alterations, including the cost of temporary repairs for
the protection of the Demised Premises, or any portion thereof, pending
completion thereof are sometimes hereinafter referred to as the "Restoration."
Landlord shall be entitled to recover all "soft" costs incurred in connection
with Landlord's performance of the Restoration including a fee competitive with
others providing similar services. The Restoration shall be carried on and
completed in accordance with the provisions and conditions of Section 13.2
hereof.
(b) If the amount of the insurance proceeds recovered from the policy
or policies maintained (or required to be maintained) by Tenant, as described in
Article VI of this Lease, is reasonably deemed insufficient by a qualified
contractor, reasonably acceptable to Tenant and Landlord (or Landlord's lender,
as the case may be) to complete the Restoration of such Improvements (exclusive
of Tenant's personal property and trade fixtures which shall be restored,
repaired or rebuilt, at Tenant's discretion, out of Tenant's separate funds),
Tenant shall, upon request of Landlord (or by Landlord's lender, as the case may
be), deposit with Landlord (or Landlord's Lender or insurance carrier, if
required) a cash deposit equal to fifty percent (50%) of W the reasonable
estimate of the amount necessary to complete the Restoration of such
Improvements less (ii) the amount of such insurance proceeds available (the
"UNFUNDED RESTORATION COST"), with Landlord being responsible for the remaining
fifty percent (50%) of the Unfunded Restoration Cost;
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provided that Landlord shall have no responsibility for any Unfunded Restoration
Cost and Tenant shall be fully responsible for any Unfunded Restoration Cost to
the extent fl) it is the result of Tenant's failure to maintain the insurance
required to be maintained pursuant to Article VI hereof, (i) sufficient
insurance proceeds are not available due to an act or omission by Tenant, or
(iii) the amount of the Unfunded Restoration Cost is less than Fifty Thousand
Dollars ($50,000). Notwithstanding the foregoing, if Landlord is prohibited from
effecting the Restoration of the Demised Premises due to applicable governmental
laws, rules or regulations then in effect, Landlord shall not be required to
effect such Restoration and this Lease shall terminate. The provisions of this
Article XIII shall be subject to and superseded by the contrary requirements of
any Lender as contained in any mortgage, deed of trust, ground lease or similar
instrument of which Tenant has actual or constructive notice.
13.2 APPLICATION OF INSURANCE PROCEEDS.
(a) All moneys recovered from the insurance policy or policies
maintained (or required to be maintained) by Tenant, shall be paid directly to
Landlord (or hold by Landlord's lender, if required) on account of such damage
or destruction. Such amounts, less the reasonable costs, if any, incurred by
Landlord in recovering such funds, shall be applied to the payment of the costs
of the Restoration and shall be paid out from time-to-time as the Restoration
progresses upon the written request of Tenant, accompanied by a certificate of
the architect or a qualified professional engineer in charge of the Restoration
stating that as of the date of such certificate (a) the sum requested is justly
due to the contractors, subcontractors, materialmen, laborers, engineers,
architects, or persons, firms or corporations furnishing or supplying work,
labor, services or materials for such Restoration, and when added to all sums
previously paid out does not exceed the value of the Restoration performed to
the date of such certificate by all of said parties; M except for the amount, if
any, stated in such certificates to be due for work, labor, services or
materials, there is no outstanding indebtedness known to the person signing such
certificate, after due inquiry, which is then due for work, labor, services or
materials in connection with such Restoration, which, if unpaid, might become
the basis of a mechanic's lien or similar lien with respect to the Restoration
or a lien upon the Demised Premises, or any portion thereof; and (c) the costs,
as estimated by the person signing such certificate, of the completion of the
Restoration required to be done subsequent to the date of such certificate in
order to complete the Restoration do not exceed the sum of the remaining
insurance moneys, plus the amount deposited by the parties (as applicable) after
payment of the sum requested in such certificate.
(b) Subject to the provisions of Section 13.1 (b), hereof, if the
insurance moneys and such other sums, if any, deposited with Landlord (or with
Landlord's lender) pursuant to Section 13.1 (a) or (b) hereof, shall be
insufficient to pay the entire costs of the Restoration, Tenant agrees to pay
any deficiency promptly upon demand. Upon completion of the Restoration and
payment in full thereof by Tenant, Landlord shall, within a reasonable period of
time, turn over to Tenant all insurance moneys or other moneys then remaining
upon the parties' joint, good-faith determination that the Restoration has been
paid for in full and the damaged or destroyed Buildings and other Improvements
repaired, restored or rebuilt as nearly as possible to the condition they were
in
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immediately prior to such damage or destruction, or with such changes or
alterations as may be made in conformity with Section 13.1 and Article XIX
hereof.
13.3 CONTINUANCE OF TENANT'S OBLIGATIONS. Except as provided for in
this Section 13.3 and in Section 13.6, no destruction of or damage to the
Demised Premises, or any portion thereof, by fire, casualty or otherwise shall
permit Tenant to surrender this Lease or shall relieve Tenant from its liability
to pay to Landlord the Base Rent and Additional Rent payable under this Lease or
from any of its other obligations under this Lease, and Tenant waives any rights
now or hereafter conferred upon Tenant by present or future law or otherwise to
quit or surrender this Lease or the Demised Premises, or any portion thereof, to
Landlord or to any suspension, diminution, abatement or reduction of rent an
account of any such damage or destruction.
13.4 AVAILABILITY OF INSURANCE PROCEEDS. To the extent that any
insurance moneys which would otherwise be payable and used in the Restoration of
the damaged or destroyed Improvements are paid to any mortgagee of Landlord and
applied in payment of or reduction of the sum or sums secured by any such
mortgage or mortgages made by Landlord on the Demised Premises, Landlord shall
make available, for the purpose of Restoration of such Improvements, an amount
equal to the amount payable to its mortgagee out of such proceeds, and such sum
shall be applied in the manner provided in Section 13.2 hereof.
13.5 COMPLETION OF RESTORATION. The foregoing provisions of this
Article XIII apply only to damage or destruction of the Improvements by fire,
casualty or other cause occurring after March 2, 1998. Any such damage or
destruction occurring prior to such time shall be restored, repaired, replaced
and rebuilt by Landlord.
13.6 TERMINATION OF LEASE. If, within twelve (12) months prior to the
expiration of the term of this Lease, the Improvements shall be destroyed or
damaged to such an extent that the Restoration thereof is reasonably estimated
to take more than sixty (60) days to complete, Tenant shall compute the amount
of the net proceeds of the insurance resulting therefrom (to be collected and
held by Landlord (or Landlord's lender)), and, provided that no Event of Default
of Incipient Default is then in existence, and further provided that Tenant has
fully and properly maintained the insurance required to be maintained hereunder,
if Tenant shall be unable or unwilling to restore such damage or destruction for
occupancy by Tenant, Tenant shall, within thirty (30) days following the
occurrence of such destruction or damage, notify Landlord, in writing, of such
fact, which notice shall be accompanied by a detailed statement of the nature
and extent of such damage or destruction, detailed estimates of the total cost
of Restoration, a statement of the amount which may be required to restore such
damage or destruction, and a statement of the amount of insurance proceeds which
will be available to restore such damage or destruction. Tenant shall hive the
option, at that time, to terminate this Lease and surrender the Demised Premises
to Landlord by a notice, in writing, addressed to Landlord, specifying such
election accompanied by Tenant's payment of the balance of the Base Rent and
Additional Rent due for the remainder of the term of this Lease and other
charges hereafter specified in this Section 13.6, provided that Tenant shall be
entitled to a credit against such amount for the amount of loss of use and
business interruption insurance Tenant which
38
is or will be actually paid to Landlord. Upon the giving of such notice and the
payment of such amounts (or evidence that such payment will be made), the term
of this Lease shall cease and come to an end on a day to be specified in
Tenant's notice, which date shall not be more than thirty (30) days after the
date of delivery of such notice by Tenant to Landlord. In such event Landlord
shall be entitled to the proceeds of all insurance required to be maintained by
Tenant hereunder and Tenant shall execute all documents reasonably requested by
Landlord to allow such proceeds to be paid to Landlord or as Landlord may
otherwise direct (e.g. to Landlord's lender).
