Exhibit 10.4.1
--------------
2.2 Building Lease
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE-NET
(Do not use this form for Multi-Tenant Property)
1. Basic Provisions ("Basic Provisions")
1.1 Parties: This Lease ("Lease"), dated for reference purposes only,
December 20, 1996, is made by and between Techplex, L.P., A California Limited
Partnership ("Lessor") and Putter Properties, Inc., a Delaware Corporation
("Lessee"), (collectively the "Parties," or individually a "Party").
1.2 Premises: That certain real property, including all improvements
therein or to be provided by Lessor under the terms of this Lease, and commonly
known by the street address of ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ located in the County of San
Diego, State of California and generally described as (describe briefly the
nature of the property) the land and an industrial building totaling
approximately 32,975 square feet located in the ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, as depicted on EXHIBIT "1" annexed to the Addendum,
see Addendum, (S)1, ("Premises"). (See Paragraph 2 for further provisions.)
1.3 Term: Ten (10) years and Zero (0) months ("Original Term") commencing
February 1, 1997 ("Commencement Date") and ending one hundred twenty (120)
months thereafter ("Expiration Date"). (See Paragraph 3 for further
provisions.)
1.4 Early Possession: See Addendum, (S)6 ("Early Possession Date"). (See
Paragraphs 3.2 and 3.3 for further provisions.)
1.5 Base Rent: $14,038.00 per month ("Base Rent"), payable on the first
(1st) day of each month commencing February 1, 1997, subject to adjustment. See
Addendum, (S)3. (See Paragraph 4 for further provisions.)
[X] If this box is checked, there are provisions in this Lease for the Base Rent
to be adjusted. See Addendum, (S)3.
1.6 Base Rent Paid Upon Execution: $14,038.00 (Fourteen Thousand Thirty-
Eight and no/100ths Dollars) as Base Rent for the period of February 1, 1997
through February 28, 1997.
1.7 Security Deposit: $25,617.00. See Addendum, (S)4, ("Security
Deposit"). (See Paragraph 5 for further provisions.)
1.8 Permitted Use: General office, research, development and
manufacturing and any other legally permitted use. (See Paragraph 6 for further
provisions.)
1.9 Insuring Party: Lessor is the "Insuring Party" unless otherwise
stated herein. (See Paragraph 8 for further provisions.)
1.10 Real Estate Brokers: The following real estate brokers
(collectively, the "Brokers") and brokerage relationships exist in this
transaction and are consented to by the Parties (check applicable boxes): CB
Commercial Real Estate Group, Inc. represents [_] Lessor exclusively ("Lessor's
Broker"); [X] both Lessor and Lessee, and CB Commercial Real Estate Group, Inc.
represents [_] Lessee exclusively ("Lessee's Broker"); [X] both Lessee and
Lessor. (See Paragraph 15 for further provisions.) See Addendum, (S)5.
1.11 Guarantor. The obligations of the Lessee under this Lease are to be
guaranteed by ▇▇▇▇▇ ▇▇▇▇▇▇ Golf Company and Odyssey Sports, Inc. ("Guarantor").
(See Paragraph 37 for further provisions.)
1.12 Addenda. Attached hereto is an Addendum or Addenda consisting of
pages 1 through 12 and Exhibits 1 through 6 of the Addendum all of which
constitute a part of this Lease.
2. Premises. See Addendum, (S)7.
2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby leases
from Lessor, the Premises, for the term, at the rental, and upon all of the
terms, covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of square footage set forth in this Lease, or
that may have been used in calculating rental, is an approximation which Lessor
and Lessee agree is reasonable and the rental based thereon is not subject to
revision whether or not the actual square footage is more or less.
2.2 Condition. Lessor shall deliver the Premises to Lessee clean and free
of debris on the Scheduled Completion Date and warrants to Lessee that the
existing plumbing, fire sprinkler system, lighting, air conditioning, heating
and loading doors, if any, in the Premises, other than those constructed by
Lessee, shall be in good operating condition as of that date. If a non-
compliance with said warranty exists on the Scheduled Completion Date, Lessor
shall, except as otherwise provided in this Lease, promptly after receipt of
written notice from Lessee setting forth with specificity the nature and extent
of such non-compliance, rectify same at Lessor's expense. If Lessee does not
give Lessor written notice of a non-compliance with this warranty as provided in
the Addendum, (S)7, correction of that non-compliance shall be the obligation of
Lessee at Lessee's sole cost and expense.
2.3 Compliance with Covenants, Restrictions and Building Code. Lessor
warrants to Lessee that the improvements on the Premises comply with all
applicable covenants or restrictions of record and applicable building codes,
regulations and ordinances in effect on the Substantial Completion Date. Said
warranty does not apply to the use to which Lessee will put the Premises or to
any Alterations or Utility Installations (as defined in Paragraph 7.3(a)) made
or to be made by Lessee. If the Premises do not comply with said warranty,
Lessor shall, except as otherwise provided in this Lease, promptly after receipt
of written notice from Lessee setting forth with specificity the nature and
extent of such non-compliance, rectify the same at Lessor's expense. If Lessee
does not give Lessor written notice of a non-compliance with this warranty as
provided in the Addendum, (S)8, correction of that non-compliance shall be the
obligation of Lessee at Lessee's sole cost and expense.
2.4 Acceptance of Premises. Lessee hereby acknowledges that neither
Lessor, nor any of Lessor's agents, has made any oral or written representations
or warranties with respect to the said matters other than as set forth in this
Lease.
3. Term.
3.1 Term. The Commencement Date, Expiration Date and Original Term of
this Lease are as specified in Paragraph 1.3.
3.2 Early Possession. See Addendum, (S)9.
3.3 Delay in Possession. See Addendum, (S)(S) 6 and 9.
4. Rent.
4.1 Base Rent. Lessee shall cause payment of Base Rent and other rent or
charges, as the same may be adjusted from time to time, to be received by Lessor
in lawful money of the United States, without offset or deduction, on or before
the day on which it is due under the terms of this Lease. Base Rent and all
other rent and charges for any period during the term hereof which is for less
than one (1) full calendar month shall be prorated based upon the actual number
of days of the calendar month involved. Payment of Base Rent and other charges
shall be made to Lessor at its address stated herein or to such other persons or
at such other addresses as Lessor may from time to time designate in writing to
Lessee.
5. Security Deposit. Lessee shall deposit with Lessor upon execution hereof
the Security Deposit set forth in Paragraph 1.7 as security for Lessee's
faithful performance of Lessee's obligations under this Lease. If Lessee fails
to pay Base Rent or other rent or charges due hereunder, or otherwise Breaches
under this Lease (as defined in Paragraph 13.1), Lessor may use, apply or retain
all or any portion of said Security Deposit for the payment of any amount due
Lessor or to reimburse or compensate Lessor for any liability, cost, expense,
loss or damage (including attorneys' fees) which Lessor may suffer or incur by
reason thereof. If Lessor uses or applies all or any portion of said Security
Deposit, Lessee shall within ten (10) days after written request therefor
deposit moneys with Lessor sufficient to restore said Security Deposit to the
full amount required by this Lease. Lessor shall not be required to keep all or
any part of the Security Deposit separate from its general accounts. Lessor,
shall, at the expiration or earlier termination of the term hereof and after
Lessee has vacated the Premises, return to Lessee (or, at Lessor's
option, to the last assignee, if any, of Lessee's interest herein), that portion
of the Security Deposit not used or applied by Lessor. Unless otherwise
expressly agreed in writing by Lessor, no part of the Security Deposit shall be
considered to be held in trust, to bear interest or other increment for its use,
or to be prepayment for any moneys to be paid by Lessee under this Lease. See
Addendum, (S)4.
6. Use. See Addendum, (S)10.
6.1 Use. Lessee shall use and occupy the Premises only for the purposes
set forth in Paragraph 1.8, or any other use which is comparable thereto and for
no other purpose. Lessee shall not use or permit the use of the Premises in a
manner that creates waste or a nuisance, or that disturbs owners and/or
occupants of, or causes damage to, neighboring premises or properties. Lessor
hereby agrees to not unreasonably withhold or delay its consent to any written
request by Lessee. Lessees assignees or subtenants, and by prospective
assignees and subtenants of the Lessee, its assignees and subtenants, for a
modification of said permitted purpose for which the premises may be used or
occupied, so long as the same will not impair the structural integrity of the
improvements on the Premises, the mechanical or electrical systems therein, is
not significantly more burdensome to the Premises and the improvements thereon,
and is otherwise permissible pursuant to this Paragraph 6. If Lessor elects to
withhold such consent, Lessor shall within five (5) business days give a written
notification of same, which notice shall include an explanation of Lessor's
reasonable objections to the change in use.
6.2 Hazardous Substances.
(a) Reportable Uses Require Consent. The term "Hazardous Substance" as
used in this Lease shall mean any product, substance, chemical material or waste
whose presence, nature, quantity and/or intensity of existence, use,
manufacture, disposal, transportation, spill, release or effect, either by
itself or in combination with other materials expected to be on the Premises, is
either: (i) potentially injurious to the public health, safety or welfare, the
environment or the premises, (ii) regulated or monitored by any governmental
authority, or (iii) a basis for liability of Lessor to any governmental agency
or third party under any applicable statute or common law theory. Hazardous
Substance shall include, but not be limited to, hydrocarbons, petroleum,
gasoline, crude oil or any products, by-products or fractions thereof. Lessee
shall not engage in any activity in, on or about the Premises which constitute a
Reportable Use (as hereinafter defined) of Hazardous Substances without the
express prior written consent of Lessor and compliance in a timely manner (at
Lessee's sole cost and expense) with all Applicable Law (as defined in Paragraph
6.3). "Reportable Use" shall mean (i) the installation or use of an above or
below ground storage tank, (ii) the generation, possession, storage, use,
transportation, or disposal of a Hazardous Substance that requires permit from,
or with respect to which a report, notice, registration or business plan is
required to be filled with, any governmental authority. Reportable Use shall
also include Lessee's being responsible for the presence in, on or about the
Premises of a Hazardous Substance with respect to which any Applicable Law
requires that a notice be given to persons entering or occupying the Premises or
neighboring properties. Notwithstanding the foregoing, Lessee may without
Lessor's prior consent, but in compliance with all Applicable Law, use any
ordinary and customary materials reasonably required to be used by Lessee in the
normal course of Lessee's business permitted on the Premises, so long as such
use is not a Reportable Use and does not expose the Premise or neighboring
properties to any meaningful risk of contamination or damage or expose Lessor to
any liability therefor. In addition, Lessor may (but without any obligation to
do so) condition its consent to the use or presence of any Hazardous Substance,
activity or storage tank by Lessee upon Lessee's giving Lessor such additional
assurances as Lessor, in its reasonable discretion, deems necessary to protect
itself, the public, the Premises and the environment against damage,
contamination or injury and/or liability therefrom or therefor, including, but
not limited to, the installation (and removal on or before Lease expiration or
earlier termination) of reasonably necessary protective modifications to the
Premises (such as concrete encasements).
(b) Duty to Inform Lessor. If Lessee knows, or has reasonable cause to
believe, that a Hazardous Substance, or a condition involving or resulting from
same, has come to be located in, on, under or about the Premises, other than as
previously consented to by Lessor, Lessee shall immediately give written notice
of such fact to Lessor. Lessee shall also immediately give Lessor a copy of any
statement, report, notice, registration, application, permit, business plan,
license, claim, action or proceeding given to, or received from, any
governmental authority or private party, or persons entering or occupying the
Premises, concerning the presence, spill, release, discharge of, or exposure to,
any Hazardous Substance or contamination in, on, or about the Premises,
including but not limited to all such documents as may be involved in any
Reportable Uses involving the Premises.
(c) Indemnification. Lessee shall indemnify, protect, defend and hold
Lessor, its agents, employees, lenders and ground lessor, if any, and the
Premises, harmless from and against any and all loss of rents and/or damages,
liabilities, judgments, costs, claims, liens, expenses, penalties, permits and
attorney's and
consultant's fees arising out of or involving any Hazardous Substance or storage
tank brought onto the Premises by or for Lessee or under Lessee's control.
Lessee's obligations under this Paragraph 6 shall include, but not be limited
to, the effects of any contamination or injury to persons, property or the
environment created or permitted by Lessee, and the cost of investigation
(including consultant's and attorney's fees and testing), removal, remediation,
restoration and/or abatement thereof, or of any contamination therein involved,
and shall survive the expiration or earlier termination of the Lease. No
termination, cancellation or release agreement entered into by Lessor and Lessee
shall release Lessee from its obligations under this Lease with respect to
Hazardous Substances or storage tanks, unless specifically so agreed by Lessor
in writing at the time of such agreement.
6.3 Lessee's Compliance with Law. Except as otherwise provided in this
Lease, Lessee, shall, at Lessee's sole cost and expense, fully, diligently and
in a timely manner, comply with all "Applicable Law," which term is used in this
Lease to include all laws, rules, regulations, ordinances, directives,
covenants, easements and restrictions of record, permits, the requirements of
any applicable fire insurance underwriter or rating bureau, and the
recommendations of Lessor's engineers and/or consultants, relating in any manner
to the Premises (including but not limited to matters pertaining to (i)
industrial hygiene, (ii) environmental conditions on, in, under or about the
Premises, including soil and groundwater conditions, and (iii) the use,
generation, manufacture, production, installation, maintenance, removal,
transportation, storage, spill or release of any Hazardous Substance or storage
tank), now in effect or which may hereafter come into effect, and whether or not
reflecting a change in policy from any previously existing policy. Lessee
shall, within five (5) days after receipt of Lessor's written request, provide
Lessor with copies of all documents and information, including, but not limited
to, permits, registrations, manifests, applications, reports and certificates,
evidencing Lessee's compliance with any Applicable Law specified by Lessor, and
shall immediately upon receipt, notify Lessor in writing (with copies of any
documents involved) of any threatened or actual claim, notice, citation,
warning, complaint or report pertaining to or involving failure by Lessee or the
Premises to comply with any Applicable Law. See Addendum, (S)8.
6.4 Inspection; Compliance. Lessor and Lessor's Lender(s) (as defined in
Paragraph 8.3(a)) shall have the right to enter the Premises at any time in the
case of an emergency, and otherwise at reasonable times after reasonable notice,
for the purpose of inspecting the condition of the Premises and for verifying
compliance by Lessee with this Lease and all Applicable Laws (as defined in
Paragraph 6.3), and to employ experts and/or consultants in connection therewith
and to advise Lessor with respect to Lessee's activities, including but not
limited to the installation, operation, use, monitoring, maintenance, or removal
of a Hazardous Substance or storage tank on or from the Premises. The costs and
expenses of any such inspections shall be paid by the party requesting same,
unless a Breach of this Lease, violation of Applicable Law, or a contamination,
caused or materially contributed to by Lessee is found to exist or be imminent,
or unless the inspection is requested or ordered by a governmental authority as
the result of any such existing or imminent violation or contamination. In any
such case, Lessee shall upon request reimburse Lessor or Lessor's Lender, as the
case may be, for the costs and expenses of such inspections.
7. Maintenance; Repairs; Utility Installations; Trade Fixtures and Alterations.
7.1 Lessee's Obligations.
(a) Subject to Lessor's obligations under Addendum, (S)(S) 2 and 11, and
subject to the provisions of Paragraphs 2.2 (Lessor's warranty as to condition),
2.3 (Lessor's warranty as to compliance with covenants, etc.), 7.2 (Lessor's
obligations to repair), 9 (damage and destruction), and 14 (condemnation),
Lessee shall, at Lessee's sole cost and expense and at all such times, keep the
Premises and every part thereof in good order, condition and repair, structural
and non-structural (whether or not such portion of the Premises requiring
repairs, or the means of repairing the same, are reasonably or readily
accessible to Lessee, and whether or not the need for such repairs occurs as a
result of Lessee's use, any prior use, the elements or the age of such portion
of the Premises), including, without limiting the generality of the foregoing,
all equipment or facilities serving the Premises, such as plumbing, heating, air
conditioning, ventilating, electrical, lighting facilities, boilers, fired or
unfired pressure vessels, fire sprinkler and/or standpipe and hose or other
automatic fire extinguishing system, including fire alarm and/or smoke detection
systems and equipment, fire hydrants, fixtures, walls (interior and exterior),
foundations, ceilings, roofs, floors, windows, doors, plate glass, skylights,
landscaping, driveways, parking lots, fences, retaining walls, signs, sidewalks
and parkways located in, on, about, or adjacent to the Premises. Lessee shall
not cause or permit any Hazardous Substance to be spilled or released in, on,
under or about the Premises (including through the plumbing or sanitary sewer
system) and shall promptly, at Lessee's expense, take all investigatory and/or
remedial action reasonably recommended, whether or not formally ordered or
required, for the cleanup of any contamination of, and for the maintenance,
security and/or monitoring of the Premises, the elements surrounding same, or
neighboring properties, that was caused or materially contributed to by Lessee,
or pertaining to or involving any Hazardous Substance and/or storage tank
brought onto the Premises by or for Lessee or under its control. Lessee,
in keeping the Premises in good order, condition and repair, shall exercise and
perform good maintenance practices. Lessee's obligations shall include
restorations, replacements or renewals when necessary to keep the Premises and
all improvements thereon or a part thereof in good order, condition and state of
repair. If Lessee occupies the Premises for seven (7) years or more, Lessor may
require Lessee to repaint the exterior of the buildings on the Premises as
reasonably required, but not more frequently than once every seven (7) years.
(b) Lessee shall pay as a part of "Operating Expenses," as defined in
Addendum, (S)2, the cost of contracts, in customary form and substance for, and
with contractors specializing and experienced in, the inspection, maintenance
and service of the following equipment and improvements, if any, located on the
Premises: (i) heating, air conditioning and ventilation equipment, (ii) boiler,
fired or unfired pressure vessels, (iii) fire sprinkler and/or standpipe and
hose or other automatic fire extinguishing systems, including fire alarm and/or
smoke detection, (iv) landscaping and irrigation systems, (v) roof covering and
drain maintenance and (vi) asphalt and parking lot maintenance.
