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UNITED STATES
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 June 30, 1996
OR
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-28330
LEGACY SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 95-4221982
(State or other jurisdiction of information or organization) (I.R.S. Employer Identification No.)
</TABLE>
<TABLE>
<S> <C>
5340 Alla Road
Los Angeles, California 90066
(Address of principal executive offices) (Zip Code)
</TABLE>
(310) 823-2423
(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 such 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 No X
----------- -----------
There were 2,432,551 shares outstanding of the registrant's Common Stock, par
value $.001 per share, as of August 13, 1996.
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LEGACY SOFTWARE, INC.
INDEX
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Page No.
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<S> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Balance Sheets at June 30, 1996 and
December 31, 1995 3
Statements of Operations for the three months
ended June 30,1996 and 1995 and the
six months ended June 30, 1996 and 1995 5
Statements of Cash Flows for the six months
ended June 30, 1996 and 1995 6
Notes to Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations for the
three and six months ended June 30, 1996 7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
Exhibits
Exhibit 10.1
Exhibit 11.1
Exhibit 27
</TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
LEGACY SOFTWARE, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . $ 4,157,324 $ 365,190
Accounts receivable, net . . . . . . . . . . . . . . . 53,985 2,951
Development co-funding recognized in excess
of development expense co-funding billings . . . . . 239,408 -
------------- ------------
Total current assets . . . . . . . . . . . . . . . 4,450,717 368,141
Software development costs . . . . . . . . . . . . . . . 466,961 76,507
Property and equipment, net . . . . . . . . . . . . . . . 238,607 84,097
Other Assets:
Deferred loan fees . . . . . . . . . . . . . . . . . . - 17,505
Deferred offering costs . . . . . . . . . . . . . . . - 157,541
Other . . . . . . . . . . . . . . . . . . . . . . . . 39,320 7,099
-------------- --------------
Total assets . . . . . . . . . . . . . . . . . . . $ 5,195,605 $ 710,890
============== ==============
</TABLE>
See accompanying notes to condensed financial statements.
3
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LEGACY SOFTWARE, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ --------------
<S> <C> <C>
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 114,610 $ 9,952
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,973 32,807
Development expense co-funding
billings in excess of development
co-funding recognized . . . . . . . . . . . . . . . . . . . . . . . . . . - 54,637
Deferred revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 399,752 -
Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000 100,000
Notes payable and current portion
of long term debt, primarily related parties . . . . . . . . . . . . . . 120,885 332,842
------------ -----------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . 776,220 530,238
Long term debt and accrued interest,
primarily from related parties, net of current portion . . . . . . . . . . . 563,185 1,005,242
Commitments
Shareholders' equity (deficit)
Preferred Stock, par value $.001 per share, 5,000,000
shares authorized; none issued and outstanding . . . . . . . . . . . . . . - -
Common Stock, par value $.001 per share, 10,000,000
shares authorized; 2,432,551 and 741,000 shares issued
and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,433 741
Additional paid in capital . . . . . . . . . . . . . . . . . . . . . . . . . 6,456,838 546,082
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,603,071) (1,371,413)
------------ ------------
Total shareholders' equity (deficit) . . . . . . . . . . . . . . . . . . 3,856,200 (824,590)
------------ ------------
Total liabilities and shareholders' equity (deficit) . . . . . . . . . . . . . $5,195,605 $ 710,890
============ ============
</TABLE>
See accompanying notes to condensed financial statements.
4
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LEGACY SOFTWARE, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1996 1995 1996 1995
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue:
Royalties . . . . . . . . . . . . . . . $ 1,210 $ 2,700 $ 1,210 $ 6,800
Software sales . . . . . . . . . . . . . 1,351 12,470 5,404 28,849
Consulting . . . . . . . . . . . . . . . 2,125 - 2,125 -
--------- -------- ----------- ---------
Total revenue . . . . . . . . . . . . 4,686 15,170 8,739 35,649
--------- -------- ----------- ---------
Costs and expenses
Cost of royalties . . . . . . . . . . . 25,500 - 51,000 -
Cost of software sales . . . . . . . . . 1,310 11,032 5,160 25,217
Product development . . . . . . . . . . 240,912 - 276,206 -
Selling, general and administrative . . 215,991 53,840 509,891 104,894
--------- -------- ----------- ---------
483,713 64,872 842,257 130,111
--------- -------- ----------- ---------
Loss from operations . . . . . . . . . . . (479,027) (49,702) (833,518) (94,462)
Interest expense . . . . . . . . . . . . . 33,740 14,465 426,204 27,541
Interest income . . . . . . . . . . . . . . (28,064) - (28,064) -
--------- -------- ----------- ---------
Net loss . . . . . . . . . . . . . . . . . (484,703) (64,167) $(1,231,658) $(122,003)
========= ======== =========== =========
Net loss per common share . . . . . . . . . (0.25) (0.05) $(0.74) $(0.09)
========= ========= ========== =========
Weighted average common stock
shares outstanding . . . . . . . . . . . 1,908,690 1,396,218 1,653,870 1,396,218
========= ========= ========= =========
</TABLE>
See accompanying notes to condensed financial statements.
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LEGACY SOFTWARE, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
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<CAPTION>
Six Months Ended June 30,
--------------------------
1996 1995
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<S> <C> <C>
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,231,658) $ (122,003)
Adjustments to reconcile net loss to net
cash used for operating activities:
Amortization of software development costs . . . . . . . . . . 51,000 -
Amortization of deferred loan fees and
original issue discount . . . . . . . . . . . . . . . . . . 355,307 -
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . 11,840 10,580
Issuance of common stock in exchange for services . . . . . . 14,400 -
Increase (decrease) in cash from changes in:
Accounts receivable, net . . . . . . . . . . . . . . . . . . . (51,034) 7,527
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . (32,221) (5,099)
Accounts payable and accrued expenses . . . . . . . . . . . . 112,824 4,421
Development expense co-funding billings in
excess of development expense co-funding
recognized . . . . . . . . . . . . . . . . . . . . . . . . . (294,045) 55,170
Deferred revenues . . . . . . . . . . . . . . . . . . . . . . 399,752 -
----------- ----------
Net cash used for operating activities . . . . . . . . . . . (663,835) (49,404)
----------- ----------
Cash flows from investing activities:
Purchase of property and equipment . . . . . . . . . . . . . . . . (166,350) -
Software development costs . . . . . . . . . . . . . . . . . . . . (441,454) (80,374)
----------- -----------
Net cash used in investing activities . . . . . . . . . . . (607,804) (80,374)
----------- ----------
Cash flows from financing activities:
Borrowings on notes payable . . . . . . . . . . . . . . . . . . . 8,184 124,585
Payments on notes payable . . . . . . . . . . . . . . . . . . . . (300,000) -
Net proceeds from initial public offering . . . . . . . . . . . . 5,355,589 -
----------- ----------
Net cash provided by financing activities . . . . . . . . . 5,063,773 124,585
----------- ----------
Increase (decrease) in cash and cash equivalents . . . . . . . . . . 3,792,134 (5,193)
Cash and cash equivalents, at beginning of period . . . . . . . . . . 365,190 20,750
----------- ----------
Cash and cash equivalents, at end of period . . . . . . . . . . . . . $ 4,157,324 $ 15,557
=========== ==========
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 80,238 $ 9,183
=========== ==========
Non-cash investing and financing activity:
A convertible note payable in the amount of $700,000 was
converted into 534,351 shares of common stock during the
Company's six months ended June 30, 1996.
</TABLE>
See accompanying notes to condensed financial statements.
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LEGACY SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS
(1) Basis of presentation
The financial information included herein is unaudited; however, such
information reflects all adjustments, consisting of only normal recurring
accruals, which are, in the opinion of management, necessary to present fairly
the Company's financial position at June 30, 1996, the results of operations
for the three and six months ended June 30, 1996 and 1995 and the cash flows
for the six months ended June 30, 1996 and 1995. Operating results for the
three- and six-month periods ended June 30, 1996, are not necessarily
indicative of the results that may be expected for the year ending December 31,
1996.
The information contained in this Form 10-Q should be read in
conjunction with the audited financial statements as of December 31, 1995 filed
as part of the Company's registration statement on Form S-1 (File No.
333-1054).
(2) Deferred Revenues
The Company has recorded $399,752 in deferred revenues relating to
amounts received from IBM relating to the Emergency Room title co-developed
with IBM. The Company will not recognize royalty revenue relating to the
Emergency Room title until it can reasonably estimate future product returns
and comply with Statement of Financial Accounting Standards No. 48 ("SFAS 48").
(3) Initial Public Offering
In May 1996, the Company completed an initial public offering of
1,150,000 shares of its common stock. Net proceeds to the Company were
$5,175,000 after deducting all offering-related expenses. The Company expects
to use the majority of the net proceeds to develop additional RealPlay
(formerly Career Sim(TM)) titles and for working capital purposes.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
Safe Harbor Statement
This report includes certain forward-looking statements regarding the
Company's expectations about growth, new and existing products, technologies
and opportunities that involve risks and uncertainties. These risks are
discussed in this report and in the Company's Registration Statement on Form
S-1 (File No. 333-1054) filed with the Securities and Exchange Commission on
February 7, 1996.
General
The Company completed an initial public offering of 1,150,000 shares
of its common stock, par value $.001 per share (the "Common Stock"), on May 17,
1996. The Company was incorporated in California in 1989 and reincorporated in
Delaware in March 1996. The Company develops edutainment CD-ROM computer
software. An edutainment product combines entertainment and education content
for home and educational use, in which learning is an integral part of playing
a game.
International Business Machines Corporation ("IBM") is currently
marketing the Emergency Room title, the Company's first RealPlay (formerly
Career Sim(TM)) series title, which the Company co-developed with IBM. To
date, IBM has not provided the Company with sufficient timely financial data
and information about sales and consignment shipments of the Emergency Room
title for the Company to recognize royalty revenue on the accrual basis in
accordance with Statement of Accounting Standards No. 48 ("SFAS 48"). There
can be no assurance that IBM will provide the Company with sufficient financial
data and information in order for the Company to recognize royalty revenue on
such title in accordance with SFAS 48 which may have material adverse effect
on the Company's business, operating results and financial position. The
Company is currently co-developing the District Attorney title, the
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Company's second RealPlay (formerly Career Sim(TM)) series title, with IBM.
Results of Operations
For the three months ended June 30, 1996 compared to the three months ended
June 30, 1995
For the three months ended June 30, 1996, revenues decreased by 69%,
from $15,170 to $4,686. This $10,484 decrease is due primarily to a decrease
in software sales as unit sales of the Company's self-developed software titles
continue to decrease due to the introduction of competing software titles
designed to better take advantage of the new personal computer hardware
available. No royalty revenue from the Emergency Room title co-developed with
IBM has been recognized in either period presented. The Company will not
recognize royalty revenue from IBM unless it can comply with SFAS 48. There
can be no assurance, however that IBM will provide the Company with sufficient
financial data and information in order for the Company to recognize royalty
revenue on the accrual basis in accordance with SFAS 48. Royalty revenues on
consignment shipments made by IBM will only be recognized when both (i) the
Company receives evidence of product sell-through from IBM and (ii) the Company
can comply with SFAS 48. Royalty revenue recognized during the three months
ended June 30, 1996 and 1995 related to other titles.
Cost of royalties increased from $0 to $25,500. The increase is due
to the amortization of capitalized software development costs associated with
the development of the Emergency Room title. Cost of software sales decreased
by $9,722 or 88% during the three months ended June 30, 1996 due to a decline
in sales of the Company's self-developed software titles during the three
months ended June 30, 1996 compared to 1995.
Product development expenses, which are net of co-funded development
expenses, increased by $240,912. This increase is primarily due to the Company
capitalizing product development expenses incurred during the three months
ended June 30, 1995 since technological feasibility had been attained.
Technological feasibility was attained for the District Attorney title during
May, 1996, prior to which all product development expenses were not
capitalized.
Selling, general and administrative expenses increased by 301%, from
$53,840 to $215,991. This $162,151 increase is almost entirely due to the
increase in the Company's overhead structure resulting from an increase in the
number of employees.
Interest expense increased from $14,465 to $33,740. This $19,275
increase relates primarily to the interest expense relating to that certain
Convertible Note in the original principal amount of $1,000,000 payable in EBC
Trust Corporation (the "Convertible Note") obtained by the Company on November
21, 1995 and retired during May 1996. The Company also had interest income of
$28,064 during the period primarily as a result of interest earned on the net
proceeds of the initial public offering.
For the six months ended June 30, 1996 compared to the six months ended June
30, 1995
For the six months ended June 30, 1996, revenues decreased by 75%,
from $35,649 to $8,739. This $26,910 decrease is due primarily to a decrease
in software sales as unit sales of the Company's self-developed software titles
continue to decrease due to the introduction of competing software titles
designed to better take advantage of the new personal computer hardware
available. No royalty revenue from the Emergency Room title co-developed with
IBM has been recognized in either period presented. The Company will not
recognize royalty revenue from IBM unless it can comply with SFAS 48. There
can be no assurance, however, that IBM will provide the Company with sufficient
financial data and information in order for the Company to recognize royalty
revenue on the accrual basis in accordance with SFAS 48. Royalty revenues on
consignment shipments made by IBM will only be recognized when both (i) the
Company receives evidence of product sell-through from IBM and (ii) the Company
can comply with SFAS 48. Royalty revenue recognized during the six months
ended June 30, 1996 and 1995 related to other titles.
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Cost of royalties increased from $0 to $51,000. The increase is due
to the amortization of capitalized software development costs associated with
the development of the Emergency Room title. Cost of software sales decreased
by $20,057 or 80% during the six months ended June 30, 1996 due to a decline in
sales of the Company's self-developed software titles during the six months
ended June 30, 1996 compared to 1995.
Product development expenses, which are net of co-funded development
expenses, increased by $276,206. This increase is primarily due to the Company
capitalizing product development expenses incurred during the six months ended
June 30, 1995 since technological feasibility had been attained. Technological
feasibility was attained for the District Attorney title during May, 1996,
prior to which all product development expenses were not capitalized.
Selling, general and administrative expenses increased by 386%, from
$104,894 to $509,891. This $404,997 increase is almost entirely due to the
increase in the Company's overhead structure resulting from an increase in the
number of employees.
Interest expense increased from $27,541 to $426,204. This $398,663
increase relates primarily to the interest expense and the amortization of the
original issue discount and loan costs incurred relating to the Convertible
Note obtained by the Company on November 21, 1995. The Company also had
interest income of $28,064 during the period primarily as a result of interest
earned on the net proceeds of the initial public offering.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital position as of June 30, 1996 is
$3,674,497 as compared to a negative $162,097 as of December 31, 1995. This
significant improvement is a result of the successful completion of an initial
public offering of the Company's common stock during May, 1996. The Company
used $300,000 of the net proceeds to repay indebtedness, while the majority of
the remaining net proceeds will be used to develop additional RealPlay
(formerly Career Sim(TM)) software titles and for working capital purposes. In
conjunction with the initial public offering, the holder of the Convertible
Note converted $700,000 of the Note into common stock of the Company. In order
to prepare for anticipated growth, the Company moved its headquarters by
entering into a three-year lease for approximately 15,309 square feet of
rentable office space at a monthly rent of $16,074.
The Company had $663,835 in cash outflows from operating activities
for the six months ended June 30, 1996 compared to using $49,404 for operating
activities during the first six months of 1995. The increase in outflows of
$614,431 between 1996 and 1995 operating cash flow primarily resulted form an
increase in the net loss after adjustments for non-cash items in operations of
$687,688, an increase in the change in accounts receivable of $58,651 and an
increase of $349,215 in the change of development co-funding recognized in
excess of development expense co-funding billings. This has been offset by
increases in the change in deferred revenues of $399,752 and an increase in the
change in accounts payable and accrued expenses of $108,403.
Investing activities in the first six months of 1996 consisted of
purchases of computer equipment and construction of leasehold improvements
totaling $166,350 and the capitalization of software development costs related
to the District Attorney title of $441,454. In the first six months of 1995
investing activities consisted of $80,374 in software development costs
associated with the Emergency Room title.
The Company had cash inflows of $5,063,773 from financing activities
for the first six months of 1996 compared to the first six months of 1995 which
provided $124,585 from financing activities. In May 1996, the Company
successfully completed an initial public offering. Net cash received by the
Company from this transaction for the six months ended June 30, 1996 was
$5,355,589, after deducting all offering related expenses incurred during 1996.
The majority of the net proceeds will be used by the Company to develop
additional RealPlay (formerly Career Sim(TM)) titles and to repay $300,000 of
the Convertible Note and for working capital purposes. Cash inflows of
$124,585 for the first six months of 1995 consisted solely of additional
borrowings.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is neither currently a party to nor is any of its property
the subject of any legal proceedings which would be material to the business or
financial condition of the Company.
ITEM 2. CHANGES IN SECURITIES.
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
ITEM 5. OTHER INFORMATION.
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following exhibits are included herewith:
Exhibit 10.1 - Sublease, dated May 31, 1996, by and between
Gilda Marx Incorporated and Legacy Software,
Inc.
Exhibit 11.1 - Weighted Average of Common Stock Shares
Outstanding
Exhibit 27 - Financial Data Schedule.
(b) The Company filed no reports on Form 8-K during the quarter
for which this report is filed.
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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.
Date: August 13, 1996 LEGACY SOFTWARE, INC.
/s/ WILLIAM E. SLINEY
------------------------------------------
William E. Sliney
Vice President and Chief Financial Officer
(Duly Authorized Officer and Principal
Financial and Accounting Officer)
11
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EXHIBIT 10.1
This Sublease, dated, for reference purposes only, May 31, 1996, is
made by and between GILDA MARX INCORPORATED, a California corporation (herein
called "Sublessor") and LEGACY SOFTWARE, INC., a Delaware corporation (herein
called "Sublessee").
1. DEFINITIONS, SCHEDULES AND ADDENDA.
1.1 DEFINITIONS.
(a) Premises shall mean a portion of the
Sublessor's second floor premises of the southwest portion of said premises as
described in Exhibit A attached hereto and made a part of this Sublease.
(b) Building shall mean that certain real
property located at 5340 Alla Road, Los Angeles, California.
(c) Sublessee's Rentable Square Footage shall
mean approximately 15,309 rentable square feet; Sublessor's Rentable Square
Footage shall mean 53,963 rentable square feet. Total Square Footage of the
Building shall mean 109,360 rentable square feet.
(d) Sublease Commencement Date shall mean June 1,
1996 or the date of signature of this Sublease by Sublessor and Sublessee, and
consent of Master Lessor, whichever is later. Sublease Expiration Date shall
mean May 31, 1999. Sublease Term shall mean the period between Sublease
Commencement Date and Sublease Expiration Date. The dates set forth in this
Paragraph 1.1 (d) are subject to adjustment pursuant to the terms of Paragraph
3.2 of this Sublease.
(e) Base Year shall mean the calendar year 1996.
(f) Master Lessor shall mean AMC Associates, a
California limited partnership.
(g) Base Rent. During the first 12 months of
Sublease term after the Base Rent Commencement Date, Sublessee's Base Rent
shall mean $192,893.40 ($12.60 per square foot of Sublessee's Rentable Square
footage) per year, payable in monthly installments of $16,074.45, subject to
the Rent Abatement described in Paragraph 4.1 below. Base Rent Commencement
Date shall be July 1, 1996, subject to the terms of Paragraph 3 of this
Sublease.
