<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO _____________
COMMISSION FILE NUMBER: 1-14208
MOSSIMO, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 33-0684524
(State or other jurisdiction of (I.R.S. Employer ID No.)
incorporation or organization)
2450 WHITE ROAD 2ND FLOOR
IRVINE, CALIFORNIA 92614-6250
(Address of principal (Zip Code)
executive offices)
(949) 797-0200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for any shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Common Stock, par value 15,011,529
$.001 per share (Outstanding on November 9, 1998)
(Class)
Exhibit Index on Page 15
<PAGE>
MOSSIMO, INC.
INDEX TO FORM 10-Q
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ITEM 1 - Financial Statements: Page
----
<S> <C>
Condensed consolidated balance sheets as of September 30, 1998 (unaudited) and December 31, 1997 . . 2
Condensed consolidated statements of operations for the three months and
nine months ended September 30, 1998 and 1997 (unaudited) . . . . . . . . . . . . . . . . . . . . 3
Condensed consolidated statements of cash flows for the nine months
ended September 30, 1998 and 1997 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Notes to condensed consolidated financial statements . . . . . . . . . . . . . . . . . . . . . . . . 5
ITEM 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations . . . 8
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ITEM 6 - Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
<PAGE>
MOSSIMO, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPT 30, DECEMBER 31,
1998 1997
------------ ------------
ASSETS (UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . $ 97 $ 655
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . 1,401 2,473
Due from factor, net . . . . . . . . . . . . . . . . . . . . . . . . . 3,043 4,001
Refundable taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 346 5,505
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,832 14,437
Prepaid expenses and other current assets. . . . . . . . . . . . . . . 312 296
------------ ------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . 15,031 27,367
PROPERTY AND EQUIPMENT, net. . . . . . . . . . . . . . . . . . . . . . . 4,223 9,182
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222 275
------------ ------------
$ 19,476 $ 36,824
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,266 $ 6,962
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,863 4,126
Accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 2,354 2,389
Current portion of long-term debt. . . . . . . . . . . . . . . . . . . 27 41
S distribution note. . . . . . . . . . . . . . . . . . . . . . . . . . 307 362
------------ ------------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . 7,817 13,880
DEFERRED ROYALTY INCOME. . . . . . . . . . . . . . . . . . . . . . . . . 356 450
DEFERRED RENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 68
LONG-TERM DEBT, net of current portion . . . . . . . . . . . . . . . . . 15 31
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.001; authorized
shares 3,000,000, no shares issued or outstanding. . . . . . . . . . - -
Common stock, par value $.001; authorized shares
30,000,000, issued and outstanding
15,011,529 - 1998 and 15,000,000 - 1997. . . . . . . . . . . . . . . 15 15
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . 31,428 31,386
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . (20,188) (9,006)
------------ ------------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . 11,255 22,395
------------ ------------
$ 19,476 $ 36,824
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
MOSSIMO, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATE)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPT 30, ENDED SEPT 30,
------------------------ ------------------------
1998 1997 1998 1997
--------- --------- --------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,001 $ 16,450 $ 36,931 $ 58,077
Cost of sales. . . . . . . . . . . . . . . . . . . . . . . . 9,360 17,026 29,545 45,655
--------- --------- --------- ---------
Gross profit . . . . . . . . . . . . . . . . . . . . . . . 1,641 (576) 7,386 12,422
Royalty income, net. . . . . . . . . . . . . . . . . . . . . 627 625 2,458 3,233
--------- --------- --------- ---------
2,268 49 9,844 15,655
--------- --------- --------- ---------
OPERATING EXPENSES:
General and administrative . . . . . . . . . . . . . . . . 3,119 3,005 8,752 9,279
Selling. . . . . . . . . . . . . . . . . . . . . . . . . . 1,460 2,088 4,633 6,483
Marketing. . . . . . . . . . . . . . . . . . . . . . . . . 392 1,607 1,444 5,393
Design . . . . . . . . . . . . . . . . . . . . . . . . . . 523 1,087 1,805 3,003
Lease restructuring. . . . . . . . . . . . . . . . . . - - 3,798 -
--------- --------- --------- ---------
Total operating expenses . . . . . . . . . . . . . . . . 5,494 7,787 20,432 24,158
--------- --------- --------- ---------
Operating loss . . . . . . . . . . . . . . . . . . . . . (3,226) (7,738) (10,588) (8,503)
--------- --------- --------- ---------
OTHER EXPENSE:
Other, net . . . . . . . . . . . . . . . . . . . . . . . . (54) (185) (127) (199)
Interest, net. . . . . . . . . . . . . . . . . . . . . . . (157) (85) (467) (61)
--------- --------- --------- ---------
Net other expense . . . . . . . . . . . . . . . . . . . (211) (270) (594) (260)
--------- --------- --------- ---------
Loss before benefit for income taxes . . . . . . . . . . . . (3,437) (8,008) (11,182) (8,763)
Benefit for income taxes . . . . . . . . . . . . . . . . . . - (3,203) - (3,505)
--------- --------- --------- ---------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . $ (3,437) $ (4,805) $ (11,182) $ (5,258)
--------- --------- --------- ---------
--------- --------- --------- ---------
Net loss per common share -
Basic and diluted. . . . . . . . . . . . . . . . . . . . . $ (.23) $ (.32) $ (.75) $ (.35)
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average common shares outstanding -
Basic and diluted. . . . . . . . . . . . . . . . . . . . . 15,011 15,000 15,011 15,000
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
MOSSIMO, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPT 30,
-------------------------
1998 1997
---------- ----------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . $ (11,182) $ (5,258)
Adjustment to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . 1,398 1,211
Write-down of in-store fixtures. . . . . . . . . . . . . . 463 -
Loss on disposition of property and equipment. . . . . . . 2,917 87
Deferred rent. . . . . . . . . . . . . . . . . . . . . . . (35) (22)
Provision for doubtful receivables . . . . . . . . . . . . 278 130
Deferred income taxes. . . . . . . . . . . . . . . . . . . - 96
Changes in:
Accounts receivable. . . . . . . . . . . . . . . . . . . 794 (1,243)
Due from factor. . . . . . . . . . . . . . . . . . . . . 958 5,809
Inventories. . . . . . . . . . . . . . . . . . . . . . . 4,605 (2,679)
Refundable taxes . . . . . . . . . . . . . . . . . . . . 5,159 (2,393)
Prepaid expenses and other current assets. . . . . . . . (96) (376)
Other assets . . . . . . . . . . . . . . . . . . . . . . (16) (7)
Accounts payable . . . . . . . . . . . . . . . . . . . . (2,263) (2,051)
Accrued liabilities. . . . . . . . . . . . . . . . . . . (35) 626
---------- ----------
Net cash flow from operating activities. . . . . . . . . . 2,945 (6,070)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITITES:
Proceeds from sales of property and equipment. . . . . . . . 500 -
Payments for acquisition of property and equipment . . . . . (319) (6,031)
---------- ----------
Net cash flow from investing activities. . . . . . . . . 181 (6,031)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in line of credit . . . . . . . . . . . . . . . . (3,696) 5,580
Proceeds from issuance of common stock . . . . . . . . . . . 42 -
Repayment of long-term debt. . . . . . . . . . . . . . . . . (30) (89)
---------- ----------
Net cash flow from financing activities. . . . . . . . . (3,684) 5,491
---------- ----------
NET CHANGE IN CASH AND CASH EQUIVALENTS. . . . . . . . . . . (558) (6,610)
CASH AND CASH EQUIVALENTS, beginning of period . . . . . . . 655 7,007
---------- ----------
CASH AND CASH EQUIVALENTS, end of period . . . . . . . . . . $ 97 $ 397
---------- ----------
---------- ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . $ 374 $ 138
---------- ----------
---------- ----------
Income taxes . . . . . . . . . . . . . . . . . . . . . . $ - $ 142
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
MOSSIMO, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND ACCOUNTING POLICIES
ORGANIZATION
Mossimo, Inc. and subsidiary ("Mossimo" or the "Company") designs, sources
and markets a lifestyle collection of contemporary men's and women's denim based
sportswear with fashion elements, and men's activewear bearing
Mossimo-Registered Trademark- trademarks. The Company also designs, sources and
markets men's and women's eyewear, and licenses its trademarks for use in
collections of women's swimwear and bodywear, men's neckwear, men's tailored
clothing, men's hosiery and men's and women's accessories. The Company
distributes its products to a diversified account base, including department
stores, specialty retailers, and sports and activewear stores located throughout
the United States, as well as one signature retail store and one outlet store in
Southern California.
The accompanying unaudited interim consolidated financial statements of the
Company have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission ("SEC") for reporting on Form 10-Q.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles ("GAAP") for complete financial
statements. The accompanying unaudited interim condensed consolidated financial
statements should be read in conjunction with the Company's consolidated
financial statements for the year ended December 31, 1997 on Form 10-K.
In the opinion of management, the unaudited condensed consolidated financial
statements contain all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the consolidated balance sheets
as of September 30, 1998 and December 31, 1997, the consolidated statements of
operations for the three months and nine months ended September 30, 1998 and
1997, and the consolidated statements of cash flows for the nine months ended
September 30, 1998 and 1997. Operating results for the three and nine months
ended September 30, 1998 are not necessarily indicative of the results that may
be expected for the entire fiscal year ending December 31, 1998.
Certain reclassifications have been made in the audited consolidated 1997
financial statements to conform to the 1998 presentation.
LOSS PER SHARE
The company computes loss per share pursuant to Statement of Financial
Accounting Standards ("SFAS") No. 128, EARNINGS PER SHARE, which requires the
dual presentation of Basic and Diluted earnings per share. The Company adopted
this pronouncement in fiscal 1997 and has restated prior periods to reflect the
adoption of SFAS No. 128. Common stock equivalents consisted of outstanding
stock options totaling 512,700 and 505,600 as of September 30, 1998 and 1997,
respectively. Common stock equivalents have not been included in the
calculation of diluted loss per share as their effect would have been
anti-dilutive for all periods presented.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30,
-------------------
1998 1997
------ ------
<S> <C> <C>
Basic weighted average shares outstanding during the period. . . . . . 15,011 15,000
Dilutive effect of stock options . . . . . . . . . . . . . . . . . . . - -
------ ------
Weighted average common shares outstanding
Basic and diluted . . . . . . . . . . . . . . . . . . . . . . . . . 15,011 15,000
------ ------
------ ------
</TABLE>
5
<PAGE>
2. CREDIT FACILITY
In April 1998, the Company's credit facility was amended to provide for a
$15.0 million revolving credit line, which is collateralized by inventory,
receivables, machinery and equipment and tradenames. The Company's borrowings
under the amended agreement are limited to eligible inventory and receivables.
Advances under the amended agreement bear interest at the prime rate plus 0.5%.
The Company's revolving line is committed through January 1, 1999 with an
extension through March 31, 1999, subject to certain conditions.
Historically, the Company has sold a substantial portion of its trade
accounts receivable to a factor, which assumes the credit risk with respect to
the collection of nonrecourse accounts receivable in exchange for a fee. The
factor approves the credit of the Company's customers prior to the sale. If the
factor disapproves of a sale to a customer and the Company decides to proceed
with the sale, the Company bears the credit risk. The factoring agreement is in
force until June 1, 2000.
3. LEASE RESTRUCTURING
During the quarter ended June 30, 1998, the Company completed a lease
restructure resulting in a charge of $3.8 million. The lease restructure charge
includes (i) $2.7 million in corporate lease restructuring expenses and costs,
including the write-down of certain fixed assets; (ii) $900,000 for the
discontinuation of the Company's screen printing business; and (iii) $200,000
for closing the Company's Pasadena retail store. As of September 30, 1998 the
remaining reserve is $430,000.
4. COMMITMENTS AND CONTINGENCIES
LITIGATION - On January 23, 1997, plaintiff Chaile Steinberg filed a
purported class action suit against the Company and certain other defendants on
behalf of individuals who purchased the Company's common stock in the initial
public offering pursuant to the Registration Statement and Prospectus
("Prospectus"), dated February 22, 1996, and on the open market from February
22, 1996 through January 14, 1997 (the "Class Period"). In addition to naming
the Company, the plaintiffs Igor Glaudnikov, Cara Debra Marks and Lois Burke
filed a second related action against the same defendants. The two cases were
subsequently consolidated by court order, dated May 19, 1997. Both Steinberg
and Glaudnikov (collectively, the "State Actions") contain identical factual
allegations, and only differ in the number of shares purchased by plaintiffs and
the California residence of two of the plaintiffs in the Glaudnikov action.
The State Actions allege that defendants made false and misleading statements
and intentionally concealed material negative information in the Prospectus and
afterward during the Class Period, which artificially inflated prices for the
Company's common stock. Plaintiffs contend that the class was damaged in an
unspecified amount as a result of this artificial inflation of the Company's
stock price.
On September 23, 1997, a federal class action complaint was filed on behalf
of plaintiff James Frenkil by the same law firm that represents the plaintiffs
in the State Actions. One of the named plaintiffs in the federal action is a
plaintiff in the State Actions. The class period and precipitating events are
the same as in the State Actions, but the federal complaint purports to allege
violations of certain federal securities laws. On October 17, 1997, the judge
stayed the federal action pending further development in the State Actions.
Defendants filed demurrers in the State Actions, challenging the legal
sufficiency of the complaints. On June 26, 1997, the judge sustained the
defendant's general demurrer to the complaints in the State Actions, finding
that neither complaint pleaded facts sufficient to constitute causes of action
against the defendants. The judge sustained the demurrer as to four of the
causes of action with leave to amend, and as to the fifth cause of action for
unlawful, unfair or fraudulent business practices and false or misleading
advertising without leave to amend. On July 9, 1998, plaintiffs filed their
first amended consolidated complaint. Defendants have demurred to the first
amended consolidated complaint, which is set for hearing on March 9, 1999.
Although the outcome of the litigation cannot be predicted, management
believes that the Company has meritorious defenses and intends to defend this
action with vigor.
6
<PAGE>
The Company is involved in certain other legal and administrative proceedings
and threatened legal and administrative proceedings arising in the normal course
of its business. While the outcome of such proceedings and threatened
proceedings cannot be predicted with certainty, in the opinion of management,
the ultimate resolution of these matters individually or in the aggregate will
not have a material adverse effect on the Company.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion includes the operations of Mossimo, Inc. and
subsidiary for each of the periods discussed. This discussion and analysis
should be read in conjunction with the Company's Consolidated Financial
Statements for the year ended December 31, 1997 on Form 10-K.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
Net sales decreased to $11.0 million during the third quarter of 1998 from
$16.5 million in the corresponding quarter in 1997. The decrease in net
sales was primarily due to a 40% decline in sales for the men's line and a
22% decline in sales for the women's line. Net sales of the men's line,
which represented 54% of the Company's net sales for the three months ended
September 30, 1998, decreased to $5.9 million in the third quarter of 1998
from $9.8 million in the third quarter of 1997. The reduction was primarily
in sales of activewear such as tees and tanks, knitwear, wovens and fleece.
However, denim sales were relatively stable. Net sales of the women's line,
which represented 35% of the Company's net sales for the three months ended
September 30, 1998, decreased to $3.8 million in the third quarter of 1998
from $4.9 million in the third quarter of 1997. This decline was primarily
due to lower sales of quick response denim during the back to school season.
Net sales of the Company's eyewear decreased approximately 71% during the
third quarter of 1998 to $279,000 from $974,000 during the same period in
1997. The decline in the eyewear line was primarily due to reduced product
releases, particularly in the Moss line, resulting from excess inventories
with core customers.
Gross profit increased to $1.6 million during the third quarter of 1998 from
a loss of $576,000 in the corresponding quarter in 1997. Gross profit as a
percentage of net sales increased to 15% compared to a loss of 3.5% in the third
quarter of 1997. The loss in the third quarter of 1997 was primarily due to a
$5.1 million write down of inventory, physical inventory shortages and
settlements with certain vendors. Excluding off price sales and the $5.1
million write down, the gross profit in 1997 was 31%. As optic's sales are
significantly below plan, an evaluation of the excess inventory was performed
which resulted in an additional $1.0 million write down. Excluding off price
sales and the $1.0 million optic's inventory write down, the gross profit
percentage for the third quarter of 1998 was 38% versus 31% for the prior year's
quarter.
Net royalty income during the third quarter of 1998 was $627,000 compared to
$625,000 in the third quarter of 1997. Net royalty income was negatively
impacted by reduced royalty income from its accessory licensee. Sales of the
Company's accessory licensee declined due to a reduction in product categories
offered during the third quarter of 1998 compared to the corresponding quarter
in 1997. The negative impact was offset by increased net royalty income from
other licensees, such as the Company's swimwear licensee.
Operating expenses decreased to $5.5 million during the third quarter of 1998
from $7.8 million in the corresponding quarter in 1997. General and
administrative expense increased to $3.1 million during the third quarter of
1998 from $3.0 million in the same period in 1997. This increase was primarily
related to a $463,000 write down of certain in-store fixtures offset by reduced
staffing and cost cutting measures. Selling expenses decreased to $1.5 million
during the third quarter in 1998 from $2.1 million during the same period in
1997 due to reduced sales commissions offset by an increased salary expense for
in house sales representatives. Marketing expense decreased to $0.4 million
during the third quarter of 1998 from $1.6 million during the same period in
1997. This decline is related to a reduction in print advertising and a delay
of the Company's photo shoot. The Company is currently working on a new
advertising campaign which it expects to present in the first half of 1999.
Design expense decreased to $0.5 million in the third quarter of 1998 compared
to $1.1 million in the same period 1997, primarily due to reduced staffing and
overall cost cutting measures in the design department.
8
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
Net sales decreased to $36.9 million during the nine months ended September
30, 1998 from $58.1 million during the nine months ended September 30, 1997.
The decrease in net sales was primarily due to a 56% decline in sales for the
men's line and a 19% decline in the women's line. Net sales of the men's
line, which represented 45% of the Company's net sales for the nine months
ended September 30, 1998, decreased to $16.7 million in the first nine months
of 1998 from $37.9 million in the first nine months of 1997. The decrease
was primarily due to reduced activewear sales to specialty stores and chains
and reduced sales to unprofitable accounts, partially offset by sales of the
Moss line totaling $2.3 million. Net sales of the women's line, which
represented approximately 34% of the Company's net sales for the nine months
ended September 30, 1998, decreased to $12.6 million for the first nine
months of 1998 from $15.5 million for the first nine months of 1997. This
decline was primarily related to reduced denim sales in the third quarter of
1998 and a reduction of sales to unprofitable accounts. Net sales of the
Company's eyewear decreased approximately 48% to $1.4 million during the
first nine months of 1998 from $2.7 million in the same period last year.
The decline in the eyewear line was primarily due to reduced product
releases, particularly in the Moss line, resulting from excess inventories
with core customers.
Gross profit decreased to $7.4 million during the first nine months of 1998
from $12.4 million in the corresponding period in 1997. Gross profit as a
percentage of net sales decreased to 20% during this period from 21% during the
same period in 1997. The decrease was primarily a result of a decrease in net
sales as discussed above. Gross profit as a percentage of net sales, excluding
excessive inventory sales, additional reserves and inventory shortages, remained
stable at 34% for the first nine months of 1998 as compared to the same period
in 1997.
Net royalty income decreased to $2.5 million during the first nine months
of 1998 from $3.2 million during the same period in 1997. The decrease was
primarily attributed to reduced sales by the Company's licensees that carry
swimwear, bodywear and accessory product categories. In addition,
unfavorable foreign exchange rate variances from the Company's Australian
licensee further impacted results. Management believes that sales of the
Company's swimwear licensee were negatively impacted, in part, by poor
weather conditions on the West Coast. Sales of the Company's accessory
licensee declined due to a reduction in product categories offered during
this period in 1998 compared to the corresponding period in 1997.
Operating expenses decreased to $20.4 million during the first nine months of
1998 from $24.2 million during the first nine months of 1997. Included in the
1998 operating expenses is a lease restructuring charge of $3.8 million, which
was finalized in the second quarter of 1998 and a $463,000 in-store fixture
reserve recorded in the third quarter of 1998. The lease restructure charge
includes (i) $2.7 million in corporate lease restructuring expenses and costs,
including the write-down of certain fixed assets; (ii) $900,000 for the
discontinuation of the Company's screen printing business; and (iii) $200,000
for closing the Company's Pasadena retail store.
During 1998, the Company reevaluated its office and facilities requirements
and agreed to relinquish its existing space for its corporate headquarters and
approximately half of the space for its warehouse/distribution. This lease
restructuring relieved the Company of annual rental obligations of approximately
$1.0 million. The Company has moved into its new corporate headquarters located
in Irvine, California and will be opening a new design studio in Santa Monica,
California. The Company's annual rent obligation for both locations is
approximately $260,000. The Company, accordingly, will realize a reduction in
annual rental obligations of approximately $740,000.
Operating expenses, excluding the lease restructuring charge, decreased to
$16.6 million during the first nine months of 1998 from $24.2 million during the
first nine months of 1997. This decrease was primarily due to reduced sales
commissions, reduced staffing, a reduction in print advertising, a delay in the
Company's photo shoot, the elimination of certain fashion shows and overall cost
cutting measures; offset by increased salary expense for in house sales
representatives and a write down of certain in-store fixtures.
The Company had net interest expense of $467,000 during the first nine months
of 1998 compared to net interest expense of $61,000 during the first nine months
of 1997. In 1998, the Company increased borrowings on
9
<PAGE>
the Company's credit facility primarily due to the loss sustained by the Company
in fiscal 1997.
The Company recorded no tax benefit in 1998 as a result of its pretax loss
compared with a tax benefit of $3.5 million in 1997. A tax benefit will be
recorded only to the extent the Company can apply for carryback claims in its
income tax returns.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash requirements are to fund the Company's working
capital needs related to inventories, accounts receivable, and property and
equipment acquisitions. Net cash provided by operating activities totaled $2.9
million for the nine months ended September 30, 1998. Cash utilized in
operating activities was comprised of the Company's net loss of $11.2 million
for the nine months ending September 30, 1998 and cash used to pay down accrued
liabilities of $2.3 million, offset by a Federal tax refund of $5.2 million, a
$4.6 million reduction in inventory and the non-cash charge of $2.9 million
associated with the write-down of assets related to the lease restructuring. As
of September 30, 1998, working capital was approximately $7.2 million compared
to $13.5 million as of December 31, 1997. The decline in working capital is
due to a $4.6 million reduction in inventory, the collection of the refundable
taxes and funding of the loss sustained by the Company during the first three
quarters of 1998, partially offset by reductions in current liabilities.