7.2 Lessor's Obligations. Except for the warranties and agreements of
Lessor contained in Paragraphs 2.2 (relating to condition of the Premises), 2.3
(relating to compliance with covenants, restrictions and building code), 9
(relating to destruction of the Premises) and 14 (relating to condemnation of
the Premises), and as otherwise provided in this Lease (see Addendum, (S)11), it
is intended by the Parties hereto that Lessor have no obligation, in any manner
whatsoever, to repair and maintain the Premises, the improvements located
thereon, or the equipment therein, whether structural or non structural, all of
which obligations are intended to be that of the Lessee under Paragraph 7.1
hereof. It is the intention of the Parties that the terms of this Lease govern
the respective obligations of the Parties as to maintenance and repair of the
Premises. Lessee and Lessor expressly waive the benefit of any statute now or
hereafter in effect to the extent it is inconsistent with the terms of this
Lease with respect to, or which affords Lessee the right to make repairs at the
expense of Lessor or to terminate this Lease by reason of any needed repairs.
7.3 Utility Installations; Trade Fixtures; Alterations.
(a) Definitions; Consent Required. The term "Utility Installations" is
used in this Lease to refer to all carpeting, window coverings, air lines, power
panels, electrical distribution, security, fire protection systems,
communication systems, lighting fixtures, heating, ventilating, and air
conditioning equipment, plumbing, and fencing in, on or about the Premises. The
term "Trade Fixtures" shall mean Lessee's machinery and equipment that can be
removed without doing material damage to the Premises. The term "Alterations"
shall mean any modification of the improvements on the Premises from that which
are provided by Lessor under the terms of this Lease, other than Utility
Installations or Trade Fixtures, whether by addition or deletion. "Lessee Owned
Alterations and/or Utility Installations" are defined as Alterations and/or
Utility Installations made by Lessee that are not yet owned by Lessor as defined
in Paragraph 7.4(a). Lessee shall not make any Alterations or Utility
Installations in, on, under or about the Premises without Lessor's prior written
consent. Lessee may, however, make non-structural Utility Installations to the
interior of the Premises (excluding the roof), as long as they are not visible
from the outside, do not involve puncturing, relocating or removing the roof or
any existing walls, and the cumulative cost thereof during the term of this
Lease as extended does not exceed $50,000.
(b) Consent. Any Alterations or Utility Installations that Lessee shall
desire to make and which require the consent of the Lessor shall be presented to
Lessor in written form with proposed detailed plans. All consents given by
Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific consent,
shall be deemed conditioned upon: (i) Lessee's acquiring all applicable permits
required by governmental authorities, (ii) the furnishing of copies of such
permits together with a copy of the plans and specifications for the Alteration
or Utility Installation to Lessor prior to commencement of the work thereon, and
(iii) the compliance by Lessee with all conditions of said permits in a prompt
and expeditious manner. Any Alterations or Utility Installations by Lessee
during the term of this Lease shall be done in a good and workmanlike manner,
with good and sufficient materials, and in compliance with all Applicable Law.
Lessee shall promptly upon completion thereof furnish Lessor with as-built plans
and specifications therefor. Lessor may (but without obligation to do so)
condition its consent to any requested Alteration or Utility Installation that
costs $10,000 or more upon Lessee's providing Lessor with a lien and completion
bond in an amount equal to the estimated cost of such Alteration or Utility
Installation.
(c) Indemnification. Lessee shall pay, when due, all claims for labor or
materials furnished or alleged to have been furnished to or for Lessee at or for
use on the Premises, which claims are or may be secured by any mechanics' or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of any
work in, on or about the Premises, and Lessor shall have the right to post
notices of non-responsibility in or on the Premises as provided by law. If
Lessee shall,
in good faith, contest the validity of any such lien, claim or demand, then
Lessee shall, at its sole expense defend and protect itself, Lessor and the
Premises against the same and shall pay and satisfy any such adverse judgment
that may be rendered thereon before the enforcement thereof against the Lessor
or the Premises. If Lessor shall require, Lessee shall furnish to Lessor a
surety bond satisfactory to Lessor in an amount equal to one and one-half times
the amount of such contested lien claim or demand, indemnifying Lessor against
liability for the same, as required by law for the holding of the Premises free
from the effect of such lien or claim.
7.4 Ownership; Removal; Surrender; and Restoration.
(a) Ownership. Subject to Lessor's right to require their removal or
become the owner thereof as hereinafter provided in this Paragraph 7.4, all
Alterations and Utility Additions made to the Premises by Lessee shall be the
property of and owned by Lessee, but considered a part of the Premises. Lessor
may, at any time and at its option, elect in writing to Lessee to be the owner
of all or any specified part of the Lessee Owned Alterations and Utility
Installations. Unless otherwise instructed per subparagraph 7.4(b) hereof, all
Lessee Owned Alterations and Utility Installations shall, at the expiration or
earlier termination of this Lease, become the property of Lessor and remain upon
and be surrendered by Lessee with the Premises. See Addendum, (S)13.
(b) Removal. Unless otherwise agreed in writing, Lessor may require
that any or all Lessee Owned Alterations or Utility Installations be removed by
the expiration or earlier termination of this Lease, notwithstanding their
installation may have been consented to by Lessor. Lessor may require the
removal at any time of all or any part of any Lessee Owned Alterations or
Utility Installations made without the required consent of Lessor.
(c) Surrender/Restoration. Lessee shall surrender the Premises by the
end of the last day of the Lease term or any earlier termination date, with all
of the improvements, parts and surfaces thereof clean and free of debris and in
good operating order, condition and state of repair, ordinary wear and tear
excepted. "Ordinary wear and tear" shall not include any damage or deterioration
that would have been prevented by good maintenance practice or by Lessee
performing all of its obligations under this Lease. Except as otherwise agreed
or specified in writing by Lessor, the Premises, as surrendered shall include
the Utility Installations. The obligation of Lessee shall include the repair of
any damage occasioned by the installation, maintenance or removal of Lessee's
Trade Fixtures, furnishings, equipment, and Alterations and/or Utility
Installations, as well as the removal of any storage tank installed by or for
Lessee, and the removal, replacement, or remediation of any soil, material or
ground water contaminated by Lessee, all as may then be required by Applicable
Law and/or good service practice. Lessee's Trade Fixtures shall remain the
property of Lessee and shall be removed by Lessee subject to its obligation to
repair and restore the Premises per this Lease.
8. Insurance; Indemnity.
8.1 Payment For Insurance. Regardless of whether the Lessor or Lessee is
the Insuring Party, Lessee shall pay for all insurance as a part of operating
expenses payable under Addendum, (S)2, required under this Paragraph 8 except to
the extent of the cost attributable to liability insurance carried by Lessor in
excess of $1,000,000 per occurrence. Premiums for policy periods commencing
prior to or extending beyond the Lease term shall be prorated to correspond to
the Lease term.
8.2 Liability Insurance.
(a) Carried by Lessee. Lessee shall obtain and keep in force during
the term of this Lease a Commercial General Liability policy of insurance
protecting Lessee and Lessor (as an additional insured) against claims for
bodily injury, personal injury and property damage based upon, involving or
arising out of the ownership, use, occupancy or maintenance of the Premises and
all areas appurtenant thereto. Such insurance shall be on an occurrence basis
providing single limit coverage in an amount not less than $1,000,000 per
occurrence with an "Additional Insured-Managers or Lessors of Premises
Endorsement and contain the "Amendment of the Pollution Exclusion" for damage
caused by heat, smoke or fumes from a hostile fire. The policy shall not contain
any intra-insured exclusions as between insured persons or organizations, but
shall include coverage for liability assumed under this Lease as an "insured
contract" for the performance of Lessee's indemnity obligations under this
Lease. The limits of said insurance required by this Lease or as carried by
Lessee shall not, however, limit the liability of Lessee nor relieve Lessee of
any obligation hereunder. All insurance to be carried by Lessee shall be primary
to and not contributory with any similar insurance carried by Lessor, whose
insurance shall be considered excess insurance only.
(b) Carried by Lessor. In the event Lessor is the Insuring Party,
Lessor shall also maintain liability insurance described in Paragraph 8.2(a),
above, in addition to, and not in lieu of, the insurance required to be
maintained by Lessee. Lessee shall not be named as an additional insured
therein.
8.3 Property Insurance - Building, Improvements and Rental Value. See
Addendum, (S)14.
(a) Building and Improvements. The Insuring Party shall obtain and
keep in force during the term of this Lease a policy or policies in the name of
Lessor, with loss payable to Lessor and to the holders of any mortgages, deeds
of trust or ground leases on the Premises ("Lender(s)"), insuring loss or damage
to the Premises. The amount of such insurance shall be equal to the full
replacement cost of the Premises, as the same shall exist from time to time, or
the amount required by Lenders. If Lessor is the Insuring Party, however, Lessee
Owned Alterations and Utility Installations shall be insured by Lessee under
Paragraph 8.4 rather than by Lessor. If the coverage is available and
commercially appropriate, such policy or policies shall insure against all risks
of direct physical loss or damage (except the perils of flood and/or earthquake
unless required by a Lender), including coverage for any additional costs
resulting from debris removal and reasonable amounts of coverage for the
enforcement of any ordinance or law regulating the reconstruction or replacement
of any undamaged sections of the Premises required to be demolished or removed
by reason of the enforcement of any building, zoning, safety or land use laws as
the result of a covered cause of loss. Said policy or policies shall also
contain an agreed valuation provision in lieu of any coinsurance clause, waiver
of subrogation, and inflation guard protection causing an increase in the annual
property insurance coverage amount by a factor of not less than the adjusted
U.S. Department of Labor Consumer Price Index for All Urban Consumers for the
city nearest to where the Premises are located. If such insurance coverage has a
deductible clause, the deductible amount shall not exceed $1,000 per occurrence,
and Lessee shall be liable for such deductible amount in the event of an Insured
Loss, as defined in Paragraph 9.1(c).
(b) Rental Value. The Insuring Party shall, in addition, obtain and
keep in force during the term of this Lease a policy or policies in the name of
Lessor, with loss payable to Lessor and Lender(s), insuring the loss of the full
rental and other charges payable by Lessee to Lessor under this Lease for one
(1) year (including all real estate taxes, insurance costs, and any scheduled
rental increases). Said insurance shall provide that in the event the Lease is
terminated by reason of an insured loss, the period of indemnity for such
coverage shall be extended beyond the date of the completion of repairs or
replacement of the Premises, to provide for one full year's loss of rental
revenues from the date of any such loss. Said insurance shall contain an agreed
valuation provision in lieu of any coinsurance clause, and the amount of
coverage shall be adjusted annually to reflect the projected rental income,
property taxes, insurance premium costs and other expenses, if any, otherwise
payable by Lessee, for the next twelve (12) month period. Lessee shall be liable
for any deductible amount in the event of such loss.
(c) Adjacent Premises. If the Premises are part of a larger building,
or if the Premises are part of a group of buildings owned by Lessor which are
adjacent to the Premises, the Lessee shall pay for any increase in the premiums
for the property insurance of such building or buildings if said increase is
caused by Lessee's acts, omissions, use or occupancy of the Premises.
(d) Tenant's Improvements. If the Lessor is the Insuring Party, the
Lessor shall not be required to insure Lessee Owned Alterations and Utility
Installations unless the item in question has become the property of Lessor
under the terms of this Lease. If Lessee is the Insuring Party, the policy
carried by Lessee under this Paragraph 8.3 shall insure Lessee Owned Alterations
and Utility Installations.
8.4 Lessee's Property Insurance. Subject to the requirements of Paragraph
8.5, Lessee at its cost shall either by separate policy or, at Lessor's option,
by endorsement to a policy already carried, maintain insurance coverage on all
of Lessee's personal property, Lessee Owned Alterations and Utility
Installations in, on, or about the Premises similar in coverage to that carried
by the Insuring Party under Paragraph 8.3. Such insurance shall be full
replacement cost coverage with a deductible of not to exceed $1,000 per
occurrence. The proceeds from any such insurance shall be used by Lessee for
the replacement of personal property or the restoration of Lessee Owned
Alterations and Utility Installations. Lessee shall be the Insuring Party with
respect to the insurance required by this Paragraph 8.4 and shall provide Lessor
with written evidence that such insurance is in force.
8.5 Insurance Policies. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the Premises are
located, and maintaining during the policy term a "General Policyholders Rating"
of at least B+, V, or such other rating as may be reasonably required by a
Lender having a lien on the Premises, as set forth in the most current issue of
"Best's Insurance Guide." Lessee shall not do or permit to be done anything
which shall invalidate the insurance policies referred to in this Paragraph 8.
If Lessee is the Insuring Party, Lessee shall cause to be delivered to Lessor
certified copies of policies of such insurance or
certificates evidencing the existence and amounts of such insurance with the
insureds and loss payable clause as required by this Lease. No such policy shall
be cancellable or subject to modification except after thirty (30) days prior
written notice to Lessor. Lessee shall at least thirty (30) days prior to the
expiration of such policies, furnish Lessor with evidence of renewals or
"insurance binders" evidencing renewal thereof. If the Insuring Party shall fail
to procure and maintain the insurance required to be carried by the Insuring
Party under this Paragraph 8, the other Party may, but shall not be required to,
procure and maintain the same, but at Lessee's expense.
8.6 Waiver of Subrogation. Without affecting any other rights or
remedies, Lessee and Lessor ("Waiving Party") each hereby release and relieve
the other, and waive their entire right to recover damages (whether in contract
or in tort) against the other, for loss of or damage to the Waiving Party's
property arising out of or incident to the perils required to be insured against
under Paragraph 8. The effect of such releases and waivers of the right to
recover damages shall not be limited by the amount of insurance carried or
required, or by any deductibles applicable thereto.
8.7 Indemnity. Except for Lessor's negligence and/or breach of express
warranties, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor, partners and
Lenders, from and against any and all claims, loss of rents and/or damages,
costs, liens, judgments, penalties, permits, attorney's and consultant's fees,
expenses and/or liabilities arising out of, involving, or in dealing with the
occupancy of the Premises by Lessee, the conduct of Lessee's business, any act,
omission or neglect of Lessee, its agents, contractors, employees or invitees,
and out of any Default or Breach by Lessee in the performance in a timely manner
of any obligation on Lessee's part to be performed under this Lease. The
foregoing shall include, but not be limited to, the defense or pursuit of any
claim or any action or proceeding involved therein, and whether or not (in the
case of claims made against Lessor) litigated and/or reduced to judgment, and
whether well founded or not. In case any action or proceeding be brought
against Lessor by reason of any of the foregoing matters, Lessee upon notice
from Lessor shall defend the same at Lessee's expense by counsel reasonably
satisfactory to Lessor and Lessor shall cooperate with Lessee in such defense.
Lessor need not have first paid any such claim in order to be so indemnified.
8.8 Exemption of Lessor from Liability. Except for Lessor's gross
negligence or Breach of this Lease, Lessor shall not be liable for injury or
damage to the person or goods, wares, merchandise or other property of Lessee,
Lessee's employees, contractors, invitees, customers, or any other person in or
about the Premises, whether such damage or injury is caused by or results from
fire, steam, electricity, gas, water or rain, or from the breakage, leakage,
obstruction or other defects of pipes, fire sprinklers, wire appliances,
plumbing, air conditioning or lighting fixtures, or from any other cause,
whether the said injury or damage results from conditions arising upon the
Premises or upon other portions of the building of which the Premises are a
part, or from other sources or places, and regardless of whether the cause of
such damage or injury or the means of repairing the same is accessible or not.
Lessor shall not be liable for any damages arising from any act of neglect of
any other tenant of Lessor. Notwithstanding Lessor's negligence or breach of
this Lease, Lessor shall under no circumstances be liable for injury to Lessee's
business or for any loss of income or profit therefrom. See Addendum, (S)12.
9. Damage or Destruction. See Addendum, (S)15.
9.1 Definitions.
(a) "Premises Partial Damage" shall mean damage or destruction to the
improvements on the Premises, other than Lessee Owned Alterations and Utility
Installations, the repair and cost of which damage or destruction is less than
50% of the then Replacement Cost of the Premises immediately prior to such
damage or destruction, excluding from such calculation the value of the land and
Lessee Owned Alterations and Utility Installations.
(b) "Premises Total Destruction" shall mean damage or destruction to
the Premises, other than Lessee Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is 50% or more of the then
Replacement Cost of the Premises immediately prior to such damage or
destruction, excluding from such calculation the value of the land and Lessee
Owned Alterations and Utility Installations.
(c) "Insured Loss" shall mean damage or destruction to improvements on
the Premises, other than Lessee Owned Alterations and Utility Installations,
which was caused by an event required to be covered by the insurance described
in Paragraph 8.3(a), irrespective of any deductible amounts coverage limits
involved.
(d) "Replacement Cost" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition,
debris removal and upgrading required by the operation of applicable building
codes, ordinances or laws, and without deduction for depreciation.
(e) "Hazardous Substance Condition" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.
9.2 Partial Damage - Insured Loss. If a Premises Partial Damage that is
an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such
damage (but not Lessee's Trade Fixtures or Lessee Owned Alterations and Utility
Installations) as soon as reasonably possible and this Lease shall continue in
full force and effect; provided, however, that Lessee shall, at Lessor's
election, make the repair of any damage or destruction the total cost to repair
of which is $10,000 or less, and, in such event, Lessor shall make the insurance
proceeds available to Lessee on a reasonable basis for this purpose.
Notwithstanding the foregoing, if the required insurance was not in force or the
insurance proceeds are not sufficient to effect such repair, the Insuring Party
shall promptly contribute the shortage in proceeds (except as to the deductible
which is Lessee's responsibility) as and when required to complete said repairs.