(h) Sublessee's Pro Rata Share shall mean 28.36%
of Sublessor's Premises. Sublessee's Pro Rata Share of the Building shall mean
13.99%. For purposes of Paragraph 4.2, Sublessee's Pro Rata Share of Excess
Operating Costs for the first 12 months of the Sublease Term after the Base
Rent Commencement Date is estimated to be $0.00 ($0.00 per square foot of
Sublessee's Rentable Square Footage) payable in monthly installments of $0.00,
subject to adjustment pursuant to Paragraph 3.2 and 4.2 below.
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(i) Security Deposit shall mean $16,074.45.
(j) Permitted Uses. The Premises may be used and
occupied for general office purposes, and for no other purpose except with the
written consent of the Master Lessor, which consent shall not be unreasonably
withheld, conditioned or delayed.
(k) Authorized Number of Parking Spaces.
Sublessee shall be entitled to a ratio of two and one-half (2.5) parking spaces
for every one thousand Rentable Square Feet of the Sublessee's Rentable Square
Footage the location of which shall be 20 spaces at the front of the building
as set forth on Exhibit "B" attached hereto, and the remainder unreserved
spaces located at the reasonable discretion of Sublessor and Master Lessor.
(l) Brokers shall mean Travers Realty Corporation
and Tooley & Company.
(m) Master Lessor's Mailing Address: AMC
Associates, c/o Tooley & Co., 3303 Wilshire Boulevard, Suite 1200, Los Angeles,
California 90010. Attention: Mr. Bruce Beatty.
(n) Sublessor's Mailing Address: c/o Gilda Marx,
5340 Alla Road, Los Angeles, California 90066.
(o) Sublessee's Mailing Address following
Commencement Date: c/o Legacy Software, Inc., 5340 Alla Road, Los Angeles,
California 90066.
1.2 EXHIBITS AND ADDENDA. The exhibits listed below
are incorporated into this Sublease by reference unless lined out. The terms
of exhibits and addenda, if any, attached or added hereto shall control over
any inconsistent provisions in the paragraphs of this Sublease, except that in
the event of a conflict between the terms of this Sublease and the Master
Lease, the terms of this Sublease shall control:
(a) Exhibit A; Description of Premises and Floor Plan
(b) Exhibit B; Location of Assigned Parking Spaces
(c) Exhibit C; Master Lease (including Addendum, Notice of Lease
Term Dates, First, Second and Third Amendments
thereto and February 4, 1994 letter agreement)
(d) Exhibit D; List of Hazardous Materials
(e) Exhibit E; Expansion Space Subject to Right of First Offer.
2. PREMISES.
2.1 SUBLEASE OF PREMISES. In consideration of the Rent
and the provisions of this Sublease, Sublessor hereby subleases to Sublessee
and Sublessee hereby subleases from Sublessor for the Sublease Term, at the
rental, and upon all of the
2
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conditions set forth herein the Premises. Sublessee's Rentable Square Footage
is a stipulated amount based upon BOMA standards of measurement for rental
purposes. Sublessor and Sublessee shall not remeasure the Premises during the
Sublease Term unless the size of the Premises shall be adjusted by agreement of
Sublessor and Sublessee. The Premises, as outlined in Exhibit A attached
hereto, shall include rights to the use of Sublessor's Common Areas, and Common
Areas of the Building. The Premises are a portion of Sublessor's premises
which are a portion of the Building. The Premises, the Sublessor's Premises,
the Building, the Common Areas of the Building, the land upon which the same
are located are herein collectively referred to as the "Industrial Center."
3. TERM.
3.1 TERM. Unless sooner terminated pursuant to any
provision hereof, the term of this Sublease shall commence on June 17, 1996 and
end on June 30, 1999, subject, however, to any earlier termination pursuant to
the terms of the Master Lease, as defined below. Notwithstanding the
foregoing, if the Master Lease is terminated due to the fault of Sublessor,
Sublessee's right to quiet possession of the Premises shall not be disturbed if
Sublessee is not in default and Sublessee attorns to the Master Lessor and
Sublessee shall continue to pay the Base Rent and all other charges payable
under the Sublease to the Master Lessor.
3.2 DELAY IN COMMENCEMENT. Notwithstanding the Sublease
Commencement Date, if for any reason Sublessor cannot deliver possession of the
Premises to Sublessee on said date, Sublessor shall not be subject to any
liability therefore, nor shall such failure affect the validity of this
Sublease or the obligations of Sublessee hereunder or extend the term hereof,
but in such case Sublessee shall not be obligated to pay rent until possession
of the Premises is tendered to Sublessee; provided, however, that if Sublessor
shall not have delivered possession of the Premises on or before August 1,
1996, Sublessee may, at Sublessee's option, by notice in writing to Sublessor
within ten (10) days thereafter, cancel this Sublease, in which event the
parties shall be discharged from all obligations thereunder. If Sublessee
occupies the Premises prior to the Sublease Commencement Date, such occupancy
shall be subject to all provisions hereof, and shall not advance the
termination date.
4. RENT.
4.1 RENT ABATEMENT PERIOD. Notwithstanding anything to
the contrary herein, during the first two months of the Term, Sublessor agrees
that Sublessee shall have no obligation to pay Sublessor any rent of any kind.
The abated rent concession set forth in this paragraph shall not diminish or
otherwise modify any of Sublessee's non-monetary obligations under this
Sublease and Master Lease during such period, and all other terms and
conditions
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of this Sublease and Master Lease shall remain in full force and effect.
4.2 RENT. Upon Sublessor and Master Lessor's delivery
to Sublessee of a fully executed Sublease, Sublessee shall pay its first
monthly installment of the Base Rent in the amount of $16,074.45 which
represents the third month's rent after the Base Rent Commencement Date
(subject to Article 1.1 (h), 3.2 and 4.1 above). Sublessee shall pay to
Sublessor, without any offset or deduction, except as may be otherwise
expressly provided in this Sublease, each monthly installment of Base Rent in
advance on the first Calendar day of each month. For the Base Year, Sublessee
shall not pay Sublessee's Pro Rata Share of Excess Operating Expenses.
Sublessee's Base Rent shall constitute Sublessee's entire rental obligation
during such twelve month period. On the first calendar day of each month of
each calendar year following the Base Year, Sublessee shall pay to Sublessor,
without any offset or deduction, except as may be otherwise expressly provided
in this Sublease, each monthly installment of Base Rent in advance together
with each monthly installment of applicable Sublessee's Pro Rata Share of
Sublessor's Excess Operating Expenses (i.e., increase in Operating Expenses
over the Base Year Operating Expenses). Monthly Installments for any
fractional calendar month, at the beginning or end of the Sublease Term, shall
be prorated based on the number of days in such month. Rent shall be payable
in lawful money of the United States to Sublessor at the address stated herein
or to such other persons or at such other places as Sublessor may designate in
writing.
4.2 (A) If during any year after the Base Year, Sublessor's
share of Operating Expenses (Sublessor's share is referred to as "Lessee's
Share" in Section 4.2(a) of the Master Lease) shall exceed Sublessor's Share of
Operating Expenses in the Base Year, Sublessee shall pay to Sublessor, in
addition to the Base Rent and all other payments under this Sublease, an amount
(the "Operating Expense Increase") equal to the applicable Sublessee's Pro Rata
Share of the increase in Operating Expenses exceeding the Base Year Operating
Expenses.
4.2 (B) The Operating Expense Increase shall be payable by
Sublessee within ten (10) days after Sublessee receives a reasonably detailed
statement of the applicable operating increases based on expenses presented to
Sublessee by Sublessor which are a Pro Rata Share of the expenses Sublessor is
obligated to pay under the Master Lease. In the event the Master Lessor under
the Master Lease estimates from time to time the amount of Sublessor's Share of
the Operating Expenses, payable monthly or quarterly, as Master Lessor shall
designate, then Sublessee shall pay Sublessee's Pro Rata Share of the Operating
Expense Increase that Sublessee is responsible for under 4.2 and 4.2 (a) herein
on the same day as the Base Rent is due hereunder. After the Base Year, in the
event that Sublessee is required to pay Sublessee's Pro Rata Share of the
Operating Expense Increase as aforesaid, Sublessor shall deliver to
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Sublessee within ten (10) days after Master Lessor, under the Master Lease,
delivers such statement to Sublessor, a reasonably detailed statement showing
the actual Operating Expense Increases incurred during the preceding year. If
Sublessee's payments under this Paragraph 4.2 (b) during said preceding year
exceed the operating expense increase payable by Sublessee as indicated on such
statement, the excess shall be deducted from Operating Expense Increases next
falling due. If Sublessee's payments under this paragraph during said
preceding year were less than the operating expense increase payable by
Sublessee as indicated on said statement, Sublessee shall pay to Sublessor the
amount of the deficiency within ten (10) days after delivery by Sublessor to
Sublessee of said statement.
5. SECURITY DEPOSIT. Sublessee shall deposit with Master
Lessor upon execution hereof one month's rent as security for Sublessee's
faithful performance of Sublessee's obligations hereunder. If Sublessee fails
to pay rent or other charges due hereunder, or otherwise defaults with respect
to any provision of this Sublease, Sublessor may use, apply or retain all or
any portion of said deposit for the payment of any rent or other charge in
default or for the payment of any other sum to which Sublessor may become
obligated by reason of Sublessee's default, or to compensate Sublessor for any
loss or damage which Sublessor may suffer thereby. If Sublessor so uses or
applies all or any portion of said deposit, Sublessee shall with ten (10) days
after written demand therefore deposit cash with Sublessor in an amount
sufficient to restore said deposit to the full amount hereinabove stated from
its general accounts. If Sublessee performs all of Sublessee's obligations
hereunder, said deposit, or so much thereof as has not theretofore been applied
by Sublessor, shall be returned, without payment of interest or other increment
for its use to Sublessee (or at Sublessor's option, to the last assignee, if
any, of Sublessee's interest hereunder) at the expiration of the term hereof,
and after Sublessee has vacated the Premises. No trust relationship is created
herein between Sublessor and Sublessee with respect to said Security Deposit
and said Security Deposit shall not be required to be kept in a separate
account.
6. USE.
6.1 USE. The Premises shall be used and occupied only
for Permitted Uses and for no other purpose.
6.2 (A) Sublessee shall, at Sublessee's expense, comply
promptly with all applicable statutes, ordinances, rules, regulations, orders,
restrictions of record, and requirements in effect during the term or any part
of the term hereof regulating the use by Sublessee of the Premises and the
occupation and use by Sublessee of the Premises and the Common Areas, as such
term is defined at Paragraph 2.3 of the Master Lease. Sublessee shall not use
or permit the use of the Premises or the Common Areas in any manner that
creates waste or a nuisance or, if there shall be more
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than one tenant of the building containing the Premises, which shall tend to
disturb such other tenants.
6.3 CONDITION OF PREMISES. Sublessee hereby accepts the
Premises in their as is condition existing as of the date of the execution
hereof, subject to all applicable zoning, municipal, county and state laws,
ordinances, and regulations governing and regulating the use of the Premises,
and accepts this Sublease subject thereto and to all matters disclosed thereby
and by any exhibits attached hereto. Sublessee acknowledges that neither
Sublessor nor Sublessor's agents have made any representation or warranty as to
the suitability of the Premises for the conduct of Sublessee's business.
Notwithstanding the foregoing, Sublessor represents and warrants that on the
Sublease Commencement Date the Premises shall be clean and free of debris and
that the roof, Building structure, plumbing, lighting, air conditioning and
heating shall be in good operating condition, and all damaged ceiling tiles
shall be replaced.
7. INSURANCE. Sublessee shall, at Sublessee's expense,
obtain and keep in force during the term of this Sublease a policy of Combined
Single Limit Bodily Injury and Property Damage insurance insuring Sublessee,
Sublessor and Master Lessor against any liability arising out of the use,
occupancy or maintenance of the Premises and the Industrial Center. Such
insurance shall be in an amount not less than $2,000,000 per occurrence. The
policy shall insure performance by Sublessee of the indemnity provisions of
Subparagraph 8.7 of the Master Lease. The limits of said insurance shall not,
however, limit the liability of Sublessee hereunder. Sublessor and Sublessee
each hereby release and relieve the other, and waive their entire right of
recovery against the other for loss or damage arising out of or incident to the
perils insured against which perils occur in, on or about the Premises, whether
due to the negligence of Sublessor or Sublessee or their agents, employees,
contractors and/or invitees. Sublessor and Sublessee shall upon obtaining the
policy of insurance required give notice to the insurance carrier or carriers
that a mutual waiver of subrogation is contained in the Sublease.
8. HAZARDOUS MATERIALS. Sublessee shall be bound by the
Hazardous Material provision set forth at Paragraph 53 of the Addendum of the
Master Lease. Sublessee shall set forth on Exhibit D attached hereto a list of
those Hazardous Materials which are used in Sublessee's business, along with a
description of handling, storage, use and disposal procedures, approved by
Sublessor in its reasonable discretion.
9. ATTORNEY'S FEES. If any party named herein brings an
action to enforce the terms hereof or to declare rights hereunder, the
prevailing party in any such action, on trial and appeal, shall be entitled to
his reasonable attorney's fees to be paid by the losing party as fixed by the
Court.
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10. PHONE ROOM. Sublessor and Sublessee agree that Sublessor
may continue to use, without charge, the existing phone room located on the
Premises to maintain Sublessor's phone equipment throughout the Term of this
Sublease or any extension thereof, provided Sublessor gives Sublessee 24 hour
prior telephonic notice before entering Sublessee's Premises.
11. CHANGE OF OWNERSHIP. Reference is made to Paragraph 56 of
the Addendum of the Master Lease which makes Sublessor not liable for any
increases in Real Property Taxes that result from changes in ownership of the
Building, other improvements and land of which the Premises are a part. Since
Sublessee's Pro Rata Share of the Operating Expenses is a fraction of
Sublessor's Operating Expenses under the Master Lease, and except as set forth
in Paragraph 56 of the Addendum, no such increase in Real Property Taxes under
this Sublease will be passed through by Sublessor to Sublessee as part of
Sublessee's Pro Rata Share of the Operating Expenses.
12. SIGNAGE. Subject to Master Lessor's prior written approval,
which shall not be unreasonably withheld, conditioned or delayed, Subtenant at
Subtenant's sole cost and expense, shall have the right to install its company
sign in place of the existing Gilda Marx sign. Sublessee shall comply with the
provisions of Paragraph 59 of the Addendum to the Master Lease. Sublessor
agrees at its sole cost and expense to remove the existing Gilda Marx sign.
13. VEHICLE PARKING. Sublessor shall provide Sublessee
with the parking spaces as provided in Paragraph 1.1(k) free of charge.
Sublessee shall not use more parking spaces than said number without the
written consent of Sublessor and Master Lessor.
14. HEATING, VENTILATING AND AIR CONDITIONING. Sublessor,
at Sublessor's expense, shall use best efforts to cause the Master Lessor to
furnish heating, ventilation and air conditioning (HVAC) throughout the
Sublease term, subject to Sublessor's right to pass through to Sublessee the
applicable Sublessee's Pro Rata Share of any increase in the HVAC cost over the
Base Year Costs. In the event that Sublessee's after-hours HVAC usage is
deemed to be unreasonable, as reasonably determined by Sublessor, then
Sublessee and Sublessor shall agree to adjust Sublessee's obligation to pay for
after-hours HVAC consumption.
15. CLEANING AND UTILITIES.
15.1. The Premises shall be cleaned at Sublessor's sole
cost and expense prior to Sublessee's move in.
15.2. Sublessor, at its sole cost and expense, shall
provide janitorial services for the Premises five (5) days per week and
utilities during normal operating hours of the Building (Monday through Friday
from 7:00 a.m. to 6:00 p.m., and on Saturday 8:00
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a.m. until 2:00 p.m.), subject to Sublessor's right to pass through to
Sublessee the applicable Sublessee's Pro Rata Share of any increase in the cost
of janitorial services and utilities over the Base Year Costs.
16. ASSIGNMENT OF SUBLEASE AND DEFAULT.
16.1 Sublessor hereby assigns and transfers to
Master Lessor the Sublessor's interest in this Sublease and all rentals and
income arising therefrom, subject however to terms of Paragraph 16.2 hereof.
16.2 Master Lessor, by executing the Consent to
Sublease, agrees that until a default shall occur in the performance of
Sublessor's obligations under the Master Lease, that Sublessor may receive,
collect and enjoy the rents accruing under this Sublease. However, if
Sublessor shall default in the performance of its obligations to Master Lessor
then Master Lessor may, at its option, receive and collect, directly from
Sublessee, all rent owing and to be owed under this Sublease.
16.3 Sublessor hereby irrevocably authorizes and
directs Sublessee, upon receipt of any written notice from the Master Lessor
stating that a default exists in the performance of Sublessor's obligations
under the Master Lease, to pay to Master Lessor the rents due and to become due
under the Sublease. Sublessor agrees that Sublessee shall have the right to
rely upon any such statement and request from Master Lessor, and that Sublessee
shall pay such rents to Master Lessor without any obligation or right to
inquire as to whether such default exists and notwithstanding any notice from
or claim from Sublessor to the contrary and Sublessor shall have no right or
claim against Sublessee for any such rents so paid by Sublessee.
16.4 No changes or modifications shall be made to
this Sublease without the written consent of Master Lessor.
17. MASTER LEASE.
17.1. Sublessor is the lessee of the Premises by virtue
of a lease together with all Exhibits A-E, the Addendum to the Lease and three
amendments to Lease, referred to elsewhere in the Sublease collectively as the
"Master Lease", a copy of which is attached hereto marked Exhibit C, dated July
29, 1992, wherein AMC Associates, a California limited partnership, is the
lessor, hereinafter collectively referred to as the "Master Lessor"
17.2 This Sublease is and shall be at all times
subject and subordinate to the Master Lease and Sublessee shall be entitled to
quiet possession of the Premises so long as Sublessee is not in default under
this Sublease.
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17.3 The terms, conditions and respective
obligations of Sublessor and Sublessee to each other under this Sublease shall
be the terms and conditions of the Master Lease except for those provisions of
the Master Lease which are directly contradicted by this Sublease in which
event the terms of this Sublease shall control over the Master Lease.
Therefore, for the purposes of this Sublease, wherever in the Master Lease the
word "Lessor" is used, it shall be deemed to mean the Sublessor herein and
wherever in the Master Lease the word "Lessee" is used it shall be deemed to
mean the Sublessee herein.
17.4 During the term of this Sublease and for all
periods subsequent for obligations which have arisen prior to the termination
of this Sublease, Sublessee does hereby expressly assume and agree to perform
and comply with, for the benefit of Sublessor and Master Lessor, its
proportionate and allocable share of each and every obligation of Sublessor
under the Master Lease, except for the following paragraphs which are excluded
therefrom:
EXCLUDED PARAGRAPHS AND EXHIBITS OF THE MASTER LEASE
1.
2.1
2.2
3.1
3.2
3.3
4.1
4.2 (a) and (b)
5, including subparagraphs.
8.1
11. Excluding Telephones
15, including subparagraphs.
39, including subparagraphs.
Exhibit A, B and E
Exhibit D
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EXCLUDED PARAGRAPHS OF ADDENDUM TO THE MASTER LEASE
Paragraphs, 48, 50, 51, 52, 58, 62, 63, 64, 67 and 69, including all of the
respective subparagraphs of the foregoing paragraphs.
With respect to Paragraph 61 of the Addendum, the phrase "enacted on
or after the date of the parties' execution of this Lease..." in the third
sentence Paragraph 61, is modified to read "enacted on or after the date of the
parties' execution of this Sublease...."