The Company maintains a $15.0 million revolving credit line, which is
collateralized by inventory, receivables, machinery and equipment and
intangibles. The Company's borrowings under the agreement, which was amended
in April 1998, are limited to eligible inventory and receivables. Advances
under the amended agreement bear interest at the prime rate plus 0.5%. The
revolving line is committed through January 1, 1999 with an extension through
March 31, 1999, subject to certain conditions. As of September 30, 1998 the
Company had $4.9 million available on the revolving line of credit. The
Company was also in compliance with all debt covenants. The Company is
currently working with its lenders to extend its credit line beyond 1999. If
the Company is unable to extend the credit line or secure other capital, it
may have an adverse affect on the Company.
Historically, the Company has sold a substantial portion of its trade
accounts receivable to a factor, which assumes the credit risk with respect to
the collection of nonrecourse accounts receivable in exchange for a fee. The
factor approves the credit of the Company's customers prior to the sale. If the
factor disapproves of a sale to a customer and the Company decides to proceed
with the sale, the Company bears the credit risk. The factoring agreement is in
force through June 1, 2000.
In 1997, the Company began cost cutting measures to more align its expense
level with its declining sales. Accordingly, the Company has reduced staffing
levels, reduced compensation to existing staff and is reviewing other cost
cutting measures which are designed to reduce operating expenses in fiscal 1998.
SEASONALITY
The Company's business is impacted by general seasonal trends that are
characteristic of the many companies in the apparel industry. However, due
primarily to the declining sales experienced in 1997 and 1998, operating trends
have not reflected the normal apparel industry seasonality. In future years, the
Company expects that its sales may reflect greater seasonal trends.
FORWARD LOOKING INFORMATION
This report on Form 10-Q contains certain forward-looking statements within
the meaning of the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements are based on the beliefs of
the Company's management as well as assumptions made by and information
currently available to the Company's management. The words "anticipate",
"believe", "may", "estimate" and similar expressions, variations of such terms
or the negative of such terms as they relate to the Company or its management
when used in this document are intended to identify such forward-looking
statements. Such statements are based on management's current expectations and
are subject to certain risks, uncertainties and assumptions. Should one or more
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, the Company's actual results, performance or achievements could
differ materially from those
10
<PAGE>
expressed in, or implied by such forward-looking statements.
NEW ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1998 the Company adopted the Financial Accounting
Standards Board's ("FASB") SFAS No. 130, REPORTING COMPREHENSIVE INCOME. The
Company does not have any material amounts of comprehensive income to report.
In June 1997, the FASB issued SFAS No. 131, DISCLOSURE ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION. SFAS No. 131 establishes standards for the
way public companies report financial information about operating segments. The
Company will adopt SFAS No. 131 in fiscal 1998, as required. This statement may
affect disclosure and presentation in the financial statements but will not have
any impact on the Company's consolidated financial position, liquidity, cash
flows or results of operations.
YEAR 2000
General
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. The Company's
computer equipment and software and devices with embedded technology that are
date-sensitive may recognize a date using "00" as the year 1900 rather than the
year 2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, and engage in similar normal business
activities.
The Company has assessed how it may be impacted by the Year 2000 issue and
has formulated and commenced implementation of a plan to address the known
aspects of the issue.
The Plan
The Company's plan encompasses its information systems, production and
facilities equipment that utilize date/time oriented software of computer chips,
products, vendors and customers and will be carried out in four phases: 1)
assessment and development of a plan; 2) remediation; 3) testing; and 4)
implementation.
With regard to information systems, production and facilities equipment and
products, the Company is substantially complete with the assessment and plan
development phase and is approximately 80% complete with its total planned
efforts including remediation, testing and implementation. The Company expects
that its remediation efforts in these areas will be substantially completed by
early 1999.
The Company is also reviewing the efforts of its vendors and customers to
become Year 2000 compliant. Letters and questionnaires have been or are in the
process of being sent to all critical entities with which the Company does
business to assess their Year 2000 readiness. To date, the Company has received
responses from approximately 95 percent of such third parties, and 100 percent
of the companies that have responded have provided written assurances that they
expect to address all of their known significant Year 2000 issues on a timely
basis. The Company anticipates that these activities will be on-going for the
remainder of 1998 and all of 1999 and will include follow-up telephone
interviews and on-site meetings as considered necessary in the circumstances.
Although this review is continuing, the Company is not currently aware of any
vendor or customer circumstances that may have a material adverse impact on the
Company. The Company will be looking for alternative suppliers where
circumstances warrant. The Company can provide no assurance that Year 2000
compliance plans will be successfully completed by suppliers and customers in a
timely manner.
Cost
The cost related to Year 2000 compliance is not expected to be significant
because the Company has been informed by the vendor of its internal accounting
software that upgrades that will bring such software into Year 2000 compliance
are currently available and will be provided to the Company under its existing
software
11
<PAGE>
maintenance agreement. The Company expects to effect the conversion of its
internal accounting system to such upgraded software by the end of 1998. The
Company believes that necessary conversions of other operational systems can
also be accomplished through vendor upgrades and enhancements as provided under
its system maintenance agreements currently in effect.
Risk
The Company believes that the Year 2000 issue will not pose significant
operational problems for the Company. However, if all Year 2000 issues are not
properly identified, or assessment, remediation and testing are not affected in
a timely manner with respect to problems that are identified, there can be no
assurance that the Year 2000 issue will not have a material adverse impact on
the Company's results of operations or adversely affect the Company's
relationships with customers, vendors, or others. Additionally, there can be no
assurance that the Year 2000 issues of other entities will not have a material
adverse impact on the Company's systems or results of operations.
Contingency Plan
The Company has not yet begun a comprehensive analysis of the operational
problems and costs (including loss of revenue) that would be reasonable likely
to result from the failure by the Company and certain third parties to complete
efforts necessary to achieve Year 2000 compliance on a timely basis. A
contingency plan has not been developed for dealing with the most reasonably
likely worst case scenario as such scenario has not yet been clearly identified.
The Company currently plans to begin such analysis and contingency planning by
March 1, 1999.
(The foregoing analysis contains forward-looking information. See cautionary
statement at the end of the Management's Discussion and Analysis section.)
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS (See Note 4 to Financial Statements)
ITEM 5 - OTHER
John Brincko's contract as president and chief executive officer will
expire on December 31, 1998 and will not be extended for the six month option
period. The Company is currently considering alternatives with regards to a
new chief executive officer.
Effective November 9, 1998, Francesca Luzuriaga resigned from her position
as a director of the Company. Concurrently with Francesca Luzuriaga's
resignation, the Board of Directors appointed Mr. John Stafford as a member of
the Compensation Committee and Mr. Robert Martini as a member of the Audit
Committee.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are included herein:
3.1 Certificate of Incorporation of the Company*
3.2 Bylaws of the Company*
10.10 Lease, dated August 19, 1998, between the Registrant and the
Cornucopia, Inc.
10.11 Lease, dated July 20, 1998, between the Registrant and 3002
Pennsylvania Avenue, LLC.
27 Financial Data Schedule
(b) Reports on Form 8-K
The Registrant did not file any reports on Form 8-K during the three
months ended September 30, 1998.
* (Incorporated by reference from the Company's Registration Statement
on Form S-1, File Number 33-80597)
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Mossimo, Inc.
November 16, 1998 /s/ John Brincko
-------------------------
John Brincko
Chief Executive Officer and President
(Principal Executive Officer)
November 16, 1998 /s/ Thora Thoroddsen
-------------------------
Thora Thoroddsen
Secretary, Treasurer and Controller
(Principal Accounting Officer)
14
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
- --------------------------------------------------------------------------------
3.1 Certificate of Incorporation of the Company*
3.2 Bylaws of the Company*
10.10 Lease, dated August 19, 1998, between the Registrant and the
Cornucopia, Inc.
10.11 Lease, dated July 20, 1998, between the Registrant and 3002
Pennsylvania Avenue, LLC.
27 Financial Data Schedule
* (Incorporated by reference from the Company's Registration
Statement on Form S-1, File Number 33-80597)
15
<PAGE>
STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE - GROSS
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
[LOGO]
1. BASIC PROVISIONS ("BASIC PROVISIONS").
1.1 PARTIES: This Lease ("LEASE"), dated for reference purposes only,
August 19, 1998, is made by and between Cornucopia, Inc.("LESSOR") and
Mossimo, Inc.("LESSEE"), (collectively the "PARTIES," or individually a
"PARTY").
1.2(a) PREMISES: That certain portion of the Building, including all
improvements therein or to be provided by Lessor under the terms of this
Lease, commonly known by the street address of 2450 White, located in the
City of Irvine, County of Orange, State of California, with zip code 92614, as
outlined on Exhibit A attached hereto ("PREMISES"). The "BUILDING" is that
certain building containing the Premises and generally described as (describe
briefly the nature of the Building):
An approximate 16,082 SF second floor office portion, part of a larger
building.
In addition to Lessee's rights to use and occupy the Premises as hereinafter
specified, Lessee shall have non-exclusive rights to the Common Areas (as
defined in Paragraph 2.7 below) as hereinafter specified, but shall not have any
rights to the roof, exterior walls or utility raceways of the Building or to any
other buildings in the Industrial Center. The Premises, the Building, the Common
Areas, the land upon which they are located, along with all other buildings and
improvements thereon, are herein collectively referred to as the "INDUSTRIAL
CENTER." (Also see Paragraph 2.)
1.2(b) PARKING: 53 unreserved vehicle parking spaces ("UNRESERVED PARKING
SPACES");, and 7 reserved vehicle parking spaces ("RESERVED PARKING SPACES").
(Also see Paragraph 2.6.)
1.3 TERM: 2 years and 0 months ("ORIGINAL TERM") commencing October 1,
1998 ("COMMENCEMENT DATE") and ending Sept. 30, 2000 ("EXPIRATION DATE").
(Also see Paragraph 3.)
1.4 EARLY POSSESSION: September 15, 1998 ("EARLY POSSESSION DATE").
(Also see Paragraphs 3.2 and 3.3.)
1.5 BASE RENT: $13,669.70 per month ("BASE RENT"), payable on the
First (1st) day of each month commencing November 1, 1998 (Also see Paragraph
4.)
/X/ If this box is checked, this Lease provides for the Base Rent to be
adjusted per Addendum Par 49, attached hereto.
1.6(a) BASE RENT PAID UPON EXECUTION: $13,669.70 as Base Rent for the
period October, 1998.
1.6(b) LESSEE'S SHARE OF COMMON AREA OPERATING EXPENSES: fifteen and
21/100 percent (15.21%) ("LESSEE'S SHARE") as determined by /X/ prorata
square footage of the Premises as compared to the total square footage of
the Building or / / other criteria as described in Addendum.
1.7 SECURITY DEPOSIT: $15,921.18 ("SECURITY DEPOSIT"). (Also see
Paragraph 5.)
1.8 PERMITTED USE: General office and light manufacturing for apparel
and other related uses. ("PERMITTED USE") (Also see Paragraph 6.)
1.9 INSURING PARTY. Lessor is the "INSURING PARTY." (Also see
Paragraph 8.)
1.10(a) REAL ESTATE BROKERS. The following real estate broker(s)
(collectively, the "BROKERS") and brokerage relationships exist in this
transaction and are consented to by the Parties (check applicable boxes):
/X/ Voit Commercial Brokerage represents Lessor exclusively ("LESSOR'S
BROKER");
/X/ CB/Richard Ellis represents Lessee exclusively ("LESSEE'S BROKER"); or
/ / _______________ represents both Lessor and Lessee ("DUAL AGENCY"). (Also
see Paragraph 15.)
1.10(b) PAYMENT TO BROKERS. Upon the 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 Broker(s) (or in the event
there is no separate written agreement between Lessor and said Broker(s), the
sum of $as per separate) agreement for brokerage services rendered by said
Broker(s) in connection with this transaction.
1.11 GUARANTOR. The obligations of the Lessee under this Lease are to
be guaranteed by None ("GUARANTOR"). (Also see Paragraph 37.)
1.12 ADDENDA AND EXHIBITS. Attached hereto is an Addendum or Addenda
consisting of Paragraphs 49 through 54, and Exhibits A through _, all of which
constitute a part of this Lease.
2. PREMISES, PARKING AND COMMON AREAS.
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 and/or Common Area Operating
Expenses, is an approximation which Lessor and Lessee agree is reasonable and
the rental and Lessee's Share (as defined in Paragraph 1.6(b)) 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 Commencement Date and warrants to Lessee that the
existing plumbing, electrical systems, fire sprinkler system, lighting, air
conditioning and heating systems and loading doors, if any, in the Premises,
other than those constructed by Lessee, shall be in good operating condition
on the Commencement Date. If a non-compliance with said warranty exists as of
the Commencement 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 within thirty (30) days after the
Commencement Date, 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 that any improvements (other than those constructed by Lessee or at
Lessee's direction) on or in the Premises which have been constructed or
installed by Lessor or with Lessor's consent or at Lessor's direction shall
comply with all applicable covenants or restrictions of record and applicable
building codes, regulations and ordinances in effect on the Commencement
Date. Lessor further warrants to Lessee that Lessor has no knowledge of any
claim having been made by any governmental agency that a violation or
violations of applicable building codes, regulations, or ordinances exist
with regard to the Premises as of the Commencement Date. Said warranties
shall not apply to any Alterations or Utility Installations (defined in
Paragraph 7.3(a)) made or to be made by Lessee. If the Premises do not comply
with said warranties, Lessor shall, except as otherwise provided in this
Lease, promptly after receipt of written notice from Lessee given within six
(6) months following the Commencement Date and setting forth with specificity
the nature and extent of such non-compliance, take such action, at Lessor's
expense, as may be reasonable or appropriate to rectify the noncompliance.
Initials: TT
----------
AM
----------
MULTI-TENANT GROSS
- -C-1993 - AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION REVISED FORM MTG-1-6/93F
PAGE 1 OF 13
<PAGE>
Lessor makes no warranty that the Permitted Use in Paragraph 1.8 is permitted
for the Premises under Applicable Laws (as defined in Paragraph 2.4).
2.4 ACCEPTANCE OF PREMISES. Lessee hereby acknowledges: (a) that it
has been advised by the Broker(s) to satisfy itself with respect to the
condition of the Premises (including, but not limited to, the electrical and
fire sprinkler systems, security, environmental aspects, seismic and
earthquake requirements, and compliance with the Americans with Disabilities
Act and applicable zoning, municipal, county, state and federal laws,
ordinances and regulations and any covenants or restrictions of record
(collectively, "APPLICABLE LAWS") and the present and future suitability of
the Premises for Lessee's intended use; (b) that Lessee has made such
investigations as it deems necessary with reference to such matters, is
satisfied with reference thereto, and assumes all responsibility therefore as
the same relate to Lessee's occupancy of the Premises and/or the terms of this
Lease; and (c) that neither Lessor, nor any of Lessor's agents, has made any
oral or written representations or warranties with respect to said matters
other than as set forth in this Lease.
2.5 LESSEE AS PRIOR OWNER/OCCUPANT. The warranties made by Lessor in this
Paragraph 2 shall be of no force or effect if immediately prior to the date
set forth in paragraph 1.1 Lessee was the owner or occupant of the Premises.
In such event, Lessee shall, at Lessee's sole cost and expense, correct any
non-compliant of the Premises with said warranties.
2.6 VEHICLE PARKING. Lessee shall be entitled to use the number of
Unreserved Parking Spaces and Reserved Parking Spaces specified in Paragraph
1.2(b) on those portions of the Common Areas designated from time to time by
Lessor for parking. Lessee shall not use more parking spaces than said
number. Said parking spaces shall be used for parking by vehicles no larger
than full-size passenger automobiles or pick-up trucks, herein called
"PERMITTED SIZE VEHICLES." Vehicles other than Permitted Size Vehicles shall
be parked and loaded or unloaded as directed by Lessor in the Rules and
Regulations (as defined in Paragraph 40) issued by Lessor. (Also see
Paragraph 2.9.)
(a) Lessee shall not permit or allow any vehicles that belong to
or are controlled by Lessee or Lessee's employees, suppliers, shippers,
customers, contractors or invitees to be loaded, unloaded, or parked in areas
other than those designated by Lessor for such activities.
(b) If Lessee permits or allows any of the prohibited activities
described in this Paragraph 2.6, then Lessor shall have the right, without
notice, in addition to such other rights and remedies that it may have, to
remove or tow away the vehicle involved and charge the cost to Lessee, which
cost shall be immediately payable upon demand by Lessor.
(c) Lessor shall at the Commencement Date of this Lease, provide
the parking facilities required by Applicable Law.
2.7 COMMON AREAS - DEFINITION. The term "COMMON AREAS" is defined as
all areas and facilities outside the Premises and within the exterior boundary
line of the Industrial Center and interior utility raceways within the
Premises that are provided and designated by the Lessor from time to time for
the general non-exclusive use of Lessor, Lessee and other lessees of the
Industrial Center and their respective employees, suppliers, shippers,
customers, contractors and invites, including parking areas, loading and
unloading areas, trash areas, roadways, sidewalks, walkways, parkways,
driveways and landscaped areas.
2.8 COMMON AREAS - LESSEE'S RIGHTS. Lessor hereby grants to Lessee,
for the benefit of Lessee and its employees, suppliers, shippers, contractors,
customers and invitees, during the term of this Lease, the non-exclusive right
to use, in common with others entitled to such use, the Common Areas as they
exist from time to time, subject to any rights, powers, and privileges
reserved by Lessor under the terms hereof or under the terms of any rules and
regulations or restrictions governing the use of the Industrial Center. Under
no circumstances shall the right herein granted to use the Common Areas be
deemed to include the right to store any property, temporarily or permanently,
in the Common Areas. Any such storage shall be permitted only by the prior
written consent of Lessor or Lessor's designated agent, which consent may be
revoked at any time. In the event that any unauthorized storage shall occur
then Lesser shall have the right, without notice, in addition to such other
rights and remedies that it may have, to remove the property and charge the
cost to Lessee, which cost shall be immediately payable upon demand by Lessor.
2.9 COMMON AREAS - RULES AND REGULATIONS. Lessor or such other
person(s) as Lessor may appoint shall have the exclusive control and
management of the Common Areas and shall have the right, from time to time, to
establish, modify, amend and enforce reasonable Rules and Regulations with
respect thereto in accordance with Paragraph 40. Lessee agrees to abide by and
conform to all such Rules and Regulations, and to cause its employees,
suppliers, shippers, customers, contractors and invitees to so abide and
conform. Lessor shall not be responsible to Lessee for the non-compliance with
said rules and regulations by other lessees of the Industrial Center.
2.10 COMMON AREAS - CHANGES. Lessor shall have the right, in Lessor's
sole discretion, from time to time: so long as Lessee's rights here under are
not impaired thereby:
(a) To make reasonable changes to the Common Areas, including,
without limitation, changes in the location, size, shape end number of
driveways, entrances, parking spaces, parking areas, loading and unloading
areas, ingress, egress, direction of traffic, landscaped areas, walkways and
utility raceways;
(b) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available;
(c) To designate other land outside the boundaries of the
Industrial Center to be a part of the Common Areas;
(d) To add additional buildings and improvements to the Common
Areas;
(e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Industrial Center, or any portion
thereof; and
(f) To do and perform such other acts and make such other changes
in, to or with respect to the Common Areas and Industrial Center as Lessor
may, in the exercise of sound business judgment, deem to be appropriate.
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. If an Early Possession Date is specified in
Paragraph 1.4 and if Lessee totally or partially occupies the Premises after
the Early Possession Date but prior to the Commencement Date, the obligation
to pay Base Rent shall be abated for the period of such early occupancy. All
other terms of this Lease, however, (including, but not limited to, carry the
insurance required by Paragraph 8) shall be in effect during such period. Any
such early possession shall not affect nor advance the Expiration Date of the
Original Term.
3.3 DELAY IN POSSESSION. If for any reason Lessor cannot deliver
possession of the Premises to Lessee by the Early Possession Date, if one is
specified in Paragraph 1.4, or if no Early Possession Date is specified, by
the Commencement Date, Lessor shall not be subject to any liability therefor,
nor shall such failure affect the validity of this Lease, or the obligations
of Lessee hereunder, or extend the term hereof, but in such case, Lessee shall
not, except as otherwise provided herein, be obligated to pay rent or perform
any other obligation of Lessee under the terms of this Lease until Lessor
delivers possession of the Premises to Lessee. If possession of the Premises
is not delivered to Lessee within thirty (30)days after the Commencement Date,
Lessee may, at its option, by notice in writing to Lessor within ten (10) days
after the end of said thirty (30)day period, cancel this Lease, in which event
the Parties shall be discharged from all obligations hereunder; provided
further, however, that if such written notice of Lessee is not received by
Lessor within said ten (10) day period, Lessee's right to cancel this Lease
hereunder shall terminate and be of no further force or effect. Except as may
be otherwise provided, and regardless of when the Original Term actually
commences, if possession is not tendered to Lessee when required by this Lease
and Lessee does not terminate this Lease, as aforesaid, the period free of the
obligation to pay Base Rent, if any, that Lessee would otherwise have enjoyed
shall run from the date of delivery of possession and continue for a period
equal to the period during which the Lessee would have otherwise enjoyed under
the terms hereof, but minus any days of delay caused by the acts, changes or
omissions of Lessee.
4. RENT. See Addendum
4.1 BASE RENT. Lessee shall pay Base Rent and other rent or charges,
as the same may be adjusted from time to time, to 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 full
month shall be prorated based upon the actual number of days of the 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.
4.2 COMMON AREA OPERATING EXPENSES. Lessee shall pay to Lessor during
the term hereof, in addition to the Base Rent, Lessee's Share (as specified in
Paragraph 1.6(b)) of all Common Area Operating Expenses, as hereinafter
defined, during each calendar year of the term of this Lease, in accordance
with the following provisions:
(a) "COMMON AREA OPERATING EXPENSES" are defined, for purposes of
this Lease, as all costs incurred by Lessor relating to the ownership and
operation of the Industrial Center, including, but not limited to, the
following:
(i) The operation, repair and maintenance, in neat, clean,
good order and condition, of the following:
Initials: TT
----------
AM
----------
MULTI-TENANT GROSS
- -C-1993 - AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION REVISED FORM MTG-1-6/93F
PAGE 2 OF 13
<PAGE>
(iii) Trash disposal. (See Adendum)
(v) Any increase above the Base Real Property Taxes (as
defined in Paragraph 10.2(b)) for the Building and the Common Areas.
