EXHIBIT 10.26
LEASE AGREEMENT
THIS LEASE, dated February 7, 1992, by and between: ▇▇▇▇ ▇▇▇▇▇▇ LATHING COMPANY
("Lessor") and EDUCATIONAL INDUSTRIAL SYSTEMS, INC. (EISI) ("Lessee"),is made
with reference to the following facts:
A. Lessor is the owner of certain industrial property located at ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, consisting of a building having a
floor area of approximately 15,500 square feet and related parking facilities
and landscaped areas.
B. Lessee desires to rent a portion of the Industrial Building and
Lessor has agreed to lease the same to Lessee, on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
ARTICLE 1.
DEMISED PREMISES AND COMMON AREAS
1.01. Lessor does hereby lease to Lessee, and Lessee does hereby rent from
Lessor, that portion of the Industrial Building consisting of approximately
11,200 square feet as shown on the drawing attached hereto as Exhibit "A-1" and
made a part hereof (the "Demised Premises"), together with the right to use the
Common Areas of the Industrial Building as hereinafter described. The parties
hereby stipulate and agree that the Demised Premises constitutes 72.3% of the
total leasable floor area of the Industrial Building.
1.02. Lessee shall have the non-exclusive right to use the Common Areas of the
Industrial Building, subject to any reasonable rules and regulations concerning
such use as may be adopted from time to time by Lessor. The term "Common Areas"
shall mean those areas within the Industrial Building provided and designated by
Lessor for the general non-exclusive use by the occupants of the Industrial
Building and their respective employees, customers and invitees, including
parking areas, loading and unloading areas, trash areas, roadways, sidewalks,
walkways, driveways, and landscaped areas. Lessee is allotted 38 parking spaces
(See Exhibit A-2). Lessor reserves the right of exclusive control and
management of the Common Areas, including the right, in Lessor's sole
discretion:
(a) To make alterations or construct additional improvements within the
Common Areas;
(b) To temporarily close any of the Common Areas for maintenance purposes,
so long as reasonable access to the Demised Premises. and parking areas remains
available at all times; and
(c) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Industrial Center, or any portion
thereof.
ARTICLE 2.
TERM
2.01. The term of this Lease shall be a period of Seven (7) years, commencing
on June 1, 1992, and ending on May 31, 1999, unless sooner terminated as
provided herein.
2.02. If Lessor, for any reason whatsoever, is unable to deliver possession of
the Demised Premises to Lessee on the commencement date specified in Section
2.01 above, Lessor shall not be liable to Lessee for any loss or damage
resulting therefrom, nor shall this Lease be void or voidable, but in such event
Lessee shall not be liable for rent or other sums due Lessor until possession of
the Demised Premises is offered to Lessee. However, if Lessor is unable to
deliver premises by October 1, 1992, this lease shall become voidable at the
option of Lessee. No delay in delivery of possession shall operate to extend the
term hereof unless otherwise stipulated in writing by the parties.
2.03. Provided that Lessee is not then in default in the performance of any of
Lessee's obligations hereunder, Lessee shall have the option to extend the term
for an additional period of five (5) years. Such option can only be exercised by
Lessee giving written notice thereof to Lessor at least one hundred twenty(120)
days prior to expiration of the initial term of the lease.
ARTICLE 3.
RENT
3.01. Lessee shall pay to Lessor as Base Rent for the Demised Premises, in
lawful money of the United States, payable in advance on or before the first day
of each calendar month without any deduction, offset or demand, the following
amounts:(a) During the first five (5) years of the lease term, the Base Rent
shall be the sum of EIGHT THOUSAND SIX HUNDRED TWENTY FOUR DOLLARS AND 00/100
($8,624.00).
(a) The Base Rent shall be increased at the beginning of the 6th year of
this Lease based upon the percentage increase, if any, in the Consumer Price
Index of the Bureau of Labor Statistics, U. S. Department of Labor, for Urban
Wage Earners and Clerical Workers, Oakland-San Francisco Area, All Items
("C.P.I."). The amount of such increase shall be calculated by multiplying the
Base Rent provided in Paragraph (a) of this Section by a fraction, the numerator
of which shall be the C.P.I. for the month in which the adjustment is made, and
the denominator of which shall be the C.P.I. for the calendar month in which the
initial term of this lease commences. The sum so calculated shall be added to
the Base Rent provided in paragraph 3.01 and shall constitute the Adjusted Base
Rent payable during the term pursuant to paragraph 3.01 of this Lease. In no
event shall the Base Rent be reduced below the amount provided in Paragraph 3.01
of this Section. In no event shall the rent increase more than 25% over the base
rent for the one time increase in the 6th year of this lease.
Pending receipt of the required C.P.I. and determination of the actual
adjustment, Lessee shall pay an estimated adjusted rental, as reasonably
determined by Lessor according to C.P.I. information then available. Upon
notification of the actual adjustment, any overpayment shall be credited
against the next installment of rent due, and any
2
underpayment shall be immediately due and payable by Lessee. Lessor's
failure to request payment of an estimated or actual rent adjustment
shall not constitute a waiver of the right to any rental adjustment
provided herein.
(b) In the event Lessee exercises the option to extend the lease term for
the five (5) year period as provided in Section 2.03, the rent payable during
the extended term shall be pursuant to Article 3.01 (c).
(c) Lessor grants to Lessee (1) one option to extend the term of this
Lease for (5) five years, beginning on the expiration of the original term of
this Lease at 95% fair market value to be mutually agreed upon and subject to
all other terms covenants and conditions contained herein. However, if Lessor
and Lessee cannot agree on a "fair market value", it will be submitted for
arbitration by choosing three Real Estate appraisers; one by Lessor, one by
lessee and the third by the first two appraisers. Lessee shall give Lessor
written notice at least one hundred twenty (120) days prior to the expiration
date of this Lease of Lessee's intention to exercise said option granted herein.