17.5 The obligations that Sublessee has assumed
under Paragraph 17.4 hereof are hereinafter referred to as the "Sublessee's
Assumed Obligations". The obligations of the Lessor under the Master Lease as
incorporated by reference in Sublease are hereinafter referred to as the
"Sublessor's Remaining Obligations".
17.6 Sublessee shall hold Sublessor free and
harmless of and from all liability, judgments, costs, damages, claims or
demands, including reasonable attorneys fees, arising out of Sublessee's
failure to comply with or perform Sublessee's Assumed Obligations.
17.7 Sublessor agrees to maintain the Master Lease
during the entire term of this Sublease, subject, however, to any earlier
termination of the Master Lease without the fault of the Sublessor, and to
comply with or perform Sublessor's Remaining Obligations and to hold Sublessee
free and harmless of and from all liability, judgments, costs, damages, claims,
demands, including reasonable attorney's fees, arising out of Sublessor's
failure to comply with or perform Sublessor's Remaining Obligations.
18. CONSENT OF MASTER LESSOR AND/OR SUBLESSOR.
18.1 The Master Lease requires that Sublessor
obtain the consent of Master Lessor to any subletting by Sublessor. Therefore,
this Sublease shall not be effective unless, within 10 days of the date this
Sublease is executed by both Sublessor and Sublessee, Master Lessor signs a
consent to this Sublease and assumption thereof thereby giving its consent to
this Subletting.
18.2 In the event that the obligations of the
Sublessor under the Master Lease have been guaranteed by third parties then
this Sublease, nor the Master Lessor's consent, shall not be effective unless,
within 10 days of the date hereof, said guarantors sign this Sublease thereby
giving guarantors consent to this Sublease and the terms thereof.
18.3 Sublessee shall have the right to assign or
sub-sublease this Sublease subject to the prior written consent of Sublessor
and Master Lessor, which consent shall not be unreasonably withheld or delayed.
Master Lessor and lessee shall share equally any net profit under such
assignment or subletting in
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the same manner as provided in Paragraph 57 of the Addendum to Master Lease.
18.4 In the event that Master Lessor does give such
consent then:
a. Such consent will not release Sublessor of
its obligations or alter the primary liability of Sublessor to pay the rent and
perform and comply with all of the obligations of Sublessor to be performed
under the Master Lease.
b. The acceptance of rent by Master Lessor from
Sublessee or any one else liable under the Master Lease shall not be deemed a
waiver by Master Lessor of any provisions of the Master Lease.
c. The consent to this Sublease shall not
constitute a consent to any subsequent subletting or assignment.
d. In the event of any default of Sublessor
under the Master Lease, Master Lessor may proceed directly against Sublessor,
any guarantors or any one else liable under the Master Lease or this Sublease
(but Sublessee shall only be liable to the extent of its Pro Rata Share and
Base Rent obligations set forth in this Sublease) without first exhausting
Master Lessor's remedies against any other person or entity liable thereon to
Master Lessor. Notwithstanding the foregoing, in no event shall Sublessee be
liable for any payments made to Sublessor and not delivered to Master Lessor by
Sublessor.
e. Master Lessor may consent to subsequent
sublettings and assignments of the Master Lease or this Sublease or any
amendments of modifications thereto without notifying Sublessor nor anyone else
liable under the Master Lease and without obtaining their consent and such
action shall not relieve such persons from liability.
f. In the event that Sublessor shall default in
its obligations under the Master Lease, then Master Lessor, at its option and
without being obligated to do so, may require Sublessee to attorn to Master
Lessor in which event Master Lessor shall undertake the obligations of
Sublessor under this Sublease from the time of the exercise of said option to
termination of this Sublease but Master Lessor shall not be liable for any
prepaid rents nor any security deposit paid by Sublessee, nor shall Master
Lessor be liable for any other defaults of the Sublessor under the Sublease.
18.5 The signatures of the Master Lessor and any
Guarantors of Sublessor at the end of this document shall constitute their
consent to the terms of this Sublease.
18.6 In the event that Sublessor defaults under
its obligations to be performed under the Master Lease by Sublessor,
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Master Lessor agrees to deliver to Sublessee a copy of any such notice of
default. Sublessee shall have the right to cure any default of Sublessor
described in any notice of default within ten days after service of such notice
of default on Sublessee. If such default is cured by Sublessee then Sublessee
shall have the right of reimbursement and offset from and against Sublessor.
In the event Sublessee elects not to cure the default of Sublessor, Sublessee's
right to quiet possession of the Premises shall not be disturbed if Sublessee
is not in default and Sublessee attorns to the Master Lessor and Sublessee
shall continue to pay the Base Rent and all other charges payable under the
Sublease to the Master Lessor.
18.7 Subject to the Industrial Center Lender's
Consent as set forth in Paragraph 21.3 below, Master Lessor agrees to deliver
to Sublessee within ninety (90) days following the execution of this Sublease a
non-disturbance agreement executed by the beneficiary of the deed of trust
encumbering the Premises, Building or the Industrial Center in a form
reasonably satisfactory to Sublessee and the beneficiary.
19. OPTION TO EXTEND TERM.
19.1 Sublessor hereby grants to Sublessee one
option (the "Option") to extend the Term of this Sublease for three (3) years
(the "Extension Period"), on the same terms and condition as set forth in the
Sublease (except that there shall be no further or additional option to extend
the Extension Period, and no further rental abatement), but at an increased
rent as set forth in Section 19.3 below. The Option shall be exercised only by
written notice delivered to Sublessor no later than May 31, 1998. If Sublessee
fails to deliver to Sublessor written notice of the exercise of the Option on
or before May 31, 1998, then the Option shall lapse, and there shall be no
further right to extend the Term of this Sublease. On or before May 31, 1998,
but no earlier than February 1, 1998, Sublessee may request, in writing, from
Sublessor the exact amount of the "Fair Rental Value" of the Premises as
referred to in Section 19.3 below. Sublessor shall deliver to Sublessee said
"Fair Rental Value" amount for the Premises, in writing, within thirty (30)
days. The Option shall be exercisable by Sublessee only on the express
conditions that (i) at the time of the exercise, and at all times prior to the
commencement of the Extension Period, Sublessee shall not be in default under
any of the provisions of this Sublease, and (ii) Sublessee shall not have been
more than five (5) days late in the payment of Base Rent more than three (3)
times during any twelve (12) month period during the term of this Sublease.
19.2 If Sublessee subleases any portion of the
Premises or assigns or otherwise transfers any interest under the Sublease to
an entity other than a Sublessee Affiliate prior to the exercise of the Option,
the Option shall lapse. If Sublessee subleases any portion of the Premises or
assigns or otherwise
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transfers any interest of the Sublease to an entity other than a Sublessee
Affiliate after the exercise of the Option but prior to the commencement of the
Extension Period, the Option shall lapse and the Term of the Sublease shall
expire as if such Option were not exercised. This Option is intended to be
personal only to Legacy Software, Inc., a Delaware corporation, and not to any
subsequent sublessee or assignee. For purposes of this Sublease, "Sublessee
Affiliate" shall have the same meaning as "Lessee Affiliate" set forth in
Paragraph 12.2 of the Master Lease by substituting "Sublessee Affiliate" for
"Lessee Affiliate."
19.3 Base Rent for the Premises shall be increased
on the first day of the Extension Period to an amount equal to the "Fair Rental
Value" of the Premises. The term "Fair Rental Value" for the purposes of this
Sublease shall mean the annual amount per rentable square foot that a willing,
comparable, new non-renewal, non-equity lessee would pay, and a willing,
comparable lessor of a comparable building in the vicinity of the Building
containing the Premises would accept, at arm's length, giving appropriate
consideration to the annual rental rate per rentable square foot, escalation
(including type, base year and stop) and abatement provisions reflecting free
rent and/or no rent during the period of construction, brokerage commissions,
if any, length of the sublease term, size and location of premises being
subleased, building standard work letter and/or tenant improvement allowances,
if any, and other generally applicable conditions of tenancy for the space in
question so that this Sublessee will obtain the same rent and other benefits
that Sublessor would otherwise give to any comparable prospective sublessee.
Fair Rental Value shall be determined by Sublessor in its sole but reasonable
discretion. Sublessor's determination of Fair Rental Value shall be subject to
Master Lessor's prior written consent, which consent shall not be unreasonably
withheld, conditioned or delayed. Sublessor shall notify Sublessee in writing
of such determination of Fair Rental Value with thirty (30) days after
Sublessor's receipt of Sublessee's notice exercising the Option. If Sublessee
shall dispute Sublessor's determination of Fair Rental Value for the Premises,
then the parties shall have twenty (20) days within which to mutually agree
upon the Fair Rental Value, and if the parties are unable to agree, the Fair
Rental Value shall be determined by the appraisal process set forth below by
delivering written notice thereof to the other party within sixty (60) days
after Sublessee exercised its Option.
Within ten (10) days after either party's election to have the Fair
Rental Value determined by the appraisal process, Sublessor and Sublessee shall
each appoint by written notice to the other an independent MAI real estate
appraiser. Each appraiser shall be a member of the American Institute of Real
Estate Appraisers and shall have at least five (5) years experience appraising
commercial real property comparable to the Building and the Premises that are
located in the Marina Del Rey/West Los Angeles area. Within five (5) days
after their appointment, the two appraisers so selected
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shall jointly appoint an equally qualified, independent third appraiser and
shall notify Sublessor and Sublessee of their selection of the third appraiser.
Within ten (10) days after the selection of the third appraiser, Sublessor and
Sublessee shall each submit in writing its own determination of the Fair Rental
Value for the Premises. The third appraiser shall select either Sublessor's or
Sublessee's determination as the Fair Rental Value Rate of the Premises within
twenty (20) days after the date of his appointment and shall notify Sublessor
and Sublessee in writing of such selection. If either party or its appraiser
fails to comply with this Section, then the party or its appraiser that has
complied with this Section shall determine the Fair Rental Value of the
Premises. If the two appraisers so selected do not choose the third appraiser
within said five (5) day period, Sublessee or Sublessor may apply to the
Presiding Judge of the Superior Court of the State of California for the county
in which the Premises is located for the appointment of a third appraiser.
Each party shall pay the fees, costs and expenses of the appraiser
appointed by such party. Each party shall pay one-half (1/2) of the fees,
costs and expenses of the third appraiser. if the Fair Rental Value has not
been determined at such time as Sublessee is obligated to pay Base Rent for
such Extension Period, Sublessee shall pay as Base Rent pending such
determination, the Base Rent in effect for the Premises immediately prior to
the Extension Period; provided, however, within thirty (30) days after the
determination of the Fair Rental Value, the excess or shortage of Base Rent
that has been actually paid, shall be paid to Sublessor by Sublessee or
reimbursed by Sublessor to Sublessee.
20. RIGHT OF FIRST OFFER. Subject to Gilda Marx, Inc. leasing
the Expansion Space (defined below), Sublessor grants to Sublessee the Right of
First Offer for approximately 8,000 rentable square feet adjacent to the
Premises and east of the restrooms on the second floor ("Expansion Space").
Upon the Expansion Space becoming available, Sublessor shall notify Sublessee
in writing that said Expansion Space is available and Sublessee shall have five
(5) business days following receipt of such notification from Sublessor to
notify Sublessor in writing of its desire to sublease said Expansion Space.
Failure of Sublessee to notify Sublessor of its desire to sublease said
Expansion Space within said five (5) days shall cause said Right of First Offer
to lapse and to be null and void. In the event Sublessee exercises its Right
of First Offer, the security deposit set forth in Paragraph 5 above shall be
increased pro rata and the rent for said Expansion Space shall be its then Fair
Rental Value and the term of the sublease for the Expansion Space shall be
coterminous with the initial term of the Sublease or any extension thereof.
Fair Rental Value shall be determined in the same manner as provided for the
determination of Fair Rental Value in Section 19.3 of this Sublease and shall
include Sublessee's Pro Rata Share of any increase in Operating Expenses over
the Base Year Operating Expenses.
14
<PAGE> 15
21. CONDITION PRECEDENT. This Sublease is subject to:
21.1 The successful completion of Sublessee's
proposed Initial Public Offering prior to May 14, 1996 or in the alternative,
Sublessor's and Master Lessor's approval of alternate security arrangements:
21.2 Consent of the Master Lessor; and
21.3 Consent of the Industrial Center Lender.
22. ASSIGNMENT OF SUBLEASE. Concurrently with the execution of
this Sublease, Sublessor shall assign this Sublease to Mastor Lessor and Master
Lessor shall accept and assume such assignment. In connection with such
assignment, Sublessor and Sublessee agree that Master Lessor shall not be
responsible for and shall be held harmless from (a) any damage to the Premises
after the execution hereof arising from or related to Sublessor's move out and
Sublessee's move in and (b) any damages related to any breach of Sublessor's
obligations in the last sentence of Paragraph 6.3 hereof. Upon satisfaction of
the conditions precedent in Section 21 of the Sublease and Master Lessor's
Lender's approval of the Assignment of the Sublease to Master Lessor, Sublessee
shall be released from its obligations under this Sublease except for the move
in/move out damages described in the previous sentence and the payment of the
commissions to the Brokers.
23. BROKERS FEE.
23.1 Upon execution hereof and removal of all
contingencies by all parties, Sublessor shall pay to TRAVER'S REALTY
CORPORATION, a licensed real estate broker, a commission equal to 4% of the
aggregate rental for the first three (3) years of the term of this Sublease and
to Tooley & Company, a licensed real estate broker, a commission equal to 2% of
the aggregate rental for the first three (3) years of the term of this
Sublease.
23.2 These commissions shall be paid as follows:
One-half (1/2) on full execution and delivery of this Sublease and removal of
all contingencies and the second one-half (1/2) upon occupancy of the Premises.
24. CONFIDENTIALITY. Sublessee agrees that, except as
otherwise required by law, it shall keep confidential, and shall not disclose
to any third party, the terms, provisions and contents of this Sublease, or any
information relating to this Sublease.
25. EXECUTION. Sublessor and Sublessee hereby agree to sign one
original of this Sublease with handwritten comments. Within three business
days, the parties shall execute quadruplicate
15
<PAGE> 16
originals of this Sublease typed to include the handwritten comments.
SUBLESSOR:
GILDA MARX INCORPORATED
a California corporation
By:/s/ SIG
---------------------------------------------------
Its: C.E.O.
--------------------------------------------------
Executed on 6/10/96
------------------------------------------
SUBLESSEE:
LEGACY SOFTWARE, INC.
A Delaware corporation
By:_________________________________________________
Its:________________________________________________
Executed on ________________________________________
16
<PAGE> 17
originals of this Sublease typed to include the handwritten comments.
SUBLESSOR:
GILDA MARX INCORPORATED
a California corporation
By:
---------------------------------------------------
Its:
--------------------------------------------------
Executed on
------------------------------------------
SUBLESSEE:
LEGACY SOFTWARE, INC.
A Delaware corporation
By: /s/ SIG
-------------------------------------------------
Its: Vice President - Finance and Admin
------------------------------------------------
Executed on 6/11/96
----------------------------------------
16
<PAGE> 18
EXHIBIT "A"
[Floor Plan of Second Floor Premises at
5340 Alla Road, Los Angeles.]
<PAGE> 19
EXHIBIT "B"
[Parking Plan for Legacy Software, Inc.]
<PAGE> 20
EXHIBIT "C"
STANDARD INDUSTRIAL LEASE - MULTI-TENANT
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
[COMPANY LOGO]
1. Parties. This Lease dated for reference purposes only July 29, 1992, is
made by and between AMC Associates, a California Limited Partnership (herein
called "Lessor") and Gilda Marx Incorporated, a California corporation (herein
called "Lessee").
2. Premises, Parking and Common Areas.
2.1 Premises. Lessor hereby Leases to Lessee and Lessee leases from Lessor
for the term, at the rental, and upon all of the conditions set forth herein,
real property situated in the County of Los Angeles, State of California
commonly know as 5340 Alla Road, Los Angeles, California and described as
approximately the southerly 53,000 rentable square feet of space on the ground
floor and second floor of the building located at 5340 Alla Road, Los Angeles,
California 90066 herein referred to as the "Premises", as may be outlined on an
Exhibit attached hereto. Including rights to the Common Areas as hereinafter
specified but not including any rights to the roof of the Premises or to any
Building in the industrial Center. The Premises are a portion of a building
herein referred to as the "Building." The Premises, the Building, the Common
Areas, the land upon which the same are located,are herein collectively
referred to as the "Industrial Center." See Addendum Paragraphs 47 and 48.
2.2 Vehicle Parking. Lessee shall be entitled to 159 vehicle parking
spaces, unreserved and unassigned, on those portions of the Common Areas
designated by Lessor for parking the 15 reserved portion of such spaces being
highlighted on Exhibit "B" attached herein. Lessee shall not use more parking
spaces than said number. Said parking spaces shall be used only for parking by
vehicles no larger than full size passenger automobiles or pick-up trucks as
well as delivery vans, herein called "Permitted Size Vehicles." Vehicles other
than Permitted Size Vehicles are herein referred to as "Oversized Vehicles."
2.2.1 Lessee shall not permit or allow any vehicles that belong to or
are controlled by Lessee or Lessee's employees, suppliers, shippers, customers,
or invitees to be loaded, unloaded, or parked in areas other than those
designated by Lessor for such activities. See Addendum Paragraph 49.
2.2.2 If Lessee permits or allows any of the prohibited activities
described in paragraph 2.2 of this Lease, 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.
2.3 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 that are provided and designated by the Lessor from
time to time for the general non-exclusive use of Lessor, Lessee and of other
lessees of the Industrial Center and their respective employees, suppliers,
shippers, customers and invitees, including parking areas, loading and
unloading areas, trash areas, roadways, sidewalks, walkways, parkways,
driveways and landscaped areas.
2.4 Common Areas - Lessee's Rights. Lessor hereby grants to Lessee, for
the benefit of Lessee and its employees, suppliers, shippers 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.
2.5 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. Lessee
agrees to abide by and conform to all such rules and regulations and "CCSR's"
and to cause its employees, suppliers, shippers, customers, and invitees to so
abide and conform. Lessor shall not be responsible to Lessee for the
non-compliance with said rules and regulations and "CCSR's" by other lessees of
the Industrial Center. The "CCSR's" are attached hereto as Exhibit "C".
2.6 Common Areas - Changes. Lessor shall have the right, in Lessor's sole
discretion, from time to time:
(a) To make changes to the Common Areas, including, without limitation,
changes in the location, size, shape and number of driveways, entrances, parking
spaces, parking area, loading and unlading areas, ingress, egress, direction of
traffic, landscaped areas and walkways; (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; (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 judgement,
deem to be appropriate.
2.6.1 Lessor shall at all times provide the parking facilities required
by applicable law and in no event shall the number of parking spaces that
Lessee is entitled to under paragraph 2.2 be reduced.
3. Term.
3.1 Term. The term of this Lease shall be for ten (10) years commencing
on December 1, 1992 and ending on November 30, 2002 unless sooner terminated
pursuant to any provision hereof. See Addendum Paragraph 50.
3.2 Delay In Possession. Notwithstanding said commencement date, if for
any reason Lessor cannot deliver possession of the Premises to Lessee by
January 31, 1993, as such January 31, 1993 date is extended by Force Majeure
Delays and Lessee Delays as defined in Paragraphs 50.2.2 and 50.2.3. Lessee
may at Lessee's option, by notice in writing to Lessor within ten (10) days
thereafter, 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. See Addendum Paragraphs 50 and 51.