ARTICLE XIV
CONDEMNATION
14.1 CONDEMNATION OF ENTIRE DEMISED PREMISES. If, during the Initial
Term of this Lease or any extension or renewal thereof, the entire Demised
Premises or the entire Buildings shall be taken as the result of the exercise of
the power of eminent domain (hereinafter referred to as the "Proceedings"), this
Lease and all right, title and interest of Tenant hereunder shall cease and come
to an end on the date of vesting of title pursuant to such Proceedings. In any
taking of the Demised Premises, or any portion thereof, whether or not this
Lease is terminated as in this Article provided, Tenant shall not be entitled to
any portion of the award for the taking of the Demised Premises or damage to the
Improvements, except as otherwise provided in Section 14.3 with respect to the
restoration of the Improvements, and Tenant hereby waives any right it now has
or may have under present or future law to receive any separate award of damages
for its interest in the Demised Promises or any portion thereof, except that
Tenant shall have, nevertheless, the limited right to prove in the Proceedings
and to receive any award which may be made for damages to or condemnation of
Tenant's movable trade fixtures and equipment or alterations to the Demised
Premises for which Tenant has directly paid (i.e. not Tenant Improvements paid
for with the Tenant Improvements Allowance), for goodwill, and for Tenant's
relocation costs in connection therewith.
14.2 PARTIAL CONDEMNATION/TERMINATION OF LEASE. If, during the Term of
this Lease, an amount of the entire Demised~ Premises is taken in a Proceeding
which is less than the entire Demised Premises but is so much that the utility
and functionality of the Demised Premises for Tenant's intended use (as
described in Section 4. 1, hereof) is materially and adversely affected
(including as a result of the taking of a portion of the area of the Demised
Premises used for vehicular parking), notwithstanding the restoration of the
Demised Premises as provided below, Tenant may, at its option, and subject to
the requirements of this Section 14.2 terminate this Lease as to the remainder
of the Demised Premises not so taken. Notwithstanding the foregoing, Tenant
shall not have the right to terminate this Lease pursuant to the preceding
sentence unless (a) the business of Tenant conducted in the portion of the
Demised Premises taken cannot reasonably be carried on with substantially the
same utility and functionality in the remainder of the Demised Promises, and (b)
Tenant (or Landlord for Tenant) cannot construct or secure on the Demised
Premises substantially similar space to the space so taken and as a
substantially integrated whole with the remaining portion of the Demised
Promises. Furthermore, Tenant may terminate this Lease following such a taking
if (i) the remainder of the Demised Premises cannot be restored as described
39
in this Section 14.2 within one hundred eighty 0 80) days, or (ii) Tenant is
deprived of the use of the Demised Premises for more than ninety (90)
consecutive days, following the date of vesting of title in such Proceedings.
Such termination as to the remainder of the Demised Premises shall be effected
by notice in writing given not more than thirty (30) days after the date of
vesting of title in such Proceedings, and shall specify a date no more than
thirty (30) days after the giving of such notice as the date for such
termination. Upon the date specified in such notice, the Term of this Lease, and
all right, title and interest of Tenant hereunder, shall cease and come to an
and. If this Lease is terminated as provided in this Section 14.2, Landlord
shall be entitled to and shall receive the total award made in such Proceedings,
Tenant hereby assigning any interest in such award, damages, and compensation to
Landlord, and Tenant hereby waiving any right Tenant now has or may have under
present or future law to receive any separate award of damages for its interest
in the Demised Premises or any portion thereof or its interest in this Lease,
except as otherwise provided in Section 14.1. The right of Tenant to terminate
this Lease as provided in this Section 14.2, shall not cure or otherwise release
Tenant from any then existing breach of Tenant's performance of any of the
terms, covenants or conditions of this Lease an its part to be performed. In the
event that Tenant elects not to terminate this Lease as to the remainder of the
Demised Premises, the rights and obligations of Landlord and Tenant shall be
governed by the provisions of Section 14.3 hereof.
14.3 PARTIAL CONDEMNATION /CONTINUATION OF LEASE. If this Lease is not
terminated as provided in Section 14.2 hereof, then this Lease shall, upon
vesting of title in the Proceedings, terminate as to the parts so taken, and
Tenant shall have no claim or interest in the award, damages, consequential
damages and compensation, or any part thereof except as otherwise provided in
Section 14.1, Tenant hereby waiving any right Tenant now has or may have under
present or future law to receive any separate award of damages for its interest
in the Demised Premises or any portion thereof or its interest in this Lease,
except as otherwise provided in Section 14.1 and except that Tenant shall have
the right to apply to Landlord for reimbursement as hereinafter provided from
such funds as specified in this Section 14.3. The net amount of the award (after
deduction of all costs and expenses, including attorneys' fees) shall be held by
Landlord (or Landlord's lender) and applied as hereinafter provided. Landlord,
in such case, covenants and agrees, at Landlord's sole cost and expense promptly
to restore that portion of the Improvements on the Demised Premises not so taken
to a complete architectural and mechanical unit for the use and occupancy of
Tenant as provided in this Lease. In the event that the net amount of the award
(after deduction of all costs and expenses, including attorneys' fees) that may
be received by Landlord in any such Proceedings for physical damage to the
Improvements as a result of such taking, and held by Landlord (or Landlord's
lender) for restoration of the Demised Premises, is insufficient to pay all
costs of such restoration work, Landlord shall pay the difference. Tenant shall
not be liable for any additional sum.
14.4 CONTINUANCE OF OBLIGATIONS. In the event of any termination of
this Lease or any part thereof as a result of any such Proceedings, Tenant shall
pay to Landlord all Base Rent, all Additional Rent and other charges payable
hereunder with respect to that portion of the Demised Premises so taken in such
Proceedings with respect to which this Lease shall have terminated justly
apportioned to the date of such termination. From and after the date of vesting
of possession in such Proceedings, Tenant shall continue to pay the Base Rent,
Additional Rent and other charges payable
40
hereunder as in this Lease provided to be paid by Tenant, subject to an
abatement of a just and proportionate part of the Base Rent according to the
extent and nature of such taking as provided for in Sections 14.3 and 14.5
hereof in respect to the Demised Premises remaining after such taking.
14.5 ADJUSTMENT OF RENT. In the event of a partial taking of the
Demised Premises under Sections 14.2 or 14.3 hereof in which case this Lease is
not terminated, the Base Rent for the period from and after the date of vesting
of title in such Proceedings, until the termination of this Lease, shall be
reduced to a sum equal to the product of the Base Rent provided for herein
multiplied by a fraction, the numerator of which is the total square footage of
the Buildings after such taking and after the same shall have been restored to a
complete architectural unit, and the denominator of which is the total square
footage of the Buildings prior to such taking.
ARTICLE XV
ASSIGNMENT, SUBLETTING, ETC.