In order for Lessee to avail itself of said option period, Lessee must have
lived up to and observed the timely performance of all terms covenants and
conditions contained in the Lease Agreement. In no event shall the rent be less
than that rent paid at the end of the original seven (7) year term.
3.02. If the commencement date is not the first day of a calendar month, or if
the termination date is not the last day of a calendar month, the monthly rental
for the fractional month shall be prorated on the basis of a thirty (30) day
month.
3.03. Lessee acknowledges that late payment of rent and any other charges
provided herein will cause Lessor to incur costs not contemplated by this Lease,
the exact amount of such costs being extremely difficult and impracticable to
determine. Such costs include, without limitation, processing and accounting
charges, late charges that may be imposed on Lessor by the terms of any
encumbrances against the Industrial Building and penalties on delinquent tax
payments. Lessee therefore agrees that if any installment of rent or other
charge payable by Lessee hereunder is not received by Lessor within ten (10)
days after the same becomes due, Lessor shall be entitled to collect an
additional sum equal to one and one-half percent (1.5%) of the delinquent
payment for each month or fraction thereof that the rent or other charge remains
unpaid. Acceptance of any late charge shall not constitute a waiver of Lessee's
default with respect to the overdue amount, nor prevent Lessor from exercising
any other rights and remedies available to Lessor hereunder or provided by law.
ARTICLE 4.
SECURITY DEPOSIT
4.01. Lessee has deposited with Lessor the sum of($8,624.00) as and for a
security deposit. Upon adjustment of the Base Rent in accordance with Section
3.01, the security deposit shall be increased to an amount equal to the Adjusted
Base Rent for one (1) month and Lessee shall promptly deposit the increase with
Lessor.
3
4.02. If Lessee defaults with respect to any provision of this Lease, Lessor
may use, apply or retain all or any part of the security deposit to cure such
default or to compensate Lessor for all damages sustained by Lessor resulting
from Lessee's default. If any portion of said deposit is so used or applied,
Lessee shall within ten (10) days after written demand therefor, deposit cash
with Lessor in an amount sufficient to restore the security deposit to its
original amount, and Lessee's failure to do so shall constitute a material
breach of this Lease. Lessor's obligations with respect to the security deposit
are those of a debtor and not a trustee. Lessor shall not be required to
segregate the security deposit as a separate fund and Lessee shall not be
entitled to any interest thereon. If Lessee shall fully and faithfully perform
every provision of this Lease to be performed by Lessee, the security deposit or
any balance thereof shall be returned to Lessee within thirty (30) days after
termination of the Lease.
ARTICLE 5.
USE
5.01. The Demised Premises shall be used and occupied by Lessee solely for
Office/Warehouse and for no other or additional purpose without the prior
written consent of Lessor.
5.02. Lessee shall not use the Demised Premises or permit anything to be done
in or about the Demised Premises which is prohibited by or will in any way
conflict with any law, statute, ordinance or governmental rule or regulation now
in force or which may hereafter be in force, or which is prohibited by the
standard form of fire insurance policy, or will in any way increase the existing
rate of any fire or other insurance covering the Industrial Building or any of
its contents, or cause any change or cancellation of such insurance. The
judgment of any court of competent jurisdiction or the admission of Lessee in
any action against Lessee, whether Lessor be a party thereto or not, that Lessee
has violated any law, statute, ordinance or governmental rule, regulation or
requirement,, shall' be conclusive of that fact as between Lessor and Lessee.
Lessee shall not do or permit anything to be done in or about the Demised
Premises which will in any way obstruct or interfere with the rights of other
tenants in the Industrial Building, or injure or annoy them, or use or allow the
Demised Premises to be used for any improper, immoral, unlawful or objectionable
purpose, nor shall Lessee cause, maintain or permit any nuisance in, on or about
the Demised Premises or commit or suffer to be committed any waste in, on or
about the Demised Premises.
ARTICLE 6.
LEASEHOLD IMPROVEMENTS
6.01. Lessor shall perform, at Lessor's own expense, the alterations and
improvements to the Demised Premises as described in "Exhibit A-1," attached
hereto and made a part hereof. Acceptance of the Demised Premises shall
constitute acceptance of any alterations and improvements therein performed by
Lessor and shall further constitute an acknowledgment by Lessee that the Demised
Premises are in good order, condition, and repair. Lessee, however, shall have
30 days from occupancy to submit a written "punch list" to Lessor of items to be
corrected by Lessor At Lessor's expense. Lessor shall have thirty (30) days to
complete items submitted by Lessee for correction.
4
6.02. Lessee may perform, at Lessee's own expense, the alterations and
improvements if any, to the Demised Premises as required for Lessee's business
and Lessor hereby consents to the performance of such work. Lessee may have
access to the Demised Premises prior to the commencement of the lease term for
the purpose' of installing Lessee's improvements, provided that such work does
not obstruct or interfere with the work being performed therein by Lessor. No
delay by Lessee in the completion of Lessee's work, shall delay commencement of
the lease term on the date specified in Section 2.01, unless such delay was
directly and primarily caused by Lessor. Lessor may submit a bid to Lessee for
performance of the work described in Exhibit "C" by Lessor, but Lessee shall not
be obligated to utilize the services of Lessor and may select any licensed
contractor to perform such work.
6.03. Except as expressly provided herein, Lessor shall have no obligation to
make any alterations or improvements to the Demised Premises for the benefit of
Lessee. Lessee acknowledges that neither Lessor nor anyone acting on Lessor's
behalf has made any representation or warranty as to the suitability or fitness
of the Demised Premises for the conduct of Lessee's business or for any other
purpose.
ARTICLE 7.