(vi) Any "Insurance cost Increase" (as defined in Paragraph
8.1).
(c) The inclusion of the improvements, facilities and services set
forth in Subparagraph 4.2(a) shall not be deemed to impose an obligation upon
Lessor to either have said improvements or facilities or to provide those
services unless the Industrial Center already has the same, Lessor already
provides the services, or Lessor has agreed elsewhere in this Lease to
provide the same or some of them.
(d) Lessee's Share of Common Area Operating Expenses shall be
payable by Lessee within ten (10) days after a reasonably detailed statement
of actual expenses is presented to Lessee by Lessor. At Lessor's option,
however, an amount may be estimated by Lessor from time to time of Lessee's
Share of annual Common Area Operating Expenses and the same shall be payable
monthly or quarterly, as Lessor shall designate, during each 12-month period
of the Lease term, on the same day as the Base Rent is due hereunder. Lessor
shall deliver to Lessee within sixty (60) days after the expiration of each
calendar year a reasonably detailed statement showing Lessee's Share of the
actual Common Area Operating Expenses incurred during the preceding year. If
Lessee's payments under this Paragraph 4.2(d) during said preceding year
exceed Lessee's Share as indicated on said statement, Lessee shall be credited
the amount of such overpayment against Lessee's Share of Common Area Operating
Expenses next becoming due. If Lessee's payments under this Paragraph 4.2(d)
during said preceding year were less than Lessee's Share as indicated on said
statement, Lessee shall pay to Lessor the amount of the deficiency within ten
(10) days after delivery by Lessor to Lessee of said statement.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon Lessee's 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 Defaults 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 therefore deposit monies 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 monies to be paid by Lessee under this Lease.
6. USE.
6.1 PERMITTED USE.
(a) Lessee shall use and occupy the Premises only for the
Permitted Use set forth in Paragraph 1.8, or any other legal use which is
reasonably comparable thereto, and for no other purpose. Lessee shall not use
or permit the use of the Premises in a manner that is unlawful, creates waste
or a nuisance, or that disturbs owners and/or occupants of, or causes damage
to the Premises or neighboring premises or properties.
(b) Lessor hereby agrees to not unreasonably withhold or delay
its consent to any written request by Lessee, Lessee's assignees or
subtenants, and by prospective assignees and subtenants of Lessee, its
assignees and subtenants, for a modification of said Permitted Use, so long as
the same will not impair the structural integrity of the improvements on the
Premises or in the Building or the mechanical or electrical systems therein,
does not conflict with uses by other lessees, is not significantly more
burdensome to the Premises or the Building 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 after such
request 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 potential
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 or by-products thereof. Lessee shall not engage in any activity in or
about the Premises which constitutes 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 Requirements (as defined in Paragraph 6.3). "REPORTABLE USE" shall
mean (i) the installation or use of any above or below ground storage tank,
(ii) the generation, possession, storage, use, transportation, or disposal of
a Hazardous Substance that requires a permit from, or with respect to which a
report, notice, registration or business plan is required to be filed with,
any governmental authority, and (iii) the presence in, on or about the
Premises of a Hazardous Substance with respect to which any Applicable Laws
require 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 upon notice to Lessor and in compliance with all
Applicable Requirements, use any ordinary and customary materials reasonably
required to be used by Lessee in the normal course of the Permitted Use, so
long as such use is not a Reportable Use and does not expose the Premises, 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 any Reportable Use of any
Hazardous Substance 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 therefor, including, but not limited
to, the installation (and, at Lessor's option, removal on or before Lease
expiration or earlier termination) of reasonably necessary protective
modifications to the Premises (such as concrete encasements) and/or the
deposit of an additional Security Deposit under Paragraph 5 hereof.
(b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable
cause to believe, that a Hazardous Substance has come to be located in, on,
under or about the Premises or the Building, other than as previously
consented to by Lessor, Lessee shall immediately give Lessor written notice
thereof, together with 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
concerning the presence, spill, release, discharge of, or exposure to, such
Hazardous Substance including, but not limited to, all such documents as may
be involved in any Reportable Use involving the Premises. Lessee shall not
cause or permit any Hazardous Substance to be spilled or released in, on,
under or about the Premises (including, without limitation, through the
plumbing or sanitary sewer system).
(c) INDEMNIFICATION. Lessee shall indemnify, protect, defend ad
hold Lessor, its agents, employees, lenders and ground lessor, if any, and the
Premises, harmless from and against any and all damages, liabilities,
judgments, costs, claims, liens, expenses, penalties, loss of permits and
attorneys' and consultants' fees arising out of or involving any Hazardous
Substance brought onto the Premises by or for Lessee or by anyone under
Lessee's control. Lessee's obligations under this Paragraph 6.2(c) shall
include, but not be limited to, the effects of any contamination or injury to
person, property or the environment created or suffered by Lessee, and the
cost of investigation (including consultants' and attorneys' 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 this Lease. No termination, cancellation or release
agreement entered into by Lessor and Lessee shall release Lessee from its
obligations under this lease with respect to Hazardous Substances, unless
specifically so agreed by
Initials: TT
----------
AM
----------
MULTI-TENANT GROSS
- -C-1993 - AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION REVISED FORM MTG-1-6/93F
PAGE 3 OF 13
<PAGE>
Lessor in writing at the time of such agreement.
6.3 LESSEE'S COMPLIANCE WITH REQUIREMENTS. Lessee shall, at Lessee's
sole cost and expense, fully, diligently and in a timely manner, comply with
all "APPLICABLE REQUIREMENTS," which term is used in this Lease to mean 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 Lessee's use of 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), now in effect or which
may hereafter come into effect. 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 Requirements specified by Lessor, and
shall immediately upon receipt, notify Lessor in writing (with copies of any
documents involved) of any threatened or actual claim, notice, citation,
warning, complaint or report pertaining to or involving failure by Lessee or
the Premises to comply with any Applicable Requirements.
6.4 INSPECTION; COMPLIANCE WITH LAW. Lessor, Lessor's agents,
employees, contractors and designated representatives, and the holders of any
mortgages, deeds of trust or ground leases on the Premises ("LENDERS") shall
have the right to enter the Premises at any time in the case of an emergency,
and otherwise at reasonable times and with 24 hours prior notice, for the
purpose of inspecting the condition of the Premises and for verifying
compliance by Lessee with this Lease and all Applicable Requirements (as
defined in Paragraph 6.3), and Lessor shall be entitled to employ experts
and/or consultants in connection therewith to advise Lessor with respect to
Lessee's activities, including, but not limited to, Lessee's installation,
operation, use, monitoring, maintenance, or removal of any Hazardous Substance
on or from the Premises. The costs and expenses of any such inspections shall
be paid by the party requesting same, unless a Default or Breach of this Lease
by Lessee or a violation of Applicable Requirements or a contamination, caused
or materially contributed to by Lessee, is found to exist or to 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
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. SEE ADDENDUM
(a) Subject to the provisions of Paragraphs 2.2 (Condition), 2.3
(Compliance with Covenants, Restrictions and Building Code), 7.2 (Lessor's
Obligations), 9 (Damage or Destruction), and 14 (Condemnation), Lessee shall,
at Lessee's sole cost and expense and at all times, keep the Premises and
every part thereof in good order, condition and repair (whether or not such
portion of the Premises requiring repair, 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
specifically serving the Premises, such as plumbing, heating, air
conditioning, ventilating, electrical, lighting facilities, boilers, fired or
unfired pressure vessels, fire hose connections if within the Premises,
fixtures, interior walls, interior surfaces of exterior walls, ceilings,
floors, windows, doors, plate glass, and skylights, but excluding any items
which are the responsibility of Lessor pursuant to Paragraph 7.2 below.
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.
(b) Lessee shall, at Lessee's sole cost and expense, procure and
maintain a contract, with copies to Lessor, in customary form and substance
for and with a contractor specializing and experienced in the inspection,
maintenance and service of the heating, air conditioning and ventilation
system for the Premises. However, Lessor reserves the right, upon notice to
Lessee, to procure and maintain the contract for the heating, air conditioning
and ventilating systems, and if Lessor so elects, Lessee shall reimburse
Lessor, upon demand, for the cost thereof.
(c) If Lessee fails to perform Lessee's obligations under this
Paragraph 7.1, Lessor may enter upon the Premises after ten (10) days' prior
written notice to Lessee (except in the case of an emergency, in which case no
notice shall be required), perform such obligations on Lessee's behalf, and
put the Premises in good order, condition and repair, in accordance with
Paragraph 13.2 below.
7.2 LESSOR'S OBLIGATIONS. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance with Covenants, Restrictions end Building Code),
4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee's Obligations), 9
(Damage or Destruction) and 14 (Condemnation), Lessor, shall keep in good
order, condition and repair the foundations, exterior walls, structural
condition of interior bearing walls, exterior roof, fire sprinkler and/or
standpipe and hose (if located in the Common Areas) or other automatic fire
extinguishing system including fire alarm and/or smoke detection systems and
equipment, fire hydrants, parking lots, walkways, parkways, driveways,
landscaping, fences, signs and utility systems serving the Common Areas and
all parts thereof, as well as providing the services for which there is a
Common Area Operating Expense pursuant to Paragraph 4.2. Lessor shall not be
obligated to paint the exterior or interior surfaces of exterior walls nor
shall Lessor be obligated to maintain, repair or replace windows, doors or
plate glass of the Premises. Lessee expressly waives the benefit of any
statute now or hereafter in effect which would otherwise afford Lessee the
right to make repairs at Lessor's expense or to terminate this Lease because
of Lessor's failure to keep the Building, Industrial Center or Common Areas in
good order, condition and repair.
7.3 UTILITY INSTALLATIONS, TRADE FIXTURES, ALTERATIONS.
(a) DEFINITIONS; CONSENT REQUIRED. The term "UTILITY
INSTALLATIONS" is used in this Lease to refer to all air lines, power panels,
electrical distribution, security, fire protection systems, communications
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 which can be removed
without doing material damage to the Premises. The term "ALTERATIONS" shall
mean any modification of the improvements on the Premises which are provided
by Lessor under the terms of this Lease, other than Utility installations or
Trade Fixtures. "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 pursuant to Paragraph 7.4(a). Lessee shall not make
nor cause to be made 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) without Lessor's consent but upon notice to
Lessor, so long as they are not visible from the outside of the Premises, do
not involve puncturing, relocating or removing the roof or any existing walls,
or changing or interfering with the fire sprinkler or fire detection systems
and the cumulative cost thereof during the term of this Lease as extended does
not exceed $10,000.00
(b) CONSENT. Any Alterations or Utility Installations that Lessee
shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with detailed plans. 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 be in
compliance with all Applicable Requirements. 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 $2,500.00 or
more upon Lessee's providing Lessor with a lien and completion bond in an
amount equal to one and one-half times the estimated cost of such Alteration
or Utility Installation.
(c) LIEN PROTECTION. 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 mechanic's or materialmen's lien against the Premises or any interest
therein. Lessee shall give Lessor not less then 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 the amount of such contested lien claim or demand,
indemnifying Lessor against liability for the same, as-or as otherwise
required by law for the holding of the Premises free from the effect of such
lien or claim. In addition, Lessor may require Lessee to pay Lessor's
attorneys' fees and costs in participating in such action if Lessor shall
decide it is to its best interest to do so.
7.4 OWNERSHIP, REMOVAL, SURRENDER, AND RESTORATION.
(a) OWNERSHIP. Subject to Lessor's right to require their removal
and to cause Lessee to become the owner thereof as hereinafter provided in
this Paragraph 7.4, all Alterations and Utility installations 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 the Premises and be
surrendered with the Premises by Lessee.
(b) REMOVAL. Unless otherwise agreed in writing, Lessor may
require that any or all Lessee-Owned Alterations or Utility Installations be
removed by the
Initials: TT
----------
AM
----------
MULTI-TENANT GROSS
- -C-1993 - AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION REVISED FORM MTG-1-6/93F
PAGE 4 OF 13
<PAGE>
expiration or earlier termination of this Lease, notwithstanding that their
installation may have been consented to by Lessor. Lessor may require the
removal at any time of all or any part of any 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,
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 herein, the Premises, as
surrendered, shall include the Alterations and 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 Lessee-Owned Alterations and 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 Requirements and/or good
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 OF PREMIUM INCREASES.
(a) As used herein, the TERM "INSURANCE COST INCREASE" is defined
as any increase in the actual cost of the insurance applicable to the Building
and required to be carried by Lessor pursuant to Paragraphs 8.2(b), 8.3(a) and
8.3(b), ("REQUIRED INSURANCE"); over and above the Base Premium, as
hereinafter defined, calculated on an annual basis, "INSURANCE COST INCREASE"
shall include, but not be limited to, requirements of the holder of a mortgage
or deed of trust covering the Premises, increased valuation of the Premises,
and/or a general premium rate increase. The term "INSURANCE COST INCREASE"
shall not, however, include any premium increases resulting from the nature of
the occupancy of any other lessee of the Building. If the Parties insert a
dollar amount in Paragraph 1.9, such amount shall be considered the "BASE
PREMIUM." If a dollar amount has not been inserted in Paragraph 1.9 and if the
Building has been previously occupied during the twelve (12) month period
immediately preceding the Commencement Date, the "BASE PREMIUM" shall be the
annual premium applicable to such twelve (12) month period. If the Building
was not fully occupied during such twelve (12} month period, the "BASE
PREMIUM" shall be the lowest annual premium reasonably obtainable for the
Required Insurance as of the Commencement Date, assuming the most nominal use
possible of the Building. In no event, however, shall Lessee be responsible
for any portion of the premium cost attributable to liability insurance
coverage in excess of $1,000,000 procured under Paragraph 8.2(b).
(b) Lessee shall pay any Insurance Cost increase to Lessor
pursuant to Paragraph 4.2. Premiums for policy periods commencing prior to, or
extending beyond, the term of this Lease shall be prorated to coincide with
the corresponding Commencement Date or Expiration Date.
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, Lessor and any Lender(s) whose names have been
provided to Lessee in writing (as additional insureds) 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" endorsement
for damage caused by heat, smoke or fumes from a hostile fire. The policy
shall not contain any intra-insured exclusions as between insured persons or
organizations, but shall include coverage for liability assumed under this
Lease as an "INSURED CONTRACT" for the performance of Lessee's indemnity
obligations under this Lease. The limits of said insurance 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. Lessor shall also maintain liability
insurance described in Paragraph 8.2(a) above, at Lessor's costs, 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.
(a) BUILDING AND IMPROVEMENTS. Lessor 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 any Lender(s), insuring against
loss or damage to the Premises. Such insurance shall be for full replacement
cost, as the same shall exist from time to time, or the amount required by any
Lender(s), but in no event more than the commercially reasonable and available
insurable value thereof if, by reason of the unique nature or age of the
improvements involved, such latter amount is less than full replacement cost.
Lessee-Owned Alterations and Utility Installations, Trade Fixtures and
Lessee's personal property shall be insured by Lessee pursuant to Paragraph
8.4. If the coverage is available and commercially appropriate, Lessor's
policy or policies shall insure against all risks of direct physical loss or
damage (except the perils of flood end/or earthquake unless required by a
Lender or included in the Base Premium), 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 Building 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 loss, but not including
plate glass insurance. Said policy or policies shall also contain an agreed
valuation provision in lieu of any co-insurance 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.
(b) RENTAL VALUE. Lessor shall also 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 any Lender(s), insuring the loss of the full rental
and other charges payable by all lessees of the Building to Lessor for one
year (including all Real Property Taxes, insurance costs, all Common Area
Operating Expenses and any scheduled rental increases). Said insurance may
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
co-insurance clause, and the amount of coverage shall be adjusted annually to
reflect the projected rental income, Real Property Taxes, insurance premium
costs and other expenses, if any, otherwise payable, for the next 12-month
period. Common Area Operating Expenses shall include any deductible amount in
the event of such loss,
(c) ADJACENT PREMISES. Lessee shall pay for any increase in the
premiums for the property insurance of the Building and for the Common Areas
or other buildings in the Industrial Center if said increase is caused by
Lessee's acts, omissions, use or occupancy of the Premises.
(d) LESSEE'S IMPROVEMENTS. Since Lessor is the Insuring Party,
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.
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, Trade Fixtures and
Lessee-Owned Alterations and Utility Installations in, on, or about the
Premises similar in coverage to that carried by Lessor as the Insuring Party
under Paragraph 8.3(a). Such insurance shall be full replacement cost coverage
with a deductible not to exceed $1,000 per occurrence. The proceeds from any
such insurance shall be used by Lessee for the replacement of personal
property and the restoration of Trade Fixtures and Lessee-Owned Alterations
and Utility Installations. Upon request from Lessor, Lessee 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 required by a
Lender, 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. Lessee shall cause to be
delivered to Lessor, within seven (7) days after the earlier of the Early
Possession Date or the Commencement Date, certified copies of, or certificates
evidencing the existence and amounts of, the insurance required under
Paragraphs 8.2(a) and 8.4. No such policy shall be cancelable or subject to
modification except after thirty (30) days' prior written notice to Lessor.
Lessee shall at least thirty (30) days prior to the expiration of such
policies, furnish Lessor with evidence of renewals or "INSURANCE BINDERS"
evidencing renewal thereof, or Lessor may order such insurance and charge the
cost thereof to Lessee, which amount shall be payable by Lessee to Lessor upon
demand.
8.6 WAIVER OF SUBROGATION. Without affecting any other rights or
remedies, Lessee and Lessor each hereby release and relieve the other, and
waive their entire right to recover damages (whether in contract or in tort)
against the other, for loss or damage to their 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. Lessor and Lessee agree to have their
respective insurance companies issuing property damage insurance waive any
right to subrogation that such companies may have against Lessor or Lessee, as
the case may be, so long as the insurance is not invalidated thereby.
8.7 INDEMNITY. Except for Lessor's negligence, intentional harm,
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, loss of permits,
attorneys' and consultants' fees, expenses and/or liabilities arising out of,
involving, or in connection
Initials: TT
----------
AM
----------
MULTI-TENANT GROSS
- -C-1993 - AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION REVISED FORM MTG-1-6/93F
PAGE 5 OF 13
<PAGE>
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. 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. 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, invites, 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,
wires, appliances, plumbing, air conditioning or lighting fixtures, or from
any other cause, whether 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, 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 or neglect of any other lessee of Lessor nor from the failure by
Lessor to enforce the provisions of any other lease in the Industrial Center.
Notwithstanding Lessor's negligence or breach of this Lease, Lessor shall
under no circumstances be liable for injury to Lessee's business or for any
loss of income or profit therefrom.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "PREMISES PARTIAL DAMAGE" shall mean damage or destruction to
the Premises, other than Lessee-Owned Alterations and Utility Installations,
the repair cost of which damage or destruction is less than fifty percent
(50%) of the then Replacement Cost (as defined in Paragraph 9.1(d)) of the
Premises (excluding Lessee-Owned Alterations and Utility Installations and
Trade Fixtures) immediately prior to such damage or destruction.
(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 fifty percent
(50%) or more of the then Replacement Cost of the Premises (excluding
Lessee-Owned Alterations and Utility Installations and Trade Fixtures)
immediately prior to such damage or destruction. In addition, damage or
destruction to the Building, other than Lessee-Owned Alterations and Utility
Installations and Trade Fixtures of any lessees of the Building, the cost of
which damage or destruction is fifty percent (50%) or more of the then
Replacement Cost (excluding Lessee-Owned Alterations and Utility Installations
and Trade Fixtures of any lessees of the Building) of the Building shall, at
the option of Lessor, be deemed to be Premises Total Destruction.
(c) "INSURED LOSS" shall mean damage or destruction to the
Premises, other than Lessee-Owned Alterations and Utility Installations and
Trade Fixtures, which was caused by an event required to be covered by the
insurance described in Paragraph 8.3(a) irrespective of any deductible amounts
or coverage limits involved.
(d) "REPLACEMENT COST" shall mean the cost to repair or rebuild
the improvements owned by Lessor at the time of the occurrence to their
condition existing immediately prior thereto, including demolition, debris
removal and upgrading required by the operation of applicable 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 PREMISES PARTIAL DAMAGE - INSURED LOSS. If 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. In the event, however, that
there is a shortage of insurance proceeds and such shortage is due to the fact
that, by reason of the unique nature of the improvements in the Premises, full
replacement cost insurance coverage was not commercially reasonable and
available, Lessor shall have no obligation to pay for the shortage in
insurance proceeds or to fully restore the unique aspects of the Premises
unless Lessee 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, Lessor 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 Lessor does not receive such funds or
assurance within such ten (10) day period, and if Lessor does not so elect to
restore and repair, then this Lease shall terminate sixty (60) days following
the occurrence of the damage or destruction, unless Lessee elects to do such
work at its sole expense. Unless otherwise agreed, Lessee shall in no event
have any right to reimbursement from Lessor for 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 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), 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
date 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 such commitment from Lessee. 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 after 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.
9.4 TOTAL DESTRUCTION. Notwithstanding any other provision hereof, if
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 9.7.
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 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 (a) exercising such option, and (b)
providing Lessor with any shortage in insurance proceeds (or adequate
assurance thereof) needed to make the repairs on or before the earlier of (i)
the date which is ten (10) days after Lessee's receipt of Lessor's written
notice purporting to terminate this Lease, or (ii) the day prior to the date
upon which such option expires. If Lessee duly exercises such option during
such period and provides Lessor with funds (or adequate assurance thereof) to
cover any shortage in insurance proceeds, Lessor shall, at Lessor's 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 such period, then this Lease shall
terminate as of the date set forth in the first sentence of this Paragraph 9.5.
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) In the event of (i) Premises Partial Damage or (ii) Hazardous
Substance Condition for which Lessee is not legally responsible, the Base
Rent, Common Area Operating Expenses and other charges, if any, payable by
Lessee hereunder for the period during which such damage or condition, its
repair, remediation or restoration continues, shall be abated in proportion to
the degree to which Lessee's use of the Premises is impaired, but not in
excess of proceeds from insurance required to be carried under Paragraph
8.3(b). Except for abatement of Base Rent, Common Area Operating Expenses 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 damage, destruction, repair,
remediation or restoration.