3.3 Early Possession. If Lessee occupies the Premises prior to said
commencement date, such occupancy shall be subject to all provisions of this
Lease, such occupancy shall not advance the termination date and Lessee shall
pay rent for such period at the initial monthly rates set forth below.
4. Rent.
4.1 Base Rent. Lessee shall pay to lessor, as Base Rent for the Premises,
without any offset or deduction, except as may be otherwise expressly provided
in this Lease, on the 1st day of each month of the term hereof, monthly payments
in advance of $ square foot per month ("rentable" having the meaning
set forth in Addendum Paragraph 48), increased on the 1st day of the 31st, 61st
and 91st month of the Lease Term pursuant to the provisions of Addendum
Paragraph 52 of the lease. Lessee shall pay Lessor upon execution hereof one
month's rent as 1/2 of the Base Rent for the 1st and 2nd months of the Term of
this Lease. Rent for any period during the term hereof which is for less than
one month shall be a pro rate portion of the Base Rent. Rent shall be payable
in lawful money of the United States to Lessor at the address stated herein or
to such other persons or at such other places as Lessor may designate in
writing.
4.2 Operating Expenses. Lessee shall pay to Lessor during the term
hereof, in addition to the Base Rent, Lessee's Share, as hereinafter defined,
of all Operating Expenses, as hereinafter defined, during each calendar year of
the term of this Lease, in accordance with the following provisions:
(a) "Lessee's Share" is defined, for purposes of this Lease, as
percent as adjusted from time to time based on the area of the Premises as a
percentage of the area of the Building taking into account the potential
increase or decrease of the square footage of the Building. See Addendum
Paragraph 48.
(b) "Operating Expenses" is defined, for purposes of this Lease, as all
costs incurred by Lessor, if any, for:
(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, roadway, sidewalks, walkways, parkways,
driveways, landscaped areas, striping, bumpers, irrigation systems, Common Area
lighting facilities and fences and gates;
(bb) Trash disposal services;
(cc) Tenant directories;
(dd) Fire detection systems including sprinkler system
maintenance and repair:
Initials: [SIG]
----------
American Industrial Real Estate Association 1981 MULTI TENANT - MODIFIED NET
<PAGE> 21
(ee) Security services to the extent provided by
Lessor; Lessee is to install, maintain and repair its own security hardware
(ff) Any other service to be provided by Lessor that
is elsewhere in this Lease stated to be an "Operating Expense."
(ii) Any deductible portion of an insured loss concerning
any of the items or matters described in this paragraph 4.2:
(iii) The cost of the premiums for the liability and property
insurance policies to be maintained by Lessor under paragraph 8 hereof.
(iv) The amount of the real property tax to be paid by
Lessor under paragraph 10.1 hereof.
(v) The cost of water, gas and electricity to service the
Common Areas.
(c) The inclusion of the improvements, facilities and services set
forth in paragraph 4.2(b)(i) of the definition of Operating Expenses shall not
be deemed to impose an obligation under Lessor to either have said improvements
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 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 Operating
Expenses and the same shall be payable monthly or quarterly, as Lessor shall
designate during each twelve-month period of the Lease term, on the same day as
the Base Rent is due hereunder. In the event that Lessee pays Lessor's
estimate of Lessee's Share of Operating Expense as aforesaid. 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
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 entitled to credit the amount of
such overpayment against Lessee's Share of Operating Expenses next falling
due. If Lessee's payments under this paragraph 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, Lessee's Share shall be adjusted on a fair
and equitable basis by Lessor to reflect the actual relative use by Lessee of
any variable operating expense or services such as water, trash disposal
services, based upon the use of such services, expenses relating to the other
portions of the Building. (See Addendum Paragraph 69.)
5. Security Deposit. Lessee shall deposit with Lessor upon execution
hereof of $200,000.00 as security for Lessee's faithful performance of Lessee's
obligations hereunder. If Lessee fails to pay rent or other charges due
hereunder, or otherwise defaults with respect to any provision of this Lease,
Lessor may use, apply or retain all or any portion of said deposit for the
payment of any rent or other charge in default or for the payment of any other
sum to which Lessor may become obligated by reason of Lessee's default, or to
compensate Lessor for any loss or damage which Lessor may suffer thereby. If
Lessor so uses or applies all of any portion of said deposit, Lessee shall
within ten (10) days after written demand therefor deposit cash with Lessor
in an amount sufficient to restore said deposit to the full amount then
required of Lessee. If the monthly rent shall from time to time increase
during the term of this Lease, Lessee shall, at any time of such increase,
deposit with Lessor additional money as a security deposit so that the total
amount of the security deposit held by Lessor 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 4. Lessor shall not be
required to keep said security deposit separate from its general accounts. If
Lessee performs all of Lessee's obligations hereunder, said deposit, or so much
there as has not theretofore been applied by Lessor, shall be returned, without
payment of Interest or other increments for its use, to Lessee (or, at Lessor's
option, to the last assignee, if any, of Lessee's interest hereunder) at the
expiration of the term hereof, and after Lessee has vacated the Premises. No
trust relationship is created herein between Lessor and Lessee with respect to
said Security Deposit.
6. Use.
6.1 Use. The Premises shall be used and occupied only for general
office purposes, warehouse, distribution, light assembly, outlet store and other
lawfully related uses. or any other use which is reasonably comparable for no
other purposes. See Addendum Paragraph 53.
6.2 Compliance with Law.
(a) Lessor warrants to Lessee that the Premises. In the state
existing on the date that the Lease term commences, but without regard to the
use for which Lessee will occupy the Premises does not violate any covenants
or restrictions of record, or any applicable building code regulation or
ordinance in effect on such Lease term commencement date. In the event it is
determined that this warranty has been violated . then it shall be the
obligation of the Lessor, after written notice from the Lessee, to promptly, at
Lessor's sole cost and expense, rectify any such violation. In the event
Lessee does not give to Lessor written notice of the violation of this warranty
within six months from the date that the Lessee term commences, the correction
of same shall be the obligation of the Lessee at Lessee's sole cost. The
warranty contained in this paragraph 6.2 (a) shall be no force or effect if
prior to the date of this Lessee was an owner or occupant of the Premises and,
in such event, Lessee shall correct any such violation at Lessee's sole cost.
(b) Except as provided in paragraph 6.2 (a) Lessee shall, at
Lessee's expense, promptly comply with all applicable statutes, ordinances,
rules, regulations, orders, covenants and restrictions of record, and
requirements of any fore insurance underwriter or rating bureaus, now in
effect or which may hereafter come into effect, whether or not they reflect a
change in policy from the now existing, during the term or any part of the term
hereof, relating in any manner to the Premises and use by Lessee of the Premises
and of the Common Areas. Lessee shall not use nor permit the use of the
Premises or the Common Area in any manner that will tend to create waste or a
nuisance or shall tend to disturb other occupants of the Industrial Center.
6.3 Condition of Premises
(a) Lessor shall deliver the Premises to Lessee clean and free
of debris on the Lease commencement date (unless Lessee is already in
possession and Lessor warrants to Lessee that the roof and Building structure
plumbing, lighting, air conditioning, heating, and loading doors in the Premises
shall be in good operating condition on the Lease Commencement date and Lessor
further warrants that throughout the term Lessor will keep the structural
elements of the roof, bearing walls and the foundation in sound and good
operating condition. In the event that it is determined that this warranty has
been violated, then it shall be the obligation of Lessor, after receipt of
written notice from Lessee selling forth with specificity the nature of the
violation to promptly at Lessor's sole cost, rectify such violation. Lessee's
failure to give such written notice to Lessor within six (6) months after the
Lease commencement date shall cause the conclusive presumption that Lessor has
compiled with all of Lessor's obligations hereunder. The warranty contained in
this paragraph 6.3 (a) shall be of no force or effect if prior to the date of
this Lease. Lessee was and owner or occupant of the Premises.
(b) Except as otherwise provided in the Lease, Lessee hereby
accepts the Premises in their condition existing as the Lease commencement date
that Lessee takes possession of the Premises, whichever is earlier, subject
to all applicable zoning, municipal, county and state laws, ordinances governing
and regulating the use of the Premises, and any covenants or restrictions of
record, and accepts this Lease subject thereto and to all matters disclosed
thereby and by any exhibits attached hereto. Lessee acknowledges that neither
Lessor nor Lessor's agent had made any representation or warranty as to the
present or future suitability of the Premises for the conduct of Lessee's
business.
7. Maintenance, Repairs, Alterations and Common Area Services
7.1 Lessor's Obligations. Subject to the provisions of paragraphs 4.2
(Operating Expenses), 6 (Use), 7.2 (Lessee's Obligations) and 9 (Damage or
Destruction) and except for damage caused by any negligent or intentional act
or omission of Lessee. Lessee's employees, supplies, shippers, customers, or
invites, in which event Lessee shall repair the damage. Lessor, at Lessor's
expense, subject to reimbursement pursuant to paragraph 4.2 shall keeping good
condition and repair the foundations, exterior walls, structural condition of
interior bearing walls, and roof of the Premises, as well as the parking lots,
walkways, driveways, landscaping, fences, signs and utility installations of
the Common Areas and all parts thereof, as well as providing the services for
which there is an Operating Expenses pursuant to paragraph 4.2 Lessor shall
not, however, be obligated to paint the exterior or interior surface of
exterior walls, nor shall Lessor be required to maintain, repair or replace
windows, doors or plate glass of the Premises. Lessor shall have no obligation
to make repairs under this paragraph 7.1 until a reasonable time after receipt
of written notice from Lessee of the need for such repairs. Lessee expressly
waives the benefits of any statue now or hereafter in effect which would
otherwise afford Less the right to make repairs at Lessor's expense or to
terminate this Lease because of Lessor's failure to keep the Premises in good
order, condition and repair Lessor shall not be liable for damages or loss of
any kind or nature by reason of Lessor's failure to furnish any Common Area
Services when such failure is caused by accident, breakage, repairs, strikes,
lockout, or other labor disturbances or disputes of any character, or by any
other cause beyond the reasonable control of Lessor.
7.2 Lessee's Obligations.
(a) Subject to the provisions of paragraphs 6 (Use), 7.1 (Lessor's
Obligations, and 9 (Damage or Destruction). Lessee, at Lessee's expense, shall
keep in good order, condition and repair the Premises and every part thereof
(whether or not the damaged portion of the Premises or the means of repairing
the same are seasonably or readily accessible to Lessee) including, without
limiting the generally of the foregoing all plumbing, heating, ventilating and
air conditioning systems (Lessee shall procure and maintain, at Lessee's
expense, a ventilating and air conditioning system maintenance contract),
electrical and lighting facilities and equipment within the Premises, fixtures,
interior walls and interior surfaces of exterior walls, ceilings, windows,
doors, plate glass, roof repairs (at a maximum cost to Lessee of $2,000 per
year, calculated on a non-cumulative basis), as opposed to replacement, and
skylights located within the Premises Lessor reserves the right to procure and
surfaces of exterior walls, ceilings, windows, doors, plate glass and skylights
located within the premises. Lessor reserves the right to procure and maintain
the ventilating and air conditions system maintenance contract and if Lessor so
effects. Lessee shall reimburse Lessor, upon demand, for the cost thereof.
(b) If Lessee fails to perform Lessee's obligations under this
paragraph 7.2 under any other paragraph of this Lease, Lessor may enter upon
the Premises after ten (10) day's prior written notice to Lessee (except in the
case of emergency, in which no notice shall be required), perform such
obligations on Lessee's behalf and put the Premises in goods order, condition
and repair,and the cost thereof together with interest thereon at the maximum
rate then allowable by law shall be due and payable as additional rent to
Lessor together with Lessee's next Base Rent Installment.
(c) On the last day of the term hereof, or on any sooner
termination, Lessee shall surrender the Premises to Lessor in the same
condition as received, ordinary wear and tear excepted, clean and free of
debris. Any damage or deterioration of the Premises shall not be deemed
ordinary wear and tear if the same could have been prevented by good
maintenance practices. Lessee shall repair any damage to the Premises
occasioned by the installation of removal of Lessee's trade fixtures,
alternations, furnishings and equipment. Notwithstanding anything to the
contrary otherwise stated in this Lease, Lessee shall leave the air lines,
power panels, electrical distribution systems, lighting fixtures, space
heaters, air conditioning, plumbing and facing on the Premises in good
operating condition.
7.3 Alterations and Additions.
(a) Lessee shall not, without Lessor's prior written consent
make any alterations, improvements, additions, or Utility Installations in on
or about the Premises, or the Industrial Center, except for nonstructural
alterations to the Premises not exceeding $10,000 in cumulative costs, during
the term of this Lease. In any event, whether or not in excess of $10,000 in
cumulative cost, Lessee shall make no change or alterations to the
Initials: [SIG]
-------------
-------------
-2-
<PAGE> 22
exterior of the Premises not the exterior of the Building nor the Industrial
Center without Lessor's prior written consent. As used in this paragraph 7.3
the term "Utility Installation" shall mean carpeting, window coverings, air
lines, power panels, electrical distribution systems, lighting fixtures, space
heaters, air conditioning, plumbing and fencing. Lessor may require that Lessee
remove any or all of said alterations. Improvements, additions or Utility
Installations at the expiration of the term, and restore the Premises and the
Industrial Center to their prior condition. Lessor may require Lessee to
provide Lessor, at Lessee's sole cost and expense, a lien and completion bond in
an amount equal to one and one-half times the estimated cost of such
improvements to insured Lessor against any liability for mechanic's and
materialmen's liens and to insured completion of the work. Should Lessee make
any alterations, improvements, additions or Utility installations without the
prior approval of Lessor. Lessor may at any time during the term of this Lease,
require that Lessee remove any or all of the same.
(b) Any alterations, improvements, additions or Utility installations
in or about the Premises or the Industrial Center that Lessee shall desire to
make and which requires the consent of the Lessor shall be presented to Lessor
in written form, with proposed detailed plans. If Lessor shall give its
consent, the consent shall be deemed conditioned upon Lessee acquiring a permit
to do so from appropriate governmental agencies, the furnishing of a copy
thereof to Lessor prior to the commencement of the work and the compliance by
Lessee of all conditions of said permit in a prompt and expeditious manner.
(c) 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 in
the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises, or the Industrial Center, or any
interest therein. Lessee shall give Lessor not less than ten (10) days' notice
prior to the commencement of any work in the Premises, and Lessor shall have the
right to post notices of non-responsibility in or on the Premises or the
Building 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 itself and Lessor 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 or the Industrial Center, upon the
condition that if Lessor shall require, Lessee shall furnish to Lessor a surety
bond satisfactory to Lessor in an amount equal to such contested lien claim or
demand indemnifying Lessor against liability for the same and holding the
Premises and the industrial center free from the affect 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 Lessor's best
interest to do so.
(d) All alterations, improvements, additions and Utility
installations (whether or not such Utility installations constitute trade
fixtures of Lessee), which may be made on the Premises, shall be the property of
Lessor and shall remain upon and be surrendered with the Premises at the
expiration of the Lease term, unless Lessor requires their removal pursuant to
paragraph 7.3(a). Notwithstanding the provisions of this paragraph 7.3(d),
Lessee's machinery and equipment, other than that which is affixed to the
Premises so that it cannot be removed without material damage to the Premises
and other than Utility Installations, shall remain the property of Lessee and
may be removed by Lessee subject to the provisions of paragraph 7.2.
7.4 Utility Additions, Lessor reserves the right to install new or
additional utility facilities throughout the Building and the Common Areas for
the benefit of Lessor or lessee, or any other lessee of the Industrial Center,
including but not by way of limitation such utilities as plumbing, electrical
systems (which shall be separately metered), security systems, communication
systems, and fire protection and detection systems so long as such installation
do not unreasonably interfered with Lessee's use of the Premises.
8. Insurance; Indemnity.
8.1 Liability Insurance - Lessee. Lessee shall, at Lessee's expense,
obtain and keep in force during the term of this lease a policy of Combined
Single Limit Bodily Injury and Property Damage Insurance insuring Lessee and
Lessor against any liability arising out of the use occupancy or maintenance of
the Premises and the Industrial Center. Such Insurance shall be in an amount
not less than $2,000,000 per occurrence. The policy shall insured performance
by Lessee of the Indemnity provisions of this paragraph 8. The limits of said
insurance shall not however, limit the liability of Lessee hereunder.
8.2 Liability Insurance - Lessor. Lessor shall obtain and keep in force
during the term of this lease a policy of Combined Single Limit bodily Injury
and Property Damage Insurance. Insuring Lessor, but not Lessee, against any
liability arising out of the ownership, use, occupancy or maintenance of the
industrial center in an amount not less than $2,000,000 per occurrence with
excess liability coverage of at least $10,000,000 (Landlord's present excess
liability coverage is $25,000,000).
8.3 Property Insurance. Lessor shall obtain and keep in force during the
term of this lease a policy or policies of insurance covering loss or damage to
the Industrial Center Improvements, but not Lessee's personal property,
fixtures, equipment or tenant improvements. In an amount not to exceed the
full replacement value thereof, as the same may exist from time to time,
providing protection against all perils included within the classification of
fire, extended coverage, vandalism, malicious mischief, flood (in the event
same is required by a lender having a lien on the Premises), special extended
perils ("all risk," as such term is used in the insurance industry), plate
glass insurance, earthquake insurance and such other insurance as Lessor deems
advisable. In addition, Lessor shall obtain and keep in force, during the term
of this Lease, a policy of rental value insurance covering a period of one
year, with loss payable to Lessor, which insurance shall also cover all
Operating Expenses for said period. In the event that the Premises shall
suffer an insured loss as defined in paragraph 9.1(g) hereof, the deductible
amounts under the casualty insurance policies relating to the Premises shall be
paid by the Lessee.
8.4 Payment of Premium Increase.
(a) After the term of this Lease has commenced, Lessee shall not be
responsible for paying Lessee's Share of any increase in the property insurance
premium for the Industrial Center specified by Lessor's insurance carrier as
being caused by the use, acts or omissions of any other lease of the Industrial
Center, or by the nature of such other lessee's occupancy which create an
extraordinary or unusual risk.
(b) Lessee, however, shall pay the entirety of any increase in the
property insurance premium for the Industrial Center over what it was
immediately prior to the commencement of the term of this Lease if the increase
is specified by Lessor's Insurance carrier as being caused by the nature of
Lessee's occupancy or any act or omission of Lessee.
8.5 Insurance Policies. Insurance required hereunder shall be in companies
holding a "General Policyholders Rating" of at least B plus, or such other
rating as may be required by a lender having a lien on the Premises, as set
forth in the most current issue of "Best's Insurance Guide." Lessee shall not
do or permit to be done anything which shall invalidate the insurance policies
carried by Lessor. Lessee shall deliver to Lessor copies of liability
insurance policies required under paragraph 8.1 or certificates evidencing the
existence and amounts of such insurance within seven (7) days after the
commencement date of this Lease. No such policy shall be cancellable or
subject to reduction of coverage or other 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 renewals or
"binders" thereof.
8.6 Waiver of Subrogation. Lessee and Lessor each hereby release and
relieve the other, and waive their entire right of recovery against the other
for loss or damage arising out of or incident to the perils insured against
which perils occur in, on or about the Premises, whether due to the negligence
of Lessor or Lessee or their agents, employees, contractors and/or invitees.
Lessee and Lessor shall, upon obtaining the policies of insurance required give
notice to the insurance carrier or carriers that the foregoing mutual waiver of
subrogation is contained in this Lease.