UTILITIES AND SERVICES
7.01. Lessor shall provide separate electricity and gas meters for the Demised
Premises. Lessee shall establish its own account with the utility company to
provide electricity and gas service to the Demised Premises and shall pay all
fees and charges for such service directly to the utility company.
7.02. Lessee shall pay, as additional rent, the cost of the following utilities
and services furnished to the Demised Premises:
(a) 72.3% of all water, sewer, and Common Area maintenance charges
(landscaping and parking lot sweeping) for the Industrial Building, as billed to
Lessee by Lessor.
(b) Garbage collection charges attributable to the Demised Premises, as
billed to Lessee by Lessor according to Lessee's actual usage thereof.
The foregoing charges shall be due and payable to Lessor within ten (10) days
after receipt of a billing therefor by Lessee. Billing shall occur on a monthly
basis.
7.03. Lessor shall maintain the Common Areas of the Industrial Building in good
condition and repair, except for damage occasioned by the act of Lessee, which
damage shall be repaired by Lessor at Lessee's or it's agent and invitees
expense. Lessor shall have no obligation to provide janitorial service for the
Demised Premises.
7.04. Lessor shall not be in default hereunder or be liable for any damages
directly or indirectly resulting from, nor shall the rent provided herein be
abated by reason of Lessor's failure to furnish or delay in furnishing any
utilities or services when such failure or delay is caused by accident,
breakage, repairs, strikes, lockouts or other labor dispute, or by limitation,
curtailment,
5
rationing or restrictions on use of electricity, gas, water or other utility, or
any other cause, similar or dissimilar, beyond the reasonable control of Lessor.
ARTICLE 8.
INDEMNITY AND INSURANCE
8.01. Lessee and Lessor hereby waives any and all claims against each other for
damage to any property or injury to or death of any person in, upon or about the
Demised premises, arising at any time and from any cause other than solely by
reason of the negligence or willful misconduct of each other. Lessee further
expressly indemnifies and holds Lessor harmless from and against any and all
claims, demands, causes of action, liabilities, costs or expenses, including
attorney's fees, occasioned by or in any way connected with the condition, use
or misuse of the Demised Premises, or occasioned by any act or omission of
Lessee and Lessee's agents, servants, employees, invitees or other persons who
may come upon the Demised Premises, except for damage to any property or injury
to or death of any person caused solely by the negligence or willful misconduct
of Lessor.
8.02. Lessee hereby agrees to maintain in full force and effect at all times
during the term of this Lease, at Lessee's expense, a policy or policies of
comprehensive general liability insurance, insuring against all liability of
Lessee and Lessee's authorized representatives or its agents and invitees,
arising out of or in connection with Lessee's use and occupancy of the Demised
Premises and also insuring performance by Lessee of the indemnity provisions set
forth in Section 8.01. The initial amount of such insurance shall be at least
$1,000,000.00, and shall be subject to periodic increase based upon inflation,
recommendations by Lessor's insurance advisors, and other relevant factors.
However, the amount of such general liability insurance shall not limit Lessee's
liability nor relieve Lessee of any obligations under this Lease. The general
liability insurance policy shall name Lessor as an insured party thereunder, and
shall be endorsed to provide that no cancellation or reduction in coverage will
be made without thirty (30)days prior written notice to Lessor. A copy of the
policy or a certificate of insurance shall be furnished to Lessor.
8.03. Lessor shall maintain in full force and effect a policy or policies
covering loss or damage to the Industrial Building, to the extent of the
replacement value thereof. Such policy or policies shall provide protection
against all perils included within the classification of fire, extended
coverage, vandalism, malicious mischief, and any other perils (excluding flood
and earthquake) which Lessor deems necessary. Lessor shall also maintain in full
force and effect a rental income insurance policy, with loss payable to Lessor,
in an amount equal to one year's gross rent from the Industrial Building, which
insurance shall also cover all real estate taxes and insurance costs for said
period. Lessee shall pay to Lessor, as additional rent, an amount equal to 72.3%
of the premiums paid by Lessor for the hazard and rental income insurance
policies described herein, such amount to be paid within ten (10) days after
Lessee's receipt of a billing therefor from Lessor. Lessee shall be responsible
for maintaining its own insurance covering the personal property, trade fixtures
and removable leasehold improvements owned by Lessee and located upon the
Demised Premises.
6
8.04. Lessor and Lessee each hereby waive any and all rights of recovery
against the other party, or against the agents, employees or representatives of
the other party, on account of loss or damage to the property of the waiving
party to the extent that such loss or damage is insured against under any
insurance policies which either Lessor or Lessee may have in force at the time
of such loss or damage. Each party shall, upon obtaining the insurance required
hereunder, give notice to the insurance carrier that the foregoing mutual waiver
of subrogation is contained in this Lease and Lessee and Lessor shall cause each
insurance policy obtained by each party to provide that the insurance company
waives all right of recovery by way of subrogation against either Lessor or
Lessee in connection with any damage covered by such policy.
ARTICLE 9.
REPAIRS AND MAINTENANCE
9.01. Lessee shall, at all times during the term hereof and at Lessee's own
expense, keep and maintain the Demised Premises and every part thereof in good
condition and repair. Lessee hereby waives all rights to make repairs at the
expense of Lessor or in lieu thereof to vacate the Demised Premises as provided
by California Civil Code Section 1942 or any other law, statute or ordinance now
or hereafter in effect.
9.02. The obligations of Lessee to maintain the Demised Premises shall not
include the roof or structural components of the building or any replacement of
the air conditioning units or replacement of the compressor or heat exchanger
within such units. Moreover, Lessor hereby warrants to Lessee that all
mechanical, electrical, plumbing and other systems within the Demised Premises
are in good operating condition and repair and Lessor will be responsible for
any necessary repairs or replacements thereof, beyond normal maintenance, for a
period of one (1) year from the commencement of the lease term, provided such
repair or replacement is not the result of any negligent act or failure to
maintain or omission by Lessee.