In the event, however, the shortage in proceeds was due to the fact that, by
reason of the unique nature of the improvements, replacement cost insurance
coverage was not commercially reasonable and available, Lessor shall have no
obligation to pay for the shortage in insurance proceeds or to fully restore the
unique aspects of the Premises unless Lessee provides Lessor with the funds to
cover same, or adequate assurance thereof, within ten (10) days following
receipt of written notice of such shortage and request therefor. If Lessor
receives said funds or adequate assurance thereof within said ten (10) day
period, the party responsible for making the repairs shall complete them as soon
as reasonably possible and this Lease shall remain in full force and effect. If
Lessor does not receive such funds or assurance within said period, Lessor may
nevertheless elect by written notice to Lessee within ten (10) days thereafter
to make such restoration and repair as is commercially reasonable with Lessor
paying any shortage in proceeds in which case this Lease shall remain in full
force and effect. If in such case Lessor does not so elect, then this Lease
shall terminate sixty (60) days following the occurrence of the damage or
destruction. Unless otherwise agreed, Lessee shall in no event have any right to
reimbursement from Lessor any funds contributed by Lessee to repair any such
damage or destruction. Premises Partial Damage due to flood or earthquake shall
be subject to Paragraph 9.3 rather than Paragraph 9.2., notwithstanding that
there may be some insurance coverage, but the net proceeds of any such insurance
shall be made available for the repairs if made by either Party.
9.3 Partial Damage - Uninsured Loss. If a Premises Partial Damage that is
not an Insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense and
this Lease shall continue in full force and effect, but subject to Lessor's
rights under Paragraph 13), Lessor may at Lessor's option, either: (i) repair
such damage as soon as reasonably possible at Lessor's expense, in which event
this Lease shall continue in full force and effect, or (ii) give written notice
to Lessee within thirty (30) days after receipt by Lessor of knowledge of the
occurrence of such damage of Lessor's desire to terminate this Lease as of the
date sixty (60) days following the giving of such notice. In the event Lessor
elects to give such notice of Lessor's intention to terminate this Lease, Lessee
shall have the right within ten (10) days after the receipt of such notice to
give written notice to Lessor of Lessee's commitment to pay for the repair of
such damage totally at Lessee's expense and without reimbursement from Lessor.
Lessee shall provide Lessor with the required funds or satisfactory assurance
thereof within thirty (30) days following Lessee's said commitment. In such
event this Lease shall continue in full force and effect, and Lessor shall
proceed to make such repairs as soon as reasonably possible and the required
funds are available. If Lessee does not give such notice and provide the funds
or assurance thereof within the times specified above, this Lease shall
terminate as of the date specified in Lessor's notice of termination. See
Addendum, (S)15.1.
9.4 Total Destruction. Notwithstanding any other provision hereof, if a
Premises Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the damage
or destruction is an Insured Loss or was caused by a negligent or willful act of
Lessee. In the event, however, that the damage or destruction was caused by
Lessee, Lessor shall have the right to recover Lessor's damages from Lessee
except as released and waived in Paragraph 8.6.
9.5 Damage Near End of Term. If at any time during the last six (6)
months of the term of this Lease there is damage for which the cost to repair
exceeds one (1) month's Base Rent, whether or not an Insured Loss, Lessor may,
at Lessor's option, terminate this Lease effective sixty (60) days following the
date of occurrence of such damage by giving written notice to Lessee of Lessor's
election to do so within thirty (30) days after the date of occurrence of such
damage. Provided, however, if Lessee at that time has an exercisable option to
extend this Lease or to purchase the Premises, then Lessee may preserve this
Lease by, within twenty (20) days following the
occurrence of the damage, or before the expiration of the time provided in such
option for its exercise, whichever is earlier ("Exercise Period"), (i)
exercising such option and (ii) providing Lessor with any shortage in insurance
proceeds (or adequate assurance thereof) needed to make the repairs. If Lessee
duly exercises such option during said Exercise Period and provides Lessor with
funds (or adequate assurance thereof) to cover any shortage in insurance
proceeds, Lessor shall, at Lessor's expense repair such damage as soon as
reasonably possible and this Lease shall continue in full force and effect. If
Lessee fails to exercise such option and provide such funds or assurance during
said Exercise Period, then Lessor may at Lessor's option terminate this Lease as
of the expiration of said sixty (60) day period following the occurrence of such
damage by giving written notice to Lessee of Lessor's election to do so within
ten (10) days after the expiration of the Exercise Period, notwithstanding any
term or provision in the grant of option to the contrary. See Addendum, (S)15.2.
9.6 Abatement of Rent; Lessee's Remedies. See Addendum, (S)15.3.
(a) In the event of damage described in Paragraph 9.2 (Partial Damage
-Insured), whether or not Lessor or Lessee repairs or restores the Premises, the
Base Rent, Real Property Taxes, insurance premiums, and other charges, if any,
payable by Lessee hereunder for the period during which such damage, its repair
or the restoration continues (not to exceed the period for which rental value
insurance is required under Paragraph 8.3(b)), shall be abated in proportion to
the degree to which Lessee's use of the Premises is impaired. Except for
abatement of Base Rent, Real Property Taxes, insurance premiums, and other
charges, if any, as aforesaid, all other obligations of Lessee hereunder shall
be performed by Lessee, and Lessee shall have no claim against Lessor for any
damage suffered by reason of any such repair or restoration, except for Lessor's
gross negligence or willful misconduct.
(b) If Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Premises within
ninety (90) days after such obligation shall accrue, Lessee may, at any time
prior to the commencement of such repair or restoration, give written notice to
Lessor and to any Lenders of which Lessee has actual notice of Lessee's election
to terminate this Lease on a date not less than sixty days following the giving
of such notice. If Lessee gives such notice to Lessor and such Lenders and such
repair or restoration is not commenced within thirty (30) days after receipt of
such notice, this Lease shall terminate as of the date specified in said notice.
If Lessor or a Lender commences the repair or restoration of the Premises within
thirty (30) days after receipt of such notice, this Lease shall continue in full
force and effect. "Commence" as used in this Paragraph shall mean either the
unconditional authorization of the preparation of the required plans, or the
beginning of the actual work on the Premises, whichever first occurs.
9.7 Hazardous Substance Conditions. If a Hazardous Substance Condition
occurs, unless Lessee is legally responsible therefor (in which case Lessee
shall make the investigation and remediation thereof required by Applicable Law
and this Lease shall continue in full force and effect, but subject to Lessor's
rights under Paragraph 13), Lessor may at Lessor's option either (i) investigate
and remediate such Hazardous Substance Condition, if required, as soon as
reasonably possible at Lessor's expense, in which event this Lease shall
continue in full force and effect, or (ii) if the estimated cost to investigate
and remediate such condition exceeds twelve (12) times the then monthly Base
Rent or $100,000, whichever is greater, give written notice to Lessee within
thirty (30) days after receipt by Lessor of knowledge of the occurrence of such
Hazardous Substance Condition of Lessor's desire to terminate this Lease as of
the date sixty (60) days following the giving of such notice. In the event
Lessor elects to give such notice of Lessor's intention to terminate this Lease,
Lessee shall have the right within ten (10) days after the receipt of such
notice to give written notice to Lessor of Lessee's commitment to pay for the
investigation and remediation of such Hazardous Substance Condition totally at
Lessee's expense and without reimbursement from Lessor except to the extent of
an amount equal to twelve (12) times the then monthly Base Rent or $100,000,
whichever is greater. Lessee shall provide Lessor with the funds required of
Lessee or satisfactory assurance thereof within thirty (30) days following
Lessee's said commitment. In such event this Lease shall continue in full force
and effect, and Lessor shall proceed to make such investigation and remediation
as soon as reasonably possible and the required funds are available. If Lessee
does not give such notice and provide the required funds or assurance thereof
within the times specified above, this Lease shall terminate as of the date
specified in Lessor's notice of termination. If a Hazardous Substance Condition
occurs for which Lessee is not legally responsible, there shall be abatement of
Lessee's obligations under this Lease to the same extent as provided in
Paragraph 9.6(a) for a period of not to exceed twelve (12) months.
9.8 Termination - Advance Payments. Upon termination of this Lease
pursuant to this Paragraph 9, an equitable adjustment shall be made concerning
advance Base Rent and any other advance payments made by Lessee to Lessor.
Lessor shall, in addition, return to Lessee so much of Lessee's Security Deposit
as has not been, or is not then required to be, used by Lessor under the terms
of this Lease. See Addendum, (S)15.4.
9.9 Waive Statutes. Lessor and Lessee agree that the terms of this Lease
shall govern the effect of any damage to or destruction of the Premises with
respect to the termination of this Lease and hereby waive the provisions of any
present or future statute to the extent inconsistent herewith.
10. Real Property Taxes.
10.1 Payment of Taxes. Lessee shall pay the Real Property Taxes, as
defined in Paragraph 10.2, applicable to the Premises during the term of this
Lease as a part of the Operating Expenses payable under Addendum, (S)2. If any
such taxes to be paid by Lessee shall cover any period of time prior to or after
the expiration or earlier termination of the term hereof, Lessee's share of such
taxes shall be equitably prorated to cover only the period of time within the
tax fiscal year this Lease is in effect, and Lessor shall reimburse Lessee for
any overpayment after such proration.
10.2 Definition of "Real Property Taxes." 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 (other than inheritance,
personal income or estate taxes) imposed upon the Premises by any authority
having the direct or indirect power to tax, including any city, state or federal
government, or any school, agricultural, sanitary, fire, street, drainage or
other improvement district thereof, levied against any legal or equitable
interest of Lessor in the Premises or in the real property of which the Premises
are a part, Lessor's right to rent or other income therefrom, and/or Lessor's
business of leasing the Premises. The term "Real Property Taxes" shall also
include any tax, fee, levy, assessment or charge, or any increase therein
imposed by reason of events occurring, or changes in applicable law taking
effect, during the term of this Lease, including but not limited to a change in
the ownership of the Premises or in the improvements thereon, the execution of
this Lease, or any modification, amendment or transfer thereof, and whether or
not contemplated by the Parties.
10.3 Joint Assessment. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the Real Property Taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be determined by Lessor from the respective valuations
assigned in the assessor's work sheets or such other information as may be
reasonably available. Lessor's reasonable determination thereof, in good faith,
shall be conclusive.
10.4 Personal Property Taxes. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee Owned Alterations, Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or elsewhere. When possible, Lessee shall
cause its Trade Fixtures, furnishings, equipment and all other personal property
to be assessed and billed separately from the real property of Lessor. If any
of Lessee's said personal property shall be assessed with Lessor's real
property, Lessee shall pay Lessor the taxes attributable to Lessee within ten
(10) days after receipt of a written statement setting forth the taxes
applicable to Lessee's property or, at Lessor's option, as provided in Paragraph
10.1(b).
11. Utilities. Lessee shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services supplied to the
Premises, together with any taxes thereon. If any such services are not
separately metered to Lessee, Lessee shall pay a reasonable proportion, to be
determined by Lessor, of all charges jointly metered with other premises.
12. Assignment and Subletting. See Addendum, (S)16.
12.1 Lessor's Consent Required.
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or otherwise transfer or encumber (collectively,
"assignment") sublet all or any part of Lessee's interest in this Lease or in
the Premises without Lessor's prior written consent given under and subject to
the terms of Paragraph 36.
(b) See Addendum, (S)16.
(c) See Addendum, (S)16.
(d) An assignment or subletting of Lessee's interest in this Lease
without Lessor's specific prior written consent shall, at Lessor's option, be
Default curable after notice per Paragraph 13.1(c). Lessor shall have the right
to upon thirty (30) days written notice ("Lessor's Notice"), increase the
monthly Base Rent to fair market
rental value or one hundred ten percent (110%) of the Base Rent then in effect,
whichever is greater. Pending determination of the new fair market rental value,
if disputed by Lessee, Lessee shall pay the amount set forth in Lessor's Notice,
with any overpayment credited against the next installment(s) of Base Rent
coming due, and any underpayment for the period retroactively to the effective
date of the adjustment being due and payable immediately upon the determination
thereof. Further, in the event such Breach and market value adjustment, (i) any
index-oriented rental or price adjustment formulas contained in this Lease shall
be adjusted to require that the base index is determined with reference to the
index applicable to the time of such adjustment, and (ii) any fixed rental
adjustments scheduled during the remainder of the Lease term shall be increased
in the same ratio as the new market rental bears to the Base Rent in effect
immediately prior to the market value adjustment.
12.2 Terms and Conditions Applicable to Assignment and Subletting.
(a) Regardless of Lessor's consent, any assignment shall not: (i) be
effective without the express written assumption by such assignee of the
obligations of Lessee under this Lease, (ii) release Lessee of any obligations
hereunder, or (iii) alter the primary liability of Lessee of the payment of Base
Rent and other sums due Lessor hereunder or for the performance of any other
obligations to be performed by Lessee under the Lease.
(b) Lessor may accept any rent or performance of Lessee's obligations
from any person other than Lessee pending approval or disapproval of assignment.
Neither a delay in the approval or disapproval of such assignment nor the
acceptance of any rent or performance shall constitute a waiver or estoppel of
Lessor's right to exercise its remedies for the Default or Breach by Lessee of
any of the terms, covenants or conditions of this Lease.
(c) The consent of Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessor or to
any subsequent or successive assignment or subletting by the sublessee.
However, Lessor may consent to subsequent sublettings and assignments of the
sublease or any amendments or modifications thereto without notifying Lessee or
anyone else liable on the Lease or sublease and without obtaining their consent,
and such action shall not relieve such persons from liability under this Lease
or sublease.
(d) In the event of any Breach of Lessee's obligations under this
Lease, Lessor may proceed directly against Lessee, any Guarantor or any one else
responsible for the performance of the Lessee's obligations under this Lease,
including the sublessee, without first exhausting Lessor's remedies against any
other person or entity responsible therefor to Lessor, or any security held by
Lessor or Lessee.
(e) Each request for consent to an assignment or subletting shall be
in writing, accompanied by information relevant to Lessor's determination to the
financial and operational responsibility and appropriateness of the proposed
assignee or sublessee, including but not limited to the intended and/or required
modification of the Premises, if any, together with a non-refundable deposit of
$1,000 as reasonable consideration for Lessor's considering and processing the
request for consent. Lessee agrees to provide Lessor with such other or
additional information and/or documentation as may be reasonably requested by
Lessor.
(f) Any assignee of this Lease shall, by reason of accepting such
assignment, be deemed for the benefit of Lessor, to have assumed and agreed to
conform and comply with each and every term, covenant, condition and obligation
herein to be observed or performed by Lessee during the term of said assignment
or sublease, other than such obligations as are contrary to or inconsistent with
provisions of an assignment to which Lessor has specifically consented in
writing.
12.3 Additional Terms and Conditions Applicable to Subletting. The
following terms and conditions shall apply to any subletting by Lessee of any
part of the Premises and shall be deemed included in all subleases under this
Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease of all or a portion
of the Premises heretofore or hereafter made by Lessee, and Lessor may collect
such rent and income and apply same toward Lessee's obligations under this
Lease; provided, however, that until a Breach (as defined in Paragraph 13.1)
shall occur in the performance of Lessee's obligations under this Lease, Lessee
may, except as otherwise provided in this Lease, receive, collect and enjoy the
rents accruing under such sublease. Lessor shall not, by reason of this or any
other assignment of such sublease to Lessor, nor by reason of the collection of
the rents from a sublessee, be deemed liable to the sublessee for any failure of
Lessee to perform and comply with any of Lessee's obligations to such sublessee
under such sublease. Lessee hereby irrevocably authorizes and directs any such
sublessee, upon receipt of a written notice from Lessor stating that a Breach
exists in the performance of Lessee's obligations under this Lease, to pay to
Lessor the rents
and other charges due and to become due under the sublease. Sublessee shall rely
upon such statement and request from Lessor and shall pay such rents and other
charges to Lessor without any obligation or right to inquire as to why such
Breach exists and notwithstanding any notice from or claim from Lessee to the
contrary. Lessee shall have no right or claim against said sublessee or, until
the Breach has been cured, against Lessor, for any such rents and other charges
so paid by said sublessee to Lessor.
(d) No sublessee shall further assign or sublet all or any part of
the Premises without Lessor's prior written consent.
13. Default; Breach; Remedies. See Addendum, (S)17.
13.1 Default; Breach. Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as herein
defined), $350.00 is a reasonable minimum sum per such occurrence for legal
services and costs in the preparation and service of a notice of Default and
that Lessor may include the cost of such services and costs in said notice as
rent due and payable to cure said Default. A "Default" is defined as a failure
by the Lessee to observe, comply with or perform any of the terms, covenants,
conditions or rules applicable to Lessee under this Lease. A "Breach" is
defined as the occurrence of any one or more of the following Defaults, and,
where a grace period for cure after notice is specified herein, the failure by
Lessee to cure such Default prior to the expiration of the applicable grace
period, shall entitle Lessor to pursue the remedies set forth in Paragraphs 13.2
and/or 13.3:
(a) The abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease, the failure
by Lessee to make any payment of Base Rent or any other monetary payment
required to be made by Lessee hereunder, whether to Lessor or to a third party,
as and when due, where such failure continues for a period of three (3) days
following written notice thereof by or on behalf of Lessor to Lessee.
(c) See Addendum, (S)17.2.
(d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40 hereof,
that are to be observed, complied with or performed by Lessee, other than those
described in subparagraphs (a), (b), or (c), above, where such Default continues
for a period of thirty (30) days after written notice thereof by or on behalf of
Lessor to Lessee; provided, however, that if the nature of Lessee's Default is
such that more than thirty (30) days are reasonably required for its cure, then
it shall not be deemed to be a Breach of this Lease by Lessee if Lessee
commences such cure within said thirty (30) day period and thereafter diligently
prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) The making by
Lessee of any general arrangement or assignment for the benefit of creditors;
(ii) Lessee's becoming a "debtor" as defined in 11 U.S.C. (S)101 or any
successor statute thereto (unless, in the case of a petition filed against
Lessee, the same is dismissed within sixty (60) days; (iii) the appointment of a
trustee or receiver to take possession of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where possession
is not restored to Lessee within thirty (30) days; or (iv) the attachment,
execution or other judicial seizure of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where such
seizure is not discharged within thirty (30) days; provided, however, in the
event that any provision of this subparagraph (e) is contrary to any applicable
law, such provision shall be of no force or effect, and not affect the validity
of the remaining provisions.
(f) The discovery by Lessor that any financial statement given to
Lessor by Lessee or any Guarantor of Lessee's obligations hereunder was
materially false.