8.7 Indemnity. Lessee shall indemnify and hold harmless Lessor from and
against any and all claims arising from Lessee's use of the Industrial Center,
or from the conduct of Lessee's business or from any activity, work or things
done, permitted or suffered by Lessee in or about the Premises or elsewhere and
shall further indemnify and hold harmless Lessor from and against any and all
claims arising from any breach or default in the performance of any obligation
on Lessee's part to be performed under the terms of this Lease, or arising from
any act or omission of Lessee or any of Lessee's agents, contractors or
employees, and from and against all costs, attorney's fees, expenses and
liabilities incurred in the defense of any such claim or any action or
proceeding brought thereon; and in case any action or proceeding be brought
against Lessor by reason of any such claim, 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. Lessee, as a material
part of the consideration to Lessor, hereby assumes all risk of damage to
property of Lessee or injury to persons in, upon or about the Industrial center
arising from any cause and Lessee hereby waives all claims in respect thereof
against Lessor. See Addendum Paragraph 60.
8.8 Exemption of Lessor from Liability. Except as provided to the contrary
in Addendum Paragraph 54, Lessee hereby agrees that Lessor shall not be liable
for injury to Lessee's business or any loss of income therefrom or for damage
to the goods, wares, merchandise or other property of Lessee. Lessee's
employees, invitees, customers, or any other person in or about the Premises or
the Industrial Center, nor shall Lessor be liable for injury to the person of
Lessee, Lessee's employees, agents or contractors, 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,
sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures,
or from any other cause, whether said damage or injury results from conditions
arising upon the Premises or upon other portions of the Industrial Center, or
from other sources or places and regardless of whether the cause of such damage
or injury or the means of repairing the same is inaccessible to Lessee, Lessor
shall not be liable for any damages arising from any act or neglect of any
other lessee, occupant or user of the Industrial Center, nor from the failure
of Lessor to enforce the provisions of any other lease of the Industrial
Center. See Addendum Paragraph 54.
9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Partial Damage" shall mean if the Premises are damaged
or destroyed to the extent that the cost of repair is less than fifty percent
of the then replacement cost of the Premises.
(b) "Premises Total Destruction" shall mean if the Premises are
damaged or destroyed to the extent that the cost of repair is fifty percent or
more of the then replacement cost of the Premises.
(c) "Premises Building Partial Damage" shall mean if the Building of
which the Premises are a part is damaged or destroyed to the extent that the
cost to repair is less than fifty percent of the then replacement cost of the
Building; and
(d) "Premises Building Total Destruction" shall mean if the Building of
which the Premises are a part is damaged or destroyed to the extent that the
cost to repair is fifty percent or more of the then replacement cost of the
Building.
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(e) "Insured Loss" shall mean damage or destruction which was covered
by an event required to be covered by the insurance described in paragraph 8.
The fact that an insured Loss has a deductible amount shall not make the loss
an uninjured loss.
(f) "Replacement Cost" shall mean the amount of money necessary to be
spent in order to repair or rebuild the damaged area to the condition that
existed immediately prior to the damage occurring excluding all improvements
made by lessees.
9.2 Premises Partial Damage: Premises Building Partial Damage.
(a) Insured Loss: Subject to the provisions of paragraphs 9.4 and
9.5. If at any time during the term of this Lease there is damage which is an
Insured Loss and which falls into the classification of either Premises Partial
Damage or Premises Building Partial Damage, then Lessor shall at Lessor's
expense, repair such damage to the Premises, but not Lessee's fixtures,
equipment or tenant improvements, as soon as reasonably possibly and this Lease
shall continue in full force and effect.
(b) Uninsured Loss: Subject to the provisions of paragraph 9.4 and
9.5. If at any time during the term of this Lease there is damage which is not
an Insured Loss and which falls within the classification of Premises Partial
Damage or Premises Building Partial Damage, unless caused by a negligent or
willful act of Lessee (in which event Lessee shall make the repairs at Lessee's
expense), which damage prevents Lessee from using the Premises. 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 notification to Lessee within thirty (30) days
after the date of the occurrence of such damage of Lessor's intention to cancel
and 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
intention to repair such damage at Lessee's expense, without reimbursement from
Lessor, in which event this Lease shall continue in full force and affect, and
Lessee shall proceed to make such repairs as soon as reasonably possible. If
Lessee does not give such notice within such 10-day period this Lease shall be
cancelled and terminated as of the date of the occurrence of such damage. See
Addendum Paragraph 55.
9.3 Premises Total Destruction: Premises Building Total Destruction.
(a) Subject to the provisions of paragraphs 9.4 and 9.5. If at any
time during the term of this Lease there is damage, whether or not it is an
Insured Loss, and which falls into the classifications of either (I) Premises
Total Destruction, or (II) Premises Building Total Destruction, than Lessor may
at Lessor's option either (I) repair such damage or destruction, but not
Lessee's fixtures, equipment or tenant improvements, as soon as reasonably
possible at Lessor's expense, and this Lease shall continue in full force and
effect, or (II) give written notice to Lessee within thirty (30) days after the
date of occurrence of such damage of Lessor's intention to cancel and terminate
this Lease, in which case this Lease shall be cancelled and terminated as of
the date of the occurrence of such damage.
9.4 Damage Near End of Term.
(a) Subject to paragraph 9.4 (b). If at any time during the last six
months of the term of this Lease there is substantial damage whether or not an
Insured Loss, which falls within the classification of Premises Partial Damage.
Lessor or Lessee may at their option cancel and terminate this Lease as of the
date of occurrence of such damage by giving written notice to the other party of
the terminating party's election to do so within 30 days after the date of
occurrence of such damage.
(b) Notwithstanding paragraph 9.4(n). In the event that Lessee has an
option to extend or renew this Lease, and the time within which said option may
be exercised has not yet expired, Lessee shall exercise such option. If it is
to be exercised at all, no later than twenty (20) days after the occurrence of
an insured Loss falling within the classification of Premises Partial Damage
during the last six months of the term of this Lease if Lessee duly exercises
such option during said twenty (20) day period. Lessor shall treat such damage
as it would under Paragraphs 9.2 and 9.3. Paragraph 9.4 (a) shall apply.
9.5 Abatement of Rent: Lessee's Remedies.
(a) In the event Lessor repairs or restores the Premises pursuant to
the provisions of this paragraph 9, the rent payable hereunder for the period
during which such damage, repair or restoration continues shall be abated in
proportion to the degree to which Lessee's use of the Premises is impaired.
Except for abatements of rent. If any, Lessee shall have no claim against
Lessor for any damage suffered by reason of any such damage, destruction,
repair 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 such repair or
restoration within ninety (90) days after such obligation shall accrue. Lessee
may at Lessee's option cancel and terminate this Lease by giving Lessor written
notice of Lessee's election to do so at any time prior to the commencement of
such repair or restoration. In such event this Lease shall terminate as of the
date of such notice.
9.6 Termination - Advance Payments. Upon termination of this Lease
pursuant to this paragraph 9, an equitable adjustment shall be made concerning
advance rent and any advance payments made by Lessee to Lessor. Lessor shall,
in addition, return to Lessee so much of Lessee's security deposit as has not
therefore been applied by Lessor.
9.7 Waiver. Lessor and Lessee waive the provisions of any statute which
relate to termination of leases when leased property is destroyed and agree
that such event shall be governed by the terms of this Lease.
10. Real Property Taxes.
10.1 Payment of taxes. Lessor shall pay the real property tax, as defined
in paragraph 10.3, applicable to the Industrial Center subject to reimbursement
by Lessee of Lessee's Share of such taxes in accordance with the provisions of
paragraph 4.2 except as otherwise provided in paragraph 10.2.
10.2 Additional Improvements. Lessee shall not be responsible for paying
Lessee's Share of any increase in real property tax 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. Lessee shall, however, pay to
Lessor at the time that Operating Expenses are payable under paragraph 4.2(c)
the entirety of any increase in real property tax if assessed solely by
reason of additional improvements placed upon the Premises by Lessee or at
Lessee's request.
10.3 Definition of "real Property Tax." As used herein, the term "real
property tax" 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 on the Industrial Center as defined in Addendum
Paragraph 47 or any portion thereof by any authority having the direct or
indirect power to tax, including any city, county, state or federal government,
or any school, agricultural, sanitary, fire, street, drainage or other
improvement district thereof, as against any legal or equitable Interest of
Lessor in the Industrial Center or in any portion thereof, as against lessor's
right to rent or other income therefrom, and as against Lessor's business of
leasing the Industrial Center. The term "real property tax" shall also include
any tax, fee, levy, assessment or charge (i) in substitution of partially or
totally, any tax, fee, levy, assessment or charge herein above included within
the definition of "real property tax" or (ii) the nature of which was
hereinbefore included within the definition of "real property tax" or (iii)
which is Imposed for a service or right not charged prior to June 1, 1978, or,
if previously charged, has been increased since June 1, 1978, or (iv) (See
Addendum Paragraph 56) or (v) which is imposed by reason of this transaction,
any modifications or changes hereto, or any transfers hereof.
10.4 Joint Assessment. If the Industrial Center is not separately
assessed, Lessee's Share of the real property tax liability shall be an
equitable proportion of the real property taxes for all of the land and
improvements included within the tax parcel assessed, such proportion to be
determined by Lessor from the respective valuations assigned in the assessor's
work sheets or such other information as may be reasonably available Lessor's
reasonable determination thereof, in good faith, shall be conclusive.
10.5 Personal Property Taxes.
(a) Lessee shall pay prior to delinquency all taxes assessed against
and levied upon trade fixtures, furnishings, equipment and all other personal
property of Lessee contained in the Premises or elsewhere. When possible,
Lessee shall cause said trade fixtures, furnishings, equipment and all other
personal property to be assessed and billed separately from the real property
of Lessor.
(b) If any of Lessee's said personal property shall be assessed with
Lessor's real property, Lessee shall pay to Lessor the taxes attributable to
Lessee within ten (10) days after receipt of a written statement setting forth
the taxes applicable to Lessee's property.
11. Utilities. Lessee shall pay for all water, gas, heat, light, power,
telephone and other utilities and services supplied to the Premises, together
with any taxes thereon. If any such services are not separately metered to the
Premises, Lessee shall pay at Lessor's option, either Lessee's Share or a
reasonable proportion to be determined by Lessor of all charges jointly metered
with other premises in the Building.
12. Assignment and Subletting.
12.1 Lessor's Consent Required. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Lessee's interest in the Lease or in the Premises,
without Lessor's prior written consent, which Lessor shall not unreasonably
withhold. Lessor shall respond to Lessee's request for consent hereunder in a
timely manner and any attempted assignment, transfer, mortgage, encumbrance or
subletting without such consent shall be void, and shall constitute a breach of
this Lease without the need for notice to Lessee under paragraph 13.1.
12.2 Lessee Affiliate. Notwithstanding the provisions of paragraph 12.1
hereof, (Lessee may assign or sublet the Premises, or any portion thereof,)
without Lessor's consent, to any corporation which controls is controlled by or
is under common control with Lessee, or to any corporation resulting from the
merger or consolidation with Lessee, or to any person or entity which acquires
all the assets of Lessee as a going concern of the business that is being
conducted on the Premises, all of which are referred to as "Lessee Affiliate"
provided that before such assignment shall be effective said assignee shall
assume, in full, the obligations of Lessee under this Lease. Any such
assignments shall not in any
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way, affect or limit the liability of Lessee under the terms of this Lease even
if after such assignment or subletting the terms of this Lease are materially
changed or altered without the consent of Lessee, the consent of whom shall not
be necessary.
12.3 Terms and Conditions of Assignment. Regardless of Lessor's consent,
no assignment shall release Lessee of Lessee's obligations hereunder of after
the primary liability of Lessee to pay the Base Rent and Lessee's Share of
Operating Expenses, and to perform all other obligations to be performed by
Lessee hereunder. Lessor may accept rent from any person other than Lessee
pending approval or disapproval of such assignment. Neither a delay in the
approval or disapproval of such assignment nor the acceptance of rent shall
constitute a waiver or estoppel of Lessor's right to exercise its remedies for
the breach of any of the terms or conditions of this paragraph 12 or this
Lease. Consent to one assignment shall not be deemed consent to any subsequent
assignment. In the event of default by any assignee of Lessee or any successor
of Lessee. In the performance of any of the terms hereof, Lessor may proceed
directly against Lessee without the necessity of exhausting remedies
against said assignee. Lessor may consent to subsequent assignments of this
Lease or amendments or modifications to this Lease with assignees of Lessee,
without notifying Lessee, or any successor of Lessee, and without obtaining its
or their consent thereto and such action shall relieve Lessee of liability
under this Lease.
12.4 Terms and Conditions Applicable to Subletting. Regardless of
Lessor's consent, the following terms and conditions shall apply to any
subletting by Lessee of all or any part of the Premises and shall be included
in subleases:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease 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 default shall occur in the performance of Lessee's obligations under
this Lease, Lessee may receive, collect and enjoy the rents accruing under such
sublease, Lessor shall not, by reason of this or any other assignment of such
sublease to Lessor nor by reason of the collection of the rents from a
sublessee, be deemed liable to the sublessee for any failure of Lessee to
perform and comply with any of lessee's obligations to such sublessee under
such sublease. Lessee hereby irrevocably authorizes and directs any such
sublessee, upon receipt of a written notice from Lessor stating that a default
exists in the performance of Lessee's obligations under this Lease, to pay to
Lessor the rents due and to become due under the sublease. Lessee agrees that
such sublessee shall have the right to rely upon any such statement and request
from Lessor, and that such sublessee shall pay such rents to Lessor without any
obligation or the right to inquire as to whether such default exists and
notwithstanding any notice from or claim from Lessee to the contrary. Lessee
shall have no right or claim against such sublessee or Lessor for any such rents
so paid by said sublessee to Lessor. See Addendum Paragraph 57.
(b) No sublease entered into by Lessee shall be effective unless and
until it has been approved in writing by Lessor. In entering into any
sublease, Lessee shall use only such form of sublease as is satisfactory to
Lessor, and once approved by Lessor, such sublease shall not be changed or
modified without Lessor's prior written consent. Any sublessee shall, by
reason of entering into a sublease under this Lease, be deemed, for the
benefit of Lessor, to have assumed and agreed to conform and comply with each
and every obligation herein to be performed by Lessee other than such
obligations as are contrary to or inconsistent with provisions contained in a
sublease to which lessor has expressly consented in writing.
(c) If Lessee's obligations under this Lease have been guaranteed by
third parties, then a sublease, and Lessor's consent thereto, shall not be
effective unless said guarantors give their written consent to such sublease
and the terms thereof.
(d) The consent by Lessor to any subletting shall not release Lessee
from its obligations or alter the primary liability of Lessee to pay the rent
and perform and comply with all of the obligations of Lessee to be performed
under this Lease.
(e) The consent by Lessor to any subletting shall not constitute a
consent to any subsequent subletting by Lessee or to any assignment or
subletting by the sublessee. However, Lessor may consent to subsequent
sublettings and assignments of the sublease or any amendments or modifications
thereto without notifying Lessee or anyone else liable on the Lease or sublease
and without obtaining their consent and such action shall not relieve such
persons from liability.
(f) In the event of any default under this Lease, Lessor may proceed
directly against Lessee, any guarantors or any one else responsible for the
performance of this Lease, including the sublessee, without first exhausting
Lessor's remedies against any other person or entity responsible therefor to
Lessor, or any security held by Lessor or Lessee.
(g) In the event Lessee shall default 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 Lessee under such sublease from the
time of the exercise of said option to the termination of such sublease;
provided, however, Lessor shall not be liable for any prepaid rents or security
deposit paid by such sublessee to Lessee or for any other prior defaults of
Lessee under such sublease.
(h) Each and every consent required of Lessee under a sublease shall
also require the consent of lessor.
(i) No sublessee shall further assign or sublet all or any part of
the Premises without Lessor's prior written consent.
(j) Lessor's written consent to any subletting of the Premises by
Lessee shall no constitute an acknowledgement that no default then exists under
this Lease of the obligations to be performed by Lessee nor shall such consent
be deemed a waiver of any then existing default, except as may be otherwise
stated by Lessor at the time.
(k) With respect to any subletting to which Lessor has consented,
Lessor agrees to deliver a copy of any notice of default by Lessee to the
sublessee. Such sublessee shall have to right to cure a default of Lessee
within ten (10) days after service of said notice of default upon such
sublessee, and the sublessee shall have a right of reimbursement and offset
from and against Lessee for any such defaults cured by the sublessee.
12.5 Attorney's Fees. In the event Lessee shall assign or sublet the
Premises or request the consent of Lessor to any assignment or subletting or if
Lessee shall request the consent of Lessor for any act lessee proposes to do,
then Lessee shall pay Lessor's reasonable attorney's fees and reasonable
administrative costs provided, however, that if there is negotiation involved in
any particular sublease or assignment transaction, i.e., if Master Lessor is
only required to provide its typical consent, master Lessor's attorney's fees
will be limited to $250.00 per transaction.
13. Default; Remedies.
13.1 Default. The occurrence of any one or more of the following events
shall constitute a material default of this Lease by Lessee:
(a) The vacating or abandonment of the Premises by Lessee.
(b) The failure by Lessee to make any payment of rent or any other
payment required to be made by Lessee hereunder, as and when due, where such
failure shall continue for a period of three (3) days after written notice
thereof from Lessor to Lessee. In the event that Lessor serves Lessee with a
Notice to pay Rent or Quit pursuant to applicable Unlawful Detainer statutes
such Notice to Pay Rent or Quit shall also constitute the notice required by
this subparagraph.
(c) Except as otherwise provided in this Lease, the failure by Lessee
to observe or perform any of the covenants, conditions or provisions of this
lease to be observed or performed by Lessee, other than described in paragraph
(b) above, where such failure shall continue for a period of thirty (30) days
after written notice thereof from Lessor to Lessee; provided, however, that if
the nature of lessee's noncompliance is such that more than thirty (30) days are
reasonably required for its cure, then Lessee shall not be deemed to be in
default if Lessee commenced such cure within said thirty (30) day period and
thereafter diligently prosecutes such cure to completion. To the extent
permitted by law, such thirty (30) day notice shall constitute the sole and
exclusive notice required to be given to Lessee under applicable Unlawful
Detainer statutes.
(d) (i) The making by Lessee of any general arrangement or general
assignment for the benefit of creditors; (ii) Lessee becomes a "debtor" as
defined in 11 U.S.C. 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. In the event that any provision of this paragraph 13.1(d) is
contrary to any applicable law, such provision shall be of no force or effect.
(e) The discovery by Lessor that any financial statement given to
Lessor by Lessee, any assignee of Lessee, and subtenant of Lessee, any
successor in interest of Lessee or any guarantor of Lessee's obligation
hereunder, was materially false.
13.2 Remedies. In the event of any such material default by Lessee,
Lessor may at any time thereafter, with or without notice or demand and
without limiting Lessor in the exercise of any right or remedy which Lessor
may have by reason of such default:
(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 all damages incurred
by Lessor by reason of Lessee's default 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 attorney's
fees, and any real estate commission actually paid; the worth at the time of
award by the court having jurisdiction thereof of the amount by which the unpaid
rent for the balance of the term after the time of such award exceeds the
amount of such rental loss for the same period that Lessee proves could be
reasonably avoided, that portion of the leasing commission paid by Lessor
pursuant to paragraph 15 applicable to the unexpired term of this Lease.
(b) Maintain Lessee's right to possession in which case this lease
shall continue in effect whether or not Lessee shall have vacated or abandoned
the Premises. In such event Lessor shall be entitled to enforce all of
Lessor's rights and remedies under this Lease, including the right to recover
the rent as it becomes due hereunder.