15.1 RESTRICTION ON TRANSFER. Tenant shall not sublet the Demised
Premises or any portion thereof, nor assign, mortgage, pledge, transfer or
otherwise encumber or dispose of this Lease or any interest therein, or in any
manner assign, mortgage, pledge, transfer or otherwise encumber or dispose of
its interest or estate in the Demised Premises or any portion thereof (a
-Transfer") without obtaining Landlord's prior written consent in each and every
instance. For purposes of this Lease a Transfer shall be deemed to include 0)
any sale or similar transfer of more than fifty percent (50%) of the outstanding
voting securities of Tenant, or (ii) a sale of substantially all of the assets
of Tenant. Landlord's consent to a Transfer under this Section 15. 1 shall not
be unreasonably withheld or delayed, provided the following conditions are
complied with:
(a) Any Transfer of this Lease shall transfer to the assignee all of
Tenant's right, title and interest in this Lease and all of Tenant's estate or
interest in the Demised Premises.
(b) At the time of any Transfer and at the time Tenant requests
Landlord's written consent thereto, this Lease must be in full force and effect
without any uncured Event of Default or Incipient Default thereunder on the part
of Tenant.
(c) Any such transferee shall assume, by written, recordable
instrument, in form and content satisfactory to Landlord, the due performance of
all of Tenant's obligations under this Lease from and after the time of the
effective date of the assignment, and such assumption agreement shall state that
the same is made by the transferee for the express benefit of Landlord as a
third party beneficiary thereof. A copy of the assignment and assumption
agreement, both in form and content satisfactory to Landlord, fully executed and
acknowledged by transferee, together with a certified copy of a properly
executed corporate resolution (if the transferee be a corporation) authorizing
the execution and delivery of such assumption agreement, shall be sent to
Landlord ten (10) days prior to the effective date of such assignment. No
Transfer shall relieve Tenant from any of Tenant's obligations contained in this
Lease and Tenant shall remain fully liable hereunder.
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(d) In the case of a subletting, a copy of any sublease fully executed
and acknowledged by Tenant and the sublessee shall be mailed to Landlord ten
(10) days prior to the effective date of such subletting, which sublease shall
be in form and content acceptable to Landlord. Each sublease permitted under
this Section 15.1 shall contain provisions to the effect that (i) such sublease
is only for actual use and occupancy by the sublessee; (i) such sublease is
subject and subordinate to all of the terms, covenants and conditions of this
Lease and to all of the rights of Landlord thereunder; and (iii) in the event
this Lease shall terminate before the expiration of such sublease, the sublessee
thereunder will, at Landlord's option, attorn to Landlord and waive any rights
the sublessee may have to terminate the sublease or to surrender possession
thereunder as a result of the termination of this Lease.
(e) Any and all compensation paid to Tenant, in whatever form, in
consideration of such Transfer, including any differential between Base Rent and
rent paid to Tenant by such transferee, or any assignment fee or any other
amount which can be attributed to the Transfer shall be paid directly by such
transferee to Landlord.
(f) Tenant agrees to pay on behalf of Landlord any and all reasonable
costs of Landlord, including reasonable attorneys' fees paid or payable to
outside counsel, occasioned by such assignment or subletting.
15.2 TRANSFER TO AFFILIATES; SALE OR MERGER; COLLATERAL ASSIGNMENT.
Notwithstanding the foregoing provisions of Section 15.1, Tenant shall be
permitted to assign its rights under this Lease, without prior consent, in
connection with (i) an initial public offering of Tenant's stock, (ii) the sale
or transfer of substantially all of the assets of Tenant or the merger of Tenant
into another entity, provided the buyer, transferee or merged entity has a
shareholder's equity which is, as of the date of such sale or transfer, at least
as much as is Tenant's as of the date of this Lease and has a shareholder's
equity-to-debt ratio of no less than 1:1, or (iii) the granting of a security
interest in, or a collateral assignment of, Tenant's rights under this Lease in
connection with indebtedness incurred by Tenant to a bona fide third party
lender in an arms-length transaction, provided, that in any such case Tenant
shall be required to give Landlord written notice of that assignment or
subletting within thirty (30) days thereafter, including written evidence of the
identity of the assignee or sublessee (actual or deemed) and, if applicable, its
affiliation with Tenant and the terms Of such assignment. On the foreclosure or
assignment-in-lieu of foreclosure of a collateral assignment (e.g. leasehold
deed of trust) of Tenant's interest in this Lease (as permitted above), Landlord
shall enter into a new lease ("Now Lease") with the successor to Tenant's
interest in this Lease ("Successor") on the same terms and conditions expressed
in this Lease, effective as of the date of the foreclosure or assignment-in-lieu
of foreclosure, and for the balance of the Term thereafter, provided the
Successor also executes the New Lease. No Transfer under this Section 15.2 shall
relieve Tenant from any of Tenant's obligations contained in this Lease and
Tenant shall remain fully liable hereunder.
15.3 RESTRICTION AGAINST FURTHER ASSIGNMENT. Notwithstanding anything
contained in this Lease to the contrary and notwithstanding any consent by
Landlord to any Transfer of Tenant's
42
interest in the Demised Premises or any portion thereof or to any assignment of
this Lease or of Tenant's interest or estate in the Demised Premises, except as
provided in Sections 15.1 and 15.2 above, no sublessee shall assign its sublease
nor further sublease the Demised Premises or any portion thereof, and no
assignee shall further assign its interest in this Lease or its interest or
estate in the Demised Premises or any portion thereof, nor sublease the Demised
Premises or any portion thereof, without Landlord's prior written consent in
each and every instance, which consent shall be granted or withheld in
Landlord's reasonable discretion.
15.4 TENANT'S FAILURE TO COMPLY. Tenant's failure to comply with all of
the foregoing provisions and conditions of this Article XV shall, at Landlord's
option, render any purported assignment or subletting null and void and of no
force and effect.
ARTICLE XVI
SUBORDINATION, NONDISTURBANCE,
NOTICE TO MORTGAGEE AND ATTORNMENT
16.1 SUBORDINATION BY TENANT. This Lease and all rights of Tenant
therein and all interest or estate of Tenant in the Demised Premises or any
portion thereof shall be subject and subordinate to the lien of any mortgage,
dead of trust, security instrument or other document of like nature
(collectively, "Mortgage"), which at any time after the date of this Lease may
be placed upon the Demised Premises or any portion thereof, and to each and
every advance made under any such Mortgage. Tenant agrees at any time hereafter,
to execute and deliver to Landlord any instruments, releases or other documents
that may be reasonably required for the purpose of subjecting and subordinating
this Lease to the lien of any such Mortgage. It is agreed, nevertheless, that so
long as an Event of Default does not exist, that such subordination agreement or
other instrument, release or document shall not interfere with, hinder or molest
Tenant's right to quiet enjoyment under this Lease, shall not modify the terms
of this Lease, nor the right of Tenant to continue to occupy the Demised
Premises and all portions thereof, and to conduct its business thereon in
accordance with the covenants, conditions, provisions, terms and agreements of
this Lease. The lien of any such Mortgage shall not cover Tenant's trade
fixtures or other personal property located in or on the Demised Premises.
Landlord shall deliver to Tenant a commercially reasonable nondisturbance
agreement executed by all lenders having a lien on the Demised Premises on March
2, 1998 as a condition precedent in Tenant's favor, and from each future lender
as a condition to Tenant's subordination or attornment hereunder.