(g) If the performance of Lessee's obligations under this Lease is
guaranteed: (i) the death of a guarantor; (ii) the termination of a guarantor's
liability with respect to this Lease other than in accordance with the terms of
such guaranty; (iii) a guarantor's becoming insolvent or the subject of a
bankruptcy filing, which is not dismissed within 60 days; (iv) a guarantor's
refusal to honor the guaranty; or (v) a guarantor's breach of its guaranty
obligation on an anticipatory breach basis, and Lessee's failure, within sixty
(60) days following written notice by or on behalf of Lessor to Lessee of any
such event, to provide Lessor with written alternative assurance or security,
which, when coupled with the then existing resources of Lessee, equals or
exceeds the combined financial resources of Lessee and the guarantors that
existed at the time of execution of this Lease.
13.2 Remedies. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written notice
to Lessee (or in case of an emergency, without notice), Lessor may at its option
(but without obligation to do so), perform such duty or obligation on Lessee's
behalf with respect to the obtaining of reasonably required bonds, insurance
policies, or governmental licenses, permits or approvals. The costs and
expenses of any such performance by Lessor shall be due and payable by Lessee to
Lessor upon invoice therefor. If any check given to Lessor by Lessee shall not
be honored by the bank upon which it is drawn, Lessor, at its option, may
require all future payments to be made under this Lease by Lessee to be made
only by cashier's check. In the event of a Breach of this Lease by Lessee, as
defined in Paragraph 13.1, with or without further notice or demand, and without
limiting Lessor in the exercise of any right or remedy which Lessor may have by
reason of such Breach, Lessor may:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Lessee shall immediately surrender possession of the Premises to Lessor. In such
event Lessor shall be entitled to recover from Lessee: (i) the worth at the time
of the award of the unpaid rent which had been earned at the time of
termination; (ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that the Lessee proves could have
been reasonably avoided; (iii) the worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and that
portion of the leasing commission paid by Lessor applicable to the unexpired
term of this Lease. The worth at the time of award of the amount referred to in
provision (iii) of the prior sentence 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%). Efforts by Lessor to mitigate damages
caused by Lessee's Default or Breach of this Lease shall not waive Lessor's
right to recover damages under this Paragraph. If termination of this Lease is
obtained through the provisional remedy of unlawful detainer, Lessor shall have
the right to recover in such proceeding the unpaid rent and damages as are
recoverable therein, or Lessor may reserve therein the right to recover all or
any part thereof in a separate suit for such rent and/or damages. If a notice
and grace period required under subparagraphs 13.1(b), (c) or (d) was not
previously given, a notice to pay rent or quit, or to perform or quit, as the
case may be, given to Lessee under any statute authorizing the forfeiture of
leases for unlawful detainer shall also constitute the applicable notice for
grace period purposes required by subparagraphs 13.1(b), (c) or (d). In such
case, the applicable grace period under subparagraphs 13.1 (b), (c) or (d) and
under the unlawful detainer statute shall run concurrently after the one such
statutory notice, and the failure of Lessee to cure the Default within the
greater of the two such grace periods shall constitute both an unlawful detainer
and a Breach of this Lease entitling Lessor to the remedies provided for in this
Lease and/or by said statute.
(b) Continue the Lease and Lessee's right to possession in effect (in
California under California Civil Code Section 1951.4) after Lessee's Breach and
abandonment and recover the rent as it becomes due, provided Lessee has the
right to sublet or assign, subject only to reasonable limitations. See
Paragraphs 12 and 36 for the limitations on assignment and subletting which
limitations Lessee and Lessor agree are reasonable. Acts of maintenance or
preservation, efforts to relet the Premises, or the appointment of a receiver to
protect the Lessor's interest under the Lease, shall not constitute a
termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available to Lessor
under the laws or judicial decisions of the state wherein the Premises are
located.
(d) The expiration or termination of this Lease and/or the
termination of Lessee's right to possession shall not relieve Lessee from
liability under any indemnity provisions of this Lease as to matters occurring
or accruing during the term hereof or by reason of Lessee's occupancy of the
Premises.
13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee
to Lessor of rent and other sums due hereunder will cause Lessor to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed upon Lessor by the
terms of any ground lease, mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or any other sum due from Lessee shall
not be received by Lessor or Lessor's designee within five (5) days after such
amount shall be due, then, without any requirement for notice to Lessee, Lessee
shall pay to Lessor a late charge equal to six percent (6%) of such overdue
amount. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor
will incur by reason of late payment by Lessee. Acceptance of such late charge
by Lessor shall in no event constitute a waiver of Lessee's Default or Breach
with respect to such overdue amount, nor prevent Lessor from exercising any of
the other rights and remedies granted hereunder. In the event that a late charge
is payable hereunder, whether or not collected, for three (3) consecutive
installments of Base Rent, then notwithstanding Paragraph 4.1 or any other
provision of this Lease to the contrary, Base Rent shall, at Lessor's option,
become due and payable quarterly in advance. See Addendum, (S)17.
13.5 Breach by Lessor. Lessor shall not be deemed in breach of this Lease
unless Lessor fails within a reasonable time to perform an obligation required
to be performed by Lessor. For purposes of this Paragraph 13.5, a reasonable
time shall in no event be less than thirty (30) days after receipt by Lessor,
and by the holders of any ground lease, mortgage or deed of trust covering the
Premises whose name and address shall have been furnished Lessee in writing for
such purpose, of written notice specifying wherein such obligation of Lessor has
not been performed; provided, however, that if the nature of Lessor's obligation
is such that more than thirty (30) days after such notice are reasonably
required for its performance, then Lessor shall not be in breach of this Lease
if performance is commenced within such thirty (30) day period and thereafter
diligently pursued to completion.
14. Condemnation. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(all of which are herein called "condemnation"), this Lease shall terminate as
to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than ten percent (10%) of the floor
area of the Premises, or more than twenty-five percent (25%) of the land area
not occupied by any building, is taken by condemnation, Lessee may, at Lessee's
option, to be exercised in writing within thirty (30) days after Lessor shall
have given Lessee written notice of such taking (or in the absence of such
notice, within thirty (30) days after the condemning authority shall have taken
possession) terminate this Lease as of the date the condemning authority takes
such possession. If Lessee does not terminate this Lease in accordance with the
foregoing, this Lease shall remain in full force and effect as to the portion of
the Premises remaining, except that the Base Rent shall be reduced in the same
proportion as the rentable floor area of the Premises taken bears to the total
rentable floor area of the building located on the Premises. No reduction of
Base Rent shall occur if the only portion of the Premises taken is land on which
there is no building. Any award for the taking of all or any part of the
Premises under the power of eminent domain or any payment made under threat of
the exercise of such power shall be the property of Lessor, whether such award
shall be made as compensation for diminution in value of the leasehold or for
the taking of the fee, or as severance damages; provided, however, that Lessee
shall be entitled to any compensation separately awarded to Lessee for Lessee's
relocation expenses and/or loss of Lessee's Trade Fixtures. In the event that
this Lease is not terminated by reason of such condemnation, Lessor shall to the
extent of its net severance damages received, over and above the legal and other
expenses incurred by Lessor in the condemnation matter, repair any damage to the
Premises caused by such condemnation, except to the extent that Lessee has been
reimbursed therefor by the condemning authority. Lessee shall be responsible
for the payment of any amount in excess of such net severance damages required
to complete such repair. See Addendum, (S)18.
15. Broker's Fee.
15.1 The Brokers named in Paragraph 1.10 are the procuring causes of this
Lease.
15.2 Upon execution of this Lease by both Parties, Lessor shall pay to
said Broker's jointly, or in such separate shares as they may mutually designate
in writing, a fee as set forth in a separate written agreement between Lessor
and said Brokers (or in the event there is no separate written agreement between
Lessor and said Brokers, the sum of $ as per agreement) for brokerage services
----------------
rendered by said Brokers to Lessor in this transaction.
15.3 Unless Lessor and Brokers have otherwise agreed in writing, Lessor
further agrees that: (a) if Lessee exercises any Option (as defined in
Paragraph 39.1) or any Option subsequently granted which is substantially
similar to an Option granted to Lessee in this Lease, or (b) if Lessee acquires
any rights to the Premises or other premises described in this Lease which are
substantially similar to what Lessee would have acquired had an Option herein
granted to Lessee been exercised, or (c) if Lessee remains in possession of the
Premises, with the consent of Lessor, after the expiration of the term of this
Lease after having failed to exercise an Option, or (d) if said Brokers are the
procuring cause of any other lease or sale entered into between the Parties
pertaining to the Premises and/or any adjacent property in which Lessor has an
interest, or (e) if Base Rent is increased, whether by agreement or operation of
an escalation clause herein, then as to any of said transactions, Lessor shall
pay said Brokers a fee in accordance with the schedule of said Brokers in effect
at the time of the execution of this Lease.
15.4 Any buyer or transferee of Lessor's interest in this Lease, whether
such transfer is by agreement or by operation of law, shall be deemed to have
assumed Lessor's obligation under this Paragraph 15. Each Broker shall be a
third party beneficiary of the provisions of this Paragraph 15 to the extent its
interest in any commission arising from this Lease and may enforce that right
directly against Lessor and its successors.
15.5 Lessee and Lessor each represent and warrant to the other that it has
had no dealings with any person, firm, broker or finder (other than the Brokers,
if any named in Paragraph 1.10) in connection with the negotiation of this Lease
and/or the consummation of the transaction contemplated herein and that no
broker or other person, firm or entity other than said named Brokers is entitled
to any commission or finder's fee in connection with such transaction. Lessee
and Lessor do each hereby agree to indemnify, protect, defend and hold the other
harmless from and against liability for compensation or charges which may be
claimed by any such unnamed broker, finder or other similar party by reason of
any dealings or actions of the indemnifying Party, including any costs,
expenses, attorneys' fees reasonably incurred with respect thereto.
15.6 Lessor and Lessee hereby consent to and approve all agency
relationships, including any dual agencies, indicated in Paragraph 1.10.
16. Tenancy Statement.
16.1 Each Party (as "Responding Party") shall within ten (10) days after
written notice from the other Party (the "Requesting Party") execute,
acknowledge and deliver to the Requesting Party a statement in writing in form
similar to the then most current "Tenancy Statement" form published by the
American Industrial Real Estate Association, plus such additional information,
confirmation and/or statements as may be reasonably requested by the Requesting
Party.
16.2 If Lessor desires to finance, refinance, or sell the Premises, any
part thereof, or the building of which the Premises are a part, Lessee and the
Guarantors of Lessee's performance hereunder shall deliver to any potential
lender or purchaser designated by Lessor financial statements of Lessee and such
Guarantors in such form as customarily prepared by Lessee and Guarantor, as
applicable (including any additional statements for the last three years), as
may be reasonably required by such lender or purchaser, including but not
limited to Lessee's financial statements for the past three (3) years. All such
financial statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.
17. Lessor's Liability. The term "Lessor" as used herein shall mean the owner
or owners at the time in question of the fee title to the Premises, or, if it is
a sublease, of the Lessee's interest in the prior lease. In the event of a
transfer of Lessor's title or interest in the Premises or in this Lease, Lessor
shall deliver to the transferee or assignee (in cash or by credit) any unused
Security Deposit held by Lessor at the time of such transfer or assignment.
Except as provided in Paragraph 15, upon such transfer or assignment and
delivery of the Security Deposit, as aforesaid, the prior Lessor shall be
relieved of liability with respect to the obligations and/or covenants under
this Lease thereafter to be performed by the Lessor. Subject to the foregoing,
the obligations and/or covenants in this Lease to be performed by the Lessor
shall be binding only upon the Lessor as hereinabove defined. See Addendum,
(S)19.
18. Severability. The invalidity of any provision of this Lease, as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.
19. Interest on Past-Due Obligations. Any monetary payment due Lessor
hereunder, other than late charges, not received by Lessor within thirty (30)
days following the date on which it was due, shall bear interest from the
thirty-first (31st) day after it was due at the rate of 12% per annum, but not
exceed the maximum rate allowed by law, in addition to the late charge provided
for in Paragraph 13.4. See Addendum, (S)20.
20. Time of Essence. Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under this Lease.
21. Rent Defined. All monetary obligations of Lessee to Lessor under the terms
of this Lease are deemed to be rent.
22. No Prior or Other Agreements; Broker Disclaimer. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein and
no other prior agreement or understanding shall be effective.
23. Notices.
23.1 All notices required or permitted by this Lease shall be in writing
and may be delivered in person (by hand or by messenger or courier service or
may be sent by regular, certified or registered mail or U.S. Postal Service
Express Mail, with postage prepaid, or by facsimile transmission, and shall be
deemed sufficiently given if served in a manner specified in this Paragraph 23.
The addresses noted adjacent to a Party's signature on this Lease shall be that
Party's address for delivery or mailing of notice purposes. Either Party may by
written notice to the other specify a different address for notice purposes. A
copy of all notices required or permitted to be given to Lessor or Lessee
hereunder shall be concurrently transmitted to such persons or parties at such
addresses as Lessor or Lessee may from time to time hereafter designate by
written notice to the other.
23.2 Any notice sent by registered or certified mail, return receipt
requested, shall be deemed given on the date of delivery shown on the receipt or
if no delivery date is shown, the postmark thereon. If sent by regular mail the
notice shall be deemed given forty-eight (48) hours after the same is addressed
as required herein and mailed with postage prepaid. Notices delivered by United
States Express Mail or overnight courier that guarantees next day delivery shall
be deemed given twenty-four (24) hours after delivery of the same to the United
States Postal Service or courier. If any notice is transmitted by facsimile
transmission or similar means, the same shall be deemed served or delivered upon
telephone confirmation of receipt of the transmission thereof, provided a copy
is also delivered via delivery or mail. If notice is received on a Saturday,
Sunday or legal holiday, it shall be deemed received on the next business day.
24. Waivers. No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any other
term, covenant or condition hereof, or of any subsequent Default or Breach by
Lessee of the same or of any other term, covenant or condition hereof. Lessor's
consent to, or approval of, any act shall not be deemed to render unnecessary
the obtaining of Lessor's consent to, or approval of, any subsequent or similar
act by Lessee, or be construed as the basis of an estoppel to enforce the
provision or provisions of this Lease requiring such consent. Regardless of
Lessor's knowledge of a Default or Breach at the time of accepting rent, the
acceptance of rent by Lessor shall not be a waiver of any preceding Default or
Breach by Lessee of any provision hereof, other than the failure of Lessee to
pay the particular rent so accepted. Any payment given Lessor by Lessee may be
accepted by Lessor on account of moneys or damages due Lessor, notwithstanding
any qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment. See Addendum, (S)21.
25. Recording. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.
26. No Right to Holdover. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of the
Lease.
27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
29. Binding Effect; Choice of Law. This Lease shall be binding upon the
parties, their personal representatives, successors and assigns and be governed
by the laws of the State in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.
30. Subordination; Attornment; Non-Disturbance.
30.1 Subordination. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "Security Device"), now or
hereafter placed by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. Lessee
agrees that the Lenders holding any such Security Device shall have no duty,
liability or obligation to perform any of the obligations of Lessor under this
Lease, but that in the event of Lessor's default with respect to any such
obligation, Lessee will give any Lender whose name and address have been
furnished Lessee in writing for such purpose notice of Lessor's default and
allow such Lender thirty (30) days following receipt of such notice for the cure
of said default before invoking any remedies Lessee may have by reason thereof.
If any Lender shall elect to have this Lease and/or any Option granted hereby
superior to the lien of its Security Device and shall give
written notice thereof to Lessee, this Lease and such Options shall be deemed
prior to such Security Device, notwithstanding the relative dates of the
documentation or recordation thereof.
30.2 Attornment. Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new owner shall not: (i) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership, (ii) be subject to any offsets or defenses
which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one (1) month's rent.
30.3 Non-Disturbance. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this Lease
shall be subject to receiving assurance (a "non-disturbance agreement") from the
Lender that Lessee's possession and this Lease, including any options to extend
the term hereof, will not be disturbed so long as Lessee is not in Breach hereof
and attorns to the record owner of the Premises.
30.4 Self-Executing. The agreements contained in this Paragraph 30 shall
be effective without the execution of any further documents; provided, however,
that, upon written request from Lessor or a Lender in connection with a sale,
financing or refinancing of the Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any such
subordination or non-subordination, attornment and/or non-disturbance agreement
as is provided for herein.
31. Attorney's Fees. If any Party or Broker brings an action or proceeding to
enforce the terms hereof or declare rights hereunder, the Prevailing Party (as
hereafter defined) or Broker in any such proceeding, action, or appeal thereon,
shall be entitled to reasonable attorney's fees. Such fees may be awarded in
the same suit or recovered in a separate suit, whether or not such action or
proceeding is pursued to decision or judgment. The term "Prevailing Party"
shall include, without limitation, a Party or Broker who substantially obtains
or defeats the relief sought, as the case may be, whether by compromise,
settlement, judgment, or the abandonment by the other Party or Broker of its
claim or defense. The attorney's fees award shall not be computed in accordance
with any court fee schedule, but shall be such as to fully reimburse all
attorney's fees reasonably incurred.
32. Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times after reasonable notice for the
purpose of showing the same to prospective purchasers, lenders, or lessees, and
making such alterations, repairs, improvements or additions to the Premises or
to the building of which they are a part, as Lessor may reasonably deem
necessary. Lessor may at any time during the last one hundred twenty (120) days
of the term hereof place on or about the Premises any ordinary "For Lease"
signs. All such activities of Lessor shall be without abatement of rent or
liability to Lessee.
33. Auctions. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
34. Signs. Lessee may, with Lessor's prior written consent, install (but not
on the roof) such signs as are reasonably required to advertise Lessee's own
business. The installation of any sign on the Premises by or for Lessee shall
be subject to the provisions of Paragraph 7 (Maintenance, Repairs, Utility
Installations, Trade Fixtures and Alterations).
35. Termination; Merger. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies. Lessor's failure within ten (10) days following any such
event to make a written election to the contrary by written notice to the holder
of any such lesser interest, shall constitute Lessor's election to have such
event constitute the termination of such interest.