ARTICLE 10.
TAXES AND ASSESSMENTS
10.01. Lessee shall pay to Lessor, as additional rent, 72.3% of all real
property taxes levied or assessed against the Industrial Building during the
Lease term, except that:
(a) Lessee shall pay 100% of any increase in real property taxes
attributable to the alterations and improvements described in Exhibits "A" and
"B" attached hereto, and any other alterations or improvements to the Demised
Premises constructed by or for the benefit of Lessee;
(b) Lessee shall not be charged for any increase in real property taxes
after the date hereof solely attributable to alterations or improvements
constructed or installed within the Industrial Building as leasehold
improvements for the use and benefit to any other tenant or tenants.
(c) Lessee shall not be charged more than seven cents per square foot per
month for any increase in real property taxes occasioned by a sale or transfer
of the Industrial Building, or an ownership interest therein, resulting in a
complete or partial reassessment of the property.
7
10.02. Payment by Lessee of the real property taxes referred to herein shall be
made within ten (10) days after Lessor furnishes to Lessee a copy of the tax
▇▇▇▇ showing the total amount of property taxes levied or assessed against the
Industrial Building, the amount thereof payable by Lessee, and the calculation
utilized by Lessor to determine such amount. Billing shall be in two
installments made by Lessor on or about February 1, and November 1, of each year
of the Lease.
10.03. As used herein, the term "real property taxes" shall include any form of
real estate tax or assessment, general, special, ordinary or extraordinary, and
any license fee, commercial rental tax, improvement bond or bonds, levy or tax
imposed on the Industrial Building by any authority having the direct or
indirect power to tax, including any city, state or federal agency, or any
school, sanitary, fire, street, drainage, or other improvement district. The
term shall also include any tax, fee, levy, assessment, or charge imposed by any
taxing authority upon Lessor's right to receive, or the receipt of, rent or
income from the Industrial Building, or against Lessor's business of leasing the
Industrial Building. However, the term "real property taxes" does not include
Lessor's federal or state personal income or franchise taxes.
10.04. Lessee shall pay prior to delinquency all taxes levied or assessed
against the trade fixtures, equipment, furnishings, and other personal property
of Lessee located upon the Demised Premises or elsewhere. When possible, Lessee
shall cause said trade fixtures, equipment, furnishings, and other personal
property to be assessed and billed separately from the real property of Lessor.
If any of Lessee's personal property shall be assessed with Lessor's real
property, Lessee shall pay Lessor the taxes attributable to Lessee within ten
(10) days after Lessor furnishes to Lessee a written statement describing the
property in question and showing the amount of tax thereon payable by Lessee.
ARTICLE 11.
ALTERATIONS AND IMPROVEMENTS
11.01. Except for the leasehold improvements authorized to be performed by
Lessee under Section 6.02, Lessee shall not, without the prior written consent
of Lessor (which consent shall not be unreasonably withheld), make any
alterations, additions or improvements in, on or about the Demised Premises. As
a condition to giving such consent, Lessor may require Lessee to provide Lessor
a surety bond or other security satisfactory to Lessor to insure Lessor against
mechanics' and materialmen's liens and to insure completion of the work.
11.02. All alterations, additions and improvements, whether temporary or
permanent in character, made by Lessee in, on or about the Demised Premises,
except movable trade fixtures installed at the expense of Lessee, shall, in the
absence of a written request by Lessor for their removal, become the property of
Lessor and shall remain upon and be surrendered with the Demised Premises at the
termination of this Lease by lapse of time or otherwise without compensation to
Lessee.
8
ARTICLE 12.
DAMAGE OR DESTRUCTION
12.01. If the demised Premises, or other portion of the Industrial Building of
which the Demised Premises constitute a part, are damaged, by fire or other
casualty, Lessor shall forthwith repair the same, provided such repairs can, in
Lessor's opinion, be completed within one hundred eighty (180) days. In such
event, this Lease shall remain in full force and effect except that if there is
damage to the Demised Premises and such damage was not the result of negligence
or willful misconduct of Lessee or Lessee's employees or invitees, the rent
payable by Lessee shall be abated while the repairs are being made by the extent
to which the Demised Premises are unusable by Lessee in the normal conduct of
Lessee's business. If the repairs cannot, in Lessor's opinion, be completed
within one hundred eighty (180) days, Lessee shall have the option to cancel the
lease and notice shall be given within 60 days. In the event Lessor does not
elect to make the repairs which cannot be completed within one hundred eighty
(180) days, and provided the damage affects the Demised Premises or common areas
necessary to Lessee's use, Lessor shall give written notice of such fact to
Lessee within sixty (60) days after the date on which the damage occurred and
either Lessor or Lessee may, within sixty (60) days after the giving of such
notice, terminate this Lease.
12.02. Notwithstanding the provisions of Section 12.01 above, Lessor shall have
the option of terminating this Lease in any of the following circumstances:
(a) Where the damage or destruction arises from a casualty or cause not
covered by Lessor's insurance then in force, and such casualty more than 33 1/3
percent of demised premises.
(b) Where the building in which the Demised Premises are located is
damaged or destroyed to the extent of 50 percent or more of the replacement cost
thereof, whether the Demised Premises be injured or not.
(c) Where the repairs cannot be made by reason of any statute,
ordinance, rule or regulation of any governmental authority.
12.03. If Lessor is obligated or elects to repair any damage pursuant to this
Article, Lessor shall not be required to repair or replace any improvements
installed in the Demised Premises by or for Lessee, other than building.
standard tenant improvements made by Lessor, and Lessee shall, at Lessee's own
expense, repair and restore Lessee's portion of such improvements.
12.04. A total destruction of the entire building in which the Demised Premises
are located shall automatically terminate this Lease.