16.2 LANDLORD'S DEFAULT. In the event of any act or omission of
Landlord constituting a default by Landlord, other than Landlord's failure to
have the Improvements substantially completed on a timely basis as provided in
Article 11 and to make the same fully available to Tenant as therein provided,
Tenant shall not exercise any remedy until Tenant has given Landlord and any
mortgagee whose name and address have been previously provided to Tenant prior
written notice of such act or omission and until a 30-day period of time to
allow Landlord or the mortgagee to remedy such act or omission shall have
elapsed following the giving of such notice;
43
provided, however, if such act or omission cannot with due diligence and in good
faith be remedied within such 30-day period, Landlord and/or mortgagee shall be
allowed such further period of time as may be reasonably necessary provided that
it shall have commenced remedying the same with due diligence and in good faith
within said 30-day period. In the event any act or omission of Landlord which
constitutes a Landlord's default hereunder results in an immediate threat of
bodily harm to Tenant's employees, agents or invitees or damage to Tenant's
property, or exposes Tenant to criminal liability, Tenant may proceed to cure
the default without prior notice to Landlord or its mortgagee and offset the
cost thereof against Base Rent next due and payable; provided, however, in that
event Tenant shall give written notice to Landlord and its mortgagee as soon as
possible after commencement of such cure. Nothing herein contained shall be
construed or interpreted as requiring any mortgagee to remedy such act or
omission.
16.3 ATTORNMENT. Subject to Section 16.1 above, if any mortgagee shall
succeed to the rights of Landlord under this Lease or to ownership of the
Demised Premises, whether through possession or foreclosure or the delivery of a
deed to the Demised Promises, then, upon the written request of such mortgagee
so succeeding to Landlord's rights hereunder, Tenant shall attorn to and
recognize such mortgagee as Tenant's landlord under this Lease, and shall
promptly execute and deliver any instrument that such mortgagee may reasonably
request to evidence such attornment (whether before or after making of the
mortgage). In the event of any other transfer of Landlord's interest hereunder,
upon the written request of the transferee and Landlord, Tenant shall attorn to
and recognize such transferee as Tenant's landlord under this Lease and shall
promptly -execute and deliver any instrument that such transferee and Landlord
may reasonably request to evidence such attornment.
ARTICLE XVII
SIGNS
Tenant shall be allowed Buildings signage during the Term of this
Lease, provided that such sign or signs (a) do not cause any structural damage
or other material damage to the Buildings; (b) comply with and do not violate
applicable governmental laws, ordinances, rules or regulations; (c) comply with
and do not violate any existing restrictions affecting the Demised Premises and
which are of a matter of record as of the date of this Lease; (d) are compatible
with the architecture of the Buildings and the landscaped area adjacent thereto,
and (e) the design, size and location of such signs have been mutually approved
by Landlord and Tenant, which approval shall not be unreasonably withheld or
delayed. The cost of such signs shall be entirely Tenant's separate expense.
ARTICLE XVIII
FINANCIAL STATEMENTS OF TENANT
From time to time, at Landlord's request, Tenant shall provide Landlord
with Tenant's
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most recent financial statements in form and content reasonably satisfactory to
Landlord and Landlord's lenders (which, if Tenant is an entity which files
periodic financial disclosures to securities regulatory authorities, shall be
those which are periodically filed with those authorities). Landlord may provide
copies of those financial statements to current and prospective lenders,
investors and buyers, identified in writing to Tenant, for examination and
review. Landlord shall keep all such financial statements strictly confidential
and may provide copies of such financial statements to such other parties only
upon receiving in return a covenant from each recipient that such recipient
shall keep the financial statements confidential except with the prior written
consent of Tenant.
ARTICLE XIX
CHANGES AND ALTERATIONS
Tenant shall not have the right to make such changes or alterations,
structural or otherwise, to the Buildings, improvements and fixtures hereafter
erected on the Demised Premises without first complying with the following
conditions:
(a) PERMITS. No change or alteration shall be undertaken until Tenant
shall have procured and paid for, so far as the same may be required from time
to time, all municipal, state and federal permits and authorizations of the
various governmental bodies and departments having jurisdiction thereof, and
Landlord agrees to join in the application for such permits or authorizations
whenever such action is necessary, all at Tenant's sole cost and expense,
provided such applications do not cause Landlord to become liable for any cost,
fees or expenses.
(b) LANDLORD APPROVAL; COMPLIANCE WITH PLANS AND SPECIFICATIONS. Before
commencing any change, alteration, restoration or construction (hereinafter
sometimes referred to as "WORK") involving in the aggregate an estimated cost of
more than Fifty Thousand and No/100ths Dollars ($50,000) or which, in Landlord's
reasonable judgment, would alter the mechanical, structural or electrical
components of the Demised Promises, Tenant shall obtain Landlord's prior written
consent, which consent shall not be unreasonably withheld; 00 furnish Landlord
with detailed plans and specifications of the proposed change or alteration,
which shall also be subject to Landlord's prior written approval, which shall
not be unreasonably withheld; (iii) obtain Landlord's prior written approval of
a licensed architect or licensed professional engineer selected and paid for by
Tenant who shall approve any such work (hereinafter referred to as "ALTERATIONS
ARCHITECT OR ENGINEER"); and (v) obtain Landlord's prior written approval (which
shall not be unreasonably withheld or delayed) of detailed plans and
specifications prepared and approved in writing by said Alterations Architect or
Engineer and of each amendment and change thereto, and (v) for any Work
involving in the aggregate an estimated cost of more than Fifty Thousand Dollars
050,000), furnish to Landlord a surety company performance bond issued by a
surety company licensed to do business in the state in which the Demised
Premises are located and reasonably acceptable to Landlord in an amount equal to
the estimated cost of such work guaranteeing the completion thereof within a
reasonable time thereafter (1) free and clear of all mechanic's liens or
45
other liens, encumbrances, security interests and charges, and (2) in accordance
with the plans and specifications approved by Landlord.
(c) VALUE MAINTAINED. Any change or alteration shall, when completed,
be of such character so as not to reduce the value of the Demised Premises or
the Buildings to which such change or alteration is made below its value or
utility to Landlord immediately before such change or alteration, nor shall such
change or alteration reduce the area or cubic content of the Buildings to use
without Landlord's express written consent.
(d) COMPLIANCE WITH LAWS. All Work done in connection with any change
or alteration shall be done promptly and in a good and workmanlike manner and in
compliance with all building and zoning laws of the place in which the Demised
Premises are situated, and in compliance with all laws, ordinances, orders,
rules, regulations and requirements of all federal, state and municipal
governments and appropriate departments, commissions, boards and officers
thereof, and in accordance with the orders, rules and regulations of the Board
of Fire Underwriters where the Demised Premises are located or any other body
exercising similar functions. The cost of any such change or alteration shall be
paid in cash so that the Demised Premises and all portions thereof shall at all
times be free of liens for labor and materials supplied to the Demised Premises
or any portion thereof. The Work or any change or alteration shall be prosecuted
with reasonable dispatch, delays due to strikes, lockouts, acts of God,
inability to obtain labor or materials, governmental restrictions or similar
causes beyond the control of Tenant excepted. Tenant or Tenant's contractor or
subcontractor shall obtain and maintain at its sole cost and expense during the
performance of the Work workers' compensation insurance covering all persons
employed in connection with the Work and with respect to which death or injury
claims could be asserted against Landlord or Tenant or against the Demised
Premises or any interest therein, together with comprehensive general liability
insurance for the mutual benefit of Landlord and Tenant with limits of not less
than One Million Dollars ($1,000,000.00) in the event of injury to one person,
Three Million Dollars ($3,000,000.00) in respect to any one accident or
occurrence, and Five Hundred Thousand Dollars ($500,000.00) for property damage,
and the fire insurance with "extended coverage" endorsement required by Section
6.1 hereof shall be supplemented with "builder's risk" insurance on a completed
value form or other comparable coverage on the Work if the cost of such work
will be in excess of Fifty Thousand Dollars ($50,000.00). All such insurance
shall be in a company or companies authorized to do business in the state in
which the Demised Premises are located and reasonably satisfactory to Landlord,
and all such policies of insurance or certificates of insurance shall be
delivered to Landlord endorsed "Premium Paid' by the company or agency issuing
the same, or with other evidence of payment of the premium satisfactory to
Landlord.