36. Consents.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise provided
herein, wherever in this Lease the consent of a Party is required to an act by
or for the other Party, such consent shall not be unreasonably
withheld or delayed. Lessor's actual reasonable costs and expenses (including
but not limited to architects', attorneys', engineers' or other consultants'
fees) incurred in the consideration of, or response to, a request by Lessee for
any Lessor consent pertaining to the presence or use of a Hazardous Substance,
practice or storage tank, shall be paid by Lessee to Lessor upon receipt of an
invoice and supporting documentation therefor. Lessor may, as a condition to
considering any such request by Lessee, require that Lessee deposit with Lessor
an amount of money (in addition to the Security Deposit held under Paragraph 5)
reasonably calculated by Lessor to represent the cost Lessor will incur in
considering and responding to Lessee's request. Except as otherwise provided,
any unused portion of said deposit shall be refunded to Lessee without interest.
Lessor's consent to any act, assignment of this Lease or subletting of the
Premises by Lessee shall not constitute an acknowledgment that no Default or
Breach by Lessee of this Lease exists, nor shall such consent be deemed a waiver
of any then existing Default or Breach, except as may be otherwise specifically
stated in writing by Lessor at the time of such consent.
(b) All conditions to Lessor's consent authorized by this Lease are
acknowledged by Lessee as being reasonable. The failure to specify herein any
particular condition to Lessor's consent shall not preclude the imposition by
Lessor at the time of consent of such further or other conditions as are then
reasonable with reference to the particular matter for which consent is being
given.
37. Guarantor.
37.1 The form of the guaranty to be executed by each such Guarantor shall
be in the form approved by Lessor and Guarantor, and each said Guarantor shall
have the obligations as provided in the Guaranty, and the obligation to provide
the Tenancy Statement and information called for by Paragraph 16.
37.2 It shall constitute a Default of the Lessee under this Lease if any
such Guarantor fails or refuses, upon reasonable request by Lessor to give (a)
evidence of the due execution of the guaranty called for by this Lease,
including the authority of the Guarantor (and of the party signing on
Guarantor's behalf) to obligate such Guarantor on said guaranty, and including
in the case of a corporate Guarantor, a certified copy of a resolution of its
board of directors authorizing the making of such guaranty, together with a
certificate of incumbency showing the signature of the persons authorized to
sign on its behalf or (d) written confirmation that the guaranty is still in
effect.
38. Quiet Possession. Upon payment by Lessee of the rent for the Premises and
the observance and performance of all of the covenants, conditions and
provisions on Lessee's part to be observed and performed under this Lease,
Lessee shall have quiet possession of the Premises for the entire term hereof
subject to all of the provisions of this Lease.
39. Options. See Addendum, (S)22.
39.1 Definition. As used in this Paragraph 39 the word "Option" has the
following meaning: (a) the right to extend the term of this Lease or to renew
this Lease or to extend or renew any lease that Lessee has on other property of
Lessor; (b) the right of first refusal to lease the Premises or the right of
first offer to lease the Premises or the right of first refusal to lease other
property of Lessor or the right of first offer to lease other property of
Lessor; (c) the right to purchase the Premises, or the right of first refusal to
purchase the Premises, or the right of first offer to purchase the Premises, or
the right to purchase other property of Lessor, or the right of first refusal to
purchase other property of Lessor, or the right of first offer to purchase other
property of Lessor.
39.2 Options Personal To Original Lessee. Each Option granted to Lessee
in this Lease is personal to the original Lessee named in Paragraph 1 hereof,
and cannot be voluntarily or involuntarily assigned or exercised by any person
or entity other than said original Lessee while the original Lessee is in full
and actual possession of the Premises and without the intention of thereafter
assigning or subletting. The Options, if any, herein granted to Lessee are not
assignable, either as a part of an assignment of this Lease or separately or
apart therefrom, and no Option may be separated from this Lease in any manner,
by reservation or otherwise. See Addendum, (S)22.
39.3 Multiple Options. In the event that Lessee has any Multiple Options
to extend or renew this Lease, a later Option cannot be exercised unless the
prior Options to extend or renew this Lease have been validly exercised.
39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option, notwithstanding
any provision in the grant of Option to the contrary: (i) during the period
commencing with the giving of any notice of Default under
Paragraph 13.1 and continuing until the noticed Default is cured, or (ii) during
the period of time any monetary obligation due Lessor from Lessee is unpaid, or
(iii) during the time Lessee is in Breach of this Lease, or (iv) in the event
that Lessor has given to Lessee three (3) or more notices of Default under
Paragraph 13.1, whether or not the Defaults are cured, during the twelve (12)
month period immediately preceding the exercise of the Option, if such Default
has, in fact, occurred.
(b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due and
timely exercise of the Option, if, after such exercise and during the term of
this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of Lessee
for a period of thirty (30) days after such obligation becomes due or (ii)
Lessor gives to Lessee three (3) or more notices of Default under Paragraph 13.1
during any twelve (12) month period if such Defaults, in fact, occurred, whether
or not the Defaults are cured, or (iii) Lessee commits a Breach of this Lease.
40. Multiple Buildings. If the Premises are part of a group of buildings
controlled by Lessor, Lessee agrees that it will abide by, keep and observe
reasonable rules and regulations which Lessor may make from time to time for the
management, safety, care, and cleanliness of the grounds, the parking and
unloading of vehicles and the preservation of good order, as well as for the
convenience of other occupants or tenants of such other buildings, and their
invitees.
41. Security Measures. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.
42. Reservations. Lessor reserves to itself the right, from time to time, to
grant, without the consent or joinder of Lessee, such easements, rights, and
dedications that Lessor deems necessary, and to cause the recordation of parcel
maps and restrictions, so long as such easements, rights, dedications, maps and
restrictions do not unreasonably interfere with the use of the Premises by
Lessee or increase Lessee's monetary obligation. Lessee agrees to sign any
documents reasonably requested by Lessor to effectuate any such easement rights,
dedication, map or restrictions.
43. Performance Under Protest. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under any provisions
hereof, the Party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to institute suit for recovery of such sum. If it shall be adjudged
that there was no legal obligation on the part of said Party to pay such sum or
any part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay under the provisions of this
Lease.
44. Authority. If either Party hereto is a corporation, trust, or general or
limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.
45. Conflict. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the typewritten
or handwritten provisions.
46. Offer. Preparation of this Lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to lease to Lessee.
This Lease is not intended to be binding until executed by all Parties hereto.
47. Amendments. This Lease may be modified only in writing, signed by the
Parties in interest at the time of the modification. The parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease.
48. Multiple Parties. Except as otherwise expressly provided herein, if more
than one person or entity is named herein as either Lessor or Lessee the
obligations of such Multiple Parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.
See Addendum for additional provisions.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY EXECUTION OF THIS LEASE SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS
LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR SUBMISSION TO
YOUR ATTORNEY FOR HIS APPROVAL. FURTHER EXPERTS SHOULD BE CONSULTED TO
EVALUATE THE CONDITION OF THE PROPERTY AS TO THE POSSIBLE PRESENCE OF
ASBESTOS, STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO REPRESENTATION OR
RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
OR BY THE REAL ESTATE BROKER(S) OR THEIR AGENTS OR EMPLOYEES AS TO THE
LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE
TRANSACTION TO WHICH IT RELATES; THE PARTIES SHALL RELY SOLELY UPON THE
ADVICE OF THEIR OWN COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS
LEASE. IF THE SUBJECT PROPERTY IS LOCATED IN A STATE OTHER THAN
CALIFORNIA, AN ATTORNEY FROM THE STATE WHERE THE PROPERTY IS LOCATED SHOULD
BE CONSULTED.
The parties hereto have executed this Lease at the place on the dates specified
above to their respective signatures.
Executed at El Cajon Executed at Iselin, NJ
on 12/26/96 on 12/23/96
by LESSOR: by LESSEE:
Techplex, L.P., A California Limited Putter Properties, Inc., a Delaware
Partnership corporation
Its General Partner, Hamann Consolidated,
Inc., A California Corporation
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
---------------------------------------- ---------------------------------
Name Printed: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Name Printed: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: President Title: Vice President
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
Name Printed: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Secretary
Address: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Tel. No. (▇▇▇) ▇▇▇-▇▇▇▇ Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
NET ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ has Attorney In Fact for ▇▇▇▇▇ ▇▇▇▇▇▇.
NOTICE: These forms are often modified to meet changing requirements of law and
industry needs. Always write or call to make sure you are utilizing the most
current form: American Industrial Real Estate Association, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇-▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
ADDENDUM TO LEASE
BETWEEN
TECHPLEX, L.P.,
A California Limited Partnership
AND
PUTTER PROPERTIES, INC.,
a Delaware corporation
Dated December 20, 1996
TABLE OF CONTENTS
Section Page
------- ----
1. Premises Description.................................................... 1
2. Base Rent Adjustment/Operating Expenses................................. 1
2.1 Method of Payment.................................................. 1
2.2 LESSOR's Administrative Services................................... 2
2.3 Monetary Limitation................................................ 2
3. Base Rent............................................................... 2
4. Security Deposit........................................................ 2
5. Broker Representation/Licensee Disclosure............................... 2
6. Building Shell and Tenant Improvements.................................. 2
6.1 Tenant Improvements............................................... 3
6.1.1 Design of Tenant Improvements............................ 3
6.1.2 Approval of Contractor................................... 4
6.1.3 "Substantial Completion" Defined......................... 4
6.1.4 Time for Substantial Completion.......................... 4
6.1.5 Payment of Tenant Improvement Costs...................... 5
6.1.6 "Tenant Improvement Costs" Defined....................... 5
6.1.7 Change Orders............................................ 5
6.1.8 Reports and Final Reconciliation......................... 6
6.1.9 Dispute Resolution....................................... 6
7. LESSOR's Warranty Concerning the Condition of the Premises.............. 6
7.1 Hazardous Materials............................................... 6
8. LESSOR's Warranty of Compliance with Building Code and Restrictions..... 7
9. Delivery of Possession.................................................. 7
10. Use Warranty............................................................ 7
11. LESSOR's Maintenance Obligations........................................ 8
11.1 Limitations on LESSOR's Responsibility............................ 8
11.2 Exclusions........................................................ 8
12. Indemnification......................................................... 9
13. Additional Provisions Regarding Alteration Removal...................... 9
14. Property Insurance/Earthquake........................................... 9
15. Additional Provision Concerning Damage or Destruction................... 9
15.1 Partial Damage-Uninsured Loss..................................... 9
15.2 Damage Near End of Term........................................... 10
15.3 Abatement of Rent................................................. 10
15.4 Termination-Advance Payments...................................... 10
16. Additional Provision Concerning Assignment and Subletting............... 10
16.1 LESSOR's Consent/Affiliate Transaction............................ 10
16.2 Exception to Consent For Certain Subletting....................... 10
16.3 Assignee's Assumption............................................. 10
16.4 Rent Adjustment Upon Assignment or Sublease....................... 11
16.5 Presumption of Reasonableness..................................... 11
16.6 Time For Consent.................................................. 11
17. Additional Provision Concerning Default/Breach/Remedies................. 11
17.1 Limited Waiver of Costs........................................... 12
17.2 Documentation Requirements........................................ 12
17.3 Limited Late Charge Waiver........................................ 12
17.4 Limitation........................................................ 12
18. Additional Provision Regarding Condemnation............................. 12
19. Additional Provision Regarding LESSOR's Liability....................... 12
20. Additional Provision Regarding Interest................................. 12
21. Waiver.................................................................. 13
22. Additional Option Provisions............................................ 13
22.1 Adjustment to Base Rent........................................... 13
22.2 Refurbishment Allowance........................................... 14
22.3 "Index" Defined................................................... 14
23. Arbitration Procedure................................................... 14
24. Subordination/Non-Disturbance........................................... 15
25. Hazardous Materials Questionnaire....................................... 15
26. Additional Notice Provisions............................................ 15
EXHIBITS
Exhibit "1" Description of Premises
Exhibit "2" 1997 Estimated Operating Budget
Exhibit "3" Tenant Improvement Plans
Exhibit "4" Specifications
Exhibit "5" Subordination, Estoppel, Nondisturbance and Attornment Agreement
Exhibit "6" Hazardous Materials Questionnaire
ADDENDUM TO LEASE
-----------------
This ADDENDUM TO LEASE ("Addendum") is made by and between Techplex, L.P.,
a California limited partnership ("LESSOR"), and Putter Properties, Inc., a
Delaware corporation ("LESSEE"), and is intended to supplement that certain
Standard Industrial/Commercial Single-Tenant Lease Net between LESSOR and LESSEE
dated December 20, 1996 ("Lease") to which this Addendum is annexed. If there is
any inconsistency between this Addendum and the Lease, the terms of this
Addendum shall supersede and control, provided that except as otherwise stated,
references to the "Lease" mean and refer to the above referenced standard Lease
as modified by this Addendum. LESSOR and LESSEE agree as follows:
1. Premises Description. The Premises presently consist of the land and
--------------------
all improvements located on the land depicted on Exhibit "1" annexed to this
Addendum, including the "Building Shell" as described in section 6 of this
Addendum, and, following LESSOR's completion of the "Tenant Improvements" as
described in section 6 of this Addendum, the Tenant Improvements.
2. Base Rent Adjustment/Operating Expenses. The Base Rent for each
---------------------------------------
subsequent year of the Lease during the Original Term following the initial year
of the Lease shall be adjusted as provided in section 3 of this Addendum. In
addition to payment of the Base Rent, LESSEE shall, from and after February 1,
1997, be responsible for payment of all "Operating Expenses" (as defined below),
subject to the limitation provided in subsection 2.3 of this Addendum. The term
"Operating Expenses" means the following expenses and costs of the ownership and
operation of the Premises: (a) amounts payable for maintenance contracts
required to be procured pursuant to Paragraph 7.1(b) of the Lease (but not the
cost of repairs or replacements payable by LESSEE), (b) insurance required to be
maintained by LESSOR or LESSEE under the Lease (exclusive of the insurance
maintained by LESSEE under Paragraph 8.4 of the Lease), (c) Real Property Taxes,
(d) a reasonable reserve for replacement of the roof, (e) assessments and dues
payable to any association or other governing body established pursuant to any
covenants, conditions or restrictions affecting the Premises as of the date of
the Lease, (f) reimbursement to LESSOR of Carlsbad Community Facilities District
costs, (g) a fire sprinkler monitoring contract if payable separate from the
fire sprinkler maintenance contract described in Paragraph 7.1(b) of the Lease,
(h) the Administrative Fee described in subsection 2.2 of this Addendum, and (i)
the reasonable amount of other ordinary and necessary expenses and costs of
operation of the Premises, which are customarily incurred in the operation of
similarly situated real estate projects; provided, however, the term "Operating
Expenses" does not include (i) any indebtedness secured by a mortgage, deed of
trust or similar security interest granted by LESSOR and encumbering the
Premises, or (ii) any other items of expense or cost which the terms of the
Lease expressly require be paid or incurred by LESSEE, including all utility
charges payable by LESSEE under Paragraph 11 of the Lease.
2.1 Method of Payment. From and after February 1, 1997, LESSEE shall pay
-----------------
to LESSOR monthly, as additional rent, an amount equal to 1/12 of the projected
annual Operating Expenses. Such amount shall be due and payable concurrently
with the payment of the applicable Base Rent. Prior to the beginning of each
lease year, LESSOR will provide LESSEE an annual estimated Operating Budget
("Estimated Operating Budget"). Subject to LESSEE's payment of Operating
Expenses as provided in this Addendum, LESSOR shall make prompt payment of the
Operating Expenses. Any excess or deficit from the estimates shown in the
Estimated Operating Budget will be credited or billed to LESSEE at the end of
the applicable year and LESSOR shall concurrently furnish LESSEE with a detailed
statement showing actual Operating Expenses. Any deficit will be payable as
additional rent within ten (10) days of receipt of a final Operating Budget
setting forth the actual expenditures for the applicable lease year and the
deficit. Any excess shall be credited against the next payments of Operating
Expenses due from LESSEE. A copy of the 1997 Estimated Operating Budget is
attached to this Addendum as Exhibit 2; amounts of expense may vary in future
years as the Premises ages. Promptly following request, LESSOR shall furnish
LESSEE with such additional information as LESSEE may reasonably request with
respect to such Operating Expenses.
2.2 LESSOR's Administrative Services. LESSOR agrees to provide certain
--------------------------------
administrative services to assist LESSEE in the performance of LESSEE's
obligations under Paragraphs 7, 8.2, 8.3 and 10 of the Lease in consideration
for LESSEE's monthly payment of an administrative fee to LESSOR of two percent
(2%) of the Base Rent ("Administrative Fee"). Such Administrative Fee shall be
payable as a part of the Operating Expenses payable by LESSEE. LESSOR's
administrative services shall consist of the following: LESSOR shall procure, on
behalf of LESSEE, maintenance contracts required to be procured by LESSEE under
Paragraph 7.1(b) of the Lease, and shall otherwise procure bids and contract
proposals from contractors when necessary for LESSEE's performance of its
general repair obligations under Paragraph 7.1(a) of the Lease. Except with the
prior written consent of LESSEE, major items of expense exceeding $10,000.00
shall be competitively bid and LESSOR shall not submit any contracts or
proposals for any of such services to be performed by LESSOR or any affiliate of
LESSOR, except to the extent such affiliation is disclosed to LESSEE and such
contract is competitively priced. LESSOR shall not be liable for any acts or
omissions of any such contractors, nor for LESSEE's default in failing to
perform any obligation under the Lease, except to the extent of LESSOR's failure
to pay any Operating Expense from funds previously provided by LESSEE for the
payment of such Operating Expense, LESSOR's failure to perform its obligations
under the Lease, or LESSOR's gross negligence or willful misconduct.
2.3 Monetary Limitation. Notwithstanding the preceding provisions, LESSOR
-------------------
agrees that during the Original Term, the maximum amount payable by LESSEE for
Operating Expenses shall not exceed an amount equal to $4,946.25 monthly.