12.05. Except as otherwise expressly provided in this Article, Lessee hereby
waives the provisions of California Civil Code Sections 1932(2) and 1933(4).
9
ARTICLE 13.
CONDEMNATION
13.01. If all of the Demised Premises or so much thereof is taken by right of
eminent domain, or purchase in lieu thereof, such that the Demised Premises are
no longer reasonably suitable for Lessee's use, this Lease shall terminate as of
the date that possession of the Demised Premises or part thereof is taken.
13.02. If any part of the Demised Premises is taken and the remaining part
thereof (after reconstruction of the then existing building) is reasonably
suitable for Lessee's use, this Lease shall, as to the part so taken, terminate
as of the date that possession of such part is taken and the rent payable
hereunder shall be reduced in the same proportion that the floor area of the
portion of the Demised Premises so taken (less any addition thereto by reason of
any reconstruction) bears to the original floor area of the Demised Premises
immediately prior to the taking. Lessor shall, at Lessor's expense, make all
necessary repairs or alterations to restore the remaining Demised Premises to a
complete architectural unit.
13.03. No award for any partial or entire taking shall be apportioned and
Lessee hereby assigns to Lessor all of Lessee's interest therein, except that
Lessee shall be entitled to any portion of the award specifically designated as
compensation for the taking of personal property belonging to Lessee, for the
interruption of Lessee's business, for Lessee's moving costs or loss of goodwill
suffered by Lessee. No temporary taking of the Demised Premises shall terminate
this Lease or give Lessee any right to abatement of rent hereunder; any award
recovered by Lessee for such temporary taking shall belong entirely to Lessee
and Lessor shall have no interest therein. Each party agrees to execute and
deliver to the other all instruments and documents that may be required to
implement the provisions of this Section.
ARTICLE 14.
ASSIGNMENT AND SUBLETTING
14.01. Lessee shall not voluntarily or by operation of law assign, transfer,
mortgage, sublet, pledge, hypothecate or encumber all or any part of Lessee's
interest in this Lease or in the Demised Premises or any part thereof, without
Lessor's prior written consent and any attempt to do so without such consent
being first had and obtained shall be wholly void and shall constitute a breach
of this Lease. If Lessee is a corporation or partnership, any transfer of a
controlling interest in the stock of Lessee shall constitute an assignment
hereunder.
14.02. If Lessee complies with the following conditions, Lessor shall not
unreasonably withhold Lessor's consent to the assignment of this Lease or the
subletting of the Demised Premises or any portion thereof. Lessee shall submit
in writing to Lessor:
(a) The name and legal composition of the proposed Assignee or
Sublessee;
(b) The terms and provisions of the proposed Assignment or Sublease; and
10
(c) Such financial information as Lessor may reasonably request
concerning the proposed Assignee or Sublessee.
14.03. No consent by Lessor to any assignment or subletting by Lessee shall
relieve Lessee of any obligation to be performed by Lessee under this Lease,
whether occurring before or after such consent, assignment or subletting. The
consent by Lessor to any assignment or subletting shall not relieve Lessee from
the obligation to obtain Lessor's express written consent to any other
assignment or subletting. The acceptance of rent by Lessor from any other person
shall not be deemed to be a waiver by Lessor of any provisions of this Lease or
to be a consent to any assignment, subletting or other transfer. Consent to one
assignment, subletting or other transfer shall not be deemed to constitute
consent to any subsequent assignment, subletting or other transfer.
ARTICLE 15.
TRANSFER OF LESSOR'S INTEREST
15.01. Lessor shall have the right at any time to sell, transfer, assign,
pledge, hypothecate or otherwise dispose of Lessor's interest in the Demised
Premises and in this Lease. In the event of any such sale, transfer, assignment,
pledge, hypothecation or other disposition, all obligations of Lessor hereunder
from and after the date of such transfer shall devolve upon the transferee and
Lessor shall be released and discharged from all further obligation or liability
hereunder; provided, that Lessor shall be responsible for any funds in the hands
of Lessor in which Lessee has an interest until such funds have been delivered
to the transferee. Lessee agrees to attorn to the transferee provided all of
Lessor's obligations hereunder from and after the date of such transfer are
assumed by the transferee in writing for the benefit of Lessee.
ARTICLE 16.
MECHANICS' LIENS
16.01. Lessee shall keep the Demised Premises free and clear of all mechanics'
liens resulting from any construction work done by or for Lessee. Lessee shall
have the right to contest. the correctness or validity of any such lien if,
immediately on demand by Lessor, Lessee procures and records a lien release bond
issued by a corporation authorized to issue surety bonds in California in an
amount equal to one and one-half (1-1/2) times the amount of the claim of lien
or other security satisfactory to Lessor. If used, the bond shall meet the
requirements of Section 3143 of the California Civil Code and shall provide for
the payment of any sum that the claimant may recover on the claim, together with
costs of suit. Should Lessee fail to discharge any such lien or cause the same
to be released within sixty (60) days from the date the lien is filed, Lessor
may, without inquiring into the validity thereof, cause the same to be
discharged and all amounts so expended by Lessor, together with reasonable
attorney's fees and expenses, shall be paid by Lessee to Lessor as additional
rent hereunder, together with interest thereon at the rate of fifteen percent
(15%) per annum. Lessee shall give ten (10) days prior written notice to Lessor
of the date on which any construction work will be commenced so as to afford
Lessor the opportunity to post a notice of nonresponsibility.
11
ARTICLE 17.