(e) PROPERTY OF LANDLORD. All improvements and alterations (other than
Tenant's movable trade fixtures, furniture and equipment) made or installed by
Tenant shall, immediately upon completion or installation thereof, become the
property of Landlord without payment therefor by Landlord, and shall be
surrendered to Landlord on the expiration of the Term of this Lease unless and
to the extent Tenant removes the same upon termination or expiration of the Term
in which event they shall remain the property of Tenant. In no event shall
Tenant be obligated to remove all
46
or any part of such improvements or alterations.
(f) LOCATION OF IMPROVEMENTS. No change, alteration, restoration or new
construction shall be in, or connect the Improvements with, any property,
building or other improvement located outside the boundaries of the parcel of
land described in Exhibit "A" attached hereto, nor shall the same obstruct or
interfere with any existing easement.
(g) REMOVAL OF IMPROVEMENTS. As a condition to granting approval for
any changes or alterations, Landlord may require Tenant, by written notice to
Tenant given at or prior to the time of granting such approval, to remove any
improvements, additions or installations installed by Tenant in the Demised
Premises at Tenant's sole cost and expense at the end of the term of this Lease
and repair and restore any damage caused by the installation and removal of such
improvements, additions, or installations; provided, however, the only
improvements, additions or installations which Tenant shall remove shall be
those specified in such notice and those Tenant elects to remove pursuant to
subsection 19(e) above. Tenant shall not be obligated to remove any
improvements, additions or installations installed by Tenant which did not
require Landlord's prior approval as provided for in this Section 1 9(g).
(h) NOTICE TO LANDLORD. Regardless of whether Landlord's consent is
required to any change or alteration to the Demised Premises made or to be made
by Tenant, such changes or alterations shall not be commenced until two (2)
business days notice after Landlord has received notice from Tenant stating the
date such changes or alterations are to commence so that Landlord can post and
record an appropriate notice of nonresponsibility.
ARTICLE XX
MISCELLANEOUS PROVISIONS
20.1 ENTRY BY LANDLORD. Tenant agrees to permit Landlord and authorized
representatives of Landlord to enter upon the Demised Premises at all reasonable
times during ordinary business hours upon at least one (1) business day's
advance notice to Tenant for the purpose of inspecting the same and making any
repairs required to be made thereto by Landlord under the terms of this Lease,
or as required to be made thereto by Tenant under the terms of this Lease
provided that Landlord shall have first given written notice to Tenant to make
such repairs and Tenant shall have failed to make such repairs within thirty
(30) days after notice, and provided further, that Landlord shall be allowed to
enter upon the Demised Premises during an emergency. Nothing herein contained
shall imply any duty upon the part of Landlord to do any such work which, under
any provision of this Lease, Tenant may be required to perform, and the
performance thereof by Landlord shall not constitute a waiver of Tenant's
default in failing to perform the same. Landlord may, during the progress of any
work, keep and store upon the Demised Premises all necessary materials, tools
and equipment in areas designated by Tenant. Landlord shall not in any event be
liable for inconvenience, annoyance, disturbance, loss of business or other
damage to Tenant by reason of making such repairs or the performance of any such
work in or about the
47
Demised Premises or on account of bringing material, supplies and equipment
into, upon or through the Demised Premises during the course thereof, and the
obligations of Tenant under this Lease shall not be thereby affected in any
manner whatsoever; except that Landlord shall use its best efforts to not
unreasonably interfere with Tenant's use of the Demised Premises, or any portion
thereof, by reason of Landlord's making such repairs or the performance of any
such work in or about the Demised Premises or on account of bringing materials,
supplies and equipment into, upon or through the Demised Premises during the
course thereof. Tenant may accompany Landlord on any inspection or entry by
Landlord.
20.2 EXHIBITION OF DEMISED PREMISES. Landlord is hereby given the right
during usual business hours upon at least one (1) business days' advance notice
to Tenant at any time during the Term of this Lease to enter upon the Demised
Premises and to exhibit the same for the purpose of mortgaging or selling the
same. During the final year of the Term, Landlord shall be entitled (i) to
display on the Demised Promises in such manner as to not unreasonably interfere
with Tenant's business, signs reasonably approved as to design and location by
Tenant indicating that the Demised Premises are for rent and/or sale and
suitably identifying Landlord or its agent, and (ii) upon at least two (2)
business days' advance notice to Tenant, to exhibit the Demised Premises to
prospective tenants.
20.3 INDEMNIFICATION BY TENANT. To the fullest extent allowed by law,
Tenant shall at all times indemnify, defend and hold Landlord harmless against
and from any and all claims by or on behalf of any person or persons, firm or
firms, corporation or corporations, arising from the conduct or management, or
from any work or things whatsoever done in or about the Demised Premises during
the Term of this Lease, other than as a result of the sole gross negligence or
willful misconduct of Landlord or its officers, agents, employees, contractors
or subcontractors, or as a result of Landlord's breach of its obligations under
this Lease, and Tenant shall further indemnify, defend and hold Landlord
harmless against and from any and all claims arising during the Term of this
Lease from any condition of the Improvements (other than defects in construction
of the initial Improvements) or other items Landlord is required to repair or
maintain, or of any passageways or space therein, other than as a result of the
sole gross negligence or willful misconduct of Landlord or its officers,
employees, agents, contractors or subcontractors or as a result of Landlord's
breach of its obligations under this Lease, or arising from any act or
negligence of Tenant, its agents, servants, employees or licenses, or arising
from any accident, injury or damage whatsoever caused to any person, firm or
corporation occurring during the Term of this Lease in or about the Demised
Premises, other than as a result of the sole gross negligence or willful
misconduct of Landlord or its officers, employees, agents, contractors or
subcontractors, or as a result of Landlord's breach of its obligations under
this Lease, and from and against all costs, attorneys' fees, expenses and
liabilities incurred in or about any such claim or action or proceeding brought
thereon; and in case any action or proceeding be brought against Landlord by
reason of any such claim, Tenant, upon notice from Landlord, covenants to defend
such action or proceeding by counsel reasonably satisfactory to Landlord.
Tenant's obligations under this Section 20.3 shall be insured by contractual
liability endorsement on Tenant's policies of insurance required under the
provisions of Section 6.2 hereof to the extent reasonably obtainable.