3. Base Rent. The Base Rent stated in Paragraph 1.5 of the Lease for the
---------
first year of the Lease as shown below, shall be adjusted at the beginning of
the second year of the Lease and at the beginning of each year thereafter during
the Original Term in accordance with the following schedule of Base Rent:
Year Base Rent
---- ---------
1 $14,038.00
2 $17,761.00
3 $20,677.00
4 $20,841.00
5 $21,571.00
6 $22,326.00
7 $23,107.00
8 $23,915.00
9 $24,752.00
10 $25,617.00
4. Security Deposit. Notwithstanding any contrary provision in Paragraph 5
----------------
of the Lease, any unexpended portion of the Security Deposit shall be applied to
the last month's Base Rent for the Original Term, or if LESSEE exercises any
option to extend the term of the Lease, for the last month of the last extension
period.
5. Broker Representation/Licensee Disclosure. LESSOR and LESSEE each
-----------------------------------------
warrant that: (a) they have dealt with no other real estate brokers in
connection with this transaction except: CB Commercial Real Estate Group, Inc.,
who represents LESSOR and LESSEE; (b) that they were timely advised of such
dual representation and have consented to such dual representation by Brokers;
and (c) they have not and do not expect the Brokers to disclose to one party the
confidential information of the other party. In addition, LESSEE acknowledges
that it is aware that one or more principals or members of LESSOR may be
licensed real estate brokers or other licensees, including ▇▇▇▇▇ ▇▇▇▇▇▇, and
that such licensees are participating in this transaction as affiliates of
LESSOR and have not undertaken to represent the interests of LESSOR.
6. Building Shell and Tenant Improvements. LESSOR, at its expense, has
--------------------------------------
caused the completion of the construction of the Building Shell. The phrase
"Building Shell" means the building improvements and related site improvements
as shown on those certain plans and specifications prepared by Progressive
Images, dated December 5, 1995 and consisting of 38
pages ("Building Shell Plans"), including (a) roofing, fascia, exterior walls,
doors and windows, (b) footings and concrete floors, (c) "shell" fire sprinkler
system in accordance with minimum code requirements, (d) conduits and pipes for
telephone, electricity, water, fire sprinklers and sewage brought to "stub out"
termination points in or above a perimeter wall of the Premises, (e) a main
electrical termination panel for the Building, (f) paving and finish of parking
areas, entrance areas and walkways, (g) landscaping as reasonably determined by
LESSOR, and (h) site improvements consisting of street, gutters, sidewalks,
curbs, storm drains and erosion control (construction period and permanent) as
required to comply with governmental requirements; provided, however, the term
"Building Shell" does not include completion of the mezzanine light weight
concrete floor or the railings, walls or stairways for the mezzanine other than
as required for governmental approval of LESSEE's occupancy of other areas of
the Building Shell, provided LESSOR acknowledges that completion of such
mezzanine improvements may be performed by LESSEE at a later date. LESSEE
acknowledges that the "Building Shell" improvements have been completed and are
approved by LESSEE; provided, however, the preceding approval is not intended to
waive any warranties or other obligations of LESSOR.
6.1 Tenant Improvements. Subject to all requirements in this section 6,
-------------------
LESSOR shall diligently commence and pursue to completion the construction of
the Tenant Improvements to the Premises in connection with LESSEE's initial
occupancy of the Premises as provided in this section. The phrase "Tenant
Improvements" means all improvements which are not a part of the Building Shell,
as shown in the Tenant Improvement Plans (described below), including (a)
partitions, walls, and doors, (b) all surface finishes, including wall
coverings, paint, floor coverings, suspended ceilings and other similar items,
(c) duct work, heat pumps, vents, diffusers, terminal boxes and accessories for
completion of heating, ventilation and air conditioning systems within the
Premises, (d) electrical distribution systems (including panels, subpanels,
wires and outlets), lighting fixtures, outlets, switches and other electrical
work to be installed in the Premises, but excluding any additional or special
electrical requirements for the equipment room/machine shop (e) plumbing lines,
fixtures and accessories, (f) all fire and life safety control systems such as
fire walls and fire alarms (including piping, wiring and accessories) to be
located in the Premises, and fire sprinklers and lines attributable to the
Tenant Improvements and/or LESSEE's fixtures, furnishing or equipment, (g)
improvements required for compliance with Title 24, and (h) such other
improvements shown on the "Tenant Improvement Plans" (as defined below);
provided, however LESSEE's trade fixtures, equipment and personal property
(including telephone systems and cabling, computer systems and network cabling,
chairs, tables, furniture and other equipment used in LESSEE's business) shall
not be considered part of the Tenant Improvements regardless of whether shown on
the Tenant Improvement Plans. The construction of the Tenant Improvements shall
be carried out without Material Deviation (as defined below) from the Tenant
Improvement Plans, in a good and workmanlike manner using materials as described
in the Specifications (as described below), and in accordance with Applicable
Law. LESSEE will cause the Architect to submit the Tenant Improvement Plans for
government plan checking and for issuance of a building permit (the "Building
Permit") promptly following the execution of this Lease. LESSOR shall cause the
Contractor to cause the Substantial Completion (as defined below) of the Tenant
Improvements on or before the "Scheduled Completion Date" as provided in
subsection 6.1.4 below. Notwithstanding the Substantial Completion of the Tenant
Improvements, LESSOR shall remain responsible for causing the completion of any
corrective work or "punch list" required to fully complete the Tenant
Improvements in a good and professional workmanlike manner.
6.1.1 Design of Tenant Improvements. LESSOR has approved the plans
-----------------------------
prepared by ▇▇▇▇▇ Consulting Architects ("Architect"), a list of which is
annexed to this Addendum as Exhibit "3" ("Tenant Improvement Plans"), which
Tenant Improvement Plans also include specifications describing the quality or
category of materials to be utilized in the construction of the Tenant
Improvements ("Specifications"); a copy of the Specifications is annexed to this
Addendum as Exhibit "4." LESSEE will have the Architect submit the Tenant
Improvement Plans for government plan checking and for issuance of a building
permit (the "Building Permit"). The Tenant Improvement Plans and Specifications
shall be subject to any changes required by governmental authorities; provided,
however, LESSOR and LESSEE shall have the right to approve any changes to the
Tenant Improvement Plans or Specifications requested by such governmental
authorities, whether during such plan check or during the course of construction
("Government Change"), and LESSOR and LESSEE agree not to unreasonably
withhold such approval. LESSOR shall cause the Contractor to complete the Tenant
Improvements in accordance with the Tenant Improvement Plans and Specifications,
without Material Deviation. The term "Material Deviation" means a change,
modification or deviation other than (a) any change, modification or deviation
constituting a Government Change or change requested by LESSEE, (b) minor
deviations in the location or dimensions of walls, windows doors, electrical
outlets and similar improvements, or (c) any other change, modification or
deviation approved by LESSEE, which approval will not be unreasonably withheld.
6.1.2 Approval of Contractor. LESSOR and LESSEE hereby approve CSI General
----------------------
Contractors as the contractor ("Contractor") for construction of the Tenant
Improvements. LESSOR shall not permit or otherwise cause any other person or
entity to act as the general contractor for construction of the Tenant
Improvements, except in the event of a termination of the general contract with
Contractor on account of the default of Contractor. In the event of any such
termination, LESSOR shall have the right to reasonably select an alternate
licensed, general contractor to complete the construction so long as such
replacement contractor is experienced in the construction of commercial tenant
improvements and is not affiliated with LESSOR.
6.1.3 "Substantial Completion" Defined. The term "Substantial Completion"
--------------------------------
means the date upon which LESSOR satisfies all of the following requirements:
(a) the construction of the Tenant Improvements is substantially completed in
accordance with the Tenant Improvement Plans and Specifications as modified only
by any changes requested by LESSEE or Government Changes, subject only to minor
corrective work which does not affect or limit LESSEE's use of the Premises; (b)
LESSOR has procured a certificate of occupancy (whether temporary or permanent)
or other applicable permit permitting LESSEE's immediate occupancy of the
Premises and the use of the Premises for the conduct of LESSEE's business; and
(c) LESSOR has given LESSEE written notice stating that such Substantial
Completion has occurred and that the Premises are available for LESSEE's
immediate possession and occupancy ("Notice of Possession").
6.1.4 Time for Substantial Completion. LESSOR shall cause Contractor to
-------------------------------
diligently pursue the construction and cause the Substantial Completion of the
Tenant Improvements on or before a date which is no later than forty-five (45)
days following the date of LESSEE's delivery of the Building Permit to LESSOR
("Scheduled Completion Date"); provided, however, the Scheduled Completion Date
shall be extended if Substantial Completion is delayed on account of (a) changes
to the approved Tenant Improvement Plans requested by LESSEE, including time
expended in obtaining fixed, price quotations for any changed work as required
under subsection 6.1.7 of this Addendum or delays in obtaining LESSEE's approval
of any Government Changes as provided in subsection 6.1.1 of this Addendum, (b)
Government Changes, (c) delays of LESSEE in paying the amount of any Tenant
Improvement Costs payable by LESSEE, or (d) fire, earthquake or other
causalities, inclement weather conditions, delays encountered in processing
governmental approvals or inspections or other governmental action which
prevents or impedes the orderly progress of construction, delays encountered as
a result of the discovery of any unknown or concealed conditions affecting the
Premises, delays caused by general area wide labor or material shortages or
labor disputes (such as strikes or lock-outs), or any other causes beyond the
reasonable control of LESSOR or Contractor. If such delays are encountered, the
Scheduled Completion Date shall be extended but only for the number of days the
delaying event exists and prevents Contractor from proceeding with the work. The
extension of the Scheduled Completion Date pursuant to this subsection shall not
change or delay the date for LESSEE to commence payment of the Base Rent,
Operating Expenses or other charges payable by LESSEE. Except for excused delays
described in the preceding provisions, if Substantial Completion is delayed
beyond the Scheduled Completion Date, the following provisions shall apply: (i)
if the delay does not exceed thirty (30) days, LESSEE shall be credited with two
(2) free days of Base Rent for each one (1) day Substantial Completion is so
delayed, with such credits to be applied to the Base Rent next becoming due; and
(ii) if the delay exceeds thirty (30) days, then LESSEE at its option, shall
have the right to either (aa) continue to accumulate the two (2) days free Base
Rent credit for each one (1) day of additional delay and apply such credit to
Base Rent next becoming due, or (bb) terminate the Lease by giving written
notice of such election to LESSOR, which notice shall effectively terminate the
Lease upon the
expiration of ten (10) days following delivery of the notice, unless LESSOR has
caused the Substantial Completion prior to the expiration of such ten (10) day
period, in which event the termination notice shall not become effective and
this Lease shall continue in full force and effect, provided that LESSEE shall
be entitled to the accumulation and application of the free Base Rent credit
until such Substantial Completion and LESSEE shall not be required to pay
Operating Expenses during any period of Base Rent credit accumulation. If the
Lease is terminated by LESSEE pursuant to the preceding provision, LESSOR agrees
to reimburse LESSEE for LESSEE's contributions to the Tenant Improvement Costs
described in subsections 6.1.5 and 6.1.7 of this Addendum, the Security Deposit
and any rentals previously paid by LESSEE within thirty (30) days of such
termination; provided, however, LESSOR shall have no other liability whatsoever
to LESSEE on account of the failure to timely deliver the Premises.
6.1.5 Payment of Tenant Improvement Costs. The "Tenant Improvement Costs"
-----------------------------------
(as defined below) shall be allocated between LESSOR and LESSEE in the manner
hereinafter set forth. Except as otherwise provided, LESSOR shall be
responsible for payment of the amount of $225,000 towards the Tenant Improvement
Costs and LESSEE shall be responsible for payment of the amount of $184,000
("LESSEE's Initial Contribution") towards the Tenant Improvement Costs;
provided, however, LESSEE shall also be solely responsible for payment of all
fees and costs payable to any design professionals, such as architects and
engineers, in connection with the preparation of or processing for permit of the
Tenant Improvement Plans and Specifications and/or any other services concerning
or relating to the design of the Tenant Improvements. Within five (5) days from
the execution of this Lease, LESSEE shall pay LESSEE's Initial Contribution to a
fund control account maintained at Bank of Commerce ("Lender"), and the proceeds
of LESSEE's Initial Contribution shall be disbursed from such account along with
the proceeds of LESSOR's loan from Lender as the construction of the Tenant
Improvements progresses. LESSOR and LESSEE shall each be responsible for payment
of fifty percent (50%) of any Tenant Improvement Costs in excess of $409,000 up
to a maximum of $434,000. LESSEE agrees to pay to the Lender's fund control any
additional amount due from LESSEE under the preceding provision within ten (10)
days following notice from LESSOR requesting such additional funds together with
Contractor's invoices and other documentation reasonably requested by LESSEE to
evidence such costs. In the event the Tenant Improvement Costs exceed $434,000,
LESSOR shall be solely responsible for such excess, except as provided in
subsection 6.1.7 below. If, following completion of the Tenant Improvements, the
Tenant Improvement Costs are less than $409,000, LESSOR shall reimburse LESSEE
in the amount of 50% of the savings within forty-five (45) days after
Substantial Completion.
6.1.6 "Tenant Improvement Costs" Defined. The phrase "Tenant Improvement
----------------------------------
Costs" means all direct and indirect costs of furnishing, constructing and
installing the Tenant Improvements, including, without limitation, (a) any
reasonable out-of-pocket costs for design and/or architectural services incurred
by LESSOR in reviewing any changes to the Tenant Improvement Plans and/or in
connection with government inspections of the construction, but not any costs or
expenses incurred by LESSEE for such design and/or architectural services, (b)
government permit costs applicable to the Tenant Improvements, (c) amounts
payable to the contractor for overhead/profit, job site supervision, cleanup,
trash and janitorial services, (d) the actual 'hard costs" of construction of
the Tenant Improvements, and (e) any and all other expenses and costs of
whatever kind or nature incurred by LESSOR in connection with the Tenant
Improvements; provided, however, the term "Tenant Improvement Costs" shall not
include any fees of LESSOR or any affiliated entity in connection with
construction of the Tenant Improvements.
6.1.7 Change Orders. LESSEE shall have the right to issue change orders to
-------------
change or eliminate any item or detail contained in the Tenant Improvement Plans
and/or Specifications and/or to substitute and/or add other items or details not
shown on the Tenant Improvement Plans and/or Specifications, subject to
obtaining LESSOR's approval, which approval shall not be unreasonably withheld.
LESSEE will be responsible for payment of any excess Tenant Improvement Costs
resulting from any changes to the Work requested by LESSEE or necessitated by
government requirements, following LESSOR's approval of the Tenant Improvement
Plans. The cost of any such change order which results in the Tenant Improvement
Costs exceeding $409,000 shall be borne by LESSEE to the extent of the amount
so in excess. LESSOR shall have no right to issue change orders. Any such
changes shall be subject to LESSOR's approval. LESSOR shall obtain from the
Contractor a fixed price quotation for completion of the change and provide such
quotation to LESSEE. LESSEE shall deposit funds with LESSOR to pay such costs
within ten (10) days following notice from LESSOR of the Contractor's quotation
of the added cost for any change. LESSOR shall make a refund to LESSEE for any
excess payment for changes to the extent that the total Tenant Improvement Costs
are less than $409,000.
6.1.8 Reports and Final Reconciliation. During the course of construction
--------------------------------
of the Tenant Improvements, LESSEE, upon reasonable request and during LESSOR's
regular business hours, shall be entitled to inspect, review and copy invoices,
reports or other documentation received by LESSOR from Contractor regarding the
progress of Construction and the amount of Tenant Improvement Costs being
incurred. Following completion of the construction of the Tenant Improvements,
LESSOR shall deliver to LESSEE a final reconciliation report showing the total
of the Tenant Improvement Costs.
6.1.9 Dispute Resolution. In the event that LESSEE reasonably determines
------------------
that any portion of the Tenant Improvement Costs has not been properly accounted
for, LESSEE shall give LESSOR written notice of such determination, which notice
shall include a detailed explanation of the reason(s) for such determination,
within thirty (30) days following the receipt of LESSOR's final accounting. In
the event that LESSEE does not give such a written notice within such thirty
(30) day period, LESSEE shall be deemed to have conclusively approved LESSOR's
final accounting. Any dispute concerning the Tenant Improvement Costs shall be
subject to Arbitration as provided in section 23 of this Addendum. Pending the
resolution of any such dispute, LESSEE shall pay the amount invoiced by LESSOR,
and in the event LESSEE prevails in the Arbitration, LESSEE shall be entitled to
a credit against the payment of Base Rent next becoming due in an amount
determined in the Arbitration. Any Arbitration must be commenced by LESSEE
within ninety (90) days from the delivery of LESSOR's final accounting and, if
LESSEE fails to timely commence such Arbitration, LESSEE shall be deemed to have
conclusively approved LESSOR's final accounting.
7. LESSOR's Warranty Concerning the Condition of the Premises.
----------------------------------------------------------
Notwithstanding the provisions of Paragraph 2.2 of the Lease, LESSOR's warranty
in Paragraph 2.2 of the Lease applies only to the improvements included in the
Building Shell, and LESSOR is not making any warranty concerning the physical
condition of the Tenant Improvements nor the suitability of such Tenant
Improvements for use by LESSEE. Except as provided in this section and in
sections 8, 10 and 11 of this Addendum, LESSEE is accepting the Premises in an
"AS IS, WHERE IS" condition without representation or warranty by LESSOR. If
LESSEE does not give LESSOR written notice of a non-compliance with the warranty
provided in Paragraph 2.2 of the Lease within one (1) year after the Scheduled
Completion Date, correction of any non-compliance shall be the obligation of
LESSEE, at LESSEE's sole cost and expense.