(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 sixty (60) 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 (60)
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
fifteen (15) 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 fifteen (15) days after the
receipt of such notice, this Lease shall continue in full
Initials: TT
----------
AM
----------
MULTI-TENANT GROSS
- -C-1993 - AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION REVISED FORM MTG-1-6/93F
PAGE 6 OF 13
<PAGE>
force and effect. "COMMENCE" as used in this Paragraph 9.6 shall mean either
the unconditional authorization of the preparation of the required plans, or
the beginning of the actual work on the Premises, whichever occurs first.
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 Requirements and this Lease shall continue in full force and
effect, but subject to Lessor's rights under Paragraph 6.2(c) and Paragraph
13), Lessor may at Lessor's option either (i) investigate and remediate such
Hazardous Substance Condition, if required, as soon as reasonably possible at
Lessor's expense, in which event this Lease shall continue in full force and
effect, or (ii) if the estimated cost to 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 date 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 excess
costs of (a) investigation and remediation of such Hazardous Substance
Condition to the extent required by Applicable Requirements, over (b) 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
said commitment by Lessee. 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 after the required funds are
available. If Lessee does not give such notice and provide the required funds
or assurance thereof within the time period specified above, this Lease shall
terminate as of the date specified in Lessor's notice of termination.
9.8 TERMINATION - ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this Paragraph 9, Lessor shall return to Lessee any advance
payment made by Lessee to Lessor and 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.
9.9 WAIVER OF STATUTES. Lessor and Lessee agree that the terms of
this Lease shall govern the effect of any damage to or destruction of the
Premises and the Building with respect to the termination of this Lease and
hereby waive the provisions of any present or future statute to the extent it
is inconsistent herewith,
10. REAL PROPERTY TAXES.
10.1 PAYMENT OF TAXES. Lessor shall pay the Real Property Taxes, as
defined in Paragraph 10.2(a), applicable to the Industrial Center, and except
as otherwise provided in Paragraph 10.3, any increases in such amounts over
the base Real Property Taxes shall be included in the calculation of Common
Area Operating Expenses in accordance with the provisions of Paragraph 4.2.
10.2 REAL PROPERTY TAX DEFINITIONS.
(a) 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 Industrial Center 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 Industrial Center or any portion thereof, 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
Industrial Center 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.
(b) As used herein, the term "BASE REAL PROPERTY TAXES" shall be
the amount of Real Property Taxes which are assessed against the Premises,
Building or Common Areas in the calendar year during which the Lease is
executed. In calculating Real Property Taxes for any calendar year, the Real
Property Taxes for any real estate tax year shall be included in the
calculation of Real Property Taxes for such calendar year based upon the
number of days which such calendar year and tax year have in common.
10.3 ADDITIONAL IMPROVEMENTS. Common Area Operating Expenses shall
not include Real Property Taxes specified in the tax assessor's records and
work sheets as being caused by additional improvements placed upon the
Industrial Center by other lessees or by Lessor for the exclusive enjoyment
of such other lessees. Notwithstanding Paragraph 10.1 hereof, Lessee shall,
however, pay to Lessor at the time Common Area Operating Expenses are payable
under Paragraph 4.2, the entirety of any increase in Real Property Taxes if
assessed solely by reason of Alterations, Trade Fixtures or Utility
Installations placed upon the Premises by Lessee or at Lessee's request.
10.4 JOINT ASSESSMENT. If the Building is not separately assessed,
Real Property Taxes allocated to the Building 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.
10.5 LESSEE'S PROPERTY TAXES. Lessee shall pay prior to delinquency
all taxes assessed against and levied upon Lessee-Owned Alterations and
Utility Installations, Trade Fixtures, furnishings, equipment and all
personal property of Lessee contained in the Premises or stored within the
Industrial Center. When possible, Lessee shall cause its Lessee-Owned
Alterations and Utility Installations, 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 property shall be assessed
with Lessor's real property, Lessee shall pay Lessor the taxes attributable
to Lessee's property within ten (10) days after receipt of a written
statement setting forth the taxes applicable to Lessee's property.
11. UTILITIES. Lessee shall pay directly for all utilities and services
supplied to the Premises, including, but not limited to, electricity,
telephone, security, gas and cleaning of the Premises, together with any
taxes thereon. If any such utilities or services are not separately metered
to the Premises or separately billed to the Premises, Lessee shall pay to
Lessor a reasonable proportion to be determined by Lessor of all such charges
jointly metered or billed with other premises in the Building, in the manner
and within the time periods set forth in Paragraph 4.2(d).
12. ASSIGNMENT AND SUBLETTING.
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, "assign")
or 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) A change in the control of Lessee shall constitute an
assignment requiring Lessor's consent. The transfer, on a cumulative basis,
of fifty (50) percent or more of the voting control of Lessee shall
constitute a change in control for this purpose.
(c) The involvement of Lessee or its assets in any transaction,
or series of transactions (by way of merger, sale, acquisition, financing,
refinancing, transfer, leveraged buy-out or otherwise), whether or not a
formal assignment or hypothecation of this Lease or Lessee's assets occurs,
which results or will result in a reduction of the Net Worth of Lessee, as
hereinafter defined, by an amount equal to or greater than fifty (50) percent
of such Net Worth of Lessee as it was represented to Lessor of the time of
full execution and delivery of this Lease or at the time of the most recent
assignment to which Lessor has consented, or as it exists immediately prior
to said transaction or transactions constituting such reduction, at whichever
time said Net Worth of Lessee was or is greater, shall be considered an
assignment of this Lease by Lessee to which Lessor may reasonably withhold
its consent. "NET WORTH OF LESSEE" for purposes of this lease shall be the
net worth of Lessee (excluding any Guarantors) established under generally
accepted accounting principles consistently applied.
(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 a Default curable after notice per Paragraph 13.1, or a
non-curable Breach without the necessity of any notice and grace period. If
Lessor elects to treat such unconsented to assignment or subletting as a
non-curable Breach, Lessor shall have the right to either: (i) terminate this
Lease, or (ii) upon thirty (30) days' written notice ("LESSOR'S NOTICE"),
increase the monthly Base Rent for the Premises to the greater of the then
fair market rental value of the Premises, as reasonably determined by Lessor,
or one hundred ten percent (110%) of the Base Rent then in effect. 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 of such Breach and rental adjustment, (i) the
purchase price of any option to purchase the Premises held by Lessee shall be
subject to similar adjustment to the then fair market value as reasonably
determined by Lessor (without the Lease being considered an encumbrance or
any deduction for depreciation or obsolescence, and considering the Premises
at its highest and best use and in good condition) or one hundred ten percent
(110%) of the price previously in effect, (ii) any index-oriented rental or
price adjustment formulas contained in this Lease shall be adjusted to
require that the base index be determined with reference to the index
applicable to the time of such adjustment, and (iii) any fixed rental
adjustments scheduled during the remainder of the Lease term shall be
increased in the same ratio as the new rental bears to the Base Rent in
effect immediately prior the adjustment specified in Lessor's Notice.
(e) Lessee's remedy for any breach of this Paragraph 12.1 by
Lessor shall be limited to compensatory damages and/or injunctive relief.
12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.
Initials: TT
----------
AM
----------
MULTI-TENANT GROSS
- -C-1993 - AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION REVISED FORM MTG-1-6/93E
PAGE 7 OF 13
<PAGE>
(a) Regardless of Lessor's consent, any assignment or subletting
shall not (i) be effective without the express written assumption by such
assignee or sublessee of the obligations of Lessee under this Lease, (ii)
release Lessee of any obligations hereunder, nor (iii) alter the primary
liability of Lessee for 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 this Lease.
(b) Lessor may accept any rent or performance of Lessee's
obligations from any person other than Lessee pending approval or disapproval
of an assignment. Neither a delay in the approval or disapproval of such
assignment nor the acceptance of any rent for 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 Lessee
or to any subsequent or successive assignment or subletting by the assignee
or 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 under this Lease or the
sublease and without obtaining their consent, and such action shall not
relieve such persons from liability under this Lease or the sublease.
(d) In the event of any Default or Breach of Lessee's obligation
under this Lease, Lessor may proceed directly against Lessee, any Guarantors
or anyone else responsible for the performance of the Lessee's obligations
under this Lease, including any sublessee, without first exhausting Lessor's
remedies against any other person or entity responsible therefor to Lessor,
or any security held by Lessor.
(e) Each request for consent to an assignment or subletting
shall be in writing, accompanied by information relevant to Lessor's
determination as to the financial and operational responsibility and
appropriateness of the proposed assignee or sublessee, including, but not
limited to, the intended use and/or required modification of the Premises, if
any, together with a non-refundable deposit of $500.00, 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, or sublessee under, this Lease shall, by
reason of accepting such assignment or entering into such sublease, 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 or sublease 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 all
or 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 the foregoing provision 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 any 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 whether such Breach exists
and notwithstanding any notice from or claim from Lessee to the contrary.
Lessee shall have no right or claim against such sublessee, or, until the
Breach has been cured, against Lessor, for any such rents and other charges
so paid by said sublessee to Lessor.
(b) In the event of a Breach by Lessee in the performance of its
obligations under this Lease, Lessor, at its option and without any
obligation to do so, may require any sublessee to attorn to Lessor, in which
event Lessor shall undertake the obligations of the sublessor under such
sublease from the time of the exercise of said option to the expiration of
such sublease; provided, however, Lessor shall not be liable for any prepaid
rents or security deposit paid by such sublessee to such sublessor or for any
other prior defaults or breaches of such sublessor under such sublease.
(c) Any matter or thing requiring the consent of the sublessor
under a sublease shall also require the consent of Lessor herein.
(d) No sublessee under a sublease approved by Lessor shall
further assign or sublet all or any part of the Premises without Lessor's
prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or
Breach by Lessee to the sublessee, who shall have the right to cure the
Default of Lessee within the grace period, if any, specified in such notice.
The sublessee shall have a right of reimbursement and offset from and against
Lessee for any such Defaults cured by the sublessee.
13. DEFAULT; BREACH; REMEDIES.
13.1 DEFAULT; BREACH. Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter 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" by
Lessee is defined as a failure by Lessee to observe, comply with or perform
any of the terms, covenants, conditions or rules applicable to Lessee under
this Lease. A "BREACH" by Lessee 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, and shall entitle Lessor to
pursue the remedies set forth in Paragraphs 13.2 and/or 13.3:
(a) The vacating of the Premises without the intention to
reoccupy same, or 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, Lessee's Share of Common
Area Operating Expenses, or any other monetary payment required to be made by
Lessee hereunder as and when due, the failure by Lessee to provide Lessor
with reasonable evidence of insurance or surety bond required under this
Lease, or the failure of Lessee to fulfill any obligation under this Lease
which endangers or threatens life or property, where such failure continues
for a period of ten (10) days following written notice thereof by or on
behalf of Lessor to Lessee.
(c) 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) compliance with Applicable
Requirements per Paragraph 6.3, (ii) the inspection, maintenance and service
contracts required under Paragraph 7.1(b), (iii) the rescission of an
unauthorized assignment or subletting per Paragraph 12.1, (iv) a Tenancy
Statement per Paragraphs 16 or 37, (v) the subordination or non-subordination
of this Lease per Paragraph 30, (vi) the guaranty of the performance of
Lessee's obligations under this Lease if required under Paragraphs 1.11 and
37, (iii) the execution of any document requested under Paragraph 42
(easements), or (viii) any other documentation or information which Lessor
may reasonably require of Lessee under the terms of this Lease, where any
such failure continues for a period of ten (10) days following written notice
by or on behalf of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions
or provisions of this Lease, or of the rules adopted under Paragraph 40
hereof that are to be observed, complied with or performed by Lessee, other
than those described in Subparagraphs 13.1(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. Code
Section 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 13.1(e) is contrary to any applicable law, such provision shall
be of no force or effect, and shall not affect the validity of the remaining
provisions.
(f) The discovery by Lessor that any financial statement of
Lessee or of any Guarantor, given to Lessor by Lessee or any Guarantor, was
materially
Initials: TT
----------
AM
----------
MULTI-TENANT GROSS
- -C-1993 - AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION REVISED FORM MTG-1-6/93E
PAGE 8 OF 13
<PAGE>
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, (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 assurances of 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, including, but not limited to, the obtaining of
reasonably required bonds, insurance policies, or governmental licenses,
permits or approvals. The costs and expenses of any such performance by
Lessor shall be due and payable by Lessee 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 own 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 any leasing
commission paid by Lessor in connection with this Lease applicable to the
unexpired term of this Lease. The worth at the time of award of the amount
referred to in provision (iii) of the immediately preceding sentence shall be
computed by discounting such amount at the discount rate of the Federal
Reserve Bank of San Francisco or the Federal Reserve Bank District in which
the Premises are located 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
13.2. 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 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
Subparagraph 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 Subparagraph 13.1(b), (c) or (d). In such case, the applicable
grace period 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 (2) 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 recover the rent as it becomes due, provided Lessee has
the right to sublet or assign, subject only to reasonable limitations. Lessor
and Lessee agree that the limitations on assignment and subletting in this
Lease 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 this 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.
13.3 INDUCEMENT RECAPTURE IN EVENT OF BREACH. Any agreement by Lessor
for free or abated rent or other charges applicable to the Premises, or for
the giving or paying by Lessor to or for Lessee of any cash or other bonus,
inducement or consideration for Lessee's entering into this Lease, all of
which concessions are hereinafter referred to as "INDUCEMENT PROVISIONS"
shall be deemed conditioned upon Lessee's full and faithful performance of
all of the terms, covenants and conditions of this Lease to be performed or
observed by Lessee during the term hereof as the same may be extended. Upon
the occurrence of a Breach (as defined in Paragraph 13.1) of this Lease by
Lessee, any such Inducement Provision shall automatically be deemed deleted
from this Lease and of no further force or effect, and any rent, other
charge, bonus, inducement or consideration theretofore abated, given or paid
by Lessor under such an Inducement Provision shall be immediately due and
payable by Lessee to Lessor, and recoverable by Lessor, as additional rent
due under this Lease, notwithstanding any subsequent cure of said Breach by
Lessee. The acceptance by Lessor of rent or the cure of the Breach which
initiated the operation of this Paragraph 13.3 shall not be deemed a waiver
by Lessor of the provisions of this Paragraph 13.3 unless specifically so
stated in writing by Lessor at the time of such acceptance.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee 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 deed of trust covering
the Premises. Accordingly, if any installment of rent or other sum due from
Lessee shall not be received by Lessor or Lessor's designee within ten (10)
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.
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 any Lender(s) whose name and address shall have been
furnished to 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
portion of the Common Areas designated for Lessee's parking, is taken by
condemnation, Lessee may, at Lessee's option, to be exercised in writing
within ten (10) days after Lessor shall have given Lessee written notice of
such taking (or in the absence of such notice, within ten (10) days after the
condemning authority shall have taken possession) terminate this Lease as of
the date the condemning authority takes such possession. If Lessee does not
terminate this Lease in accordance with the foregoing, this Lease shall remain
in full force and effect as to the portion of the Premises remaining, except
that the Base Rent shall be reduced in the same proportion as the rentable
floor area of the Premises taken bears to the total rentable floor area of the
Premises. No reduction of Base Rent shall occur if the condemnation does not
apply to any portion of the Premises. 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 of 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 Lessee's share of the legal and other expenses
incurred by Lessor in the condemnation matter, repair any damage to the
Premises caused by such condemnation authority. Lessee shall be responsible
for the payment of any amount in excess of such net severance damages required
to complete such repair.
15. BROKERS' FEES
15.1 PROCURING CAUSE. The Broker(s) named in Paragraph 1.10 is/are
the procuring cause of this Lease.
15.2 ADDITIONAL TERMS. Unless Lessor and Broker(s) have otherwise
agreed in writing, Lessor agrees that: (a) if Lessee exercises any Option (as
defined
Initials: TT
----------
AM
----------
MULTI-TENANT GROSS
- -C-1993 - AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION REVISED FORM MTG-1-6/93E
PAGE 9 OF 13
<PAGE>
in Paragraph 39.1) granted under this Lease or any Option subsequently
granted, or (b) if Lessee acquires any rights to the Premises or other
premises in which Lessor has an interest, 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 Broker(s) a fee in accordance
with the schedule of said Broker(s) in effect at the time of the execution of
this Lease.
15.3 ASSUMPTION OF OBLIGATIONS. 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 an intended third party beneficiary of the
provisions of Paragraph 1.10 and of this Paragraph 15 to the extent of its
interest in any commission arising from this Lease and may enforce that right
directly against Lessor and its successors.
15.4 REPRESENTATIONS AND WARRANTIES. 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 as named in Paragraph 1.10(a) in connection with
the negotiation of this lease and/or the consummation of the transaction
contemplated hereby, and that no broker or other person, firm or entity other
than said named Broker(s) is entitled to any commission or finder's fee in
connection with said 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, and/or
attorneys' fees reasonably incurred with respect thereto.
16. TENANCY AND FINANCIAL STATEMENTS.
16.1 TENANCY STATEMENT. 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 a 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 FINANCIAL STATEMENT. If Lessor desires to finance, refinance, or
sell the Premises or the Building, or any part thereof, Lessee and all
Guarantors shall deliver to any potential lender or purchaser designated by
Lessor such financial statements of Lessee and such Guarantors 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. 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 15.3, upon such
transfer or assignment and delivery of the Security Deposit, as aforesaid,
the prior Lessor shall be relieved of all liability with respect to the
obligations and/or covenants under this Lease thereafter to be performed by
the Lessor. Subject to the foregoing, the obligations and/or covenants in
this Lease to be performed by the Lessor shall be binding only upon the
Lessor as hereinabove defined.
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 ten (10)
days following the date on which it was due, shall bear interest from the
date due at the prime rate charged by the largest state chartered bank in the
state in which the Premises are located plus four percent (4%) per annum, but
not exceeding the maximum rate allowed by law, in addition to the potential
late charge provided for in Paragraph 13.4.
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 or contemporaneous agreement or understanding shall be
effective. Lessor and Lessee each represents and warrants to the Brokers that
it has made, and is relying solely upon, its own investigation as to the
nature, quality, character and financial responsibility of the other Party to
this Lease and as to the nature, quality and character of the Premises.
Brokers have no responsibility with respect thereto or with respect to any
default or breach hereof by either Party. Each Broker shall be an intended
third party beneficiary of the provisions of this Paragraph 22.
23. NOTICES.
23.1 NOTICE REQUIREMENTS. All notices required or permitted by this
Lease shall be in writing and may be delivered in person (by hand or by
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 during normal business hours, 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, except that upon Lessee's taking possession of the Premises, the
Premises shall constitute Lessee's address for the purpose of mailing or
delivering notices to Lessee. A copy of all notices required or permitted to
be given to Lessor hereunder shall be concurrently transmitted to such party
or parties at such addresses as Lessor may from time to time hereafter
designate by written notice to Lessee.
23.2 DATE OF NOTICE. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown
on the receipt card, or if no delivery date is shown, the postmark thereon.
If sent by regular mail, the notice shall be deemed given forty-eight (48)
hours after the same is addressed as required herein and mailed with postage
prepaid. Notices delivered by United States Express Mail or overnight courier
that 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 or
facsimile confirmation of receipt of the transmission thereof, provided a
copy is also delivered via delivery or mail. If notice is received on a
Saturday or a Sunday or a 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 any other term, covenant or condition hereof. Lessor's
consent to, or approval of, any such 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 Default or Breach by Lessee of any provision hereof. Any payment given
Lessor by Lessee may be accepted by Lessor on account of monies or damages
due Lessor, notwithstanding any qualifying statements or conditions made by
Lessee in connection therewith, which such statements and/or conditions shall
be of no force or effect whatsoever unless specifically agreed to in writing
by Lessor at or before the time of deposit of such payment.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees 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
this Lease. In the event that Lessee holds over in violation of this
Paragraph 26 then the Base Rent payable from and after the time of the
expiration or earlier termination of this Lease shall be increased to two
hundred percent (200%) of the Base Rent applicable during the month
immediately preceding such expiration or earlier termination. Nothing
contained herein shall be construed as a consent by Lessor to any holding
over by Lessee.
Initials: TT
----------
AM
----------
MULTI-TENANT GROSS
- -C-1993 - AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION REVISED FORM MTG-1-6/93E
PAGE 10 OF 13
<PAGE>
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies
at law or in equity.
28. COVENANTS AND CONDITIONS. All provisions of this Lease to be observed or
performed by Lessee are both covenants and conditions.
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
pursuant to Paragraph 13.5. 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 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. ATTORNEYS' 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) in any such proceeding, action, or appeal thereon,
shall be entitled to reasonable attorneys' fees. Such fees may be awarded in
the same suit or recovered in a separate suit, whether or not such action or
proceeding is pursued to decision or judgment. The term "PREVAILING PARTY"
shall include, without limitation, a Party or Broker who substantially
obtains or defeats the relief sought, as the case may be, whether by
compromise, settlement, judgment, or the abandonment by the other Party or
Broker of its claim or defense. The attorneys' fee award shall not be
computed in accordance with any court fee schedule, but shall be such as to
fully reimburse all attorneys' fees reasonably incurred. Lessor shall be
entitled to attorneys' fees, costs and expenses incurred in preparation and
service of notices of Default and consultations in connection therewith,
whether or not a legal action is subsequently commenced in connection with
such Default or resulting Breach. Broker(s) shall be intended third party
beneficiaries of this Paragraph 31.
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 with 24 hours prior 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, as Lessor may reasonably deem necessary.
Lessor may at any time place on or about the Premises or Building any
ordinary "For Sale" signs and Lessor may at any time during the last one
hundred eighty (180) 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 shall not place any sign upon the exterior of the Premises
or the Building, except that 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 so long as such signs are in a location
designated by Lessor and comply with Applicable Requirements and the signage
criteria established for the Industrial Center by Lessor. 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). Unless otherwise expressly agreed herein, Lessor reserves
all rights to the use of the roof of the Building, and the right to install
advertising signs on the Building, including the roof, which do not
unreasonably interfere with the conduct of Lessee's business; Lessor shall be
entitled to all revenues from such advertising signs.