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20.4 NOTICES. All notices, demands and requests which may be or are
required to be given, demanded or requested by either party to the other shall
be in writing, and shall be sent by United States registered or certified mail,
postage prepaid, by an independent overnight courier service marked for next
business day delivery, or by telephonic facsimile transmission with automatic
written time and date confirmation of delivery transmitted between the hours of
9:00 a.m. and 5:00 p.m. (time zone of recipient, but only if confirmed within
two (2) business days by receipt of a mailed or personally delivered copy), and
addressed as follows:
To Landlord:
ADI Communication Partners, L.P.
c/o The ▇▇▇▇▇ Group
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
To Tenant:
ComStream Corporation
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
or at such other place as a party hereto may from time to time designate by
written notice thereof to the other. Notices, demands and requests which shall
be served upon Landlord by Tenant, or upon Tenant by Landlord, in the manner
aforesaid, shall be deemed received three (3) days after delivery to United
States mail, one (1) business day after delivery to an overnight courier
service, or at the time such notice, demand or request shall be transmitted by
facsimile (if confirmed as written above).
20.5 QUIET ENJOYMENT. Landlord covenants and agrees that Tenant, upon
paying the Base Rent and Additional Rent and upon' observing and keeping the
covenants, agreements and conditions of this Lease on its part to be kept,
observed and performed, shall lawfully and quietly hold, occupy and enjoy the
Demised Promises (subject to the provisions of this Lease) during the Term of
this Lease without hindrance or molestation by Landlord or by any person or
persons claiming under Landlord.
20.6 LANDLORD'S CONTINUING OBLIGATIONS. The term "Landlord," as used in
this Lease, so far as covenants or obligations on the part of Landlord are
concerned, shall be limited to mean and include only the owner or owners at the
time in question of the fee of the Demised Promises, and in the event of any
transfer or transfers or conveyance, the then grantor shall be
49
automatically freed and relieved from and after the date of such transfer or
conveyance of all liability as respects the performance of any covenants or
obligations on the part of Landlord contained in this Lease thereafter to be
performed, provided that any funds in the hands of such landlord or the then
grantor at the time of such transfer, in which Tenant has an interest, shall be
turned over to the grantee, and any amount then due and payable to Tenant by
Landlord or the then grantor under any provision of this Lease, shall be paid to
Tenant, and further provided that the now Landlord expressly assumes in writing
for the benefit of Tenant all obligations of Landlord under this Lease. The
covenants and obligations contained in this Lease on the part of Landlord shall,
subject to the aforesaid, be binding on Landlord's successors and assigns during
and in respect of their respective successive periods of ownership. Nothing
herein contained shall be construed as relieving Landlord of its obligations
under Article 11 of this Lease or releasing Landlord from any obligation to
complete the cure of any breach by Landlord during the period of its ownership
of the Demised Premises.
20.7 ESTOPPEL. Either Tenant or Landlord shall, without charge at any
time and from time to time, within ten (10) business days after written request
by the other, certify by written instrument, duly executed, ' acknowledged and
delivered to any mortgagee, assignee of a mortgagee, proposed mortgagee,
purchaser or proposed purchaser, or any other person dealing with Landlord,
Tenant or the Demised Premises:
(a) That this Lease (and all guaranties, if any) is unmodified and in
full force and effect (or, if there have been modifications, that the same is in
full force and effect, as modified and stating the modifications);
(b) The dates to which the Base Rent or Additional Rent have been paid
in advance.
(c) Whether or not there are then existing any breaches or defaults by
such party or the other party known by such party under any of the covenants,
conditions, provisions, terms or agreements of this Lease, and specifying such
breach or default, if any, or any set-offs or defenses against the enforcement
of any covenant, condition, provision, term or agreement of this Lease (or of
any guaranties) upon the part of Landlord or Tenant (or any guarantor), as the
case may be, to be performed or complied with (and, if so, specifying the same
and the steps being taken to remedy the same); and
(d) Such other statements or certificates as Landlord, Tenant or any
mortgagee may reasonably request.
It is the intention of the parties hereto that any statement delivered
pursuant to this Section 20.7 may be relied upon by any of such parties dealing
with Landlord, Tenant or the Demised Premises. Failure by Tenant to timely
respond to such request shall be deemed Tenant's certification of the accuracy
of such matters.
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20.8 DELIVERY OF CORPORATE DOCUMENTS. In the event that Tenant is a
corporation or similar business entity (e.g., limited partnership, limited
liability company or limited liability partnership), Tenant shall, without
charge to Landlord, at any time and from time to time within ten (10) business
days after written request by Landlord, deliver to Landlord, in connection with
any proposed sale or mortgage of the Demised Premises, the following instruments
and documents:
(a) Certificate of Good Standing in the state of incorporation of
Tenant and in the state in which the Demised Promises are located issued by the
appropriate state authority and bearing a current date;
(b) A copy of Tenant's articles of incorporation and by-laws (or
partnership or operating agreement, as the case may be) and any amendments or
modifications thereof certified by the secretary or assistant secretary (or
managing partner or member, as the case may be) of Tenant;
(c) A written and certified confirmation from the secretary or
assistant secretary (or managing partner or member, as the case may be) that 0)
this Lease has been duly authorized by all necessary corporate action and is a
valid and binding agreement enforceable in accordance with its terms; and (ii)
Tenant is a duly organized and validly existing corporation under the laws of
its state of incorporation, is duly authorized to carry on its business, and is
in good standing under the laws of the state in which the Demised Premises are
located, if different from the state of incorporation.
20.9 MEMORANDUM OF LEASE. Upon March 2, 1998, the parties shall
execute, acknowledge and deliver to each other, a Memorandum of Lease in the
form attached hereto as Exhibit "C" and made a part hereof. Such Memorandum of
Lease may be recorded by either party, at their sold cost and expense.
20.10 SEVERABILITY. If any covenant, condition, provision, term or
agreement of this Lease shall, to any extent, be held invalid or unenforceable,
the remaining covenants, conditions, provisions, terms and agreements of this
Lease shall not be affected thereby, but each covenant, condition, provisions,
term or agreement of this Lease shall be valid and in force to the fullest
extent permitted by law.
20.11 SUCCESSORS AND ASSIGNS. The covenants and agreements herein
contained shall bind and inure to the benefit of Landlord, its successors and
assigns, and Tenant and its permitted successors and assigns.
20.12 CAPTIONS. The caption of each article of this Lease is for
convenience and reference only, and in no way defines, limits or describes the
scope or intent of such article or of this Lease.
20.13 RELATIONSHIP OF PARTIES. This Lease does not create the
relationship of principal and agent, partnership, joint venture, or any
association or relationship between Landlord
51
and Tenant, the sole relationship between Landlord and Tenant being that of
landlord and tenant.
20.14 ENTIRE AGREEMENT. All preliminary and contemporaneous
negotiations are merged into and incorporated in this Lease. This Lease,
together with the exhibits attached hereto, contains the entire agreement
between the parties and shall not be modified or amended in any manner except by
any instrument in writing executed by the parties hereto.
20.15 NO MERGER. There shall be no merger of this Lease or of the
leasehold estate created by this Lease with any other estate or interest in the
Demised Premises by reason of the fact that the same person, firm, corporation
or other entity may acquire, hold or own, directly or indirectly, (a) this Lease
or the leasehold interest created by this Lease or any interest therein, and (b)
any such other estate or interest in the Demised Promises, or any portion
thereof. No such merger shall occur unless and until all persons, firms,
corporations or other entities having an interest (including a security
interest) in (1) this Lease or the leasehold estate created thereby, and (2) any
such other estate or interest in the Demised Premises, or any portion thereof,
shall join in a written instrument expressly affecting such merger and shall
duly record the same.
20.16 POSSESSION AND USE. Tenant acknowledges that the Demised Premises
are the property of Landlord and that Tenant has only the right to possession
and use thereof upon the covenants, conditions, provisions, terms and agreements
set forth in this Lease.