7.1 Hazardous Materials. Except as described in the reports identified in
-------------------
this section, LESSOR warrants to LESSEE that LESSOR has no knowledge of the
existence of Hazardous Substances in, on or about the Premises in violation of
any Applicable Laws. LESSEE acknowledges and agrees that LESSOR has disclosed to
LESSEE that the sole basis of LESSOR's knowledge concerning such Hazardous
Substances is that certain "Environment Site Assessment Carlsbad Airport Centre
Phase II Expansion Property, Carlsbad, California" report prepared by ▇▇▇▇▇▇▇▇-
▇▇▇▇▇, dated April, 1993, that certain "Groundwater Monitoring Well Abandonment"
report by ▇▇▇▇▇▇▇▇-▇▇▇▇▇, dated October 7, 1994, and that certain "Site
Assessment and Subsurface Investigation Report" prepared by ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Consultants, dated September 26, 1991; copies of such reports have been
furnished to LESSEE. LESSOR shall be under no obligation to conduct any
additional investigation or further inquiry concerning Hazardous Substances in
connection with entering into this Lease and making the warranty provided in
this section. LESSOR further acknowledges and agrees that LESSEE shall not be
liable to LESSOR for the costs to remedy or cleanup any Hazardous Substances
migrating or flowing on to the Premises from outside of the Premises, including,
without limitation, any off-Premises releases affecting ground water beneath the
Premises so long as such off-Premises release or discharge was not caused by
LESSEE or its agents, contractors or invitees. Subject to the limitations
described below, LESSOR shall indemnify, defend and hold harmless LESSEE
from and against any out-of-pocket loss, liability, claim, expense (including
reasonable attorneys' fees and court costs) or damage resulting from any Third
Party Claim (as defined below) which is based on the existence of any Hazardous
Substance contamination in, under or about the Premises (including groundwater)
as of the Commencement Date of the Lease or any Hazardous Substance
contamination thereafter migrating in, under or about the Premises (including
groundwater) as a result of its proximity to the former landfill described in
the reports identified in this section, but only to the extent any such loss,
liability, claim and/or expense first exceeds in aggregate the sum of
$25,000.00. The phrase "Third Party Claim" means any lawsuit, administrative
action or other proceeding commenced and maintained by any governmental agency
or other third person or entity who is not a partner, principal, agent, employee
or affiliate of LESSEE. LESSEE shall promptly give LESSOR notice of any such
Third Party Claim. LESSOR's obligation of indemnification includes the
obligation to defend the Third Party Claims through qualified legal counsel
reasonably satisfactory to LESSEE, after LESSEE has first paid losses,
liabilities, costs and/or expenses in excess of $25,000.00 on account of such
Third Party Claim, provided LESSEE need not have first paid any such Third Party
Claim in order to be so indemnified. LESSEE shall cooperate with LESSOR in such
defense.
8. LESSOR's Warranty of Compliance with Building Code and Restrictions.
-------------------------------------------------------------------
Notwithstanding the provisions of Paragraph 2.3 of the Lease, LESSOR's warranty
applies only to the improvements included in the Building Shell, and LESSOR is
not making any warranty concerning the compliance of the Tenant Improvements
with such codes, regulations, ordinances and restrictions. LESSOR's warranty
includes compliance of the Building Shell with the Americans With Disabilities
Act ("ADA"). In the event that future changes in the ADA having general
application require any modifications or improvements to the Building Shell,
LESSOR shall be responsible, at its expense, for completing such modifications
or improvements; provided, however, LESSEE, not LESSOR, shall be responsible for
any modifications or improvements: (a) affecting the Tenant Improvements or
other alterations made by LESSEE; or (b) resulting from special ADA requirements
resulting from any unusual use or employment practices of LESSEE which are not
ordinary and customary to the use or practices of tenants generally in similarly
situated real estate projects. Except with respect to LESSOR's responsibility
for future compliance of the Building Shell with future ADA requirements, if
LESSEE does not give LESSOR written notice of a non-compliance with the
warranty provided in Paragraph 2.3 of the Lease within three (3) years after the
Scheduled Completion Date, correction of any non-compliance shall be the
obligation of LESSEE, at LESSEE's sole cost and expense.
9. Delivery of Possession. LESSOR shall deliver possession of the
----------------------
Premises to LESSEE on the date of Substantial Completion. LESSEE shall accept
possession of the Premises upon the Substantial Completion of the Tenant
Improvements. During the last fourteen (14) days immediately preceding the
expected date for Substantial Completion, LESSEE shall have the right to enter
the Premises prior to completion of the Tenant Improvements in order for LESSEE
to perform work required by LESSEE to make the Premises ready for its use and
occupancy; provided, however, (a) LESSEE requests in writing, no later than ten
(10) days prior to the requested date of entry, that LESSOR procure the
liability insurance coverage required under Paragraph 8.2 of the Lease and
LESSEE pays for the cost of such insurance; and (b) any such work shall be
carried out in a manner and method which does not interfere with or delay the
construction of the Tenant Improvements, LESSOR shall give LESSEE notice of the
expected date of Substantial Completion no later than twenty (20) days prior to
the expected date of Substantial Completion.
10. Use Warranty. Notwithstanding any other provision of this Lease to the
------------
contrary, LESSOR hereby warrants to LESSEE that as of the Substantial Completion
of the Premises, applicable zoning and land use laws will generally permit use
of the Premises for office, research, development and manufacture of golf clubs,
provided that LESSEE's specific method of use of the Premises is in accordance
with all other Applicable Laws and such warranty shall not be deemed to be a
warranty that LESSEE is permitted to use the Premises exclusively for only one
of the activities described, such as office use. Any action or claim of LESSEE
for breach of the preceding warranty must be commenced within one (1) year from
the Substantial Completion Date or it shall be deemed waived.
11. LESSOR's Maintenance Obligations. Notwithstanding the provisions of
--------------------------------
Paragraphs 2.2, 2.3, 7.1 and 7.2 of the Lease, provisions of the Lease to the
contrary and except as provided in subsections 11.1 and 11.2 of this Addendum,
LESSOR, not LESSEE, shall be responsible for the maintenance and repair of
certain LESSOR Maintained Improvements. The phrase "LESSOR Maintained
Improvements" refers to and is limited to: (a) the structural elements of the
Building Shell, being the structural portion of the exterior Building Shell
walls, foundations and structural roof; (b) the non-structural roof membrane
(exclusive of roof drainage system, including gutters and downspouts, which
shall be maintained by LESSEE); and (c) Building Shell electrical, sewer and
water utilities; provided, however, and notwithstanding any other provision,
LESSOR's obligation to maintain the non-structural roof membrane shall only
apply during the Original Term.
11.1 Limitations on LESSOR's Responsibility. LESSOR's obligation for
--------------------------------------
repair and maintenance of the LESSOR Maintained Improvements is limited to
maintaining the LESSOR Maintained Improvements in a commercially reasonable
order, condition and repair and sound structural condition, and LESSEE, not
LESSOR, shall be responsible for any painting or other resurfacing of the
exterior surfaces of exterior or interior walls of LESSOR Maintained
Improvements in order to maintain such improvements in a neat and attractive
appearance. LESSOR shall not be in default of its repair and maintenance
obligation if LESSOR performs the required repairs or maintenance within thirty
(30) days after written notice from LESSEE of the need for such repairs or
maintenance. If, due to the nature of a particular repair or maintenance
obligation, more than thirty (30) days is reasonably required to complete such
repairs or maintenance, LESSOR shall not be in default so long as LESSOR
commences work within such thirty (30) day period and diligently prosecutes the
work to completion. No abatement of rent and no liability of LESSOR shall result
for any injury to or interference with LESSEE's business from the making of or
failure to make any repairs or replacements except for LESSOR's gross negligence
or willful misconduct. Except as otherwise provided herein, LESSEE waives and
releases its rights, if any, to make repair at LESSOR's expense, under
California Civil Code Sections 1941-42 or any similar law, statute or ordinance
in effect now or in the future. Notwithstanding the foregoing, if any such
repair and or maintenance obligation of LESSOR constitutes an emergency
situation involving property damage or personal injury, LESSOR shall make such
repair immediately following notice from LESSEE. If LESSOR cannot perform such
repair or maintenance obligation in time to mitigate any such property damage or
personal injury, LESSEE shall have the right to perform same and LESSOR shall
reimburse LESSEE for the reasonable, out-of-pocket cost thereof within thirty
(30) days from the receipt of an invoice from LESSEE, which invoice shall
include backup information substantiating the expenses. In the case of such
emergency situations, the notice given to LESSOR may be made by telephonic
communication so long as LESSEE continues with its best efforts to contact a
responsible employee or agent of LESSOR or LESSOR's designated manager until
successful and LESSEE simultaneously sends a facsimile transmission to LESSOR
notifying LESSOR of the emergency.
11.2 Exclusions. The provisions of Paragraph 9 (damage and destruction)
----------
and Paragraph 14 (condemnation) of the Lease, and not this section 11 of this
Addendum, shall control in the event of any damage, destruction or condemnation
of any of the LESSOR Maintained Improvements. In addition, LESSOR shall have no
responsibility to maintain or repair such LESSOR Maintained Improvements in the
following circumstances:
(a) repairs or replacements are necessitated by LESSEE's failure to
promptly perform its repair and maintenance obligations of other improvements;
(b) repairs or replacements are necessitated by any intentional or
negligent act or omission of LESSEE, its employees, agents or contractors,
including misuse or abuse of the LESSOR Maintained Improvements, and LESSEE
acknowledges that the entry upon or placing objects on any portion of the roof
shall constitute misuse;
(c) to the extent that LESSEE makes any modification or alteration
of any of the LESSOR Maintained Improvements, with or without the consent of
LESSOR, including, without limitation, penetrations of the roof or structural
elements, and LESSEE shall be deemed to have assumed full responsibility for the
repair and maintenance of any
improvements so modified, altered or added, but only to the extent any such
repair or maintenance results from LESSEE's modification or alteration;
(d) repairs or replacements are necessitated by LESSEE exceeding the
designed load bearing capacities of the walls, foundations, floor slab or other
structural elements;
(e) repairs only to remove blockages of the Building Shell plumbing
and sewer lines resulting from the misuse or from ordinary and customary and
usual blockages and not from any defect or deficiency in such improvements; or
(f) repairs or replacement to the Building Shell electrical system
resulting from any unusual or intensive power demand requirements of LESSEE, or
on account of any power fluctuation or other malfunction attributable to
equipment or other electrical system improvements to be maintained by
LESSEE.
12. Indemnification. Except for LESSEE's negligence, LESSOR shall
---------------
indemnify, protect, defend and hold harmless LESSEE and its agents from and
against any and all claims, damages, costs, liens, judgments, penalties,
attorneys' fees, expenses and/or liabilities attributable to personal injury or
property damage and/or arising out of or resulting from any act, omission or
neglect of LESSOR, its agents, contractors or employees while present on the
Premises in connection with LESSOR's exercise of any of its rights to access to
the Premises granted in this Lease. The foregoing shall include, but not be
limited to, the defense or pursuit of any claim or any action or proceeding
involved therein, and whether or not (in the case of claims made against LESSOR)
litigated and/or reduced to judgment, and whether well founded or not. In case
any action or proceeding be brought against LESSEE by reason of any of the
foregoing matters, LESSOR upon notice from LESSEE shall defend the same at
LESSOR's expense by counsel reasonably satisfactory to LESSEE and LESSEE shall
cooperate with LESSOR in such defense. LESSEE need not have first paid any such
claim in order to be so indemnified.
13. Additional Provisions Regarding Alteration Removal. Notwithstanding
--------------------------------------------------
any contrary provision in Paragraph 7.4(b) of the Lease, if LESSOR expressly
consents to any Alteration or Utility Installations constructed or installed by
LESSEE, LESSOR shall notify LESSEE at the time of giving such consent whether or
not LESSOR will require the removal of the Alteration or Utility Installation
upon expiration of the Lease, and LESSOR's failure to so notify LESSEE shall
constitute a waiver of LESSOR's right to require LESSEE to remove such
Alteration or Utility Installation upon expiration of the Lease. In addition,
and notwithstanding any contrary provisions, LESSEE shall not remove and LESSOR
shall be entitled to retain any computer network, telephone or security system
cabling or conduits placed within the walls, ceilings or floors of the Premises.
14. Property Insurance/Earthquake. Notwithstanding the provision in
-----------------------------
Paragraph 8.3(a) of the Lease requiring earthquake coverage if requested by
LESSOR's lender, LESSOR agrees that LESSEE shall not be responsible for the cost
of earthquake insurance coverage to the extent any coverage requested by
LESSOR's lender is not consistent with the prevailing practices of institutional
lenders making loans for similarly situated commercial real estate developments
in the same locale and seismic zone.
15. Additional Provision Concerning Damage or Destruction. This section
-----------------------------------------------------
includes provisions that modify and/or supplement the provisions of Paragraph 9
of the Lease concerning damage or destruction of the Premises. Except as
expressly set forth in subsections 15.1 through 15.4 of this Addendum, the
provisions of Paragraph 9 of the Lease shall be enforced in accordance with
their terms.
15.1 Partial Damage-Uninsured Loss. LESSOR agrees that LESSOR's right to
-----------------------------
terminate the Lease under Paragraph 9.3 of the Lease on account of an uninsured
loss shall not apply unless the aggregate cost and expense of repairing and
restoring the Premises exceeds One Hundred Thousand Dollars ($100,000.00), and
LESSOR shall cause such repair and restoration to be completed to the extent
required in Paragraph 9.3 of the Lease. If LESSOR elects to exercise such right
of termination and LESSEE elects to exercise its right under Paragraph 9.3 of
the Lease to complete such repairs at its expense, LESSEE shall only be
responsible for the repair or replacement costs in excess of One Hundred
Thousand Dollars ($100,000.00), and LESSOR shall be responsible for payment of
such costs up to a maximum of One Hundred Thousand Dollars ($100,000.00).
15.2 Damage Near End of Term. LESSOR agrees that LESSEE shall have the
-----------------------
same right to terminate the Lease during the last six (6) months of the term of
the Lease as provided to LESSOR under Paragraph 9.5 of the Lease, except in the
event such damage was caused by LESSEE, in which event LESSEE shall not have the
right to terminate the Lease.
15.3 Abatement of Rent. The requirement in Paragraph 9.6(a) of the Lease
-----------------
for LESSEE to continue to perform its obligations under the Lease other than
those monetary obligations subject to abatement under Paragraph 9.6(a) of the
Lease, shall not apply to the extent that LESSEE's ability to perform any such
other obligations is impaired by the damage or destruction of the Premises;
provided, however, the preceding exception shall not apply to any monetary
obligations. In addition, the waiver of LESSEE of any claim against LESSOR for
any damage suffered by reason of such repair or restoration shall not apply to
the extent such damage is solely caused by the gross negligence or willful
misconduct of LESSOR, or its agents, contractors or employees.
15.4 Termination-Advance Payments. In addition to any entitlement of
----------------------------
LESSEE to receive any advance payment under Paragraph 9.8 of the Lease, in the
event of the termination of the Lease pursuant to Paragraph 9 of the Lease
during the first five (5) years of the Original Term, LESSEE shall be entitled
to receive a portion of insurance proceeds actually received by LESSOR on
account of the unamortized cost of the Tenant Improvements, with such portion
equaling a percentage determined by (a) dividing the aggregate amount of the
Tenant Improvement Costs paid by LESSEE, (b) by the total Tenant Improvement
Costs paid by both LESSOR and LESSEE.
16. Additional Provision Concerning Assignment and Subletting. This
---------------------------------------------------------
section includes provisions that modify and/or supplement the provisions of
Paragraph 12 of the Lease concerning the assignment and subletting of the
Premises. Except as expressly set forth in subsections 16.1 through 16.4 of this
Addendum, the provisions of Paragraph 16 of the Lease shall be enforced in
accordance with their terms.
16.1 LESSOR's Consent/Affiliate Transaction. Subject to compliance with
--------------------------------------
Paragraph 12.2 of the Lease, LESSOR's consent shall not be required with respect
to an Affiliate Transaction and the provisions of Paragraph 12.1(d) of the Lease
shall not apply to an Affiliate Transaction. The term "Affiliate Transaction'
means (i) any assignment resulting from a bona fide consolidation, merger or
purchase of substantially all of LESSEE's assets, or (ii) any assignment or
sublease to an entity controlling, controlled by or under common control with
LESSEE, or an entity which acquires, is acquired by, or merges with, LESSEE;
provided, however, any such assignment shall not release or otherwise affect
LESSEE's liability for its obligations under the Lease. LESSOR agrees that
LESSEE's failure to use or occupy all or any portion of the Premises shall not
constitute a default. Further and notwithstanding anything to the contrary
contained herein, LESSOR acknowledges and agrees that the Premises may be
occupied by one or both Guarantors, companies affiliated with LESSEE, and LESSOR
consents to such occupancy. For purposes of determining whether a transaction is
an "Affiliate Transaction," references to "LESSEE" in this section shall also be
deemed to include each Guarantor.
16.2 Exception to Consent For Certain Subletting. Notwithstanding any
-------------------------------------------
other provision in Paragraph 12 of the Lease, LESSOR's consent to a sublease
shall not be required and LESSOR shall not have the right to adjust the rental
under Paragraph 12.1(d) of the Lease so long as all of the following conditions
are and remain satisfied: (a) the sublease is for a portion of the Premises
constituting less than fifty percent (50%) of the total rentable square feet of
the Premises; (b) LESSEE continues to occupy the remaining portions of the
Premises; and (c) LESSEE is not otherwise in Breach of this Lease.
16.3 Assignee's Assumption. With respect to the obligation under Paragraph
---------------------
12.2(a) for any assignee to assume the obligations of LESSEE under the Lease,
such obligation is
clarified to provide that such assumption only applies to any accrued or
unperformed obligations existing as of the date of the assignment and any future
obligations accruing on and after the date of the assignment.
16.4 Rent Adjustment Upon Assignment or Sublease. Subject to all other
-------------------------------------------
provisions of Paragraph 12 of the Lease and except in the case of an Affiliate
Transaction, if LESSEE subleases or assigns the Premises (regardless of whether
such sublease or assignment is consented to by LESSOR), LESSEE shall pay to
LESSOR, as additional rental due under this Lease, at LESSOR's option, the
following amounts: (a) in the case of an assignment, LESSOR shall be entitled to
receive an amount equal to fifty percent (50%) of the total value of the
consideration received by LESSEE on account of such assignment, less an amount
equal to any real estate commissions payable by LESSEE on account of the
assignment of this Lease, which amount shall be payable within five (5) days
from the date(s) as and when LESSEE receives such consideration; and (b) in the
case of a sublease, an amount equal to fifty percent (50%) of the Excess Rental
payable by any subtenant on account of such sublease less the costs of any real
estate commissions payable by LESSEE. The term "Excess Rental" means the rent or
other consideration received by LESSEE from the subtenant in excess of the
amount of Base Rent, additional rent and other charges payable by LESSEE under
this Lease. In no event shall this provision be construed or applied to reduce
the Base Rent or other charges payable by LESSEE under this Lease, nor modify,
waive or otherwise affect LESSOR's entitlement to increase the rentals payable
under this Lease pursuant to Paragraph 12.1(d) of the Lease in the event of an
assignment or subletting without the consent of LESSOR.