(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. Unpaid installments of rent and other unpaid monetary obligations of
Lessee under the terms of this Lease shall bear interest from the date due at
the maximum rate than allowable by law.
13.3 Default by Lessor. Lessor shall not be in default unless Lessor fails
to perform obligations required of Lessor within a reasonable time, but in no
event later than thirty (30) days after written notice by Lessee to Lessor and
to the holder of any first mortgage or deed of trust covering the Premises
whose name and address shall have theretofore been furnished to Lessee in
writing, specifying wherein Lessor has failed to perform such obligation;
provided, however, that if the nature of Lessor's obligation is such that more
than thirty (30) days are required for performance then Lessors shall not be in
default if Lessor commences performance within such thirty (30) day period and
thereafter diligently prosecuted to completion
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13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee
to Lessor of Base Rent, Lessee's Share of Operating Expenses or 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 on Lessor by the terms of any mortgage or trust
deed covering the Property. Accordingly, if any installment of Base Rent,
Operating Expenses or any 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 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 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 any of the aforesaid monetary obligations of
Lessee, then Base Rent shall automatically become due and payable quarterly in
advance, rather than monthly, notwithstanding paragraph 4.1 or any other
provision of this Lease to the contrary.
14. Condemnation. If the Premises or any portion thereof or the Industrial
Center 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 of the floor area of the Premises, or more than
twenty-five percent of that portion of the Common Areas designated as parking
for the Industrial Center is taken by condemnation, Lessee may, at Lessee's
option to be exercised in writing only 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 rent shall be reduced in the
proportion that the floor area of the Premises taken bears to the total floor
area of the Premises. No reduction of rent shall occur if the only area taken
is that which does not have the Premises located thereon. Any award for the
taking of all or any part of the Premises under the power of eminent domain or
any payment made under threat of the exercise of such power shall be the
property of Lessor, whether such award shall be made as compensation for
diminution in value of the leasehold or for the taking of the fee or as
severance damages; provided, however, that Lessee shall be entitled to any
award for loss or damage to Lessee's trade fixtures and removable personal
property. In the event that this Lease is not terminated by reason of such
condemnation, Lessor shall to the extent of severance damages received by
Lessor in connection with such condemnation, repair any damage to the Premises
caused by such condemnation except to the extent that Lessee has been
reimbursed therefor by the condemning authority. Lessee shall pay any amount
in excess of such severance damages required to complete such repair.
15. Broker's Fee.
(a) Upon execution of this Lease by both parties, Lessor shall pay to
Leonard & Ohren and Tooley & Company, Licensed real estate broker(s) a fee as
set forth in a separate agreement between Lessor and said broker.
16. Estoppel Certificate.
(a) Each party (as "responding party") shall at any time upon not less
than ten (10) days' prior written notice from the other party ("requesting
party") execute, acknowledge and deliver to the requesting party a statement in
writing (i) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and certifying
that this Lease, as so modified, is in full force and effect) and the date to
which the rent and other charges are paid in advance, if any, and (ii)
acknowledging that there are not, to the responding party's knowledge, any
uncured defaults on the part of the requesting party, or specifying such
defaults if any are claimed. Any such statement may be conclusively relied upon
by any prospective purchaser or encumbrancer of the Premises or of the business
of the requesting party.
(b) At the requesting party's option, the failure to deliver such
statement within such time shall be a material fault of this Lease by the party
who is to respond, without any further notice to such party, or it shall be
conclusive upon such party that (i) this Lease is in full force and effect
without modification except as may be represented by the requesting party, (ii)
there are no uncured defaults in the requesting party's performance, and (iii)
if Lessor is the requesting party, not more than one month's rent has been paid
in advance.
(c) If Lessor desires to finance, refinance, or sell the Property, or any
part thereof, Lessee hereby agrees to deliver to any lender or purchaser
designated by Lessor such financial statements of Lessee as may be reasonably
required by such lender or purchaser. Such statements shall include the past
three (3) years' financial statements of Lessee. 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 only the
owner or owners, at the time in question, of the fee title or a lessee's
interest in a ground lease of the Industrial Center, and except as expressly
provided in paragraph 15. In the event of any transfer of such title or
interest, Lessor herein named (and in case of any subsequent transfers then
the grantor) shall be relieved from and after the date of such transfer of all
liability as respects Lessor's obligations thereafter to be performed, provided
that any funds in the hands of Lessor or the then grantor at the time of such
transfer in which Lessee has an interest shall be delivered to the grantee.
The obligations contained in this Lease to be performed by Lessor shall,
subject as aforesaid, be binding on Lessor's successors and assigns only during
their respective periods of ownership.
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. Except as expressly herein provided,
any amount due to Lessor not paid when due shall bear interest at the maximum
rate then allowable by law from the date due. Payment of such interest shall
not excuse or cure any default by Lessee under this Lease provided, however,
that interest shall not be payable on late charges incurred by Lessee nor on
any amounts upon which late charges are paid by Lessee.
20. Time of Essence. Time is of the essence with respect to the obligations
to be performed under this Lease.
21. Additional Rent. All monetary obligations of Lessee to Lessor under the
terms of this Lease, including but not limited to Lessee's Share of Operating
Expenses and Insurance and tax expenses payable shall be deemed to be rent.
22. Incorporation of Prior Agreements; Amendments. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No
prior or contemporaneous agreement or understanding pertaining to any such
matter shall be effective. This Lease may be modified in writing only, signed
by the parties in interest at the time of the modification. Except as
otherwise stated in this Lease, Lessee hereby acknowledges that neither the
real estate broker listed in paragraph 15 hereof nor any cooperating broker on
this transaction nor the Lessor or any employee or agent of any said persons
has made any oral or written warranties or representations to Lessee relative
to the condition or use by Lessee of the Premises or the Property and Lessee
acknowledges that Lessee assumes all responsibility regarding the Occupational
Safety Health Act, the legal use and adaptability of the Premises and the
compliance thereof with all applicable laws and regulations in effect during
the term of this Lease except as otherwise specifically stated in this Lease.
The obligations of Lessor under this Lease do not constitute personal
obligations of the Lessor or of the individual partners, directors, officers,
or shareholders of Lessor with the exception of gross negligence, acts of bad
faith and willful acts, and Lessee shall look solely to the Building that is
the subject of this Lease and to no other assets of the Lessor for satisfaction
of any liability in respect of this Lease and will not seek recourse against
the Lessor or the individual partners, directors, officers or shareholders of
Lessor or any of their personal assets for such satisfaction.
23. Notices. Any notice required or permitted to be given hereunder shall be
in writing and may be given by personal delivery or by certified mail and if
given personally or by mail shall be deemed sufficiently given if addressed to
Lessee or to Lessor at the address noted below the signature of the respective
parties, as the case may be. Either party may by notice to the other specify a
different address for notice purposes except that upon Lessee's taking
possession of the Premises, the Premises shall continue Lessee's address for
notice purposes. 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 notice to
Lessor.
24. Waivers. No waiver by Lessor or any provision hereof shall be deemed a
waiver of any other provision hereof of any subsequent breach by Lessee of the
same or any other provision. Lessor's consent to, or approval of, any act
shall not be deemed to render unnecessary the obtaining of Lessor's consent to
or approval of any subsequent act by Lessee. The acceptance of rent hereunder
by Lessor shall not be a waiver of any preceding breach by Lessee of any
provision hereof, other than the failure of Lessee to pay the particular rent
so accepted, regardless of Lessor's knowledge of such preceding breach at the
time of acceptance of such rent.
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.
26. Holding Over. If Lessee, with Lessor's consent, remains in possession of
the Premises or any part thereof after the expiration of the term hereof, such
occupancy shall be a tenancy from month to month upon all the provisions of
this Lease pertaining to the obligations of Lessee, but all Options, if any,
granted under the terms of this Lease shall be deemed terminated and be of no
further effect during said month to month tenancy.
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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. Each provision of this Lease performable by
Lessee shall be deemed both a covenant and a condition.
29. Binding Effect; Choice of Law. Subject to any provisions hereof
restricting assignment or subletting by Lessee and subject to the provisions of
paragraph 17, this Lease shall bind the parties, their personal representatives,
successors and assigns. This Lease shall be governed by the laws of the State
where the Industrial Center is located and any litigation concerning this Lease
between the parties hereto shall be initiated in the county in which the
Industrial Center is located.
30. Subordination.
(a) This Lease and any Option granted hereby, at Lessor's option, shall be
subordinate to any ground lease, mortgage, deed of trust, or any other
hypothecation or security now or hereafter placed upon the Industrial Center and
to any and all advances made on the security thereof and to all renewals,
modifications, consolidations, replacements and extensions thereof.
Notwithstanding such subordination, Lessee's right to quiet possession of the
Premises shall not be disturbed if Lessee is not in default and so long as
Lessee shall pay the rent and observe and perform all of the provisions of this
Lease, unless this Lease is otherwise terminated pursuant to its terms. If any
mortgages, trustee or ground lessor shall elect to have this Lease and any
Options granted hereby prior to the lien of its mortgage, deed of trust or
ground lease, and shall give written notice thereof to Lessee, this Lease and
such Options shall be deemed prior to such mortgage, deed of trust or ground
lease, whether this Lease or such Options are dated prior or subsequent to the
date of said mortgage, deed of trust or ground lease or the date of recording
thereof.
(b) Lessee agrees to execute any documents required to effectuate an
allotment, a subordination or to make this Lease or any Option granted herein
prior to the lien of any mortgage, deed of trust or ground lease, as the case
may be. Lessee's failure to execute such documents within ten (10) days after
written demand shall constitute a material default by Lessee hereunder without
further notice to Lessee or, at Lessor's option. Lessor shall execute such
documents on behalf of Lessee as Lessee's attorney-in-fact and in lessee's
name, place and stead, to execute such documents in accordance with this
paragraph 30(b).
31. Attorney's Fees. If either party or the broker(s) named herein bring an
action to enforce the terms hereof or declare rights hereunder, the prevailing
party in any such action, on trial or appeal, shall be entitled to his
reasonable attorney's fees to be paid by the losing party as fixed by the
court. The provisions of this paragraph shall inure to the benefit of the
broker name herein who seeks to enforce a right hereunder.
32. Lessor's Access. Lessor and Lessor's agents shall have the right to enter
the Premises at reasonable times for the purpose of inspecting the same,
showing the same to prospective purchasers, lenders, or lessees, and making
such alterations, repairs, improvements or additions to the Premises or to the
building of which they are part as Lessor may deem necessary or desirable.
Lessor may at any time place on or about the Premises or the Building any
ordinary "For Sale signs and Lessor may at any time during the last 120 days
of the term hereof place on or about the Premises any ordinary "For Lease"
signs. All activities of Lessor pursuant to this paragraph shall be without
abatement of rent, nor shall Lessor have any liability to Lessee for the same.
33. Auctions. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises or the Common Areas
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 Premises or the
Industrial Center without Lessor's prior written consent. Under no
circumstances shall Lessee place a sign on any roof of the Industrial Center.
35. Merger. The voluntary or other surrender of this Lease by Lessee, or a
mutual cancellation thereof, or a termination by Lessor, shall not work a
merger, and shall, at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of Lessor, operate as an assignment to
Lessor of any or all such subtenancies.
36. Consents. Except for paragraph 33 hereof, wherever in this Lease the
consent of one party is required to an act of the other party such consent
shall not be unreasonably withheld or delayed.
38. Quiet Possession. Upon Lessee paying the rent for the Premises and
observing and performing all of the covenants, conditions and provisions on
Lessee's part to be observed and performed hereunder, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease. The individuals executing this Lease on behalf of
Lessor represent and warrant to Lessee that they are fully authorized and
legally capable of executing this Lease on behalf of Lessor and that such
execution is binding upon all parties holding an ownership interest in the
Property.
39. Options.
39.1 Definition. As used in this paragraph the word "Option" has the
following meaning: the right or option to expand, as set forth in Addendum
Paragraph 58, and option to extend, as set forth in Addendum Paragraph 67.
39.2 Options Personal. Each Option granted to Lease in this Lease is
personal to the original Lessee and may be exercised only by the original Lessee
while occupying the Premises who does so without the intent of thereafter
assigning this Lease or subletting the Premises or any portion thereof, and may
not be exercised or be assigned voluntarily or involuntarily, by or to any
person or entity other than Lessee, provided however, that an Option may be
exercised by or assigned to any Lessee Affiliate as defined in paragraph 12.2
of this Lease. The Options, if any, herein granted to Lessee are not assignable
separate and apart from this Lease, nor may any Option be separated from this
Lease in any manner, either by reservation or otherwise.
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 time commencing from the date Lessor gives to Lessee a notice of
default pursuant to paragraph 13.1(b) or 13.1(c) and continuing until the
noncompliance alleged in said notice of default is cured or (ii) during the
period of time commencing on the date after a monetary obligation to Lessor is
due from Lessee and unpaid (without any necessity for notice thereof to Lessee)
and continuing until the obligation is paid, or (iii) at any time after an
event of default described in paragraphs 13.1(a), 13.1(d), Nor 13.1(e) (without
any necessity of Lessor to give notice of such default to Lessee), or (iv) in
the event that Lessor has given to Lessee three or more notices of default under
paragraph 13.1(B), or paragraph 13.1(c), whether or not the defaults are cured,
during the 112 month period of time immediately prior to the time that Lessee
attempts to exercise the subject Option.
(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 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) Lessee fails to
commence to cure a default specified in paragraph 13.1(c) within thirty (30)
days after the date that Lessor gives notice to lessee of such default and /or
Lessee fails thereafter to diligently prosecute said cure to completion, or
(iii) Lessee commits a default described in paragraph 13.1(a), 13.1(d), or
13.1(e) (without any necessity of Lessor to give notice of such default to
Lessee), or (iv) Lessor gives to Lessee three or more notices of default under
paragraph 13.1(b), or paragraph 13.1(c), whether or not the defaults are cured.
40. Security Measures. Lessee hereby acknowledges that Lessor shall have no
obligation whatsoever to provide guard service or other security measures for
the benefits, on the Premises or the Industrial Center. Lessee assumes all
responsibility for the protection of Lessee, its agents, and invites and the
property of Lessee and of Lessee's agents and invites from acts of third
parties. Nothing herein contained shall prevent Lessor, at Lessor's sole
option, from providing security protection for the Industrial Center or any
part thereof, in which event the cost thereof shall be included within the
definition of Operating Expenses, as set forth in paragraph 4.2(b).
41. Easements. Lessor reserves to itself the right, from time to time, to
grant such easements, rights and dedications that lessor deems necessary or
desirable, and to cause the recordation of Parcel Maps and restrictions, so
long as such easements, rights, dedications. Maps and restrictions do not
unreasonably interfere with the use of the Premises by Lessee. Lessee shall
sign any of the aforementioned documents upon request of Lessor and failure to
do so shall constitute a material default of this Lease by Lessee without the
need for further notice to Lessee.
42. Performance Under Protest. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one part 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.
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ADDENDUM TO LEASE
This Addendum to Lease ("Addendum") is made and entered into by and
between AMC ASSOCIATES, a California Limited Partnership ("Lessor") and GILDA
MARX INCORPORATED, a California corporation ("Lessee") and is dated as of the
date set forth on the first page of the Standard Industrial Lease-Multi-Tenant
Lease between Lessor and Lessee (the "Lease") to which this Addendum is
attached. The promises, covenants, agreements and declarations made and set
forth herein are intended to and shall have the same force and effect as if set
forth at length in the body of the Lease to the extent that the provisions of
this Addendum are inconsistent with the terms and conditions of the Lease, the
terms and conditions of this Addendum shall control.
47. Industrial Center. The reference in this Lease to the
"Industrial Center" shall mean and refer to the single building within which the
Premises are located, together with the ancillary improvements contained on that
certain real property described as Parcel A in the city of Los Angeles, as shown
on Parcel Map L.A. No. 2568, filed in Book 41 Page 90 of Parcel Maps, in the
office of the county recorder of said county. Although the Building is located
within a project known as "Airport Marina Center", the references in the Lease
to the "Industrial Center" shall be limited solely to the Building with the
current address of 5340 Alla Road and to the above-described Parcel A, and to no
other buildings or other improvements within the Airport Marina Center.
48. Rentable Square Footage. The Premises have been described in
terms of rentable square footage which shall mean and refer to the customary
measurement standards for multi-tenant two-story tilt-up buildings in the
vicinity of the Building, together with an "add-on factor" for the second floor
Premises calculated by adding (i) the lobby area of the ground floor of the
Building which includes the new elevator to the second floor of the Premises and
which lobby area exclusively serves the Premises (except for emergency only
passage through same by the adjacent ground floor tenant), totalling
approximately 700 square feet, (ii) the freight elevator and adjacent mechanical
room which exclusively serves the Premises, (iii) the stairwells which
exclusively serve the Premises, and (iv) Lessee's Proportionate Share of the
square footage of the electrical closet and sprinkler control valve room serving
the Building. The rentable square footage of the Building shall be reduced by
the approximately 4,000 to 5,000 square foot portion of the second floor of the
Building which is to be removed pursuant to the "Final Plans" described in
Paragraph 51 below, for the purpose of creating a "high-bay" storage area for
Lessee. At any time prior to the commencement of the Term of this Lease, Lessee
shall have the right to remeasure the Premises Lo confirm the rentable square
feet contained therein, pursuant to customary measurement standards for tilt-up
buildings in the vicinity of the Building. The remeasurement shall be performed
by the architect or designer selected by Lessor to prepare the Final Plans,
after consultation with Lessor's designer, reasonably approved by Lessor.
49. Parking Rules. Lessor reserves the right to develop reasonable
and non-discriminatory parking, loading, access and other common area rules and
regulations, which rules and regulations shall in no event affect Lessor's
commitment to Lessee to a parking ratio of 3.0 spaces per 1,000 square feet of
usable area in the Premises. No parking fee shall be charged for
<PAGE> 28
vehicle parking spaces during the ten year term of this Lease. If Lessee
elects to exercise its Option to Extend pursuant to Paragraph 67 below, no
parking fee shall be charged during such Option Term; provided, however, that
if comparable buildings are then charging for parking, the "Fair Market Rental
Rate", as described in Paragraph 67.3 below, shall be increased to compensate
Lessor for the lack of such parking revenue. A portion of Lessee's parking
spaces shall be located in a reserved area close to the Building as highlighted
on Exhibit "B" to this Lease.
50. Commencement of Term.
50.1 Commencement Date. Notwithstanding the provisions of
Paragraph 3.1 of this Lease, the Term of this Lease shall commence on or upon
the earlier of (i) substantial completion of "Lessor's Work" and the "Lessee
Building Work", as defined below, or (ii) the date upon which Lessee takes
possession of or commences business operations in any portion of the Premises
("Commencement Date"). If Lessor is unable to deliver possession of the
Premises to Lessee for any reason, by April 30, 1993 (as that date is extended
by "Lessee Delays" as described in Paragraph 50.2.3 below), or if Lessor is
unable to deliver possession of the Premises to Lessee by December 31, 1992 for
reasons of damage and destruction to the Premises, Lessee shall have the option
to terminate pursuant to the procedures set forth in Paragraph 3.2 of this
Lease. The Term of this Lease shall end on the last day of the month in which
the tenth (10th) anniversary of the Commencement Date occurs.
50.2 Delay in Completion of Lessor's Work and the Lessee
Building Work.