20.17 SURRENDER OF DEMISED PREMISES. Subject to the other provisions of
this Lease, at the expiration of the Term of this Lease, Tenant shall surrender
the Demised Premises in the same condition as they were in upon delivery of
possession thereto at March 2, 1998, reasonable wear and tear, casualty and
condemnation excepted, and shall surrender all keys to the Demised Premises to
Landlord at the place then fixed for the payment of Base Rent, and shall inform
Landlord of ' all combinations on locks, safes and vaults, if any. Tenant shall
at such time remove all of its property therefrom and all alterations and
improvements placed thereon by Tenant if so requested by Landlord or otherwise
allowed, subject to Sections 19(e) and (g). Tenant shall repair any damage to
the Demised Premises caused by such removal, and any and all such property not
so removed shall, at Landlord's option, become the exclusive property of
Landlord or be disposed of by Landlord, at Tenant's cost and expense, without
further notice to or demand upon Tenant, subject to applicable law and Sections
19(e) and (g).
All property of Tenant not removed on or before the last day of the
Term of this Lease shall be deemed abandoned in accordance with, and subject to,
applicable law.
20.18 HOLDING OVER. In the event Tenant remains in possession of the
Demised Premises after expiration of this Lease and without the execution of a
new lease, it shall be deemed to be occupying the Demised Premises as a tenant
from month-to-month, subject to all the provisions, conditions and obligations
of this Lease insofar as the same can be applicable to a month-to-month
tenancy, except that the Base Rent shall be escalated to one hundred and fifteen
percent 0 15 %) of the then current Base Rent for the Demised Premises for the
first three (3) months of such
52
tenancy and one hundred fifty percent (150%) of such amount thereafter, and from
and after such three (3) month period, Tenant shall indemnify, defend and hold
Landlord harmless against loss or liability resulting from the delay by Tenant
in so surrendering the Demised Premises, including without limitation any claim
made by any succeeding occupant founded on such delay. Tenant's obligation to
observe or perform this covenant shall survive the expiration or other
termination of this Lease.
20.19 SURVIVAL. All obligations of either party (together with interest
or money obligations at the Maximum Rate of Interest) accruing prior to
expiration of the Term of this Lease shall survive the expiration or other
termination of this Lease.
20.20 BROKER'S COMMISSION. Tenant and Landlord represent that they have
dealt only with (i) C13 Commercial Real Estate Group, Inc., as brokers in
connection with this Lease. Landlord shall be responsible for paying the
commissions owing to such brokers under separate written agreements between
Landlord and such brokers. Tenant and Landlord will indemnify, defend and hold
the other harmless from and against any loss, cost or expense, including, but
not limited to, reasonable attorneys' fees and court costs, resulting from any
claim for a fee or commission by any other broker or finder resulting from their
own actions.
20.21 APPLICABLE LAW. This Lease shall be governed and interpreted in
accordance with the laws of the State of California.
20.22 COUNTERPARTS. This Lease may be executed in one or more
counterparts, each of which shall be deemed an original and all of which, when
taken together, shall constitute a single instrument.
20.23 EXPANSION OPTION. Provision has been made on the Land for the
construction of an additional building of approximately 56,000 square feet in
size as illustrated on the site plan which is included as part of the
Preliminary Plans and Specifications (the "EXPANSION BUILDING"). At any time
within twelve 0 2) months following March 2, 1998 (the "EXPANSION EXERCISE
PERIOD"), Tenant shall have the option (the "EXPANSION OPTION") of requiring
Landlord to construct the Expansion Building and leasing it to Tenant on the
same terms and conditions as Tenant leases the Demised Premises with the Term of
the lease of the Expansion Building ending concurrently with the Term of this
Lease, with the exception that the monthly Base Rent shall be an amount equal to
One Dollar and Six Cents ($1.06) per square foot of the Expansion Building
("EXPANSION RENT"). The Expansion Rent shall be increased every twenty-four (24)
months during the Initial Term to an amount equal to the product of (i) the then
applicable Expansion Rent, as may have been previously adjusted, and (iii) 1.06.
The Expansion Option may be exercised by Tenant's delivery to Landlord by the
first (1st) anniversary of March 2, 1998 of a written and irrevocable notice of
exercise ("EXERCISE NOTICE"). Upon the receipt of the Exercise Notice, Landlord
and Tenant shall meet and begin the development of plans and specifications for
the construction of Tenant Improvements in the Expansion Building. The
provisions of this Lease for the development of the Plans and Specifications
shall apply to the development of the Plans and Specifications for the Expansion
53
Building.' Tenant shall be responsible for the cost of all Tenant Improvements
constructed in the Expansion Building, provided that Landlord shall provide
Tenant with an additional Tenant Improvements Allowance of Twenty-Five Dollars
($25.00) per square foot of the Expansion Building on the same basis as the
original Tenant Improvements Allowance was provided in connection with the
construction of the Demised Premises. All other terms and conditions of this
Lease shall apply to the Expansion Building. Tenant and Landlord shall promptly
execute such supplementary documents or amendments to this Lease as Landlord or
Tenant shall deem reasonably necessary to document the addition of the Expansion
Building to the Demised Premises and the terms and conditions under which it is
leased to Tenant.
20.24 RIGHT OF FIRST OFFER ON EXPANSION BUILDING. Landlord reserves the
right to construct the Expansion Building and to remove from the definition of
Land herein that portion of the Land which is used for and dedicated to the use
of the Expansion Building. If, after the Expansion Exercise Period, Landlord has
constructed the Expansion Building and Tenant did not timely and properly
exercise its rights under the Expansion Option, then Landlord shall be free to
lease the Expansion Building or any portion thereof to tenants other than
Tenant. Notwithstanding the foregoing, before leasing any portion of the
Expansion Building to a tenant other than Tenant, Landlord shall first deliver
to Tenant a written notice of the terms and conditions under which Landlord
proposes to lease Expansion Building space to tenants ("LEASING NOTICE"). Tenant
shall have fifteen (15) days following receipt of the Leasing Notice within
which to deliver to Landlord notice of Tenant's acceptance of those terms and
conditions ("TENANT'S ACCEPTANCE") and identifying how much of the Expansion
Building (if less than the entire Expansion Building) Tenant elects to lease
from Landlord ("EXPANSION SPACE"), at which time this Lease shall be deemed
amended to include the Expansion Space into the definition of Demised Premises
and all other terms and conditions of this Lease shall prevail with respect to
the Expansion Space, with the exception of those terms and conditions contained
in the Leasing Notice which differ from the terms and conditions of this Lease
(e.g. Base Rent, Term, Tenant Improvement Allowance (if any), etc.), which
different terms and conditions shall apply to the Expansion Space in lieu of the
terms of this Lease. Tenant and Landlord shall promptly execute such
supplementary documents or amendments to this Lease as Landlord or Tenant shall
deem reasonably necessary to document the addition of the Expansion Space to the
Demised Premises and the terms and conditions under which it is leased to
Tenant. If Tenant rejects the Leasing Notice or fails to deliver Tenant's
Acceptance in a timely manner, Landlord shall be free to offer the Expansion
Building to other tenants, provided that if Landlord wishes to offer the
Expansion Building to other tenants (i) on terms more favorable than those
contained in the Leasing Notice, or (ii) on any terms and more than one (1) year
has passed since Tenant was last delivered a Leasing Notice, Landlord shall
first offer the Expansion Building to Tenant pursuant to the same procedures
described in this Section 20.24.