ENTRY BY LESSOR
17.01. Lessor and Lessor's authorized representatives shall have the right to
enter the Demised Premises with 48 hour advanced notice except in an emergency
at reasonable hours for any of the following purposes:
(a) To examine and inspect the Demised Premises;
(b) To supply any service to be provided by Lessor to Lessee hereunder;
(c) To perform any necessary maintenance or repairs that Lessor is
required or permitted to perform hereunder;
(d) To serve, post or keep posted any notices required or allowed under
the provisions of this Lease;
(e) To post "Building for sale" signs at any time during the term, to
post "for rent" or "for lease" signs during the last one hundred twenty (120)
days of the Lease term, or during any period while Lessee is in default;
(f) To show the Demised Premises to prospective tenants, buyers, lenders
or other persons at any time during the Lease term;
(g) To do any other act or thing necessary for the safety or
preservation of the Demised Premises or the Industrial Building.
17.02. Lessee hereby waives any claim for damages for any injury or
inconvenience to or interference with Lessee's business, any-loss of occupancy
or quiet enjoyment of the Demised Premises or any other loss occasioned by
Lessor's entry pursuant to Section 17.01. Lessor shall at all times have and
retain a key with which to unlock all of the doors in, on or about the Demised
Premises (excluding Lessee's vaults, safes and other secured areas designated in
writing by Lessee in advance); and Lessor shall have the right to use any and
all means which Lessor may deem proper to open said doors in an emergency in
order to obtain entry to the Demised Premises, and any entry to the Demised
Premises obtained by Lessor by any of said means, or otherwise, shall not under
any circumstances be construed or deemed to be a forcible or unlawful entry into
or a detainer of the Demised Premises, or an eviction, actual or constructive,
of Lessee from the Demised Premises, or any portion thereof.
ARTICLE 18.
DEFAULT BY LESSEE
18.01. The occurrence of any one or more of the following events ("Events of
Default") shall constitute a material default and breach of this Lease by
Lessee:
12
(a) With (10) ten days written notice from Lessor, any failure by Lessee
to pay any rental or any other sum required to be paid by Lessee hereunder, as
and when the same becomes due and payable.
(b) Any failure by Lessee to observe and perform any other provision of
this Lease to be observed or performed by Lessee, where such failure continues
for ten (10) days after written notice thereof by Lessor to Lessee; provided,
however, that if the nature of such default is such that it cannot reasonably be
cured within such ten (10) day period, Lessee shall not be deemed to be in
default if Lessee shall within such period commence such cure and thereafter
diligently prosecute the same to completion.
(c) The making by Lessee of any general assignment or general
arrangement for the benefit of creditors; the filing by or against Lessee of a
petition to have Lessee adjudged a bankrupt or a petition for reorganization or
arrangement under any law relating to bankruptcy (unless, in the case of a
petition filed against Lessee, the same is dismissed within ninety (90) days);
the appointment of a trustee or receiver to take possession of substantially all
of Lessee's interest in this Lease, where possession is not restored to Lessee
within sixty (60) days; or the attachment, execution or other judicial seizure
of substantially all of Lessee's assets located at the Demised Premises or of
Lessee's interest in this Lease, where such seizure is not discharged within
forty-five (45) days.
18.02. Any notice given under this Article shall specify the Event of Default
and the applicable lease provisions, and shall demand that Lessee perform the
provisions of this Lease, within the applicable period of time. No such notice
shall be deemed a forfeiture or a termination of this Lease provided Lessee
cures the default within the applicable period of time.
ARTICLE 19.
LESSOR'S REMEDIES UPON DEFAULT
19.01. Lessor shall have the following remedies upon the occurrence of an Event
of Default, such remedies being cumulative and not exclusive and in addition to
any other remedies available to Lessor as now or hereafter provided by law:
(a) Lessor can continue this Lease in full force and effect, and the
Lease will continue in effect as long as Lessor does not terminate Lessee's
right to possession, and Lessor shall have the right to collect rent when due,
irrespective of whether Lessee shall have abandoned the Demised Premises. During
the period Lessee is in default, Lessor can enter the Demised Premises and relet
them, or any part of them, to third parties for Lessee's account. Lessee shall
be liable immediately to Lessor for all costs Lessor incurs in such reletting,
including, without limitation, broker's commissions, expenses of remodeling the
Demised Premises required by reletting, and like costs. Reletting can be for a
period shorter or longer than the remaining term of this Lease. Lessee shall pay
to Lessor the rent specified in this Lease on the dates when the same becomes
due, less the rent Lessor receives from any reletting. No act by Lessor allowed
by this paragraph shall terminate this Lease unless Lessor notifies Lessee that
Lessor elects to terminate this Lease. After Lessee's default and for as long as
Lessor does not terminate Lessee's right to possession of the Demised Premises,
Lessee shall have the right to assign or sublet Lessee's
13
interest in this Lease pursuant to Article 14, but Lessor's consent may be
conditioned upon all defaults by Lessee being fully cured at the time of
assignment or subletting.
(b) Lessor can terminate Lessee's right to possession of the Demised
Premises at any time during Lessee's default. No act by Lessor other than giving
written notice to Lessee shall terminate this Lease. Acts of maintenance,
efforts to relet the Demised Premises, or the appointment of a receiver on
Lessor's initiative to protect Lessor's interest under this Lease shall not
constitute a termination of Lessee's right to possession. On termination, Lessor
has the right to recover from Lessee:
(1) The worth, at the time of the award, of the unpaid rent that has
been earned at the time of termination of this Lease; plus
(2) The worth, at the time of the award, of the amount by which the
unpaid rent that would have been earned after the date of termination of this
Lease until the time of award exceeds the amount of the loss of rent that Lessee
proves could have been reasonably avoided; plus
(3) The worth, at the time of the award, of the amount by which the
unpaid rent for the balance of the term after the time of award exceeds the
amount of the loss of rent that Lessee proves could have been reasonably
avoided; and
(4) Any other amount, and court costs, necessary to compensate
Lessor for all detriment proximately caused by Lessee's default.