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' and other
consultants' fees) incurred in the consideration of, or response to, a
request by Lessee for any Lessor consent pertaining to this Lease or the
Premises, including, but not limited to, consents to an assignment a
subletting or the presence or use of a Hazardous Substance, shall be paid by
Lessee to Lessor upon receipt of an invoice and supporting documentation
therefor. In addition to the deposit described in Paragraph 12.2(e), 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.
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
impositions 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 FORM OF GUARANTY. If there are to be any Guarantors of this
Lease per Paragraph 1.11, the form of the guaranty to be executed by each
such Guarantor shall be in the form most recently published by the American
Industrial Real Estate Association, and each such Guarantor shall have the
same obligations as Lessee under this Lease, including, but not limited to,
the obligation to provide the Tenancy Statement and information required in
Paragraph 16.
37.2 ADDITIONAL OBLIGATIONS OF GUARANTOR. 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 resolution of its board of directors
authorizing the making of such guaranty, together with a certificate of
incumbency showing the signatures of the persons authorized to sign on its
behalf, (b) current financial statements of Guarantor as may from time to
time be requested by Lessor, (c) a Tenancy Statement, or (d) written
confirmation that the guaranty is still in effect.
Initials: TT
----------
AM
----------
MULTI-TENANT GROSS
- -C-1993 - AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION REVISED FORM MTG-1-6/93E
PAGE 11 OF 13
<PAGE>
38. QUIET POSSESSION. Upon payment by Lessee of the rent for the Premises
and the 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.
39.1 DEFINITION. As used in this Lease, 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
1.1 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.
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 (without regard to whether notice thereof is given Lessee), 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 separate Defaults
under Paragraph 13.1 during the twelve (12) month period immediately
preceding the exercise of the Option, whether or not the Defaults are cured.
(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
(without any necessity of Lessor to give notice thereof to Lessee), or (ii)
Lessor gives to Lessee three (3) or more notices of separate Defaults under
Paragraph 13.1 during any twelve (12) month period, whether or not the
Defaults are cured, or (iii) if Lessee commits a Breach of this Lease.
40. RULES AND REGULATIONS. Lessee agrees that it will abide by, and keep and
observe all reasonable rules and regulations ("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 the Building and the Industrial Center 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 the right, from time to time, to grant,
without the consent or joinder of Lessee, such easements, rights of way,
utility raceways, and dedications that Lessor deems necessary, and to cause
the recordation of parcel maps and restrictions, so long as such easements,
rights of way, utility raceways, dedications, maps and restrictions do not
reasonably interfere with the use of the Premises by Lessee. Lessee agrees to
sign any documents reasonably requested by Lessor to effectuate any such
easement rights, dedication, map or restrictions.
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to
any amount or sum of money to be paid by one Party to the other under the
provisions hereof, the Party against whom the obligation to pay the money is
asserted shall have the right to make payment "under protest" and such
payment shall not be regarded as a voluntary payment and there shall survive
the right on the part of said Party to institute suit for recovery of such
sum. If it shall be adjudged that there was no legal obligation 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 either Lessor or Lessee or Lessor's
agent or Lessee's agent and submission of same to Lessee or Lessor shall not
be deemed an offer to lease. This Lease is not intended to be binding until
executed and delivered by all Parties hereto.
47. AMENDMENTS. This Lease may be modified only in writing, signed by the
Parties in interest at the time of the modification. 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. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional insurance company or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the
property of which the Premises are a part.
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.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM
AND PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. 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 YOUR
ATTORNEY'S REVIEW AND APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED TO
EVALUATE THE CONDITION OF THE PROPERTY FOR THE POSSIBLE PRESENCE OF
ASBESTOS, UNDERGROUND STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO
REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL
REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE BROKERS OR THEIR
CONTRACTORS, 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 IN A STATE OTHER THAN CALIFORNIA, AN ATTORNEY FROM
THE STATE WHERE THE PROPERTY IS LOCATED SHOULD BE CONSULTED.
Initials: TT
----------
AM
----------
MULTI-TENANT GROSS
- -C-1993 - AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION REVISED FORM MTG-1-6/93E
PAGE 12 OF 13
<PAGE>
The Parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.
Executed at: Executed at:
----------------------- --------------------------
on: on:
-------------------------------- -----------------------------------
By LESSOR: By LESSEE:
Cornucopia, Inc. Mossimo, Inc.
- ------------------------------------ ---------------------------------------
By: /s/ Al F. Mayo, CFO By: /s/ John P. Brincko
-------------------------------- ------------------------------------
Name Printed: Al F. Mayo Name Printed: JOHN P. BRINCKO
---------------------- --------------------------
Title: CFO Title: PRESIDENT & CEO
---------------------------- --------------------------------
By: By: /s/ Thora Thoroddsen
-------------------------------- ------------------------------------
Name Printed: Name Printed: THORA THORODDSEN
---------------------- --------------------------
Title: Title: SECRETARY & TREASURER
----------------------------- ---------------------------------
Address: 2450 White Road Address:
--------------------------- -------------------------------
Irvine, CA 92614
--------------------------- -------------------------------
Telephone: (949) 250-4080 Telephone: ( )
------------------------- -----------------------------
Facsimile: (949) 724-1338 Facsimile: ( )
------------------------- -----------------------------
BROKER: BROKER:
VOIT COMMERCIAL BROKERAGE CB/RICHARD ELLIS
Executed at: Executed at:
----------------------- ---------------------------
on: on:
-------------------------------- ------------------------------------
By: By:
-------------------------------- ------------------------------------
Name Printed: John D. Griffin Name Printed:
---------------------- --------------------------
Title: Senior Vice President Title:
----------------------------- ---------------------------------
Address: 18500 Von Karman Avenue, Address:
Suite 150
Irvine, CA 92612
--------------------------- -------------------------------
Telephone: (949) 851-5100 Telephone: ( )
------------------------- -----------------------------
Facsimile: (949) 261-9092 Facsimile: ( )
------------------------- -----------------------------
NOTE: These forms are often modified to meet changing requirements of law and
needs of the industry. Always write or call to make sure you are utilizing
the most current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700
South Flower Street, Suite 600, Los Angeles, California 90017
(213) 687-8777.
Initials: TT
----------
AM
----------
MULTI-TENANT - GROSS
PAGE 13 OF 13
<PAGE>
ADDENDUM TO LEASE
DATED AUGUST 19, 1998
BY AND BETWEEN CORNUCOPIA, INC ("LESSOR") AND MOSSIMO, INC ("LESSEE")
FOR THE PREMISES LOCATED AT
2450 WHITE ROAD, IRVINE, CALIFORNIA
49. RENT INCREASE:
-------------
In the thirteenth (13th) month of the Lease Term, the rent shall be
increased to $14,473.80 per month.
50. IMPROVEMENTS:
------------
Lessor, at his sole cost and expense, shall complete the following
improvements:
A. Recarpet the office area.
B. Repaint the doors.
Said improvement costs shall not exceed $21,411.11.
51. BUILDING ACCESS:
---------------
Lessee shall have access to the premises 24 hours per day, 7 days per week.
Lessor shall operate the building for use by the public from 7:00 a.m. to
6:00 p.m., Monday through Friday. Lessor shall provide after hours access
cards to Lessee's designated employees at a cost of $20.00 per card.
52. SIGN:
----
Lessee, at his sole cost and expense, can affix signage to the existing
monument per a mutually agreed upon plan, which complies with the City of
Irvine's sign criteria.
53. TRASH REMOVAL:
-------------
In addition to rent, Lessee shall pay $40.00 per month for trash removal.
In the event an additional dumpster is needed, due to Lessee's use, Lessee
shall be responsible for the cost of said dumpster.
54. UTILITIES:
---------
Lessee shall be responsible for all of its electrical and telephone costs
and usage associated with the premises. Lessee is responsible for securing
telephone and computer hook-up. Lessee shall also be responsible for paying
electrical costs to Lessor on a monthly basis.
AGREED & ACCEPTED:
LESSOR: CORNUCOPIA, INC.
BY: /s/ Al F. Mayo, CFO DATE: 9/3/98
----------------------------------- ------------------------------
LESSEE: MOSSIMO, INC.
BY: /s/ Thora Thoroddsen DATE: 9/2/98
---------------------------------- ------------------------------
<PAGE>
OPTION(S) TO EXTEND
STANDARD LEASE ADDENDUM
Dated August 19, 1998
--------------------------------------------------
By and Between (Lessor) Cornucopia, Inc.
--------------------------------
--------------------------------
(Lessee) Mossimo, Inc.
--------------------------------
--------------------------------
Address of Premises: 2450 White Road, Irvine, CA
--------------------------------
--------------------------------
Paragraph 52
----
A. OPTION(S) TO EXTEND:
Lessor hereby grants to Lessee the option to extend the term of this Lease
for 1 additional 36 month period(s) commencing when the prior term expires
upon each and all of the following terms and conditions:
(i) In order to exercise an option to extend, Lessee must give written
notice of such election to Lessor and Lessor must receive the same at least 6
but not more than 7 months prior to the date that the option period would
commence, time being of the essence. If proper notification of the exercise of
an option is not given and/or received, such option shall automatically expire.
Options (if there are more than one) may only be exercised consecutively.
(ii) The provisions of paragraph 39, including those relating to Lessee's
Default set forth in paragraph 39.4 of this Lease, are conditions of this
Option.
(iii) Except for the provisions of this Lease granting an option or options
to extend the term, all of the terms and conditions of this Lease except where
specifically modified by this option shall apply.
(iv) This Option is personal to the original Lessee, and cannot be
assigned or exercised by anyone other than said original Lessee and only while
the original Lessee is in full possession of the Premises and without the
intention of thereafter assigning or subletting.
(v) The monthly rent for each month of the option period shall be
calculated as follows, using the method(s) indicated below:
(Check Method(s) to be Used and Fill in Appropriately)
/ / I. COST OF LIVING ADJUSTMENT(S) (COLA)
a. On (Fill in COLA Dates): ________________________________________________
________________________________________________________________________________
the Base Rent shall be adjusted by the change, if any, from the Base Month
specified below, in the Consumer Price Index of the Bureau of Labor
Statistics of the U.S. Department of Labor for (select one): / / CPI W (Urban
Wage Earners and Clerical Workers) or / / CPI U (All Urban Consumers), for
(Fill in Urban Area):
________________________________________________________________________________
All items (1982-1984 = 100), herein referred to as "CPI".
b. The monthly rent payable in accordance with paragraph A.I.a. of this
Addendum shall be calculated as follows: the Base Rent set forth in paragraph
1.5 of the attached Lease, shall be multiplied by a fraction the numerator of
which shall be the CPI of the calendar month two months prior to the month(s)
specified in paragraph A.I.a. above during which the adjustment is to take
effect, and the denominator of which shall be the CPI of the calendar month
which is two months prior to (select one): / / the first month of the term of
this Lease as set forth in paragraph 1.3 ("Base Month") or / / (Fill in Other
"Base Month"): ____________________________________________________________.
The sum so calculated shall constitute the new monthly rent hereunder, but in
no event, shall any such new monthly rent be less than the rent payable for
the month immediately preceding the rent adjustment.
c. In the event the compilation and/or publication of the CPI shall be
transferred to any other governmental department or bureau or agency or shall be
discontinued, then the index most nearly the same as the CPI shall be used to
make such calculation. In the event that the Parties cannot agree on such
alternative index, then the matter shall be submitted for decision to the
American Arbitration Association in accordance with the then rules of said
Association and the decision of the arbitrators shall be binding upon the
parties. The cost of said Arbitration shall be paid equally by the Parties.
/X/ II. MARKET RENTAL VALUE ADJUSTMENT(S) (MRV)
a. On (Fill in MRV Adjustment Date(s)) October 1, 2000 the Base Rent
shall be adjusted to the "Market Rental Value" of the property as follows:
1) Four months prior to each Market Rental Value Adjustment Date
described above, the Parties shall attempt to agree upon what the new MRV
will be on the adjustment date. If agreement cannot be reached, within thirty
days, then:
(a) Lessor and Lessee shall immediately appoint a mutually
acceptable appraiser or broker to establish the new MRV within the next
thirty days. Any associated costs will be split equally between the Parties,
or
(b) Both Lessor and Lessee shall each immediately make a
reasonable determination of the MRV and submit such determination, in
writing, to arbitration in accordance with the following provisions:
Initials: Initials: TT
---------- ----------
Initials: AM
---------- ----------
PAGE 1 OF 2
- -C-1997 - AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION FORM OE-2-3/97E
<PAGE>
(i) Within fifteen days thereafter, Lessor and Lessee
shall each select an / / appraiser or /X/ broker ("Consultant" - check one)
of their choice to act as an arbitrator. The two arbitrators so appointed
shall immediately select a third mutually acceptable Consultant to act as a
third arbitrator.
(ii) The three arbitrators shall within thirty days of the
appointment of the third arbitrator reach a decision as to what the actual
MRV for the Premises is, and whether Lessor's or Lessee's submitted MRV is
the closest thereto. The decision of a majority of the arbitrators shall be
binding on the Parties. The submitted MRV which is determined to be the
closest to the actual MRV shall thereafter be used by the Parties.
(iii) If either of the Parties fails to appoint an
arbitrator within the specified fifteen days, the arbitrator timely appointed
by one of them shall reach a decision on his or her own, and said decision
shall be binding on the Parties.
(iv) The entire cost of such arbitration shall be paid by
the party whose submitted MRV is not selected, ie. the one that is NOT the
closest to the actual MRV.
2) Notwithstanding the foregoing, the new MRV shall not be less than
the rent payable for the month immediately preceding the rent adjustment.
b. Upon the establishment of each New Market Rental Value:
1) the new MRV will become the new "Base Rent" for the purpose of
calculating any further Adjustments, and
2) the first month of each Market Rental Value term shall become the
new "Base Month" for the purpose of calculating any further Adjustments.
/ / III. FIXED RENTAL ADJUSTMENT(S) (FRA)
The Base Rent shall be increased to the following amounts on the dates set forth
below:
On (Fill in FRA Adjustment Date(s)): The New Base Rent shall be:
$
--------------------------------- ---------------------
$
--------------------------------- ---------------------
$
--------------------------------- ---------------------
$
--------------------------------- ---------------------
B. NOTICE:
Unless specified otherwise herein, notice of any rental adjustments,
other than Fixed Rental Adjustments, shall be made as specified in paragraph
23 of the Lease.
C. BROKER'S FEE:
The Brokers specified in paragraph 1.10 shall be paid a Brokerage Fee for
each adjustment specified above in accordance with paragraph 15 of the Lease.
Initials: Initials: TT
---------- ----------
Initials: Initials: AM
---------- ----------
PAGE 2 OF 2
- -C-1997 - AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION FORM OE-2-3/97E
<PAGE>
STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE -- MODIFIED NET
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. BASIC PROVISIONS ("BASIC PROVISIONS").
1.1 PARTIES: This Lease ("LEASE"), dated for reference purposes only,
July 20, 1998, is made by and between 3002 Pennsylvania Avenue, LLC
("LESSOR") and Mossimo, Inc., a Delaware corporation ("LESSEE"),
(collectively the "PARTIES," or individually a "PARTY").
1.2(a) PREMISES: That certain portion of the Building, including all
improvements therein or to be provided by Lessor under the terms of this
Lease, commonly known by the street address of 3002 Pennsylvania Avenue,
located in the City of Santa Monica, County of Los Angeles, State of
California, with zip code 90404, as outlined on Exhibit A attached hereto
("PREMISES"). The "BUILDING" is that certain building containing the Premises
and generally described as (describe briefly the nature of the Building); A
free standing, one (1) story, brick industrial building. Lessee shall occupy
approximately 3,203 rentable square feet in addition to Lessee's rights to
use end occupy the Premises as hereinafter specified, Lessee shall have
non-exclusive rights to the Common Areas (as defined in Paragraph 2.7 below)
as hereinafter specified, but shall not have any rights to the roof, exterior
walls or utility raceways of the Building or to any other buildings in the
Industrial Center. The Premises, the Building, the Common Areas, the land
upon which they are located, along with all other buildings and improvements
thereon, are herein collectively referred to as the "INDUSTRIAL CENTER."
(Also see Paragraph 2.)
1.2(b) PARKING: 0 unreserved vehicle parking spaces ("UNRESERVED PARKING
SPACES"); and four (4) reserved vehicle parking spaces ("RESERVED PARKING
SPACES"). (Also see Paragraph 2.6.)
1.3 TERM: 5 years and 0 months ("ORIGINAL TERM") commencing November
1, 1998 ("COMMENCEMENT DATE") and ending November 1, 2003 ("EXPIRATION DATE").
(Also see Paragraph 3.)
1.4 EARLY POSSESSION: N/A ("EARLY POSSESSION DATE"). (Also see
Paragraphs 3.2 and 3.3.)
1.5 BASE RENT: $2.00 per rentable square foot per month ("BASE RENT"),
payable on the 1st day of each month commencing November 1, 1998 (Also see
Paragraph 4.)
/X/ If this box is checked, this Lease provides for the Base Rent to be
adjusted per Addendum #1, attached hereto.
1.6(a) BASE RENT PAID UPON EXECUTION: $6,406 as Base Rent for the period
first thirty (30) days.
1.6(b) LESSEE'S SHARE OF COMMON AREA OPERATING EXPENSES: fifty-one and
sixty-four hundredths percent (51.64%) ("LESSEE'S SHARE") as determined by / /
prorata square footage of the Premises as compared to the total square footage
of the Building or / / other criteria as described in Addendum __________.
1.7 SECURITY DEPOSIT: $10,000.00 ("SECURITY DEPOSIT"). (Also see
Paragraph 5.)
1.8 PERMITTED USE: office and warehouse use consistent with zoning
("PERMITTED USE") (Also see Paragraph 6.)
1.9 INSURING PARTY. Lessor is the "INSURING PARTY." (Also see
Paragraph 8.)
1.10(a) REAL ESTATE BROKERS. The following real estate broker(s)
(collectively, the "BROKERS") and brokerage relationships exist in this
transaction and are consented to by the Parties (check applicable boxes):
/ / None represents Lessor exclusively ("LESSOR'S BROKER");
/ / None represents Lessee exclusively ("LESSEE'S BROKER"); or
/ / None See Addendum #1, paragraph #4 represents both Lessor and Lessee
("DUAL AGENCY"). (Also see Paragraph 15.)
1.10(b) PAYMENT TO BROKERS. Upon the 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 Broker(s) (or in the event
there is no separate written agreement between Lessor and said Broker(s), the
sum of $N/A) for brokerage services rendered by said Broker(s) in connection
with this transaction.
1.11 GUARANTOR. The obligations of the Lessee under this Lease are to
be guaranteed by N/A ("GUARANTOR"). (Also see Paragraph 37.)
1.12 ADDENDA AND EXHIBITS. Attached hereto is an Addendum or Addenda
consisting of Paragraphs 49 through 59, and Exhibit A, all of which constitute
a part of this Lease.
2. PREMISES, PARKING AND COMMON AREAS.
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 and/or Common Area
Operating Expenses, is an approximation which Lessor and Lessee agree is
reasonable and the rental and Lessee's Share (as defined in Paragraph 1.6(b))
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 Commencement Date and warrants to Lessee that the
existing plumbing, electrical systems, fire sprinkler system, lighting, air
conditioning and heating systems, and loading doors, if any, in the Premises,
other than those constructed by Lessee, shall be in good operating condition
on the Commencement Date. It a non-compliance with said warranty exists as of
the Commencement 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 within sixty (60) days after the
Commencement Date, 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 that any improvements (other than those constructed by Lessee or at
Lessee's direction) on or in the Premises which have been constructed or
installed by Lessor or with Lessor's consent or at Lessor's direction shall
comply with all applicable covenants or restrictions of record and applicable
building codes, regulations and ordinances in effect on the Commencement Date,
including, without limitation, the Americans With Disabilities Act. Lessor
further warrants to Lessee that Lessor has no knowledge of any claim having been
made by any governmental agency that a violation or violations of applicable
building codes, regulations, or ordinances exist with regard to the Premises as
of the Commencement Date. Said warranties shall not apply to any Alterations or
Utility Installations (defined in Paragraph 7.3(a)) made or to be made by
Lessee. If the Premises do not comply with said warranties, Lessor shall, except
as otherwise provided in this Lease, promptly after receipt of written notice
from Lessee given within six (6) months following the Commencement Date and
setting forth with specificity the nature and extent of such non-compliance,
take such action, at Lessor's expense, as may be reasonable or appropriate to
rectify the non-compliance. Lessor makes no warranty that the Permitted Use in
Paragraph 1.8 is permitted for the Premises under Applicable
Initials: RB - DW
----------
TT
----------
MULTI-TENANT - MODIFIED NET
- -C-1993 - AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION REVISED FORM MTN-1-6/93E
PAGE 1 OF 12
<PAGE>
Laws (as defined in Paragraph 2.4).
2.4 ACCEPTANCE OF PREMISES. Lessee hereby acknowledges: (a) that it
has been advised by the Broker(s) to satisfy itself with respect to the
condition of the Premises (including, but not limited to, the electrical and
fire sprinkler systems, security, environmental aspects, seismic and
earthquake requirements, and compliance with the Americans with Disabilities
Act and applicable zoning, municipal, county, state and federal laws,
ordinances and regulations, and any covenants or restrictions of record
(collectively, "APPLICABLE LAWS") and the present and future suitability of
the Premises for Lessee's intended use; (b) that Lessee has made such
investigation as it deems necessary with reference to such matters, is
satisfied with reference thereto, and assumes all responsibility therefore as
the same relate to Lessee's occupancy of the Premises and/or the terms of
this Lease; and (c) that neither Lessor, nor any of Lessor's agents, has made
any oral or written representations or warranties with respect to said
matters other than as set forth in this Lease.
2.5 LESSEE AS PRIOR OWNER/OCCUPANT. The warranties made by Lessor in
this Paragraph 2 shall be of no force or effect if immediately prior to the
date set forth in Paragraph 1.1 Lessee was the owner or occupant of the
Premises. In such event, Lessee shall, at Lessee's sole cost and expense,
correct any non-compliance of the Premises with said warranties.