50.2.1 Lessor shall use commercially reasonable efforts to
cause the substantial completion, subject only to minor so-called
"punchlist" items, of the "Lessee Building Work" described in
Paragraph 51 below, and the "Lessor's Work" as more particularly
itemized on Exhibit "D" to this Lease (which "Lessor's Work" described
on Exhibit "D" shall be performed at Lessor's sole cost and expense-)
by November 1, 1992; provided, however, that such November 1, 1992
date for the completion of the Lessee Building Work and Lessor's Work,
and therefore, if applicable, the Commencement Date, shall be extended
to the extent of any "Force Majeure Delay" or "Lessee Delay" as those
terms are defined in this Paragraph 50.
50.2.2 The term "Force Majeure Delay" shall mean any delay
in the completion of the Lessee Building work and/or Lessor's Work
which is attributable to any: (1) delay or failure to perform
attributable to any strike, walkout, or other labor or industrial
disturbance (whether or not on the part of the employees of either
party hereto), civil disturbance, future order claiming jurisdiction,
act of the public enemy, war, riot, sabotage, blockade, embargo,
inability to secure customary materials, supplies or labor through
ordinary sources by reason of regulation or order of any government or
regulatory body; (2) delay attributable to the failure to secure
building permits and approvals (including' any failure to obtain a
temporary certificate of occupancy) within the same time period that
normally prevailed for obtaining such permits and approvals at the
time the tease was negotiated; (3) delay in the completion of the
Lessee Building Work and/or Lessor's Work' because of changes in laws,
'rules, regulations, codes, ordinance, or the like, or the
interpretation thereof; (4) delay attributable
2
<PAGE> 29
to lightening, earthquake, fire, storm, hurricane, tornado, flood,
washout or explosion; or (5) delay from any other cause beyond the
reasonable control of Lessor, or any of its contractors or other
representatives. Any prevention, delay or stoppage due to any Force
Majeure Delay shall excuse the performance of the Lessor for a period
of time equal to any such prevention, delay or stoppage.
50.2.3 "Lessee Delay" shall mean any delay in the
completion of the Lessee Building Work and/or Lessor's Work which is
due to any act or omission of Lessee (wrongful,negligent or
otherwise), its agents, employees, contractors, subcontractors or
licensees. Lessee Delays shall include, but shall not be limited to,
any (1) delay in the delivery by Lessee of authorizations, approvals
or disapprovals within three (3) business days of Lessee's receipt of
a written request for approval from Lessor; (2) delays due to changes
by Lessee in, or additions to, the Lessee Building Work which impact
Lessor's Work; (3) delays due to postponement of the Lessee Building
Work and/or Lessor's Work at the request of Lessee; (4) delays due to
the failure of Lessee to grant its approval of any of the Lessee
Building Work and/or Lessor's Work plans for unreasonable reasons; (5)
Lessee's request for materials, finishes or installations in
connection with the Lessee Building Work and/or Lessor's Work other
than those readily available; (6) delays attributable to the
interference of Lessee, its agents or contractors, with the completion
of the Lessee Building Work; and (7) Lessee's request to deviate from
the Building standards for the Lessee Building Work and/or Lessor's
Work. Any prevention, delay or stoppage due to any Lessee Delay shall
excuse performance of Lessor for a period of time equal to any such
prevention, delay or stoppage. Further, to the extent that Lessee
Delays result, on a net critical path basis (i.e.; on a "but for"
basis), in a delay in the Commencement Date, Lessee shall be obligated
to pay to Lessor, on a per them basis, a product of the number of days
of actual delay in the Commencement Date as a result of said Lessee
Delays, times the rent-able square feet of the Premises. For example,
if Lessee Delays, calculated on a net critical path basis, taking into
account Force Majeure Delays and delays caused by Lessor, equals ten
(10) days, then as soon as such sum has been reasonably calculated by
Lessor, and invoiced to Lessee together with reasonably particularized
evidence setting forth the basis of such net critical path Lessee
Delay calculation, Lessee shall have thirty (30) days, in which to pay
to Lessor the sum, in such example, of
In no event shall any Lessee Delay
result in any monetary obligations under this Paragraph 50.2.3 if the
Commencement Date occurs on or before December 1, 1992.
50.2.4. "Lessor Delay" shall mean any delay in the
completion of the Lessee Building Work which is due to any act or
omission of Lessor (wrongful, negligent or otherwise), its agents or
contractors (including acts or omissions while acting as an agent or
contractor for Lessee). The term "Lessor Delay" shall include but
shall not be limited to, any (1) delay in the giving of authorizations
or approvals by Lessor;. (2) delay attributable to the acts or
failures to act, whether willful, negligent or otherwise of Lessor its
agents or..contractors, where such acts or failures to act delay the
completion of the Lessee Building Work; and (3) delay attributable to
the interference of Lessor, its agents
3
<PAGE> 30
or contractors with the completion of the Lessee Building Work, or the
failure or refusal of any such party to permit Lessee, its agents or
contractors, access to and use of the Building or any Building
facilities or services, including elevators and loading docks, which
access and use are required for the orderly and continuous performance
of tile work. Further, in tile event that Lessor Delays, calculated
on a net critical path basis (i.e. on a "but for" basis) , result in
an actual out-of-pocket cost to Lessee, Lessor shall reimburse Lessee
in the amount of such cost, provided, however, that such amount shall
not exceed, on a day-for-day basis, the per diem cost of a Lessee
Delay as described in Paragraph 50.2.3 hereinabove.
51. Lessee Building Work.
51.1 Construction of Lessee Building Work.
51.1.1 Current Condition of Premises. Lessee has reviewed
the Premises as currently improved for the tenant previously occupying the
Premises, and Lessee agrees to accept the Premises in their "as is" condition,
subject to the completion of Lessor's Work and the Lessee Building Work
described herein. Lessor shall furnish and install within the Premises those
items (the "Lessee Building Work") shown on the plans and specifications
finally approved by Lessor and Lessee pursuant to Paragraph 51.1.2 below, in
compliance with all applicable codes and regulations.
51.1.2 Construction Representatives. Lessor hereby appoints
the following person as Lessor's representative ("Lessor's Representative") to
act for Lessor in all matters covered by this Paragraph 51: Mr. William Reid.
Lessee hereby appoints the following as Lessee's representative ("Lessee's
Representative") to act for Lessee on all matters covered by this Paragraph 51:
Mitchell Guzik. All inquiries, requests, instructions, authorizations and
other communications with respect to the matters covered by this Paragraph 51
shall be made to Lessor's Representative or Lessee's Representative as the case
may be. Either party may change its representative under this Paragraph 51.1.2
at any time by written notice to tile other party.
51.2 Construction Plans for Premises. All plans and
drawings required by this Paragraph 51 shall be approved by Lessor in
accordance with the schedule provided in Paragraph 51.4 below.
51.2.1 Preparation of Space Plan. Lessee shall select an
architect, reasonably approved by Lessor, or shall select Lessor's architect,
to prepare preliminary space plans for the Premises. The architect so selected
by Lessee shall be referred to herein as the "Architect". The Architect, in
consultation with Lessor's Construction Representative and his consultants
shall prepare detailed space plans sufficient to convey the architectural
design of the Lessee Building Work ("Space Plans"). The Space Plans shall be
submitted to Lessor for reasonable approval in accordance with the Paragraph
51.4 approval schedule. If Lessor shall disapprove of any portion of the Space
Plans, Lessor shall advise Lessee in writing of such disapproval and the
reasons therefor. Lessee shall then submit to Lessor %for Lessor's reasonable
approval, a redesign of tile Space Plans, incorporating those revisions
required by Lessor.
51.2.2 Preparation of Final Plans. Based on the approved
Space Plans, Lessee shall cause the Architect, in consultation with Lessor's
engineers (Lessor's electrical
4
<PAGE> 31
engineer and mechanical consultant who shall be used by Lessee for the Lessee
Building Work is Levine Siegal, and the mechanical design-build contractor for
the Lessee Building Work is Control Air), to prepare complete architectural
plans, drawings and specifications and complete engineered mechanical,
structural and electrical working drawings for the Lessee Building Work,
showing the subdivision, layout, finish and decoration work (including
carpeting and other floor coverings) desired by Lessee therefor, as well as any
internal or external communications or special utility facilities which will
require conduiting or other improvements within common areas (collectively
"Final Plans"). The Final Plans shall be approved in the same manner as
provided in Paragraph 51.2.1 above for approval of Space Plans.
51.2.3 Requirements of Lessee's Final Plans. Lessee's Final
Plans shall:
(1) be compatible with the Building shell, with the design,
construction and equipment of the Building;
(2) comply with all applicable laws and ordinances, and the
rules and regulations of all governmental authorities having
jurisdiction;
(3) comply with all applicable insurance regulations for a
fire resistant Class A building; and
(4) include locations and complete dimensions.
51.2.4 Changes at Lessee's Expense. If the Final Plans or
any amendment thereof or supplement thereto shall require changes in the
Building shell, the increased cost of the Building shell work caused by such
changes shall be charged against Lessee. The cost thereof shall include all
direct architectural and/or engineering fees and expenses in connection
therewith, as well as including compensation by Lessee for the costs of any
delays which arise from such changes, such costs including, but not limited to,
lost rent.
51.3 Allowance for Work. Lessor shall provide an allowance
(the "Allowance") of $12.50 per usable square foot times the usable square feet
within the Premises and the Building lobby serving the Premises, which Allowance
shall be used solely for the design and installation of the Lessee Building
Work. The .usable" square feet shall be the entire rentable square footage of
the Premises and the Building lobby serving the Premises, less the area of the
restrooms, the electrical closet, the stairwells, the sprinkler control valve
room, the freight elevator and the mechanical room adjacent to the freight
elevator. Usable and rentable square foot calculations are subject to
adjustment pursuant to Paragraph 48 above. All items of Lessee Building Work,
whether or not the cost thereof is covered by the Allowance, shall become the
property of Lessor upon expiration or earlier termination of the Lease and shall
remain on the Premises at all times during the Term of this Lease. Lessee shall
not be entitled to receive a credit against Lessee's obligation to pay Rent
under the Lease ("Rent Credit") for any portion of the Allowance which is not
expended by Lessor. If the Lessee Building Work. is estimated by the general
contractor in charge of construction to cost more than the Allowance, including
all direct and indirect costs, then Lessee shall deposit with Lessor prior to
the commencement of the work of construction of the Lessee Building Work, the
difference between the Allowance and such estimated cost.
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<PAGE> 32
51.4. Construction of Lessee's Building Work. Following
Lessor's approval of the Final Plans, Lessor's general contractor in charge of
construction shall commence and diligently proceed with the construction of all
of the Lessee Building Work; provided, however, that Lessor hereby grants to
Lessee the right to work with Lessor, upon the prior reasonable written
approval of Lessor, with respect to the construction of any or all of the
Lessee Building Work, so long as such efforts are coordinated with the general
contractor in charge of construction. Further, if Lessee makes such election
not later than ten (10) working days following the date of full execution and
delivery of this Lease, Lessee shall have the right to require Lessor to bid
the work of construction of the Lessee Building Work to as many as three
licensed general contractors, each of whom have been approved in writing by
Lessor; provided further, however, that the bidding process of such work of
construction shall not extend any of the scheduled dates set forth in Paragraph
51.5 hereinbelow relative to the calculation of Lessee Delays, if any.
51.5 Schedule.
Approval of Space Plans and Final Plans shall proceed as
Indicated below and each action shall be completed on or before the date herein
specified:
<TABLE>
<CAPTION>
Action Responsibility Due Date
------ -------------- --------
<S> <C> <C> <C>
(1) Delivery to Lessor of Lessee 30 days from the
initial Space Plans date of full
execution and
delivery of this
Lease
(2) Delivery to Lessee of Lessor 37 days from the
Lessor 37 days from date of full
written notice approving execution and
or the date of delivery of this
disapproving initial Lease
Space Plans
(3) Delivery to Lessor, if Lessee 44 days from the
necessary, of redesign date of full
of the date of Space execution and
Plans delivery of this
Lease
(4) Delivery to Lessee of Lessor 51 days from the
written notice of final date of full
approval of Space Plans execution and
delivery of this
Lease
(5) Delivery to Lessor of Lessee as soon as
Final Plans reasonably possible
(6) Delivery to Lessee of Lessor Four (4) business
written notice approving days after receipt
or disapproving the of Final Plans
Final Plans
(7) Delivery to Lessor, if Lessee as soon as
necessary, of redesign reasonably possible
of Final Plans
</TABLE>
6
<PAGE> 33
<TABLE>
<CAPTION>
Action Responsibility Due Date
------ -------------- --------
<S> <C> <C> <C>
(8) Delivery to Lessee of Lessor Two (2) business days
written notice of final after receipt of design
approval of the Final of Final Plans
Plans
</TABLE>
52. Rent Adjustments. On the first day of the
thirty-first (31st), sixty-first (61st) and ninety-first (91st) month
following the Commencement Date, (the "Effective Dates') during the
ten (10) year Term of the Lease, Base Rent shall be adjusted in
accordance with the following schedule:
<TABLE>
<CAPTION>
Rent Per Month Adjustment
Foot Per Month Month
-------------- ----------
<S> <C>
31st
61st
91st
</TABLE>
53. Hazardous Materials.
53.1 Hazardous Materials Permitted. Except as provided
below, Lessee shall not conduct, cause to be conducted, or permit any Hazardous
Materials Activities, as defined below, on, under or about the Premises by
Lessee, Lessee's employees, agents, contractors, licensees or invitees, whether
or not consented to by Lessor hereunder. In no event shall Lessee use the
Premises or suffer or permit anything to be done in or about the Premises which
will in any way conflict with any law, statute, zoning restriction, ordinance
or governmental rule, regulation or requirement of any public authority
asserting jurisdiction over the Premises, now in force or which may hereafter
be in force, or the requirements of the Board of Fire Underwriters or other
similar body now or hereafter constituted relating to or affecting the
condition, use or occupancy of the Premises (the "Hazardous Materials Laws").
Subject Lo Lessee's covenant to strictly comply with all Hazardous Materials
Laws and all other terms and conditions of this Paragraph, Lessee, its agents,
employees, contractors, licensees and invitees may bring upon, keep and use in
or about the Premises (1) general office supplies typically used in an office
area in the ordinary course of business, such as copier toner, liquid paper,
art supplies, graphics paints and 'paint thinners, markers, glue, ink, and
general cleaning solvents and supplies, for use in the manner for which they
were designed, in such amounts as may be normal for the office business
operations conducted by Lessee on the Premises, and (2) only those Hazardous
Materials which are used in Lessee's business operations on the Premises and
which appear on a list of Hazardous Materials, along with a description of
handling, storage, use and disposal procedures, approved by Lessor in its
reasonable discretion and attached hereto as Exhibit "E". From time to time
during the term of this Lease, Lessee may submit a revised list of Hazardous
Materials and handling, storage, use and disposal procedures Lo Lessor for'
approval, which approval shall be at Lessor's reasonable discretion. Lessee
hereby acknowledges and agrees that it shall be solely responsible for any and
all fines, damages and costs of correction of arty violation of this Paragraph,
as well as the removal and disposal of the Hazardous Materials causing the
violation. Furthermore, Lessee shall place no loads upon the floors, walls or
ceilings or which may damage the building; nor place any harmful liquids in the
drainage systems; nor dump or
7
<PAGE> 34
store waste materials, refuse or other materials or allow such to remain
outside the building proper.
53.2 Definition of Hazardous Material. As used herein,
the term "Hazardous Materials' means any hazardous or toxic substance, material
or waste which is or becomes regulated by any local governmental authority, the
State of California or the United States Government. The term "Hazardous
Material" includes, without limitation, any material or substance which is (1)
defined as a "hazardous waste," "extremely hazardous waste" or 'restricted
hazardous waste" under Sections 25115, 25117 or 25122.7, or listed pursuant to
Section 25140, of the California Health and Safety Code, Division 20, Chapter
6.5 (hazardous Waste Control Law), (2) defined as a "hazardous substance" under
Section 25316 of the California Health and Safety Code, Division 20, Chapter
6.8 (Carpenter-Presley-Tanner Hazardous Substance Account Act), (3) defined as
a "hazardous material," "hazardous substance," or "hazardous waste" under
Section 25501 of the California Health and Safety Code, Division 20, Chapter
6.95 (Hazardous Materials Release Response Plans and inventory), (4) defined as
a "hazardous substance' under Section 25281 of the California Health and Safety
Code, Division 20, Chapter 6.7 (Underground Storage of Hazardous Substances),
(5) petroleum, (6) asbestos, (7) listed under Article 9 or defined as hazardous
or extremely hazardous pursuant to Article 11 of Title 22 of the California
Administrative Code, Division 4, Chapter 20, (8) designated as a "hazardous
substance" pursuant to Section 311 of the Federal Water Pollution Control Act
(33 U.S.C. Section 1317), (9) defined as a "hazardous substance" pursuant to
Section 1004 of the Federal Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901 et seq. (42 U.S.C. Section 6903), or (z) defined as a "hazardous
substance" pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601 et seq. (42 U.S.C.
Section 9601). In no event shall Lessee be obligated under the terms of this
Lease for the remediation of any Hazardous Materials which were located on the
Premises prior to the date possession of the Premises was delivered to Lessee
or which migrated under the Premises from off-site during the term of this
Lease. Further, Lessor hereby represents and warrants to Lessee that Lessor
will be fully responsible for undertaking all remedial work which may be
required by applicable law by the failure of Lessor to comply with Hazardous
Materials laws, at Lessor's sole cost and expense, except to the extent that
such expense is the obligation of Lessee under the provisions of this Paragraph
53. Lessor hereby warrants and represents that to the best of its knowledge the
premises are free from any and all hazardous materials as defined in this
sub-paragraph 53.2
53.3 Periodic Inspection and Remediation. Lessor or
Lessor's representatives-and employees may enter the Premises at any
reasonable time during the Lease term on at least 24 hours notice (except in
the case of emergencies related to Hazardous Materials) to inspect Lessee's
compliance with the provisions of this Paragraph 53. Throughout the term of
the Lease Lessee shall maintain accurate and complete records with respect to
Lessee's use, storage, handling and disposal of Hazardous Materials in, on or
about the Premises, and Lessee shall make such records available to Lessor and
Lessor's environmental consultants in connection with any inspection or
proposed inspection of the Premises. In the event Lessor discovers that Lessee
is not in compliance with this Paragraph, Lessee, at its sole cost and expense,
shall immediately bring its operations on the Premises into compliance.
53.4 Indemnification. Lessee shall be liable to Lessor
for, and shallindemnify, protect, defend with counsel designated by Lessor, and
hold Lessor, its officers, employees, and agents, harmless from and against any
and all claims, damages, fines,
8
<PAGE> 35
penalties, costs and liabilities arising out of tile breach of this Paragraph
53, including, but not limited to, all clean-up and restoration costs resulting
from any such Hazardous Materials Activities.
53.5 Payment of Costs by Lessee. All sums payable by
Lessee pursuant to this Paragraph 53 shall constitute additional rent payable
under the Lease and shall be due and payable within ten (10) days of written
demand therefor.
53.6 Survivability. The obligations of Lessee under this
Paragraph 53 shall survive the expiration or earlier termination of this Lease,
and shall constitute obligations that are independent and severable from
Lessee's covenants and obligations Lo pay rent under the Lease.