"The worth, at the time of the award," as used in (1) and (2) above,
is to be computed by allowing interest at the rate of ten percent (10%) per
annum from the date of default. "The worth, at the time of the award" as used in
(3) above is to be computed by discounting the amount at the discount rate of
the Federal Reserve Bank of San Francisco at the time of the award, plus one
percent (1%). The term "rent," as used in this Article shall be deemed to
include all monetary sums required to be paid by Lessee pursuant to the terms of
this Lease.
ARTICLE 20.
LESSOR'S RIGHT TO CURB DEFAULTS
20.01 If Lessee shall fail to pay any sum of money, other than rent, required
to be paid by Lessee hereunder, or shall fail to perform any other act on
Lessee's part to be performed hereunder, and such failure shall continue for ten
(10) days after notice thereof by Lessor, Lessor may, but shall not be obligated
to do so, and without waiving or releasing Lessee from any obligations of
Lessee, make such payment or perform any such other act on Lessee's part to be
made or performed hereunder. All sums expended by Lessor, including necessary
incidental costs, shall be deemed additional rent hereunder and shall be payable
to Lessor immediately upon demand, together with interest thereon at the rate of
fifteen percent (15%) per annum from the date of expenditure to the date of
reimbursement.
14
ARTICLE 21.
COSTS OF SUIT
21.01. In the event legal action between Lessor and Lessee shall become
necessary in order to enforce or interpret this Lease, or any provision
contained herein, the prevailing party shall be entitled to recover all costs
and expenses as may be incurred in connection therewith, including reasonable
attorney's fees.
21.02. Should Lessor, without fault on Lessor's part, be made a party to any
litigation instituted by Lessee or by any third party against Lessee, or by or
against any person holding under or using the Demised Premises by license of
Lessee, or for the foreclosure of any lien for labor or materials furnished to
or for Lessee or any such other person or otherwise arising out of or resulting
from any act or transaction of Lessee or of any such other person, Lessee
covenants to save and hold Lessor harmless from any judgment rendered against
Lessor or the Demised Premises or any part thereof, and all costs and expenses,
including reasonable attorney's fees, incurred by Lessor in connection with such
litigation.
ARTICLE 22.
SUBORDINATION
22.01. In the event the holder of any deed of trust hereafter to be placed
against the Demised Premises requires that this Lease be subordinate to any such
encumbrance, this Lease shall be subordinate to that encumbrance if Lessor first
obtains from the holder of the deed of trust a written agreement providing that
for so long as Lessee' shall perform all of Lessee's duties and obligations
hereunder, no foreclosure, deed given in lieu of foreclosure or sale under such
deed of trust shall affect Lessee's rights under this Lease. Lessee shall attorn
to any purchaser at any foreclosure sale, or to any grantee or transferee
designated in any deed given in lieu of foreclosure. Lessee shall execute the
written agreement and any other documents required by the holder of the deed of
trust to accomplish the purposes of this Article, and upon Lessee's failure or
refusal to do so within five (5) days after demand, Lessee hereby appoints
Lessor as Lessee's attorney-in-fact to execute such agreement or other documents
for and on behalf of Lessee. The power of attorney granted herein shall be
deemed to be coupled with an interest and to be irrevocable.
ARTICLE 23.
ESTOPPEL CERTIFICATE
23.01. Each party, within ten (10) days after notice from the other, shall
execute and deliver to the other, in recordable form, a certificate stating that
this Lease is unmodified and in full force and effect, or in full force and
effect as modified stating the modifications. The certificate also shall state
the amount of monthly rent, the dates to which the rent has been paid in
advance, the amount of any security deposit or prepaid rent, and shall further
certify that there is no uncured default by the other party under the Lease, or
specify such default, if any is claimed. Failure to deliver the certificate
within the ten (10) days, shall be conclusive upon the party failing to deliver
the certificate for the benefit of the party requesting the certificate, and any
successor to the party requesting the certificate, that this Lease is in full
force and effect and has not been
15
modified except as may be represented by the party requesting the certificate,
that there are no uncured defaults by the party requesting the certificate and
that not more than one (1) month's rent has been paid in advance.
ARTICLE 24.
HOLDING OVER
24.01. If Lessee remains in possession of all or any part of the Demised
Premises after the expiration of the term hereof, with the express or implied
consent of Lessor, such tenancy shall be from month to month only, and not a
renewal hereof or an extension for any further term and in such case rent and
other monetary sums due hereunder shall be the amount payable at the expiration
of the term of this Lease and such month to month tenancy shall be subject to
every other term, covenant and agreement contained herein.
ARTICLE 25.
SURRENDER
25.01. Upon the expiration or earlier termination of this Lease, Lessee shall
surrender the Demised Premises in the same condition as received, ordinary wear
and tear and damage by fire, earthquake, act of God or the elements alone
excepted. Lessee shall remove all of Lessee's personal property and trade
fixtures and shall repair, at Lessee's expense, any damage to the Demised
Premises or the Industrial Building caused by such removal, including, without
limitation, repair of floors and patching and repainting of walls where
required, all to Lessor's reasonable satisfaction. Any personal property or
trade fixtures not removed at the expiration or earlier termination of this
Lease shall be deemed abandoned by Lessee. If Lessor so elects, Lessee shall
also remove any alterations or improvements installed by or for Lessee which
would otherwise remain as part of the Demised Premises and Lessee shall restore
the Demised Premises to their condition prior to such installation.
25.02. Should Lessee fail to remove any personal property or trade fixtures, or
fail to remove any alterations or improvements as requested by Lessor, Lessee
shall be liable to Lessor for any and all removal costs, transportation and
storage expenses, and the cost of restoring the Demised Premises as required
herein. Lessee shall indemnify Lessor against any loss, damage or liability
resulting from delay by Lessee in so surrendering the Demised Premises,
including, without limitation, any claims made by any succeeding tenants founded
on such delay.
ARTICLE 26.