2.6 VEHICLE PARKING. Lessee shall be entitled to use the number of
Unreserved Parking Spaces and Reserved Parking Spaces specified in Paragraph
1.2(b) on those portions of the Common Areas designated from time to time by
Lessor for parking. Lessee shall not use more parking spaces than said
number. Said parking spaces shall be used for parking by vehicles no larger
than full-size passenger automobiles or pick-up trucks, herein called
"PERMITTED SIZE VEHICLES." Vehicles other than Permitted Size Vehicles shall
be parked and loaded or unloaded as directed by Lessor in the Rules and
Regulations (as defined in Paragraph 40) issued by Lessor. (Also see
Paragraph 2.9.)
(a) Lessee shall not permit or allow any vehicles that belong
to or are controlled by Lessee or Lessee's employees, suppliers, shippers,
customers, contractors or invitees to be loaded, unloaded, or parked in areas
other than those designated by Lessor for such activities.
(b) if Lessee permits or allows any of the prohibited
activities described in this Paragraph 2.6, then Lessor shall have the right,
without notice, in addition to such other rights and remedies that it may
have, to remove or tow away the vehicle involved and charge the cost to
Lessee, which cost shall be immediately payable upon demand by Lessor.
(c) Lessor shall at the Commencement Date of this Lease provide
the parking facilities required by Applicable Law.
2.7 COMMON AREAS - DEFINITION. The term "COMMON AREAS" is defined as
all areas and facilities outside the Premises and within the exterior
boundary line of the Industrial Center and interior utility raceways within
the Premises that are provided and designated by the Lessor from time to time
for the general nonexclusive use of Lessor, Lessee and other lessees of the
Industrial Center and their respective employees, suppliers, shippers,
customers, contractors and invitees, including parking areas, loading and
unloading areas, trash areas, roadways, sidewalks, walkways, parkways,
driveways and landscaped areas.
2.8 COMMON AREAS - LESSEE'S RIGHTS. Lessor hereby grants to Lessee,
for the benefit of Lessee and its employees, suppliers, shippers, contract
customers and invitees, during the term of this lease, the non-exclusive
right to use, in common with others entitled to such use, the Common Areas as
they exist from time to time, subject to any rights, powers, and privileges
reserved by Lessor under the terms hereof or under the terms of any rules and
regulations or restrictions governing the use of the Industrial Center. Under
no circumstances shall the right herein granted to use the Common Areas be
deemed to include the right to store any property, temporarily or
permanently, in the Common Areas. Any such storage shall be permitted only by
the prior written consent of Lessor or Lessor's designated agent, which
consent may be revoked at any time. In the event that any unauthorized
storage shall occur then Lessor shall have the right, without notice, in
addition to such other rights and remedies that it may have, to remove the
property and charge the cost to Lessee, which cost shall be immediately
payable upon demand by Lessor.
2.9 COMMON AREAS - RULES AND REGULATIONS. Lessor or such other
person(s) as Lessor may appoint shall have the exclusive control and
management of the Common Areas shall have the right, from time to time, to
establish, modify, amend and enforce reasonable Rules and Regulations with
respect thereto in accordance with Paragraph 40. Lessee agrees to abide by
and conform to all such Rules and Regulations, and to cause its employees,
suppliers, shippers, customers, contractors and invitees to so abide and
conform. Lessor shall not be responsible to Lessee for the non-compliance
with said rules and regulations by other lessees of the Industrial Center.
2.10 COMMON AREAS - CHANGES. Lessor shall have the right, in Lessor's
sole discretion, from time to time so long as Lessee's rights hereunder are
not impaired thereby.
(a) To make reasonable changes to the Common Areas, including,
without limitation, changes in the location, size, shape and number of
driveways, entrances, parking spaces, parking areas, loading and unloading
areas, ingress, egress, direction of traffic, landscaped areas, walkways and
utility raceways;
(b) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available;
(c) To designate other land outside the boundaries of the
Industrial Center to be a part of the Common Areas;
(d) To add additional buildings and improvements to the Common
Areas;
(e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Industrial Center, or any portion
thereof; and
(f) To do and perform such other acts and make such other
changes in, to or with respect to the Common Areas and Industrial Center as
Lessor may, in the exercise of sound business judgment, deem to be
appropriate.
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. If an Early Possession Date is specified in
Paragraph 1.4 and if Lessee totally or partially occupies the Premises after
the Early Possession Date but prior to the Commencement Date, the obligation
to pay Base Rent shall be abated for the period of such early occupancy. All
other terms of this Lease, however, (including, but not limited to, the
obligations to pay Lessee's Share of Common Area Operating Expenses and to
carry the insurance required by Paragraph 8) shall be in effect during such
period. Any such early possession shall not affect nor advance the Expiration
Date of the Original Term.
3.3 DELAY IN POSSESSION. If for any reason Lessor cannot deliver
possession of the Premises to Lessee by the Early Possession Date, if one is
specified in Paragraph 1.4, or if no Early Possession Date is specified, by
the Commencement Date, Lessor shall not be subject to any liability therefor,
nor shall such failure affect the validity of this Lease, or the obligations
of Lessee hereunder, or extend the term hereof, but in such case, Lessee
shall not, except as otherwise provided herein, be obligated to pay rent or
perform any other obligation of Lessee under terms of this Lease until Lessor
delivers possession of the Premises to Lessee. If possession of the Premises is
not delivered to Lessee within sixty (60) days after the Commencement Date,
Lessee may, at its option, by notice in writing to Lessor within ten (10)
days after the end of said sixty (60) day period, cancel this Lease, in which
event the Parties shall be discharged from all obligations hereunder; provided
further, however, that if such written notice of Lessee is not received by
Lessor within said ten (10) day period, Lessee's right to cancel this Lease
hereunder shall terminate and be of no further force or effect. Except as may
be otherwise provided, and regardless of when the Original Term actually
commences, if possession is not tendered to Lessee when required by this
Lease and Lessee does not terminate this Lease, as aforesaid, the period of
the obligation to pay Base Rent, if any, that Lessee would otherwise have
enjoyed shall run from the date of delivery of possession and continue for a
period equal to the period during which the Lessee would have otherwise
enjoyed under the terms hereof, but minus any days of delay caused by the
acts, changes or omissions of Lessee.
4. RENT.
4.1 BASE RENT. Lessee shall pay Base Rent and other rent or charges,
as the same may be adjusted from time to time, to 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 full
month shall be prorated based upon the actual number of days of the 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.
4.2 COMMON AREA OPERATING EXPENSES. Lessee shall pay to Lessor
during the term hereof, in addition to the Base Rent, Lessee's Share (as
specified in Paragraph 1.6(b)) of all Common Area Operating Expenses, as
hereinafter defined, during each calendar year of the term of this Lease, in
accordance with the following provisions:
(a) "COMMON AREA OPERATING EXPENSES" are defined, for purposes
of this Lease, as all costs incurred by Lessor relating to the ownership and
operation of the Industrial Center, including, but not limited to, the
following:
(i) The operation, repair and maintenance, in neat, clean,
good order and condition, of the following:
(aa) The Common Areas, including parking areas, loading
and unloading areas, trash areas, roadways, sidewalks, walkways, parkways
driveways, landscaped areas, striping, bumpers, irrigation systems, Common
Area lighting facilities, fences and gates, elevators and roof.
(bb) Exterior signs and any tenant directories.
(cc) Fire detection and sprinkler systems.
(ii) The cost of water and electricity to service the Common
Areas.
(iii) Trash disposal, property management and the costs of
any environmental inspections.
Initials: RB - DW
----------
TT
----------
MULTI-TENANT - MODIFIED NET
- -C-1993 - AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION REVISED FORM MTN-1-6/93E
PAGE 2 OF 12
<PAGE>
(vi) Real Property Taxes (as defined in Paragraph 10.2) to be
paid by Lessor for the Building and the Common Areas under
Paragraph 10 hereof.
(vi) The costs of the premiums for the insurance policies
maintained by Lessor under Paragraph 8 hereof.
(vii) Any deductible portion of an insured loss concerning the
Building or the Common Areas.
(viii) Any other services to be provided by Lessor that are stated
elsewhere in this Lease to be a Common Area 0perating
Expense.
(b) Any Common Area Operating Expenses and Real Property Taxes
that are specifically attributable to the Building or to any other building
in the Industrial Center or to the operation, repair and maintenance thereof,
shall be allocated entirely to the Building or to such other building.
However, any Common Area operating Expenses and Real Property Taxes that are not
specifically attributable to the Building or to any other building or to the
operation, repair and maintenance thereof, shall be equitably allocated by
Lessor to all buildings in the Industrial Center.
(c) The inclusion of the improvements, facilities and services
set forth in Subparagraph 4.2(a) shall not be deemed to impose an obligation
upon Lessor to either have said improvements or facilities or to provide
those services unless the Industrial Center already has the same, Lessor
already provides the services, or Lessor has agreed elsewhere in this Lease
to provide the same or some of them.
(d) Lessee's Share of Common Area Operating Expenses shall be
payable by Lessee within twenty (20) days after a reasonably detailed
statement of actual expenses is presented to Lessee by Lessor. At Lessor's
option, however, an amount may be estimated by Lessor from time to time of
Lessee's Share of annual Common Area Operating Expenses and the same shall be
payable monthly or quarterly, as Lessor shall designate, during each 12-month
period of the Lease term, on the same day as the Base Rent is due hereunder.
Lessor shall deliver to Lessee within sixty (60) days after the expiration of
each calendar year a reasonably detailed statement showing Lessee's Share of
the actual Common Area Operating Expenses incurred during the preceding year.
If Lessee's payments under this Paragraph 4.2(d) during said preceding year
exceed Lessee's Share as indicated on said statement, Lessee shall be credited
the amount of such overpayment against Lessee's Share of Common Area
Operating Expenses next becoming due. If Lessee's payments under this
Paragraph 4.2(d) during said preceding year were less than Lessee's Share as
indicated on said statement, Lessee shall pay to Lessor the amount of the
deficiency within twenty (20) days after delivery by Lessor to Lessee of said
statement.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon Lessee's
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 Defaults 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 twenty (20) days
after written request therefor deposit monies with Lessor sufficient to
restore said Security Deposit to the full amount required by this Lease. Any
time the Base Rent increases during the term of this Lease, Lessee shall, upon
written request from Lessor, deposit additional monies with Lessor as an
addition to the Security Deposit so that the total amount of the Security
Deposit shall at all times bear the same proportion to the then current Base
Rent as the initial Security Deposit bears to the initial Base Rent set forth
in Paragraph 1.5. 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 monies to be paid by Lessee under this Lease.
6. USE.
6.1 PERMITTED USE.
(a) Lessee shall use and occupy the Premises only for the
Permitted Use set forth in Paragraph 1.8, or any other legal use which is
reasonably comparable thereto, and for no other purpose. Lessee shall not use
or permit the use of the Premises in a manner that is unlawful, creates waste
or a nuisance, or that disturbs owners and/or occupants of, or causes damage
to the Premises or neighboring premises or properties.
(b) Lessor hereby agrees to not unreasonably withhold or delay
its consent to any written request by Lessee, Lessee's assignees or
subtenants, and by prospective assignees and subtenants of Lessee, its
assignees and subtenants, for a modification of said Permitted Use, so long
as the same will not impair the structural integrity of the improvements on
the Premises or in the Building or the mechanical or electrical systems
therein, does not conflict with uses by other lessees, is not significantly
more burdensome to the Premises or the Building 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 after
such request 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 materially injurious to the public
health, safety or welfare, the environment, or the Premises; (ii) regulated or
monitored by any governmental authority; or (iii) a reasonable basis for
potential liability of Lessor to any governmental agency or third party under
any applicable statute or common law. Hazardous Substance shall include, but
not be limited to, hydrocarbons, petroleum, gasoline, crude oil or any
products or by-products thereof. Lessee shall not engage in any activity in or
about the Premises which constitutes 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 requirements (as defined in Paragraph 6.3). "REPORTABLE USE" shall
mean (i) the installation or use of any above or below ground storage tank;
(ii) the generation, possession, storage, use, transportation, or disposal of
a Hazardous Substance that requires a permit from, or with respect to which a
report, notice, registration or business plan is required to be filed with,
any governmental authority; and (iii) the presence in, on or about the
Premises of a Hazardous Substance with respect to which any Applicable Laws
require 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 upon notice to Lessor and in compliance with all
Applicable Requirements, use any ordinary and customary materials reasonably
required to be used by Lessee in the normal course of the Permitted Use, so
long as such use is not a Reportable Use and does not expose the Premises 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 any Reportable Use of any
Hazardous Substance 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 therefor, including, not limited to,
the installation (and, at Lessor's option, removal on or before Lease
expiration or earlier termination) of reasonably necessary protective
modifications to the Premises (such as concrete encasements) and/or the
deposit of an additional Security Deposit under Paragraph 5 hereof.
(b) DUTY TO INFORM LESSOR. If either party knows, or has
reasonable cause to believe, that a Hazardous Substance has come to be
located in, on, under or about the Premises or the Building, other than as
previously consented to or notified to the other party, the first party shall
immediately give the other party written notice thereof, together with 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 concerning the presence, spill,
release, discharge of, or exposure to, such Hazardous Substance including,
but not limited to, all such documents as may be involved in any Reportable
Use involving the Premises. Neither party shall cause or permit any Hazardous
Substance to be spilled or released in, on, under or about the Premises
(including, without limitation, through the plumbing or sanitary sewer
system).
(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 damages, liabilities,
judgments, costs, claims, liens, expenses, penalties, loss of permits and
attorneys' and consultants' fees arising out of or involving any Hazardous
Substance brought onto the Premises by or for Lessee or by anyone under
Lessee's control. Lessee's obligations under this Paragraph 6.2(c) shall
include, but not be limited to, the effects of any contamination or injury to
person, property or the environment created or suffered by Lessee, and the
cost of investigation (including consultants' and attorneys' 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 this Lease. No termination, cancellation or release
agreement entered into by Lessor and Lessee shall release Lessee from its
obligations under this Lease with respect to Hazardous Substances, unless
specifically so agreed by Lessor in writing at the time of such agreement.
6.3 LESSEE'S COMPLIANCE WITH REQUIREMENTS. Lessee shall, at Lessee's
sole cost and expense, fully, diligently and in a timely manner, comply with
all "APPLICABLE REQUIREMENTS," which term is used in this Lease to mean 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 Lessee's use of 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), now in effect or
which may hereafter come into effect. Lessee shall, within five (5) days after
Initials: RB - DW
---------
TT
---------
MULTI-TENANT MODIFIED NET
- -C-1993 - AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION REVISED FORM MTN-1-6/93E
PAGE 3 OF 12
<PAGE>
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 Requirements specified by Lessor, and
shall immediately upon receipt, notify Lessor in writing (with copies of any
documents involved) of any threatened or actual claim, notice, citation,
warning, complaint or report pertaining to or involving failure by Lessee or
the Premises to comply with any Applicable Requirements.
6.4 INSPECTION; COMPLIANCE WITH LAW. Lessor, Lessor's agents,
employees, contractors and designated representatives, and the holders of any
mortgages, deeds of trust or ground Leases on the Premises ("Lenders") shall
have the right to enter the Premises at any time in the case of an emergency,
and otherwise at reasonable times after twenty-four (24) hours prior written
notice, for the purpose of inspecting the condition of the Premises and for
verifying compliance by Lessee with this Lease and all Applicable
Requirements (as defined in Paragraph 6.3), and Lessor shall be entitled to
employ experts and/or consultants in connection therewith to advise Lessor
with respect to Lessee's activities, including but not limited to Lessee's
installation, operation, use, monitoring, maintenance, or removal of any
Hazardous Substance on or from the Premises. The costs and expenses of any
such inspections shall be paid by the party requesting same, unless a Default or
Breach of this Lease by Lessee or a violation of Applicable Requirements or a
contamination, caused or materially contributed to by Lessee, is found to
exist or to 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 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 the provisions of Paragraphs 2.2 (Condition), 2.3
(Compliance with Covenants, Restrictions and Building Code), 7.2 (Lessor's
Obligations), 9 (Damage or Destruction), and 14 (Condemnation), Lessee shall,
at Lessee's sole cost and expense and at all times, keep the Premises and
every part thereof in good order, condition and repair (whether or not such
portion of the Premises requiring repair, 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
specifically serving the Premises, such as plumbing, heating, air
conditioning, ventilating, electrical, lighting facilities, boilers, fired or
unfired pressure vessels, fire hose connections if within the Premises,
fixtures, interior walls, interior surfaces of exterior walls, ceilings,
floors, windows, doors, plate glass, and skylights, but excluding any items
which are the responsibility of Lessor pursuant to Paragraph 7.2 below.
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 order, condition
and state of repair.
(b) Lessee shall, at Lessee's sole cost and expense, procure and
maintain a contract, with copies to Lessor, in customary form and substance
for and with a contractor specializing and experienced in the inspection,
maintenance and service of the heating, air conditioning and ventilation
system for the Premises. However, Lessor reserves the right, upon notice to
Lessee, to procure and maintain the contract for the heating, air
conditioning and ventilating systems, and if Lessor so elects, Lessee shall
reimburse Lessor, upon demand, for the cost thereof.
(c) If Lessee fails to perform Lessee's obligations under this
Paragraph 7.1, Lessor may enter upon the Premises after thirty (30) days'
prior written notice to Lessee (except in the case of an emergency, in which
case no notice shall be required), perform such obligations on Lessee's
behalf, and put the Premises in good order, condition and repair, in
accordance with Paragraph 13.2 below.
7.2 LESSOR'S OBLIGATIONS. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance with Covenants, Restrictions and Building Code),
4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee's Obligations), 9
(Damage or Destruction) and 14 (Condemnation), Lessor, subject to
reimbursement pursuant to Paragraph 4.2, shall keep in good order, condition
and repair the foundations, exterior walls, structural condition of interior
bearing walls, exterior roof, fire sprinkler and/or standpipe and hose (if
located in the Common Areas) or other automatic fire extinguishing system
including fire alarm and/or smoke detection systems and equipment, fire
hydrants, parking lots, walkways, parkways, driveways, landscaping, fences,
signs and utility systems serving the Common Areas and all parts thereof, as
well as providing the services for which there is a Common Area Operating
Expense pursuant to Paragraph 4.2. Lessor shall be obligated to paint the
exterior or interior surfaces of exterior walls but Lessor shall not be
obligated to maintain, repair or replace windows, doors or plate glass of the
Premises. Lessee expressly waives the benefit of any statute now or hereafter
in effect which would otherwise afford Lessee the right to make repairs at
Lessor's expense or to terminate this Lease because of Lessor's failure to
keep the Building, Industrial Center or Common Areas in good order, condition
and repair.
7.3 UTILITY INSTALLATIONS, TRADE FIXTURES, ALTERATIONS.
(a) DEFINITIONS; CONSENT REQUIRED. The term "UTILITY
INSTALLATIONS" is used in this Lease to refer to all air lines, power panels,
electrical distribution, security, fire protection systems, communications
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 furnishings, machinery and equipment, and other
Installations of any kind whatsoever, which can be removed without doing
material damage to the Premises. The term "ALTERATIONS" shall mean any
modification of the improvements on the Premises which are provided by Lessor
under the terms of this Lease, other than Utility installations or Trade
Fixtures. "LESSEE-OWNED ALTERATIONS AND/OR UTILITY INSTALLATIONS" are defined
as nonstructural Alterations and/or Utility Installations made by Lessee that
are not yet owned by Lessor pursuant to Paragraph 7.4(a). Lessee shall not
make nor cause to be made 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 or Alterations to the
interior of the Premises (excluding the roof) without Lessor's consent but
upon notice to Lessor, so long as they are not visible from the outside of the
Premises, do not involve puncturing, relocating or removing the roof or any
existing walls, or changing or interfering with the fire sprinkler or fire
detection systems and the cost thereof during the term of this lease as
extended does not exceed $5,000.00 as to any project, or $50,000.00 over any
twelve (12) month period.
(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 reasonably detailed plans. All
consents given by Lessor, whether by virtue of Paragraph 7.3(a) or by
subsequent specific consent, shall be deemed condition 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 be in compliance with all Applicable Requirements. 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 $5000.00 or more upon Lessee's providing Lessor with a lien and
completion bond in an amount equal to one and one-half times the estimated
cost of such Alteration or Utility Installation.
(c) LIEN PROTECTION. Lessee pay when due all claims for Labor or
materials furnished or alleged to have been furnished to or for Lessee at or
for use the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice 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
the amount of such contested lien claim or demand, indemnifying Lessor
against liability for the same, or as otherwise required by law for the
holding of the Premises free from the effect of such lien or claim. In
addition, Lessor may require Lessee to pay Lessor's attorneys' fees and costs
in participating in such action if Lessor shall decide it is to its best
interest to do so.
7.4 OWNERSHIP, REMOVAL, SURRENDER, AND RESTORATION.
(a) OWNERSHIP. Subject to Lessor's right to require their
removal and to cause Lessee to become the owner thereof as hereinafter
provided in this Paragraph 7.4, all Alterations and Utility Installations
made to the Premises by Lessee shall be the property of and owned by Lessee,
but consider 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 the
Premises and be surrendered with the Premises by Lessee.
(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 at the time
that their installation may have been consented to by Lessor. Lessor may
require the removal at any time of all or any part of any 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,
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 herein, the Premises, as
surrendered, shall include the Alterations and Utility Installations. The
obligation of Lessee shall include the repair of
Initials: RB - DW
---------
TT
---------
MULTI-TENANT MODIFIED NET
- -C-1993 - AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION REVISED FORM MTN-1-6/93E
PAGE 4 OF 12
<PAGE>
any damage occasioned by the installation, maintenance or removal of Lessee's
Trade Fixtures, furnishings, equipment, and Lessee-Owned Alterations and
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 Requirements. Lessee's Trade Fixtures shall remain the property
of Lessee and may be removed by Lessee subject to its obligation to repair
and restore the Premises per this Lease.
8. INSURANCE; INDEMNITY.
8.1 PAYMENT OF PREMIUMS. The cost of the premiums for the insurance
policies maintained by Lessor under this Paragraph 8 shall be a Common Area
Operating Expense pursuant to Paragraph 4.2 hereof. Premiums for policy
periods commencing prior to, or extending beyond, the term of this Lease
shall be prorated to coincide with the corresponding Commencement Date or
Expiration Date.