16.5 Presumption of Reasonableness. To the extent that the Lease provides
-----------------------------
for LESSOR's reasonable consent to an assignment of the Lease, LESSEE
acknowledges and agrees that LESSOR shall be conclusively deemed to have
reasonably withheld such consent if (a) the Net Worth of the proposed assignee
does not exceed One Million Dollars ($1,000,000.00) as evidenced by financial
statements conforming to the requirements of section 16.6 of the Lease, or (b)
the assignee's use of the Premises would increase the risk of contamination of
any Hazardous Substance from the risk presented by LESSEE's use of the Premises
as determined by Dames & ▇▇▇▇▇, or such other qualified environmental consultant
as LESSOR and LESSEE may reasonably approve if Dames & ▇▇▇▇▇ decline to make
such determination. LESSEE shall be responsible for the fees of such consultant.
Nothing in this section shall be construed or applied to restrict LESSOR from
withholding its consent for other reasonable grounds, and this provision is
included solely to provide LESSOR the benefit of the conclusive presumption with
respect to one or both of the above described conditions.
16.6 Time For Consent. LESSOR shall give LESSEE written notice of its
----------------
consent or refusal to consent to a proposed assignment no later than thirty (30)
days following receipt from LESSEE of the last of the Transfer Documentation and
LESSEE's payment under Paragraph 12.2(e) of the Lease ("LESSOR's Notice"). The
term "Transfer Documentation" means and includes the following documentation,
which shall be certified in writing as true, correct and complete by the
assignee: (a) the name, address, telephone number and responsible representative
of the assignee; (b) financial statements, prepared by a certified public
accountant or equivalent, for the last three (3) years of assignee's operation,
including balance sheet, income statements and any other statements prepared in
the ordinary course of assignee's operations; (c) written reports, government
filings and other relevant documentation, if any, describing the extent of the
use of Hazardous Substances in assignee's general business operations, and, if
different, the use of the Premises proposed by assignee; and (d) all written
contracts and agreements, including lease assignments, signed between LESSEE (or
any of its affiliates) and the assignee relating to or in any way concerning the
assignment or any contemporaneous transaction, which contracts and agreements
must evidence that the assignment is subject only to the condition or
contingency of LESSOR's consent. If LESSOR does not timely give LESSOR's Notice,
LESSOR shall be deemed to have given its consent to the assignment as disclosed
in the Transfer Documentation.
17. Additional Provision Concerning Default/Breach/Remedies. This section
-------------------------------------------------------
includes provisions that modify and/or supplement the provisions of Paragraph 13
of the Lease concerning a Default and Breach and remedies. Except as expressly
set forth in subsections 17.1
through 17.3 of this Addendum, the provisions of Paragraph 13 of the Lease shall
be enforced in accordance with their terms.
17.1 Limited Waiver of Costs. LESSOR agrees to waive the charges for
-----------------------
preparation of a notice of Default in the following circumstances: (a) it is
determined that a Default, in fact, did not occur; or (b) the first Default
occurring during any rolling twelve (12) month period other than a Default
arising on account of the failure to pay Base Rent or any other monetary charge.
17.2 Documentation Requirements. Except as expressly otherwise provided in
--------------------------
this Lease, the failure by LESSEE to provide LESSOR with reasonable written
evidence (in duly executed original form, if applicable) of (i) a Tenancy
Statement required pursuant to Paragraphs 16 or 37 of the Lease, (ii) the
execution of any document requested under Paragraph 42 (easements) of the Lease,
or (iii) the subordination or non-subordination of this Lease as provided in
Paragraph 30 of the Lease, where such failure continues for a period of ten (10)
days following written notice by or on behalf of LESSOR to LESSEE, shall
constitute a Breach. Except as expressly otherwise provided in this Lease, the
failure by LESSEE to provide LESSOR with reasonable written evidence (in duly
executed original form, if applicable) of (aa) compliance with Applicable Law as
required under Paragraph 6.3 of the Lease, (bb) the rescission of an
unauthorized assignment or subletting of the Premises under Paragraph 12.1(b) of
the Lease, or (cc) any other documentation or information which LESSOR may
reasonably require of LESSEE under the terms of this Lease, where such failure
continues for a period of thirty (30) days following written notice by or on
behalf of LESSOR to LESSEE, shall constitute a Breach.
17.3 Limited Late Charge Waiver. Notwithstanding the provisions of
--------------------------
Paragraph 13.4 of the Lease, LESSOR agrees to waive any late charges so long as
LESSEE is not late in payment of the Base Rent or additional rent on more than
one (1) occasion during any twelve (12) month period and LESSEE otherwise pays
the late rent within three (3) business days from LESSOR's delivery of written
notice of such nonpayment.
17.4 Limitation. Notwithstanding the provisions of Paragraph 13.2 of the
----------
Lease, LESSOR agrees to refrain from undertaking direct action so long as
LESSEE, within ten (10) days following receipt of LESSOR's notice, provides
satisfactory evidence that LESSEE has commenced the required performance and
that LESSEE's performance will be completed within the time period allowed for
LESSEE to cure a Default with respect to the item to be performed.
18. Additional Provision Regarding Condemnation. Notwithstanding any
-------------------------------------------
contrary provision in Paragraph 14 of the Lease, in addition to any other
compensation to which LESSEE may be entitled to pursuant to Paragraph 14 of the
Lease, if a taking occurs during the first five (5) years of the Original Term,
LESSEE shall be entitled to receive a portion of any condemnation proceeds
actually received by LESSOR attributable to the unamortized cost of the Tenant
Improvements, with such portion equaling a percentage determined by (a) dividing
the aggregate amount of the Tenant Improvement Costs paid by LESSEE, (b) by the
total Tenant Improvement Costs paid by both LESSOR and LESSEE.
19. Additional Provision Regarding LESSOR's Liability. Notwithstanding the
-------------------------------------------------
provisions of Paragraph 17 of the Lease, the provision providing for LESSOR, or
its successors, to be relieved from liability upon transfer or assignment of the
Lease shall only apply so long as such transferee or assignee expressly assumes
in writing the obligations of the LESSOR under this Lease arising from and after
the date of such assignment or transfer.
20. Additional Provision Regarding Interest. Notwithstanding the
---------------------------------------
provisions of Paragraph 19 of the Lease, to the extent that LESSOR becomes
entitled to collect more than one late charge for the same Default, LESSOR
agrees to waive interest charges to the extent that the amount actually
collected by LESSOR on account of any cumulative late charges (not including the
initial late charge attributable to the particular Default), if taken together
with the interest on the same sums, would exceed the amount of interest on the
undue amount provided in Paragraph 19 of the Lease.
21. Waiver. No waiver by LESSEE of any breach of any term, covenant or
------
condition hereof by LESSOR shall be deemed a waiver of any other term, covenant
or condition hereof, or of any subsequent breach by LESSOR of the same or of any
other term, covenant or condition hereof.
22. Additional Option Provisions. Notwithstanding the provisions of
----------------------------
Paragraph 39.2 of the Lease providing that the options are personal to LESSEE,
LESSEE shall have the right to assign the options as a part of the assignment of
the Lease in the following circumstances: (a) in an Affiliate Transaction; or
(b) in an assignment to which LESSOR is obligated to provide its consent in
accordance with Paragraph 12 of the Lease and section 16 of this Addendum;
provided, however, in the case of preceding clause (b), LESSOR shall have the
right to elect to terminate this Lease rather than permit the assignment of the
options, by giving LESSEE notice of such termination in LESSOR's Notice under
subsection 16.6, and such termination shall be effective upon the later to occur
of (i) the expiration of thirty (30) days following the delivery of such
LESSOR's Notice, or (ii) the date of the proposed assignment. In addition,
subject to Paragraph 39 of the Lease, LESSOR is granting to LESSEE two (2)
successive options to extend the Lease term for successive five (5) year
periods, with the first option period beginning upon the expiration of the
Original Term and the second option period beginning on the expiration of the
first option period. Each option shall be exercised only by written notice
delivered to LESSOR no earlier than 365 days and no later than 180 days before
the expiration of the Lease, or previous option period, whichever is applicable.
Regardless of cause, if LESSEE fails to timely give notice of the exercise of an
option, all option rights will automatically lapse and terminate and be of no
further force or effect without any requirement of notice or demand by LESSOR.
The Base Rent for each option period shall be adjusted in accordance with
subsection 22.1 of this Addendum at the beginning of each option period. The
other terms and conditions of the Lease shall remain in effect during each
option period, except: (a) except as provided in subsection 22.2 of this
Addendum, no tenant improvements or allowances shall be provided by LESSOR, and
LESSEE shall be deemed to have extended the term of the Lease and accepted the
Premises "AS IS" in their then existing condition and without representation or
warranty from LESSOR; (b) upon the exercise of the first option, LESSEE shall
have only one remaining option to extend the Lease for an additional five (5)
year period, and upon the exercise of the second option, LESSEE shall have no
further right to extend the term of the Lease; (c) the limitation on Operating
Expenses under section 2 of this Addendum shall not apply; and (d) as provided
in section 11 of this Addendum, LESSOR shall have no further responsibility for
the maintenance and repair of the non-structural roof membrane.
22.1 Adjustment to Base Rent. Except as otherwise provided in this
-----------------------
section, the Base Rent shall be adjusted at the beginning of each option period
to 95% of the "fair rental value" of the Premises as determined in the following
manner:
(a) Within thirty (30) days from LESSEE's notice, LESSOR and
LESSEE shall meet in an effort to negotiate, in good faith, the fair rental
value of the Premises as of the beginning of the applicable option period. If
LESSOR and LESSEE have not agreed upon the fair rental value of the Premises at
least ninety (90) days prior to the beginning of the applicable option period,
the fair rental value shall be determined by appraisal, by one or more
appraisers ("Appraiser(s)"). The Appraisers shall have at least five (5) years
experience in the appraisal of commercial/industrial real property in the area
in which the Premises is located and shall be members of professional
organizations such as M.A.I. or equivalent.
(b) If LESSOR and LESSEE are not able to agree upon the fair
rental value of the Premises within the prescribed time period, then LESSOR and
LESSEE shall attempt to agree in good faith upon a single Appraiser not later
than seventy-five (75) days prior to the beginning of the applicable option
period. If LESSOR and LESSEE are unable to agree upon a single Appraiser within
such time period, then LESSOR and LESSEE shall each appoint one Appraiser not
later than sixty-five (65) days prior to the beginning of the applicable option
period. Within ten (10) days thereafter, the two (2) appointed Appraisers shall
appoint a third Appraiser. If either LESSOR or LESSEE fails to appoint its
Appraiser within the prescribed time period, the single Appraiser appointed
shall determined the fair rental value of the 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 rental value of the
Premises. Each party
shall bear the cost of its own Appraiser and the parties shall share equally the
cost of the single or third Appraiser, if applicable.
(c) For the purposes of such appraisal, the term "fair rental
value" shall mean the price that a ready and willing tenant would pay, as of the
beginning of the applicable option period, as monthly rent to a ready and
willing landlord of property comparable to the Premises if such property were
exposed for lease on the open market for a reasonable period of time and taking
into account all of the purposes for which such property may be used. Fair
rental value shall take into consideration all monetary concessions being
granted in connection with such comparable property, including without
limitation, rent abatement concessions and tenant improvements or allowances
(after deduction for the refurbishment allowance afforded LESSEE under
subsection 22.2 of this Addendum) provided therefor. If a single Appraiser is
chosen, then such Appraiser shall determine the fair rental value of the
Premises. Otherwise, the fair rental value of the Premises shall be the
arithmetic average of the two (2) of the three (3) appraisals which are closest
in amount, and the third appraisal shall be disregarded. LESSOR and LESSEE shall
instruct the Appraiser(s) to complete the determination of the fair rental value
not later than thirty (30) days prior to the beginning of the applicable option
period. If the fair rental value is not determined prior to the beginning of the
applicable option period, then LESSEE shall continue to pay to LESSOR the Base
Rent applicable to the Premises immediately prior to such extension, until the
fair rental value is determined. When the fair rental value of the Premises is
determined, LESSOR shall deliver notice thereof to LESSEE, and if the fair
rental value is higher, LESSEE shall pay to LESSOR, within ten (10) days after
receipt of such notice, the difference between the Base Rent actually paid by
LESSEE to LESSOR and the new Base Rent determined hereunder.
(d) Notwithstanding any other provision of this Lease, in no
event shall the Base Rent in effect for the last year of the Original Term, or
the last year of the immediately preceding option period ("Prior Base Rent"), be
decreased on account of the operation of this section. If the fair rental value
of the Premises determined under this section is less than the Prior Base Rent,
then the Base Rent for the applicable option period shall equal the Prior Base
Rent.
(e) The provision providing for an adjustment to 95% of the fair
market rental shall not apply if LESSOR becomes obligated to pay any real estate
brokerage commission pursuant to any agreements or other acts or omissions of
LESSEE on account of LESSEE's extension of the term of the Lease. If any such
commissions are payable, the rent shall be 100% of the fair market rental,
subject to the provisions of preceding clause (d).
22.2 Refurbishment Allowance. In the case of each option period,
-----------------------
LESSOR shall reimburse LESSEE for certain "Refurbishment Expenses" (as defined
below) up to a maximum amount not to exceed the "Refurbishment Allowance" (as
defined below). The term "Refurbishment Expense(s)" means out-of-pocket expenses
paid by LESSEE, no earlier than 180 days prior to the beginning of each option
period, to replace carpet, repaint interior walls and replace damaged or soiled
ceiling tiles with comparable quality materials to the items being replaced or
refurbished. The term "Refurbishment Allowance" means an amount, calculated as
of the beginning of each option period, equal to the lesser of (i) $41,450.00
increased by increases in the "Index" (as defined below) from the Commencement
Date, or (ii) a maximum amount of $62,175.00.
22.3 "Index" Defined. The term "Index" means the Consumer Price Index
--------------
for Urban Wage Earners and Clerical Workers, in the Los Angeles-Anaheim-
Riverside metropolitan area, All Items (1982-84 equals 100), published by the
Bureau of Labor Statistics of the United States Department of Labor. If the
Bureau of Labor Statistics revises the Index, the parties agree that the Bureau
of Labor Statistics will be the sole judge of the comparability of successive
indexes, but if that agency fails to supply indexes that it deems comparable, or
if no succeeding index is published, then the parties shall negotiate in good
faith to reasonably determine an appropriate alternative published price index.
23. Arbitration Procedure. Whenever in this Lease another provision
---------------------
expressly provides for the resolution of a dispute through Arbitration, the
arbitration procedures provided
in this section shall apply ("Arbitration"). Any Arbitration permitted pursuant
to this section shall be commenced and conducted in accordance with the
California Code of Civil Procedure, Section 1281, et. seq., and the discovery
procedures permitted by Section 1283.05 of the Code shall apply. The Arbitration
award rendered shall be final and binding and judgment may be entered upon it in
accordance with applicable laws and any court having jurisdiction thereof.
Except on account of claims, disputes and other matters in question required to
be submitted to Arbitration in accordance with another section of this Lease,
all other claims, disputes and actions arising from or relating to this Lease
shall be commenced and maintained in the appropriate court having jurisdiction.
Notwithstanding any other provision, the jurisdiction of any arbitrators
appointed pursuant to this provision shall not extend to the award of any
exemplary or punitive damages, or other substantially equivalent damages.
24. Subordination/Non-Disturbance. LESSEE shall execute and deliver to
-----------------------------
LESSOR, in favor of LESSOR's lender, a Subordination, Estoppel, Nondisturbance
and Attornment Agreement in the form as shown in Exhibit "5" annexed to this
Lease upon request, and LESSOR shall cause LESSOR's lender to execute such
agreement in favor of LESSEE. If the Premises are presently encumbered by a
mortgage, deed of trust or similar security interest in favor of LESSOR's
lender, within thirty (30) days from LESSOR's execution of the Lease, LESSOR
shall cause such lender to enter into a nondisturbance acknowledging LESSEE's
right to continued occupancy under the Lease so long as LESSEE is not in Breach
of the Lease and notwithstanding LESSOR's default under the mortgage, deed of
trust or other security device. If such lender requests, such nondisturbance
agreement shall also include provisions regarding the subordination of the Lease
and certain estoppel certification and LESSEE agrees to execute a Subordination,
Estoppel, Nondisturbance and Attornment Agreement in the form as shown in
Exhibit "5" annexed to this Addendum.
25. Hazardous Materials Questionnaire. Without limiting LESSEE's
---------------------------------
obligations under Paragraph 6.2 of the Lease regarding compliance with
Applicable Laws concerning Hazardous Substances, LESSEE shall, within ten (10)
days from the execution, complete and deliver to LESSOR for its filing with
applicable government authorities a Hazardous Materials Questionnaire in the
form as set forth in Exhibit "6" annexed to this Addendum.
26. Additional Notice Provisions. LESSEE may, by giving written notice to
----------------------------
LESSOR, change the address for notices under Paragraph 23 of the Lease from the
address of the Premises to any other address designated by LESSEE. In addition,
LESSOR shall also give copies of any notice of Default or Breach as follows:
U.S. Industries, Inc., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇,
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties have executed this Addendum as of the date
set forth above.
"LESSOR"
TECHPLEX, L.P., a California limited partnership
By Its General Partner
HAMANN CONSOLIDATED, INC.,
a California corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇, Secretary
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ has Attorney In
Fact for ▇▇▇▇▇ ▇▇▇▇▇▇
"LESSEE"
PUTTER PROPERTIES, INC., a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Vice President
By:
-----------------------------------------
[Signature]
-----------------------------------------
Print Name and Title of Signatory