WAIVER
26.01. No covenant, term or condition or the breach thereof shall be deemed
waived, except by written consent of the party against whom the waiver is
claimed, and any waiver of any covenant, term or condition shall not be deemed
to be a waiver of any preceding or succeeding breach of the same or any other
covenant, term or condition. Acceptance by Lessor of any performance by Lessee
after the time the same shall have become due shall not constitute a waiver by
Lessor of the breach or default of any covenant, term or condition unless
otherwise
16
expressly agreed to by Lessor in writing. The receipt and acceptance by Lessor
of delinquent rent shall constitute only a waiver of timely payment for the
particular rent payment involved.
ARTICLE 27.
QUIET ENJOYMENT
Lessor hereby covenants with Lessee that upon payment by Lessee of the
rent as aforesaid and upon observance and performance of the terms of this Lease
by Lessee, Lessee shall peaceably hold and enjoy the Demised Premises for the
term hereby demised without hindrance or interruption by Lessor or any person or
persons lawfully or equitably claiming by, through or under Lessor.
ARTICLE 28.
NOTICES
28.01. All notices or demands required or permitted to be given hereunder shall
be in writing and shall be either personally served or mailed by certified mail,
return receipt requested, to the other party at the following addresses:
To Lessor: To Lessee:
▇▇▇▇ ▇▇▇▇▇▇ LATHING COMPANY EISI
▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, #▇▇▇ ▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇ "▇"
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
28.02. Either party may change the foregoing address by giving notice to the
other in the manner provided herein. Any notice sent by mail shall be deemed
received on the second business day following deposit of the notice in the
United States Mail, with proper postage prepaid thereon.
ARTICLE 29.
MISCELLANEOUS PROVISIONS
29.01. Captions. The captions used in this Lease are for convenience only and
--------
shall not be deemed to be relevant in resolving any question of interpretation
or construction of any provision contained herein.
29.02. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties and supersedes and cancels any prior agreements or
understandings, whether written or oral. This Agreement can only be modified by
a written amendment hereto executed by both parties.
29.03. Severability. If any term or provision of this Lease shall, to any
------------
extent, be determined by a court of competent jurisdiction to be invalid or
unenforceable, the remainder of this Lease shall not be affected thereby, and
each term and provision of this Lease shall be valid and enforceable to the
fullest extent permitted by law.
17
29.04. Time. Time is hereby declared to be of the essence of this Lease
----
and-each and every provision hereof.
29.05. Corporate Authority. If Lessee is a corporation, each of the persons
-------------------
executing this Lease on behalf of Lessee does hereby represent and warrant that
Lessee currently is in good standing in the state of its incorporation, that
Lessee is qualified to do business in California, that the corporation has full
right and authority to enter into this Lease, and that each person executing
this Lease on behalf of the corporation is duly authorized and empowered to do
so.
29.06. Calendar Days. All references herein to any acts or obligations to be
-------------
performed within a certain number of days shall mean calendar days.
29.07. Effective Date. Submission of this instrument for examination or
--------------
signature by Lessee does not constitute a reservation of or option for lease,
and this instrument is not effective as a lease or otherwise until execution and
delivery by both Lessor and Lessee, in which event this Lease shall become
effective on the date of execution or such other date as may be specified in
writing signed by Lessor and Lessee.
29.08. Choice of Law. This Lease shall be governed by and interpreted in
-------------
accordance with the laws of the State of California.
29.09. Memorandum of Lease. This Lease Agreement shall not be recorded but the
-------------------
parties may agree to execute and record a Memorandum of Lease, in form
satisfactory to Lessor and Lessee.
29.10. Successors and Assigns. Subject to the restrictions against assignment
----------------------
and subletting by Lessee, this Lease shall be binding upon and inure to the
benefit of the respective heirs, executors, administrators, personal
representatives, successors and assigns of the parties hereto.
ARTICLE 30.
ACKNOWLEDGMENT
Lessee acknowledges that there is currently a Deed of Trust on the
Industrial Building for the benefit of Penn Mutual and Annuity-Company, and that
this lease is subordinate to such Deed of Trust. By signing below, Lender agrees
that so long as Lessee performs all of Lessee's obligations and duties
hereunder, no foreclosure, deed given in lieu of foreclosure or sale under such
Deed of Trust shall affect Lessee's rights under this Lease, and Lessee agrees
to attorn to any purchaser at any foreclosure sale, or to any grantee or
transferee designated in any deed given in lieu of foreclosure.
30.01. Hazardous Waste Clause.
1. Lessor represents and warrants that:
a) At no time have the premises, the building or the land been used
for the generation, storage or disposal of hazardous materials, extremely
hazardous materials or as a landfill or other waste disposal site.
18
b) The premises are in full compliance with all laws, regulations,
rules, or requirements of law of the federal, state and local governments
relating to the pollution or protection of the environment (including without
limitation, air, water, and land) and with all permits or licenses issued
thereunder. No event has occurred which, with the passage of time or the giving
of notice or both, would constitute non-compliance with such environmental laws.
c) There are no agreements, consent orders, decrees, judgments,
license or permit-conditions, or other directives, issued by a governmental
entity or agency relating to the future use of the Premises or requiring any
change in the present condition of the Premises.
d) There are no actions, suits, claims or proceedings relating to a
violation or non-compliance with any environmental law or with respect to
the disposal, discharge or release of hazardous materials at or from the
Premises.
2. Lessor shall save and hold Lessee harmless from any and all costs for
any government directed or threatened remediation or cleanup at the Premises,
provided, however, that if Lessee has caused such remediation or cleanup to be
required by disposing of hazardous materials on or in the Premise's then, and in
that event, Lessee shall bear the cost of any government required remediation or
cleanup.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease the day and year
first above written.
LESSOR:
▇▇▇▇ ▇▇▇▇▇▇ LATHING COMPANY, a
California General Partnership
By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------
LESSEE:
EISI, INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
19