8.2 LIABILITY INSURANCE
(a) CARRIED BY LESSEE. Lessee, at its expense, shall obtain and
keep in force during the term of this Lease a Commercial General Liability
policy of insurance protecting Lessee, Lessor and any Lender(s) whose names
have been provided to Lessee in writing (as additional insureds) 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"
endorsement for damage caused by heat, smoke or fumes from a hostile fire.
The policy shall not contain any intra-insured exclusions as between insured
persons or organizations, but shall include coverage for liability assumed
under this Lease as an "insured contract" for the performance of Lessee's
indemnity obligations under this Lease. The limits of said insurance 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. Lessor shall also maintain liability
insurance described in Paragraph 8.2(a) above at Lessor's cost, 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.
(a) BUILDING AND IMPROVEMENTS. Lessor 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 any Lender(s), insuring against
loss or damage to the Premises. Such insurance shall be for full replacement
cost, as the same shall exist from time to time, or the amount required by
any Lender(s), but in no event more than the commercially reasonable and
available insurable value thereof if, by reason of the unique nature or age
of the improvements involved, such latter amount is less than full
replacement cost. Lessee-Owned Alterations and Utility Installations, Trade
Fixtures and Lessee's personal property shall be insured by Lessee pursuant
to Paragraph 8.4. If the coverage is available end commercially appropriate,
Lessor's policy or policies shall insure against all risks of direct physical
loss or damage (except the perils of flood and/or earthquake unless
reasonably available and 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 Building
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 loss,
but not including plate glass insurance. Said policy or policies shall also
contain an agreed valuation provision in lieu of any co-insurance 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.
(b) RENTAL VALUE. Lessor, at its sole expense, shall also 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 any Lender(s), insuring the
loss of the full rental and other charges payable by all lessees of the
Building to Lessor for one year (including all Real Property Taxes, insurance
costs, all Common Area Operating Expenses and any scheduled rental
increases). Said insurance may 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 co-insurance clause, and the amount
of coverage shall be adjusted annually to reflect the projected Rental
Income, Real Property Taxes, insurance premium costs and other expenses, if
any, otherwise payable, for the next 12-month period. Common Area Operating
Expenses shall include any deductible amount in the event of such loss.
(c) ADJACENT PREMISES. Lessee, at its sole expense, shall pay
for any increase in the premiums for the property insurance of the Building
and for the Common Areas or other buildings in the Industrial Center if said
increase is caused by Lessee's acts, omissions, use or occupancy of the
Premises.
(d) LESSEE'S IMPROVEMENTS. Since Lessor is the insuring Party,
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.
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, Trade Fixtures and
Lessee-Owned Alterations and Utility Installations in, on, or about the
Premises similar in coverage to that carried by Lessor as the Insuring Party
under Paragraph 8.3(a). Such insurance shall full replacement cost coverage
with a deductible not to exceed $1,000 per occurrence. The proceeds from any
such insurance shall be used by Lessee for the replacement of personal
property and the restoration of Trade Fixtures and Lessee-Owned Alterations
and Utility Installations. Upon request from Lessor, Lessee 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 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 required by a
Lender, 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. Lessee shall cause to be
delivered to Lessor, within seven (7) days after the earlier of the Early
Possession Date or the Commencement Date, certified copies of, or
certificates evidencing the existence and amounts of, the insurance required
under Paragraph 8.2(a) and 8.4. No such policy shall be cancelable or subject
to modification except after thirty (30) days' prior written notice to
Lessor. Lessee shall, at least thirty (30) days prior to the expiration of
such policies, furnish Lessor with evidence of renewals or "insurance
binders" evidencing renewal thereof, or Lessor may order such insurance and
charge the cost thereof to Lessee, which amount shall be payable by Lessee to
Lessor upon demand.
8.6 WAIVER OF SUBROGATION. Without affecting any other rights or
remedies, Lessee and Lessor each hereby release and relieve the other, and
waive their entire right to recover damages (whether in contract or in tort)
against the other, for loss or damage to their 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 insures carried or required, or by any
deductibles applicable thereto. Lessor and Lessee agree to have their
respective insurance companies issuing property damage insurance waive any
right to subrogation that such companies may have against Lessor or Lessee,
as the case may be, so long as the insurance is not invalidated thereby.
8.7 INDEMNITY. Except for Lessor's 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, loss of permits,
attorneys' and consultants' fees, expenses and/or liabilities arising out of,
involving, or in connection 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 invites, 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 limed 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. 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. 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, invites, 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, wires, appliances, plumbing, air conditioning or lighting
fixtures, or from any other cause, whether 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, 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 or neglect of any other lessee of Lessor nor
from the failure by Lessor to enforce the provisions of any other lease in
the Industrial Center. Except for Lessor's negligence, intentional harm or
breach of this Lease, Lessor shall under no circumstances be liable for
injury to Lessee's business or for any loss of income or profit therefrom.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
Initials: RB - DW
---------
TT
---------
MULTI-TENANT - MODIFIED NET
- -C-1993 - AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION REVISED FORM MTN-1-6/93E
PAGE 5 OF 12
<PAGE>
(a) "PREMISES PARTIAL DAMAGE" shall mean damage or destruction
to the Premises, other than Lessee-Owned Alterations Utility Installations,
the repair cost of which damage or destruction is less than fifty percent
(50%) of then Replacement Cost (as defined in Paragraph 9.1(d)) of the
Premises (excluding Lessee-Owned Alterations and Utility Installations and
Trade Fixtures) immediately prior to such damage or destruction.
(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 fifty
percent (50%) or more of the then Replacement Cost of the Premises (excluding
Lessee-Owned Alterations and Utility Installations and Trade Fixtures)
immediately prior to such damage or destruction. In addition, damage or
destruction to the Building, other than Lessee-Owned Alterations and Utility
installations and Trade Fixtures of any lessees of the Building, the cost of
which damage or destruction is fifty percent (50%) or more of the then
Replacement Cost (excluding Lessee-Owned Alterations and Utility
Installations and Trade Fixtures of any lessees of the Building) of the
Building shall, at the option of Lessor, be deemed to be Premises Total
Destruction.
(c) "INSURED LOSS" shall mean damage or destruction to the
Premises, other than Lessee-Owned Alterations and Utility Installations and
Trade Fixtures, which was caused by an event required to be covered by the
insurance described in Paragraph 8.3(a) irrespective of any deductible
amounts or coverage limits involved.
(d) "REPLACEMENT COST" shall mean the cost to repair or rebuild
the improvements owned by Lessor at the time of the occurrence to their
condition existing immediately prior thereto, including demolition, debris
removal and upgrading required by the operation of applicable building codes,
ordinances or laws, and without deduction for depreciation, as established by
a duly licensed, reputable contractor or architect selected by, but
independent of, Lessor.
(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 PREMISES PARTIAL DAMAGE - INSURED LOSS. If 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. In the event, however,
that there is a shortage of insurance proceeds and such shortage is due to
the fact that, by reason of the unique nature of the improvements in the
Premises, full replacement cost insurance coverage was not commercially
reasonable and available, Lessor shall have no obligation to pay for the
shortage in insurance proceeds or to fully restore the unique aspects of the
Premises unless Lessee provides Lessor with the funds to cover same, or
adequate use assurance thereof, within twenty (20) days following receipt of
written notice of such shortage and request therefor. If Lessor receives said
funds or adequate assurance thereof within said twenty (20) day period,
Lessor 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 twenty (20) 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
Lessor does not receive such funds or assurance within such twenty (20) day
period, and if Lessor does not so elect to restore and repair, then this
Lease shall terminate sixty (60) days following the occurrence of the damage
or destruction, unless Lessee elects to do such work at its own expense.
Unless otherwise agreed, Lessee shall in no event have any right to
reimbursement from Lessor for 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 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), 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
date 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 twenty (20) 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 such commitment from Lessee. 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 after 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.
9.4 TOTAL DESTRUCTION. Notwithstanding any other provision hereof,
if 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 9.7.
9.5 DAMAGE NEAR END OF TERM. If at any time during the last twelve
(12) months of the term of this Lease there is damage for which the cost to
repair exceeds one month's Base Rent, whether or not an Insured Loss, either
Lessee or Lessor may, at its option, terminate this Lease effective sixty
(60) days following the date of occurrence of such damage by giving written
notice to the other party of its 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 (a) exercising such option,
and (b) providing Lessor with any shortage in insurance proceeds (or adequate
assurance thereof) needed to make the repairs on or before the earlier of (i)
the date which is ten (10) days after Lessee's receipt of Lessor's written
notice purporting to terminate this lease, or (ii) the day prior to the date
upon which such option expires. If Lessee duly exercises such option during
such period and provides Lessor with funds (or adequate assurance thereof) to
cover any shortage in insurance proceeds, Lessor shall, at Lessor's 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 such period, then this Lease shall
terminate as of the date set forth in the first sentence of this Paragraph
9.5.
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) In the event of (i) Premises Partial Damage or (ii)
Hazardous Substance Condition for which Lessee is not legally responsible,
the Base Rent, Common Area Operating Expenses and other charges, if any,
payable by Lessee hereunder for the period during which such damage or
condition, its repair, remediation or restoration continues, shall be abated
in proportion to the degree to which Lessee's use of the Premises is
impaired, but not in excess of proceeds from insurance required to be carried
under Paragraph 8.3(b). Except for abatement of Base Rent, Common Area
Operating Expenses 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 damage, destruction, repair, remediation or restoration.
(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 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
(60) days following the giving of such notice. If Lessee gives such notice to
Lessor and such Lenders end 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 the receipt of such notice, this Lease shall continue in full force and
effect. "Commence" as used in this Paragraph 9.6 shall mean either the
preparation of the required plans, or the beginning of the actual work on the
Premises, whichever occurs first.
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 Requirements and this Lease shall continue in full force and
effect, but subject to Lessor's rights under Paragraph 6.2(c) and Paragraph
13), Lessor may, at Lessor's option, either (i) investigate and remediate
such Hazardous Substance Condition, if required, as soon as reasonably
possible at Lessor's expense, in which event this Lease shall continue in
full force end 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 date 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 excess costs of (a) investigation and remediation
of such Hazardous Substance Condition to the extent required by Applicable
Requirements, over (b) 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 said commitment by Lessee. 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 after the
required funds are available. If Lessee does not give such notice and provide
the required funds or assurance thereof within the time period specified
above, this Lease shall terminate as of the date specified in Lessor's notice
of termination.
9.8 TERMINATION - ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this Paragraph 9, Lessor shall return to Lessee any advance
payment made by Lessee to Lessor and 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.
Initials: RB - DW
---------
TT
---------
MULTI-TENANT - MODIFIED NET
- -C-1993 - AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION REVISED FORM MTN-1-6/93E
PAGE 6 OF 12
<PAGE>
9.9 WAIVER OF STATUTES. Lessor and Lessee agree that the terms of
this lease shall govern the effect of any damage to or destruction of the
Premises and the Building with respect to the termination of this Lease and
hereby waive the provisions of any present or future statute to the extent it
is inconsistent herewith.
10. REAL PROPERTY TAXES.
10.1 PAYMENT OF TAXES. Lessor shall pay the Real Property Taxes, as
defined in Paragraph 10.2, applicable to the Industrial Center, and except as
otherwise provided in Paragraph 10.3, any such amounts shall be included in
the calculation of Common Area Operating Expenses in accordance with the
provisions of Paragraph 4.2.
10.2 REAL PROPERTY TAX DEFINITION. 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 Industrial Center 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 Industrial Center or any portion
thereof, 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 Industrial Center 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. In
calculating Real Property Taxes for any calendar year, the Real Property
Taxes for any real estate tax year shall be included in the calculation of
Real Property Taxes for such calendar year based upon the number of days
which such calendar year and tax year have in common.
10.3 ADDITIONAL IMPROVEMENTS. Common Area Operating Expenses shall
not include Real Property Taxes specified in the tax assessor's records and
work sheets as being caused by any sale or other transfer by Lessor or by
additional improvements placed upon the Industrial Center by other lessees or
by Lessor for the exclusive enjoyment of such other lessees. Notwithstanding
Paragraph 10.1 hereof, Lessee shall, however, pay to Lessor at the time
Common Area Operating Expenses are payable under Paragraph 4.2, the entirety
of any increase in Real Property Taxes if assessed solely by reason of
Alterations, Trade Fixtures or Utility Installations placed upon the Premises
by Lessee or at Lessee's request.
10.4 JOINT ASSESSMENT. If the Building is not separately assessed,
Real Property Taxes allocated to the Building 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.
10.5 LESSEE'S PROPERTY TAXES. Lessee shall pay prior to delinquency
all taxes assessed against and levied upon Lessee-Owned Alterations and
Utility Installations, Trade Fixtures, furnishings, equipment and all
personal property of Lessee contained in the Premises or stored within the
Industrial Center. When possible, Lessee shall cause its Lessee-Owned
Alterations and Utility Installations, 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 property shall be assessed
with Lessor's real property, Lessee shall pay Lessor the taxes attributable
to Lessee's property as reasonably determined by Lessee within twenty (20)
days after receipt of a written statement setting forth the taxes applicable
to Lessee's property.
11. UTILITIES. Lessee shall pay directly for all utilities and services
supplied to the Premises, including, but not limited to, electricity,
telephone, security, gas and cleaning of the Premises, together with any
taxes thereon. If any such utilities or services are not separately metered
to the Premises or separately billed to the premises, Lessee shall pay to
Lessor a reasonable proportion to be determined by Lessor of all such charges
jointly metered or billed with other Premises in the Building, in the manner
and within the time periods set forth in Paragraph 4.2(d).
12. ASSIGNMENT AND SUBLETTING.
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, "ASSIGN")
or 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) A change in the control of Lessee shall constitute an
assignment requiring Lessor's consent. The transfer, on a cumulative basis,
of fifty percent (50%) or more of the voting control of Lessee shall
constitute a change in control for this purpose.
(c) The involvement of Lessee or its assets in any transaction,
or series of transactions (by way of merger, sale, acquisition, financing,
refinancing, transfer, leveraged buy-out or otherwise), whether or not a
formal assignment or hypothecation of this Lease or Lessee's assets occurs,
which results or will result in a reduction of the Net Worth of Lessee, as
hereinafter defined, by an amount equal to or greater than fifty percent
(50%) of such Net Worth of Lessee as it was represented to Lessor at the time
of full execution end delivery of this Lease or at the time of the most
recent assignment to which Lessor has consented, or as it exists immediately
prior to said transaction or transactions constituting such reduction, at
whichever time said Net Worth of Lessee was or is greater, shall be
considered an assignment of this Lease by Lessee to which Lessor may
reasonably withhold its consent. "NET WORTH OF LESSEE" for purposes of this
Lease shall be the net worth of Lessee (excluding any Guarantors) established
under generally accepted accounting principles consistently applied.
(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 a Default curable after notice per Paragraph 13.1, or a
non-curable Breach without the necessity of any notice and grace period. If
Lessor elects to treat such unconsented to assignment or subletting as a
non-curable Breach, Lessor shall have the right to either: (i) terminate this
Lease, or (ii) upon thirty (30) days' written notice ("LESSOR'S NOTICE"),
increase the monthly Base Rent for the Premises to the greater of the then
fair market rental value of the Premises, as reasonably determined by Lessor,
or one hundred ten percent (110%) of the Base Rent then in effect. 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 of such Breach and rental adjustment, (i) the
purchase price of any option to purchase the Premises held by Lessee shall be
subject to similar adjustment to the then fair market value as reasonably
determined by Lessor (without the Lease being considered an encumbrance or
any deduction for depreciation or obsolescence, and considering the Premises
at its highest and best use and in good condition) or one hundred ten percent
(110%) of the price previously in effect, (ii) any index-oriented rental or
price adjustment formulas contained in this Lease shall be adjusted to
require that the base index be determined with reference to the index
applicable to the time of such adjustment, and (iii) any fixed rental
adjustments scheduled during the remainder of the Lease term shall be
increased in the same ratio as the new rental bears to the Base Rent in
effect immediately prior the adjustment specified in Lessor's Notice.
(e) Lessee's remedy for any breach of this Paragraph 12.1 by
Lessor shall be limited to compensatory damages and/or injunctive relief.
12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.
(a) Regardless of Lessor's consent, any assignment or subletting
shall not (i) be effective without the express written assumption by such
assignee or sublessee of the obligations of Lessee under this Lease, (ii)
release Lessee of any obligations hereunder, nor (iii) alter the primary
liability of Lessee for 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 this Lease.
(b) Lessor may accept any rent or performance of Lessee's
obligations from any person other than Lessee pending approval or disapproval
of an assignment.
(c) The consent of Lessor to any assignment or subletting shall
not constitute a consent to any subsequent assignment or subletting by Lessee
or to any subsequent or successive assignment or subletting by the assignee
or sublessee. However, Lessor may not consent to subsequent sublettings and
assignments of the sublease or any amendments or modifications thereto
without notifying Lessee or anyone else liable under this Lease or the
sublease and without obtaining their consent, and such action shall not
relieve such persons from liability under this Lease or the sublease.
(d) In the event of any Default or Breach of Lessee's obligation
under this Lease, Lessor may proceed directly against Lessee, any Guarantors
or anyone else responsible for the performance of the Lessee's obligations
under this Lease, including any sublessee, without first exhausting Lessor's
remedies against any other person or entity responsible therefor to Lessor,
or any security held by Lessor.
(e) Each request for consent to an assignment or subletting
shall be in writing, accompanied by information relevant to Lessor's
determination as to the financial and operational responsibility and
appropriateness of the proposed assignee or sublessee, including, but not
limited to, the intended use and/or required modification of the Premises, if
any. 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, or sublessee under, this Lease shall, by
reason of accepting such assignment or entering into such sublease, 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 or sublease to which Lessor has specifically
consented in writing.
Initials: RB - DW
---------
TT
---------
MULTI-TENANT - MODIFIED NET
- -C-1993 - AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION REVISED FORM MTN-1-6/93E
PAGE 7 OF 12
<PAGE>
12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions shall apply to any subletting by Lessee of all
or any part of the Premises and shall be deemed included in all subleases
under this Lease whether or not expressly incorporated therein:
(a) Solely as security for Lessee's performance hereunder,
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 the
foregoing provision 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
any 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 whether
such Breach exists and notwithstanding any notice from or claim from Lessee
to the contrary. Lessee shall have no right or claim against such sublessee,
or, until the Breach has been cured, against Lessor, for any such rents and
other charges so paid by said sublessee to Lessor.
(b) In the event of a Breach by Lessee in the performance of its
obligations under this Lease, Lessor, at its option and without any
obligation to do so, may require any sublessee to attorn to Lessor, in which
event Lessor shall undertake the obligations of the sublessor under such
sublease from the time of the exercise of said option to the expiration of
such sublease; provided, however, Lessor shall not be liable for any prepaid
rents or security deposit paid by such sublessee to such sublessor or for any
other prior defaults or breaches of such sublessor under such sublease.
(c) Any matter or thing requiring the consent of the sublessor
under a sublease shall also require the consent of Lessor herein.
(d) No sublessee under a sublease approved by Lessor shall
further assign or sublet all or any part of the Premises without Lessor's
prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or
Breach by Lessee to the sublessee, who shall have the right to cure the
Default of Lessee within the grace period, if any, specified in such notice.
The sublessee shall have a right of reimbursement and offset from and against
Lessee for any such Defaults cured by the sublessee.
13. DEFAULT; BREACH; REMEDIES.
13.1 DEFAULT; BREACH. Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter 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" by
Lessee is defined as a failure by Lessee to observe, comply with or perform
any of the terms, covenants, conditions or rules applicable to Lessee under
this Lease. A "BREACH" by Lessee 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, and shall entitle Lessor to
pursue the remedies set forth in Paragraphs 13.2 and/or 13.3:
(a) the vacating of the Premises without the intention to
reoccupy same, or the abandonment of the Premises for ten (10) consecutive
business days.
(b) Except as expressly otherwise provided in this Lease, the
failure by Lessee to make any payment of Base Rent, Lessee's Share of Common
Area Operating Expenses, or any other monetary payment required to be made by
Lessee hereunder, the failure by Lessee to provide Lessor with reasonable
evidence of insurance or surety bond required under this Lease, or the
failure of Lessee to fulfill any obligation under this Lease which endangers
or threatens life or property, where such failure continues for a period of
three (3) business days following written notice thereof by or on behalf of
Lessor to Lessee.
(c) 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) compliance with Applicable
Requirements per Paragraph 6.3, (ii) the inspection, maintenance and service
contracts required under Paragraph 7.1(b), (iii) the rescission of an
unauthorized assignment or subletting per Paragraph 12.1, (iv) a Tenancy
Statement per Paragraphs 16 or 37, (v) the subordination or non-subordination
of this Lease per Paragraph 30, (vi) the guaranty of the performance of
Lessee's obligations under this Lease if required under Paragraphs 1.11 and
37, (vii) the execution of any document requested under Paragraph 42
(easements), or (viii) any other documentation or information which Lessor
may reasonably require of Lessee under the terms of this Lease, where any
such failure continues for a period of ten (10) business days following
written notice by or on behalf of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions
or provisions of this Lease, or of the rules adopted under Paragraph 40
hereof that are to be observed, complied with or performed by Lessee, other
those described in Subparagraphs 13.1(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. code
Section 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 session 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 in
thirty (30) days; provided, however, in the event that any provision of this
Subparagraph 13.1(a) is contrary to any applicable law, such provision shall
be of no force or effect, and shall not affect the validity of the remaining
provisions.
(f) The discovery by Lessor that any financial statement of
Lessee or of any Guarantor, given to Lessor by Lessee or any Guarantor, 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, (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 assurances of security,
which, when coupled with the then existing resources of Lessee, equals or
exceeds the combined financial resources of Lessee and the Guarantors that
exist 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 fifteen (15) business 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, including, but not limited to, the
obtaining of reasonably required bonds, insurance policies, or governmental
licenses, permits or approvals. The costs and expenses of any such
performance by Lessor shall be due and payable by Lessee 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 due to any fault of Lessee, Lessor, at its
own 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 reasonable cost of recovering possession of the
Premises, reasonable expenses of reletting, including necessary renovation
and alteration of the Premises, reasonable attorneys' fees, and that portion
of any leasing commission paid by Lessor in connection with this Lease
applicable to the unexpired term of this Lease. The worth at the time of
award of the amount referred to in provision (iii) of the immediately
preceding sentence shall be computed by discounting such amount at the
Initials: RB - DW
---------
TT
---------
MULTI-TENANT - MODIFIED NET
- -C-1993 - AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION REVISED FORM MTN-1-6/93E
PAGE 8 OF 12
<PAGE>
discount rate of Federal Reserve Bank of San Francisco or Federal Reserve
Bank District in which the Premises are located 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 13.2. 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 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 purposes required by Subparagraph 13.1(b), (c) or (d). In such case,
the applicable grace period 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 (2) 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 recover the rent as it becomes due, provided Lessee has
the right to sublet or assign, subject only to reasonable limitations. Lessor
and Lessee agree that the limitations on assignment and subletting in this
Lease 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 this 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 deed of trust covering
the Premises. Accordingly, if any installment of rent or other sum due from
Lessee shall not be received by Lessor or Lessor's designee within ten (10)
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 five percent
(5%) 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.