20.25 LEASE SECURITY - LETTER OF CREDIT. In addition to its primary
obligation under this Lease, Tenant shall provide additional security against an
Event of Default under this Lease in the form of a One Million Four Hundred
Thousand Dollar ($1,400,000) Irrevocable Standby Letter of Credit ("LC"), naming
Landlord as the payee thereunder, with terms as described in more detail below.
The LC shall be delivered to Landlord concurrent with the recordation of
Landlord's
54
construction loan, provided that Tenant has had at least five (5) days advance
notice from Landlord of the date of such recordation, and shall be held by
Landlord until such time as both W Tenant's Equity Balance, calculated as
defined below, exceeds its Debt Balance, also as defined below, and 00 Tenant's
Equity Balance exceeds $20,000,000.
(a) TERMS OF LETTER OF CREDIT. The LC shall be an irrevocable standby
letter of credit, issued by Royal Bank of Canada, Bank of Nova Scotia, Bank of
Montreal or an equivalent rated bank, in a form which meets international treaty
standards for letters of credit. The LC shall be for a twelve (12) month term.
The LC shall be drawable by Landlord upon presentation of a sight draft or
demand to the LC issuer. Landlord may present such a sight draft or demand if
(i) the LC has not been renewed and replaced by Tenant by thirty (30) days prior
to the expiry date of the then effective LC, or (ii) Tenant defaults under the
Lease and, as a result of such default, the Lease is terminated. Proceeds of the
drawn LC shall be applied to damages or charges to which Landlord is entitled
under the Lease as a result of Tenant's default. The LC is not intended to
represent liquidated damages for Tenant's default, but only a mechanism for
paying the damages or charges to which Landlord may be entitled. Landlord shall
be entitled to grant a security interest in, or make a collateral assignment of,
Landlord's rights under the LC in connection with mortgage indebtedness incurred
by Landlord to a bona fide third party institutional lender in an arms-length
transaction.
(b) RETURN OF LETTER OF CREDIT. The Letter of Credit shall be returned
to Tenant upon receipt by Landlord of written certification from Tenant's CFO or
CEO that (i) the Equity Balance of Tenant exceeds the Debt Balance and (ii) the
Equity Balance of Tenant exceeds $20,000,000. The certification shall contain
reasonably adequate back-up information to evidence the calculation of Equity
Balance and Debt Balance. I
(i) EQUITY BALANCE. Equity Balance shall equal Tenant's share
capital plus retained earnings as reflected in Tenant's annual and certified
financial statements. Retained earnings shall be calculated pursuant to U.S.
GAAP. A Goodwill adjustment (to the extent it is not reflected in retained
earnings) of approximately $25,000,000 which applies to the Goodwill created in
the acquisition of Tenant by Comtel in 1992, is the only major expected GAAP
adjustment to the Retained Earnings balance as of December 31, 1996.
(ii) Debt Balance. Debt Balance shall equal the "Investment
Control" intercompany debt due to Tenant's parent corporation at the time
calculated for purposes of this Section 20.25.
(c) Tenant and Landlord shall execute such documents as may be
reasonably necessary to document and perfect the security arrangements described
above.
20.26 RECONFIGURATION OF LAND; EASEMENT FOR OFF-SITE PARKING. Landlord
and Tenant acknowledge that the Land is currently comprised of three separate
legal lots. A portion of one of these three lots (Lot 4) is intended to be used
as the site of the Expansion Building (the "EXCESS LAND") which will be located
on a lot adjacent to the Land (Lot 3). It is Landlord's intention,
55
at some time after the execution of this Lease and the recordation of the
Memorandum of Lease, to adjust the lot line between Lot 4 and the adjacent Lot 3
with the result that the size of the three lots comprising the Land will be
reduced to approximately 9.85 acres. If, and to the extent, it is not feasible
to locate all 750 parking spaces which are part of the Demised Premises on the
Land as then configured, Landlord shall arrange for access to parking spaces on
the Excess Land or on Lot 3 so as to provide Tenant with the required parking.
Tenant shall cooperate with Landlord in connection with the reconfiguration of
the Land and the Excess Land, including the execution of such documents as may
be reasonably necessary in connection therewith.
20.27 TITLE INSURANCE. Tenant's obligations under this Lease shall be
subject to and expressly conditioned on Tenant being able to obtain, at Tenant's
sole cost and expense, a leasehold policy of title insurance from First American
Title Company ("TITLE COMPANY") which insures that Tenant's leasehold interest
granted pursuant to this Lease is subject only to W non-delinquent real property
taxes and assessments for the current year; (ii) all exceptions to title
disclosed in a preliminary title report which Tenant shall obtain from Title
Company promptly following execution of this Lease and to which Tenant does not
object, (iii) standard printed exceptions, customarily set forth in Title
Company's leasehold policy of title insurance, and (iv) any other lien
voluntarily imposed or agreed to by Tenant as of the date of this Lease or
arising from Tenant's acts or omissions ("LEASEHOLD POLICY"). It is the
intention of the parties that this condition precedent is established as an
accommodation to Tenant to allow it to make arrangements to obtain the Leasehold
Policy. Accordingly, Tenant shall not object to any item which appears in the
preliminary title report which does not materially and adversely affect the
utility and functionality of Tenant's use of the Demised Premises as
contemplated in this Lease and shall exercise its best efforts to obtain such
Leasehold Policy and to pay the costs and premiums associated therewith. Tenant
shall be deemed to have obtained the Leasehold Policy, and this condition
satisfied, unless Landlord receives written notice from Tenant fifteen 0 5) days
following the date of this Lease that Tenant has been unable to obtain such
Leasehold Policy and the reasons it has been unable to do so. If Landlord cannot
correct such matters as may be needed to be corrected in order for Tenant to
obtain the Leasehold Policy within thirty (30) days following receipt of such
notice, then this Lease shall automatically terminate.
20.28 ATTORNEYS' FEES. In the event of any litigation, arbitration,
mediation or any other action taken by either party to this Lease to enforce any
provision of this Lease, enforce any remedy available upon default under this
Lease, or seek a declaration of the rights of a party under this Lease, the
prevailing party shall be entitled to recover in such action such attorneys'
fees and costs as may be reasonably incurred, including, without limitation, the
costs of reasonable investigation, preparation and professional or expert
consultation, travel expenses, costs on appeal, court reporter fees and
expenses, incurred by reason of such litigation, arbitration or other action.
All other attorneys' fees and cost relating to this Agreement and the
transactions described herein shall be borne by the party incurring the same.
56
IN WITNESS WHEREOF, each of the parties hereto have caused this Lease
to be duly executed as of the day and year first above written.
LANDLORD:
ADI COMMUNICATION PARTNERS, L.P.
a California limited partnership
By: ▇▇▇▇▇ Development, Inc.,
a California corporation
Its General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its: President
TENANT:
COMSTREAM CORPORATION
a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Its: VP & CFO
57
Exhibit "A"
LEGAL DESCRIPTION OF PROPERTY
▇▇▇▇▇▇▇ ▇, ▇ & ▇ ▇▇ ▇▇▇▇▇▇ Map No. 17755, in the City of San Diego, County of
San Diego, State of California, filed in the Office of the County Recorder of
San Diego County, September 17, 1996, as File No. ▇▇▇▇-▇▇ ▇▇▇▇ of Official
Records.
58
Exhibit "13"
PRELIMINARY PLANS AND SPECIFICATIONS
59