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 any Lender(s) whose name and address shall have been
furnished to Lessee in writing for such purpose, of written notice satisfying
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 portion of the Common Areas designated for Lessee's parking, is
taken by condemnation, Lessee may, at Lessee's option, to be exercised in
writing within ten (10) business days after Lessor shall have given Lessee
written notice of such taking (or in the absence of such notice, within ten
(10) business 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 Premises. No reduction of
base rent shall occur if the condemnation does not apply to any portion of
the Premises. 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 of 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, business interruption 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 Lessee's share of the legal and other
expenses incurred by Lessor in the condemnation matter, repair any damage to
the Premises caused by such condemnation authority. Lessee shall be
responsible for the payment of any amount in excess of such net severance
damages required to complete such repair.
15. BROKERS' FEES
15.1 PROCURING CAUSE. The Broker(s) named in Paragraph 1.10 is/are
the procuring cause of this Lease.
15.2 ADDITIONAL TERMS. Unless Lessor and Broker(s) have otherwise
agreed in writing, Lessor agrees that: (a) if Lessee exercises any Option (as
defined in Paragraph 39.1) granted under this Lease or any Option
subsequently granted, or (b) if Lessee acquires any rights to the Premises or
other premises in which Lessor has an interest, 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 Broker(s) a fee in accordance with the
schedule of said Broker(s) in effect at the time of execution of this Lease.
15.3 ASSUMPTION OF OBLIGATIONS. Any buyer or transfer 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 an intended third party beneficiary of the
provisions of Paragraph 1.10 and of this Paragraph 15 to the extent of its
interest in any commission arising from this Lease and may enforce that right
directly against Lessor and its successors.
15.4 REPRESENTATIONS AND WARRANTIES. 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 as named in Paragraph 1.10(a) in connection with
the negotiation of this lease and/or the consummation of the transaction
contemplated hereby, and that no broker or other person, firm or entity other
than said named Broker(s) is entitled to any commission or finder's fee in
connection with said 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 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, and/or attorneys' fees
reasonably incurred with respect thereto.
16. TENANCY AND FINANCIAL STATEMENTS.
16.1 TENANCY STATEMENT. Each Party (as "RESPONDING PARTY") shall
within ten (10) business days after written notice from the other Party (the
"REQUESTING PARTY") execute, acknowledge and deliver to the Requesting Party
a statement in writing in a 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 FINANCIAL STATEMENT. If Lessor desires to finance, refinance, or
sell the Premises or the Building, or any part thereof, Lessee and all
Guarantors shall deliver to any potential lender or purchaser designated by
Lessor such financial statements of Lessee and such Guarantors 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. In the
event of a
Initials: RB - DW
---------
TT
---------
MULTI-TENANT - MODIFIED NET
- -C-1993 - AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION REVISED FORM MTN-1-6/93E
PAGE 9 OF 12
<PAGE>
transfer of Lessor's title or interest in 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 15.3, upon such transfer or assignment and
delivery of the Security Deposit, as aforesaid, the prior Lessor shall be
relieved of all liability with respect to the obligations and/or covenants
under this Lease thereafter to be performed by the Lessor. Subject to the
foregoing, the obligations and/or covenants in this Lease to be performed by
the Lessor shall be binding only upon the Lessor as hereinabove defined.
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 ten (10)
days following the date on which it was due, shall bear interest from the
date due at the prime rate charged by the largest state chartered bank in the
state in which the Premises are located plus four percent (4%) per annum, but
not exceeding the maximum rate allowed by law, in addition to the potential
late charge provided for in Paragraph 13.4.
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 other prior or contemporaneous agreement or understanding shall be
effective. Lessor and Lessee each represents and warrants to the Brokers that
it has made, and is relying solely upon, its own investigation as to the
nature, quality, character and financial responsibility of the other Party to
this Lease and as to the nature, quality and character of the Premises.
Brokers have no responsibility with respect thereto or with respect to any
default or breach hereof by either Party. Each Broker shall be an intended
third party beneficiary of the provisions of this Paragraph 22.
23. NOTICES.
23.1 NOTICE REQUIREMENTS. All notices required or permitted by this
Lease shall be in writing and may be delivered in person (by hand or
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 during normal business hours, 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, except that upon Lessee's taking possession of the Premises, the
Premises shall constitute Lessee's address for the purpose of mailing or
delivering notices to Lessee. A copy of all notices required or permitted to
be given to Lessor hereunder shall be concurrently transmitted to such party
or parties at such addresses as Lessor may from time to time hereafter
designate by written notice to Lessee.
23.2 DATE OF NOTICE. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown
on the receipt card, or if no delivery date is shown, the postmark thereon.
Notices delivered by United States Express Mail or overnight courier that
guarantees next day delivery shall be deemed given upon delivery of the same
by 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 or facsimile confirmation of receipt of the
transmission thereof, provided a copy is also delivered via delivery or mail.
If notice is received on a Saturday or a Sunday or a 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 any other term, covenant or condition hereof. Lessor's
consent to, or approval of, any such 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 Default or Breach by Lessee of any provision hereof. Any payment given
Lessor by Lessee may be accepted by Lessor on account of monies or damages
due Lessor, notwithstanding any qualifying statements or conditions made by
Lessee in connection therewith, which such statements and/or conditions shall
be of no force or effect whatsoever unless specifically agreed to in writing
by Lessor at or before the time of deposit of such payment
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees 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
this Lease. In the event that lessee holds over in violation of this
Paragraph 26 then the Base Rent payable from and after the time of the
expiration or earlier termination of this Lease shall be increased to one
hundred ten percent (110%) for the first thirty (30) days, and thereafter to
two hundred percent (200%) of the Base Rent applicable during the month
immediately preceding such expiration or earlier termination. Nothing
contained herein shall be construed as a consent by Lessor to any holding
over by Lessee.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies
at law or in equity,
28. COVENANTS AND CONDITIONS. All provisions of this Lease to be observed
or performed by Lessee are both covenants and conditions.
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 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
pursuant to Paragraph 13.5. 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 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 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 Premises, Lessee and lessor shall execute
such further writings as may reasonably required to separately document any
such subordination or non-subordination, attornment and/or non-disturbance
agreement as is provided for herein.
31. ATTORNEYS' 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) in any such proceeding, action, or appeal thereon,
shall be entitled to reasonable attorneys' fees. Such fees may be awarded in
the same suit or recovered in a separate suit, whether or not such action or
proceeding is pursued to decision or judgment. The term "PREVAILING PARTY"
shall include, without limitation, a Party or Broker who substantially
obtains or defeats the relief sought, as the case may be, whether by
compromise, settlement, judgement, or the abandonment by the other Party or
Broker of its claim or defense. The attorneys' fee award shall not be
computed in accordance with any court fee schedule, but shall be such as to
fully reimburse all attorneys' fees reasonably incurred. Lessor shall be
enticed to attorneys' fees, costs and expenses incurred in preparation and
service of notices of Default and consultations in connection therewith,
whether or not a legal action is subsequently commenced in connection with
such Default or resulting Breach. Broker(s) shall be intended third party
beneficiaries of this Paragraph 31.
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 en
emergency, and otherwise at reasonable times after twenty-four (24) hours'
prior written 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, as Lessor may
reasonably deem necessary.
Initials: RB - DW
---------
TT
---------
MULTI-TENANT - MODIFIED NET
- -C-1993 - AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION REVISED FORM MTN-1-6/93E
PAGE 10 OF 12
<PAGE>
Lessor may at any time place on or about the Premises or Building any
ordinary "For Sale" signs and Lessor may at any time during the last one
hundred eighty (180) 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 shall not place any sign upon the exterior of the Premises
or the Building, except that 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 so long as such signs are in a location
designated by Lessor and comply with Applicable Requirements and signage
criteria established for the Industrial Center by Lessor. 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). Unless otherwise expressly agreed herein, Lessor reserves
all rights to the use of the roof of the Building, and the right to install
advertising signs on the Building, including the roof, which do not
unreasonably interfere with the conduct of Lessee's business; Lessor shall be
entitled to all revenues from such advertising signs.
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 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' and other
consultants' fees) incurred in the consideration of, or response to, a
request by Lessee for any Lessor consent pertaining to this Lease or the
Premises, including, but not limed to, consents to an assignment, a
subletting or the presence or use of a Hazardous Substance, shall be paid by
Lessee to Lessor upon receipt of an invoice and supporting documentation
therefor. In addition to the deposit described in Paragraph 12.2(a), 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.
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 b 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
impositions 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 FORM OF GUARANTY. If there are to be any Guarantors of this
Lease per Paragraph 1.11, the form of the guaranty to be executed by each
such Guarantor shall be in the form most recently published by the American
Industrial Real Estate Association, and each such Guarantor shall have the
same obligations as Lessee under this Lease, including, but limited to, the
obligation to provide the Tenancy Statement and information required in
Paragraph 16.
37.2 ADDITIONAL OBLIGATIONS OF GUARANTOR. 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 resolution of its board of directors
authorizing the making of such guaranty, together with a certificate of
incumbency showing the signatures of the persons authorized to sign on its
behalf, (b) current financial statements of Guarantor as may from time to
time be requested by Lessor, (c) a Tenancy Statement, 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 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.
39.1 DEFINITION. As used in this Lease, the word "OPTION" has the
following meaning: (a) the right to extend the term of this Lease or to renew
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
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.
40. RULES AND REGULATIONS. Lessee agrees that it will abide by, and keep and
observe all reasonable non-discriminatory rules and regulations ("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 the Building and the Industrial Center 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 the right, from time to time, to grant,
without the consent or joinder of Lessee, such easements, rights of way,
utility raceways, and dedications that Lessor deems necessary, and to cause
the recordation of parcel maps and restrictions, so long as such easements,
rights of way, utility raceways, dedications, maps and restrictions do not
unreasonably interfere with the use of the Premises by Lessee. Lessee agrees
to sign any documents reasonably requested by Lessor to effectuate any such
easement rights, dedication, map or restrictions.
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to
any amount or sum of money to be paid by one Party to the other under the
provisions hereof, the Party against whom the obligation to pay the money is
asserted shall have the right to make payment "UNDER PROTEST" and such
payment shall not be regarded as a voluntary payment and there shall survive
the right on the part of said Party to institute suit for recovery of such
sum. If it shall 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
Initials: RB - DW
---------
TT
---------
MULTI-TENANT - MODIFIED NET
- -C-1993 - AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION REVISED FORM MTN-1-6/93E
PAGE 11 OF 12
<PAGE>
represents and warrants that he or she is duly authorized to execute and
deliver this Lease on its behalf.
45. CONFLICT. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the
typewritten or handwritten provisions.
46. OFFER. Preparation of this Lease by either Lessor or Lessee or Lessor's
agent or Lessee's agent and submission of same to Lessee or Lessor shall not be
deemed an offer to lease. This Lease is not intended to be binding until
executed and delivered by all Parties hereto.
47. AMENDMENTS. This Lease may be modified only in writing, signed by the
Parties in interest at the time of the modification. 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. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional insurance company or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the
property of which the Premises are a part.
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.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. 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 YOUR ATTORNEY'S
REVIEW AND APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED TO EVALUATE THE
CONDITION OF THE PROPERTY FOR THE POSSIBLE PRESENCE OF ASBESTOS,
UNDERGROUND STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO REPRESENTATION OR
RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
OR BY THE REAL ESTATE BROKERS OR THEIR CONTRACTORS, 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 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 and on the dates
specified above their respective signatures.
Executed at: Los Angeles, CA Executed at:
-------------------------- --------------------------
on: October 29, 1998 on:
------------------------------------ -----------------------------------
BY LESSOR: BY LESSEE:
3002 Pennsylvania Avenue, LLC Mossimo, Inc., a Delaware corporation
- --------------------------------------- --------------------------------------
- --------------------------------------- --------------------------------------
By: /s/ Richman Bry, Jr. By: /s/ Thora Thoroddsen
------------------------------------ -----------------------------------
Name Printed: Richman Bry, Jr. Name Printed: Thora Thoroddsen
-------------------------- -------------------------
Title: Manager Title: Secretary Treasurer
--------------------------------- --------------------------------
By: /s/ David R. Wilson By:
------------------------------------ -----------------------------------
Name Printed: David R. Wilson Name Printed:
-------------------------- -------------------------
Title: Manager Title:
--------------------------------- --------------------------------
Address: Address:
------------------------------- ------------------------------
- --------------------------------------- --------------------------------------
Telephone: ( ) Telephone: ( )
--- ----------------------- --- ----------------------
Facsimile: ( ) Facsimile: ( )
--- ----------------------- --- ----------------------
BROKER: BROKER:
Executed at: Executed at:
--------------------------- -------------------------
on: on:
------------------------------------ -----------------------------------
By: By:
------------------------------------ -----------------------------------
Name Printed: Name Printed:
-------------------------- -------------------------
Title: Title:
--------------------------------- --------------------------------
Address: Address:
------------------------------- ------------------------------
- --------------------------------------- --------------------------------------
Telephone: ( ) Telephone: ( )
--- ----------------------- --- ----------------------
Facsimile: ( ) Facsimile: ( )
--- ----------------------- --- ----------------------
NOTE: These forms are often modified to meet changing requirements of law end
needs of the industry. Always write or call to make sure you are
utilizing the most current form: AMERICAN INDUSTRIAL REAL ESTATE
ASSOCIATION, 700 South Flower Street, Suite 600, Los Angeles,
California 90017. (213) 687-8777
Initials: RB - DW
----------
TT
----------
MULTI-TENANT - MODIFIED NET
- -C-1993 - AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION REVISED FORM MTG-1-6/93E
PAGE 12 OF 12
<PAGE>
FIRST ADDENDUM TO LEASE
BY AND BETWEEN
3002 PENNSYLVANIA AVENUE LLC ("LESSOR")
AND
MR. MOSSIMO GIANNULLI, AN INDIVIDUAL ("LESSEE")
This is a First Addendum to that Standard Industrial Lease dated July 20, 1998
by and between 3002 Pennsylvania Avenue LLC. ("Lessor") and Mr. Mossimo
Giannulli as an individual, ("Lessee"). This Addendum relates to the premises
at 3002 Pennsylvania Avenue, Santa Monica, California 90404 (the "Premises").
This First Addendum is a part of the Lease and a continuation thereof. To the
extent any provision of this Addendum changes or is inconsistent with the
Lease, the provisions of this First Addendum shall control.
1. Referring to paragraph 5 of the Lease, any references to attorney's fees
therein shall be a to "reasonable attorney's fees".
2. Referring to paragraph 8.2 of the Lease, the reference thereto of
$1,000,000 per occurrence shall be changed to $2,000,000. However, in the
event Lessor requests same, Lessee shall increase that amount up to
$5,000,000, but Lessor shall pay any additional cost of such insurance above
that which would have been incurred for a $2,000,000 policy.
3. Referring to paragraph 31, of the Lease, the attorney's fees and costs
shall be reasonable under the circumstances.
4. BROKERS' COMMISSION. Lessor and Lessee acknowledges that there are no
Brokers involved in connection with this Lease and/or Lessee's occupancy
of the Premises. Lessee confirms that it has not engaged any broker in
connection with this Lease. David Wilson is a principle of Lee &
Associates and 3002 Pennsylvania LLC. He is not acting as a Broker.
5. TENANT IMPROVEMENTS. The premises shall be delivered to Lessee in a
finished shell condition per the attached building plans and specifications
(Exhibit D) which will be approved by the City of Santa Monica Building
Department including without limitation the condition of the ceilings,
interior brick and windows. All Tenant Improvements shall be paid for by
Lessee. All Tenant improvements made by Lessee shall become the property of
Lessor upon expiration or earlier termination of the Lease. Lessee agrees that
included in the Improvements to be constructed by Lessee shall be sound
proofing insulation to be installed in the Premises as and where reasonably
requested by Lessor, including without limitation all floor surfaces. Such
sound insulation shall be defined as standard commercial carpet, floor
covering or any other reasonable surface, and shall be of type and quality
reasonably acceptable to Lessor. All floors and walls to be adequately sound
insulated, All ceiling heights to be a minimum of 10 foot finished.
In accordance with paragraph 7 of the Lease, all Tenant Improvements to
be constructed on the Premises shall be constructed by Lessee at Lessee's
expense.
Page 1
<PAGE>
The public liability insurance and property damage insurance carried by
each contractor of Lessee shall insure Lessor and Lessee, as their interests
may appear, as well as the contractor (or subcontractor), and each contractor
shall deliver to Lessor a copy of all insurance policies which shall provide
at least thirty (30) days prior written notice to Lessor and Lessee of any
cancellation.
Lessee shall try to utilize the same contractors who installed the base
electrical, fire and safety (including sprinkler) and HVAC for Lessee's
Leasehold Improvements. However, in the event such contractors are not
utilized, and a dispute arises as to defect therein and whose responsibility
those defects are (as between Lessor's contractors and Lessee's contractors),
Lessor and Lessee will select an independent contractor to determine
responsibility for the defect, the parties will share the cost of that
determination, and that determination will be binding upon the parties. In the
event the parties cannot agree in the selection of a contractor, each shall
select a contractor, and the two (2) of them will select a third, and the
contractors will then make the determination by majority vote. In such event,
each party shall pay for their own contractor as selected, and both parties
shall share the cost of the third contractor.
6. RENT SCHEDULE. The base rental schedule during year one for the Premises
is $2.00 per rentable square foot per month triple net, escalating
annually by three and one-half percent (3.5%), compounded. The
rentable/useable add-on factor shall be defined as twelve (12%) percent.
7. PARKING. Four (4) tandem spaces on-site at fifty dollars ($50.00) per
space per month, escalating annually by three and one-half percent
(3.5%), compounded 1-3.
8. BASE BUILDING. Lessor shall provide, the following Base Building work:
a) One (1) ton of HVAC per 500 square feet installed on the roof ducted
to the space. The distribution of HVAC is a tenant cost.
b) Install a sub-meter for electric to separately meter both spaces.
c) Restrooms per Code and ADA approved per the Landlord's plan.
d) Electrical service and panels as per Landlord's plan.
e) Smoke detectors and exit lights installed per local codes.
f) The completion of all site work, landscaping and gating.
g) There is no asbestos or other hazardous materials in or about the
Premises to the best of Landlord's knowledge.
h) Operable windows repaired per plans.
i) Concrete floor in existing "as is" condition.
j) Exterior lighting will be installed per plans.
k) Sandblast the interior.
Page 2
<PAGE>
9. OPTION. Lessee may extend the term of this Lease for one (1) additional
five (5) year period of time upon the terms set forth herein, and Lessee
shall be presumed to have exercised its right to extend this Lease
unless Lessee shall have given Lessor written notice of its election not
to so extend the term of this Lease at least sixty (60) days before the
end of the Original Term.
10. APPROVAL. Notwithstanding anything to the contrary contained in
Paragraph 12 of this Lease, if Lessee requests in writing Lessor's
approval of any assignment or sublet as provided in this Lease, Lessor's
failure to give any such disapproval, on the basis of reasonable grounds
which shall be stated in a reasonably detailed writing delivered to
Lessee within ten (10) business days after such request, shall be deemed
to constitute approval thereof, and shall not result in a breach or
default by Lessee under this Lease.
11. PERMITTED TRANSFERS BY LESSEE. Notwithstanding anything to the contrary
contained is this Lease, Lessee may, without the prior consent of
Lessor, assign this Lease or sublet the premises, or any portion
thereof, to a corporation or other entity which: (i) owns, is owned by
or is under common ownership with Lessee; or (ii) as a result of a
consolidation, merger, acquisition or other reorganization with Lessee,
owns more than 50% of Lessee's stock or assets. Except as provided
below, any such assignment or sublet shall be subject to the following:
(i) Lessee shall remain fully liable during the unexpired term of this
Lease; and (b) any such assignment or sublet shall be subject to all of
the terms, covenants and conditions of this Lease. In addition to the
foregoing, and notwithstanding anything to the contrary contained in
this Lease, Lessee shall have the right, without the prior consent of
Lessor, to assign this Lease or sublet the premises, or any portion
thereof, to any entity which has a net worth computed pursuant to
generally accepted accounting principles consistently applied (as shown
in a financial statement to be delivered by such entity to Lessor at
least ten (10) business days prior to the effective date of such
assignment or sublet) equal to or greater than Lessee; provided that
such entity expressly assumes in writing all of Lessee's obligations
hereunder. Provided the foregoing conditions relating to net worth and
written assumptions of obligations are satisfied, Lessee shall be
released from all of its obligations hereunder upon consummation of such
assignment or sublet.
Page 3
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 97
<SECURITIES> 0
<RECEIVABLES> 6,815
<ALLOWANCES> 2,371
<INVENTORY> 9,832
<CURRENT-ASSETS> 15,031
<PP&E> 7,084
<DEPRECIATION> 2,861
<TOTAL-ASSETS> 19,476
<CURRENT-LIABILITIES> 7,817
<BONDS> 0
0
0
<COMMON> 15
<OTHER-SE> 11,240
<TOTAL-LIABILITY-AND-EQUITY> 19,476
<SALES> 11,001
<TOTAL-REVENUES> 11,628
<CGS> 9,360
<TOTAL-COSTS> 9,360
<OTHER-EXPENSES> 5,494
<LOSS-PROVISION> 123
<INTEREST-EXPENSE> 157
<INCOME-PRETAX> (3,437)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,437)
<EPS-PRIMARY> (.23)
<EPS-DILUTED> (.23)
</TABLE>