54. Indemnification of Lessor's Negligence. In no event
pursuant to the provisions of Paragraphs 8.7 or any other Paragraph of this
Lease shall Lessee be obligated to indemnify Lessor for Lessor's ordinary or
gross negligence or wilful misconduct, except to the extent that the same is
covered by the terms of the insurance policies required Lo be carried by Lessee
under this Lease, in which event the waiver of subrogation provision shall
provide for such indemnity of Lessor by Lessee. The reciprocal of the
foregoing is hereby agreed upon by tile parties; i.e., Lessor shall not be
required to indemnify Lessee for its ordinary or gross negligence or wilful
misconduct, except to the extent that the same is covered by the terms of the
insurance policies required to be carried by Lessor under this Lease, in which
event the waiver of subrogation provisions of this Lease shall provide for such
indemnity of Lessee by Lessor. Notwithstanding anything to the contrary set
forth in Subparagraphs 8.6 and 8.7 of the Lease, Lessor shall indemnify and
hold harmless Lessee from arid against any and all claims, costs, expenses
(including reasonable attorneys' fees and costs) arid liabilities arising from
the negligent acts or omissions of Lessor except to the extent any such claims,
costs, expenses or liabilities are covered by tile insurance required to be
carried by Lessee pursuant to Subparagraph 8.2, or if such insurance is not
carried by Lessee, to the extent such claims, costs, expenses and liabilities
would have been covered by the required insurance had it been obtained by
Lessee. Further, Lessee's agreement to indemnify and hold Lessor harmless as
provided in Subparagraphs 8.6 and 8.7 of the Lease and Paragraph 53 of the
Addendum to Lease, and the agreement by Lessor Lo indemnify and hold Lessee
harmless pursuant to this Paragraph 54 and Paragraph 53 of the Addendum to
Lease, are not intended to and shall not relieve any insurance carrier of its
obligations under policies required to be carried by Lessor or Lessee,
respectively, pursuant to the provisions of this Lease to the extent that such
policies cover the matters which are the subject of such indemnities. If
either party breaches this Lease by its failure to carry required insurance,
such failure shall automatically be deemed to be the covenant and agreement by
Lessor or Lessee, respectively, to self-insure such required coverage, with
full waiver of subrogation.
55. Uninsured Casualty. If an event of damage occurs which is
uninsured and if it is the opinion of Lessor's licensed general contractor that
the repair of such damage will take more than one hundred eighty (180) days to
repair, then, regardless of whether or not Lessor elects to repair such
uninsured damage, Lessee shall have the right to terminate this Lease by
delivery of notice of such election to Lessor within thirty (30) days after
receipt of such contractor's certificate.
9
<PAGE> 36
56. Proposition 13 Protection. Notwithstanding any
direct or indirect implication of Paragraph 10.3 of tile printed form of this
Lease, or any other provision of this Lease, Lessee shall not be liable for the
payment of any increase in real property taxes resulting from a sale, financing
or refinancing, transfer or change in ownership of the Building that is caused
by Lessor (as opposed to being caused by changes in applicable law or by
independent actions of the government such as the creation of a so-called
"split tax roll" or the repeal of "Proposition 13" which was adopted by the
voters of tile State of California in the June, 1978 Election) (collectively,
"Transfers") otherwise permitted to be assessed under Proposition 13, in excess
of the normal and customary actual tax increase, currently not in excess of two
percent (2%) of the taxes for the previous year, which would have occurred had
any such transfer not taken place; i.e., Lessee shall be treated economically
as if such Transfer and such subsequent tax increase did not occur.
57. Assignment and Subletting. Notwithstanding anything
to the contrary in this Lease, if for any proposed assignment or sublease
Lessee receives rent or other consideration, either Initially or over tile term
of tile assignment or sublease, in excess of the Rent payable under the Lease,
or, in case of the sublease of a portion of the Premises, in excess of such
Rent fairly allocable to such portion, Lessee shall pay to Lessor as additional
rent under tile Lease, without reducing or effecting any other obligations of
Lessee hereunder, fifty percent (50%) of the excess of any sums or other
economic consideration received by Lessee from any assignee or subtenant other
than a Lessee Affiliate less (I) Rent otherwise payable hereunder, (ii) tenant
improvement allowances, (iii) brokerage commissions, and (v) legal fees.
Lessee understands, acknowledges and agrees that Lessor's right to receive any
consideration paid in connection with an approved assignment or subletting is a
material inducement for Lessor's agreement to lease the Premises to Lessee upon
the terms and conditions set forth herein.
58. Option to Expand. Lessor hereby grants to Lessee an
option to expand ("Expansion Option") to cause the Premises to include the
approximately 22,000 rentable square feet located on the ground floor of the
building presently leased to Patient Care Pharmacy, Inc. The Expansion Option
shall be available to Lessee at' the end of the fifth (5th) anniversary of the
term of this Lease ("Option Date") with the right in Lessor's sole discretion
to accelerate or extend the Option Date by up to nine (9) months. Lessor shall
notify Lessee as soon as possible prior to the Option Date as to the scheduled
date of availability of the premises subject to the Expansion Option
("Expansion Space"). Thereafter, Lessee must exercise this Expansion Option by
providing Lessor with written notice of such intent not less than twelve (12)
months prior to the Option Date; provided, however, that if, Lessor has not
notified Lessee as to the scheduled date of availability of the Expansion Space
by such date which is twelve (12) months prior' to the Option Date, then the
twelve (12) month exercise date shall be continuously revised to be that date
which is ten (10) days following receipt of such notice of availability. The
Expansion Option is subject to the physical vacation by Patient Care Pharmacy,
Inc. and any other entity then in possession of the Expansion Space. If any
such occupying entity does not physically vacate the Expansion Space as
scheduled, the., Expansion Option shall be extended by the number of days
between the scheduled vacation date for such entities and the actual date of
vacation by such entities. The terms, covenants and conditions with respect to
tile lease of tile Option Space shall be tile same as tile terms, covenants and
conditions
10
<PAGE> 37
set forth in this Lease, except that, if the expansion takes place after the
first two (2) years of the term of this Lease, the rental rate for the
Expansion Space shall be Lessor's then scheduled rental rate for comparable
space within the industrial center, adjusted to reflect the fact that there
will be no tenant improvement allowance relative to the Expansion Space.
59. Signage. Lessor hereby agrees that Lessee, at
Lessee's sole cost and expense, shall have the right during the term of the
Lease to construct a monument sign, exclusively identifying Lessee, at the
northeast corner of Alla Road and Coral Tree Place, bearing Lessee's name
and/or logo (the "Identity Sign"). The graphics, materials, color, design,
lettering, size, quality and specifications of the Identity Sign shall be
subject to the prior written approval of Lessor, which shall not be
unreasonably withheld or delayed, and shall also comply with all other
applicable laws, statutes, ordinances, rules, regulations, permits, approvals.
The Identity Sign shall be installed by Lessee, and Lessee shall pay the costs
incurred in the design, construction and installation of the Identity Sign.
Lessee, at its sole cost and expense, shall maintain the Identity Sign in
accordance with a maintenance program approved and supervised by Lessor. At
the expiration or earlier termination of the Lease, Lessee shall, at Lessee's
sole cost and expense, remove- Lessee's name from such monument and cause the
monument to be restored to its condition existing prior to the installation of
Lessee's name and/or logo thereon. If Lessee fails to remove Lessee's name
and/or logo from the Identity Sign and restore the monument as provided in this
Paragraph 59 within thirty (30) days of the expiration or earlier termination
of the Lease, then Lessor may perform such work and all costs and expenses
incurred by Lessor shall be paid by Lessee to Lessor within ten (10) days of
Lessee's receipt of an invoice therefor. This paragraph shall survive the
termination of this Lease. Lessee's rights set forth in this Paragraph 59 to a
monument sign with exclusive identification of Lessee, shall in no event affect
or diminish Lessor's right to grant to other tenants of the Building separate
monument signage at other locations, as well as building signage located
directly on the Building. Lessee's monument sign, however, shall be the only
monument sign at the northeast corner of Alla Road and Coral Tree Place.
60. Utilities/Access. Lessor hereby agrees that all
electrical service to the Premises shall be separately metered or sub-metered.
Access to the Premises shall be available on a twenty-four (24) hour per days,
seven (7) days per week basis. The elevator, the heating, ventilating and air
conditioning systems, electricity and other utilities shall be available
twenty-four (24) hours per day, seven (7) days per week.
61. Operating Expenses. Lessor and Lessee acknowledge
that the rental rate set forth in this Lease does not include any of the
Building operating expenses as defined in Paragraph 4.2 of this Lease and does
not include any of the repair and maintenance costs described in Paragraph 7,
insurance costs described in Paragraph 9 and real estate taxes described in
Paragraph 10. Lessor agrees that in no event shall Lessee be responsible' for
a ny capital costs associated with Building renovation, and in particular' with
respect to the requirements of the Americans With Disabilities Act of 1990
("ADA"). However, Lessee shall be liable for Its proportionate share of the
costs of any capital improvements or equipment required by laws other than the
ADA enacted on or after the date of the parties' execution of this Lease
(amortized over the useful life of the such improvements and/or equipment),
calculated to include interest at the then current prime rate of the then
largest state chartered bank in
11
<PAGE> 38
the State of California plus two percent (2%), or costs of capital improvements
and equipment required to reduce operating expenses (amortized at an annual
rate reasonably calculated to equal the amount of operating expenses to be
saved in each calendar year throughout the term [as determined at the time
Lessor elected Lo proceed with the capital improvements or acquisition of the
capital equipment Lo reduce operating expenses)), calculated to include
interest at the then current prime rate of the then largest state chartered
bank in the State of California plus two percent (2%). All operating expenses
shall be calculated to reflect an assumed ninety-five percent (95%) occupancy
level, which calculation shall in no event result in any profit to Lessor.
Finally, Lessor agrees that Lessee shall have the right to audit the operating
expenses by use of a nationally recognized accounting firm. As a condition Lo
such auditing right, Lessee shall meet with Lessor and review the operating
expenses at the offices of Lessor and thereafter if Lessor and Lessee have not
come to agreement on the appropriate operating expenses to be paid by Lessee,
Lessee may retain such independent auditor. If as a result of the audit the
operating expenses are reduced by more than ten percent (10%), the cost of such
audit shall be borne by Lessor.
62. Reimbursement of Tenant's Current Rent Obligation.
Effective as of the Commencement Date, the following is agreed:
(a) Lessor shall reimburse Lessee for any rental which
Lessee owes to its two current landlords under leases from and after
the Commencement Date with respect to property located at 220 South
Stoner Avenue ("Stoner Lease") and 11755 Exposition Boulevard
("Exposition Lease"). The Stoner Lease names the lessee as Gilda Marx
Industries, Inc.; the Exposition Lease names Flexatard, Inc. as the
lessee. The current monthly rent on the Stoner Lease which expires on
March 31, 1993, is $1,900 per month. The current monthly rent for the
Exposition Lease, which expires on March 15, 1993, is $21,255 per
month.
(b) The procedure for reimbursement to Lessee shall be
that Lessee shall deliver to Lessor a receipt marked paid from each of
Lessee's present landlords ("Existing Lessors") as Lessee delivers
their monthly rental checks to them for base rent and Lessee's share
of common area expenses. Within five (5) business days after receipt
of the pa id receipt from each of the current landlords, Lessor shall
reimburse Lessee for the base rent and for Lessee's proportionate
share of the common area maintenance charges in a monthly sum not to
exceed $23,155, and in a total sum not to exceed $81,845.
(c) Lessor's obligation shall be reduced by any amounts
received by Lessee reducing its rental obligations under the Existing
Leases, such as for example, a reduction due to an agreement by one or
both Existing Lessors as to a lease buy-out.
63. Right of First Offer. In the event that at any time
during the Term of this Lease, or any extension thereof, any space which is
adjacent to the Premises on the first (1st) floor of the Building shall become
available for lease to third parties ("First Right Space") after Lessor is
assured that the leases (and lease extensions) of any existing tenants of such
space, or Tooley & Company, will terminate or expire, Lessor shall give Lessee
written notice of such availability, and the basic economic terms, including
but not limited to the Lessor's
12
<PAGE> 39
determination of the initial rental, which shall be at Lessor's then-scheduled
rent for comparable space in the Industrial Center (collectively, the "Economic
Terms'), upon which Lessor is willing to lease such space to Lessee or to a
third party. Within five (5) business days after receipt of such notice,
Lessee must give Lessor written notice ("Lessee's First Right Notice") pursuant
to which Lessee shall elect to (a) lease such First Right Space upon such
Economic Terms and the same non-Economic Terms as set forth in the Lease; (b)
refuse to lease such First Right Space, specifying that such refusal is not
based upon said Economic Terms, but upon Lessee's lack of need for such First
Right Space, in which event Lessor may lease such First Right Space upon any
terms it deems appropriate; or (c) refuse to lease the First Right Space,
specifying that such refusal is based upon said Economic Terms, in which
event-Lessee shall also specify revised Economic Terms upon which Lessee shall
be willing to lease such First Right Space. In the event that Lessee does not
so respond in writing to Lessor's notice within said period, Lessee shall be
deemed to have elected clause (b) above. In the event Lessee gives Lessor
notice pursuant to clause (c) above, Lessor may elect either to (x) lease such
First Right Space to Lessee upon such revised Economic Terms proposed by Lessee
and the same other non-Economic Terms as set forth in the Lease; or (y) enter
into a lease for the First Right Space with any third party upon terms which
are not more favorable to said party than those Economic Terms proposed by
Lessee. Lessee's right described herein shall be personal to the original
Lessee and may not be exercised or be assigned, voluntarily or involuntarily,
by or to any person or entity other than the original Lessee. The parties
agree to execute an amendment to this Lease promptly after Lessee's exercise of
the right described herein in order to include the First Right Space and the
lease terms thereof.
64. Satellite Antenna. Notwithstanding anything to the
contrary contained in the Lease, Lessee shall have the right to install, operate
and maintain a satellite dish or similar antenna ("Antenna") in a location on
the roof Lop of the Building to be determined by Lessor. Lessee's installation
and operation of the Antenna shall be governed by the following terms and
conditions:
(a) Lessee's right to install, operate and
maintain the Antenna shall be subject to all governmental laws, rules
and regulations and Lessor makes no representation that such laws,
rules and regulations permit such installation and operation; Lessee,
in conjunction with Lessor, shall obtain all necessary governmental
approvals and permits prior to installation;
(b) all costs of installation, operation and
maintenance of the antenna and the connecting cable (including,
without limitation, costs of obtaining any necessary permits) shall be
borne by Lessee;
(c) it is expressly understood that Lessor
retains the right to use the roof of the Building for any purpose
whatsoever provided that Lessor shall not unduly interfere with the
use of the Antenna;
(d) Lessee shall use the Antenna so as not to
cause any interference to other lessees in the Building or with any
other Lessee's communication equipment and not to damage or interfere
with the normal operation of the Building, including any mechanical
system thereof;
13
<PAGE> 40
(e) Lessor shall not have any obligations with
respect to the Antenna nor shall Lessor be responsible for any damage
that may be caused to Lessee or the Antenna by any other lessee in the
Building. Lessor makes no representation that the Antenna will be
able to receive or transmit communication signals without interference
or disturbance (whether or not by reason of the installation or use of
similar equipment by others on the roof) and Lessee agrees that Lessor
shall not be liable Lo Lessee therefor;
(f) Lessee shall (i) be solely responsible for
any damage caused result of the Antenna, including, but not limited
to, any damage caused to the roof of the Building during the
installation or maintenance of the Antenna, or caused by the Antenna
itself, (ii) promptly pay any tax, license or permit fees charged
pursuant to any laws or regulations in connection with the
installation, maintenance or use of the Antenna and comply with all
precautions and safeguards recommended by all governmental
authorities, (iii) pay for all necessary repairs, replacements to or
maintenance of the Antenna, and (iv) not bore into any structural
elements of the Building in connection with the installation of the
antenna;
(g) at Lessor's request, Lessee shall remove the
Antenna and connecting cable at Lessee's expense upon the expiration
or sooner termination of the Lease or upon the imposition of any
governmental law or regulation which may require removal, and shall
repair the roof of the Building upon such removal to the extent
required by such work of removal; and
(h) the size, color and appearance of the Antenna
shall be subject to Lessor's reasonable approval and shall be subject
to conditions imposed by Lessor with regard to height and the
aesthetics of the materials around the perimeter of the Antenna on the
roof of the Building in order to shield the appearances of the
Antenna, prior to Lessee's installation thereof.
65. Confidentiality. Lessor and Lessee acknowledge that
the terms and conditions contained in this Lease shall remain confidential
between the parties to the Lease, and no summaries or copies of the Lease shall
be distributed, duplicated or otherwise transmitted orally or in writing to any
other entity or person unless the same is required in connection with the
financing or refinancing of the Building, or the sale of the Building, or any
other commercially reasonable requirement of either party based upon a written
request to the other party.
66. Asbestos.
(a) Lessor represents and warrants to Lessee that
neither the Building nor the Premises, nor any walls, ceilings, beams
or ducts enclosing or connected to or serving the Premises, to the
extent such items have been or will be constructed by or at the
express direction of Lessor or Lessor's employees, contain or will
contain any friable asbestos. .,Lessor further represents, warrants
and covenants that it will at all times comply with all laws, rules,
regulations, ordinances, policies, etc. pertaining to asbestos with
regard to all items or improvements installed or introduced in or on
the Building or Premises by Lessor or its agents or employees. Lessor
shall be liable for any and all losses, damages, costs and expenses,
including attorneys' fees, incurred by-Lessee or Lessee's employees,
invitees,
14
<PAGE> 41
agents and representatives as a result of the breach of any of the
foregoing representations. Further, Lessor represents, warrants and
agrees that, without limiting the foregoing, Lessor shall, at all
times, reasonably act so as to prevent the installation of asbestos in
the Building; provided, however, notwithstanding the foregoing, Lessor
shall not be responsible for the actions of Lessee or any other
Lessees or its or their employees, agents, contractors, sublessees,
licensees, assigns or invitees. In the event it is disclosed that the
Building, the Premises or such walls, ceilings, beams, and ducts do
contain asbestos (and the same was constructed by or at the express
direction of Lessor or Lessor's employees), Lessor shall, at, its
cost, if and at such time as Lessee may request in writing, promptly
remove such asbestos from the Building or the Premises, as the case
may be, and take all reasonable steps necessary to prevent exposure of
the Premises, and Lessee and Lessee's employees, invitees, agents and
representatives, to asbestos during such removal. If Lessor fails to
promptly and safely remove any such asbestos as so requested by
Lessee, Lessee may, in its sole discretion, take immediate steps to
remove such asbestos or prevent such asbestos from contaminating the
Premises, Lessee and Lessee's employees, invitees, agents and
representatives, all at Lessor's sole cost and expense.
(b) Lessee represents and warrants to Lessor that
no portion of the Premises or any improvements, fixtures, equipment,
machinery, furniture or personal property used, located or installed
therein, to the extent such items are used, constructed, installed or
introduced into the Premises by or at the express direction of Lessee
or Lessee's employees (but not by Lessor or Lessor's agents or
employees), contain or will contain any asbestos. In addition, Lessee
represents, warrants and covenants that it will at all times comply
with all laws, rules, regulations, ordinances, policies, etc.
pertaining to asbestos with regard to all items or improvements
installed or introduced in or on the Building or Premises by Lessee or
its agents or employees. Lessee shall be liable for any losses,
damages, costs and expenses, including attorneys' fees, incurred by
Lessor or Lessor's employees, invitees, agents and representatives as
a result of the breach of any of the foregoing representations.
Further, Lessee represents, warrants and agrees that, without limiting
the foregoing, Lessee shall, at all times, reasonably act so as to
prevent the use, introduction or installation of any asbestos in the
Premises. In the event it is disclosed that the Premises or any
improvements, alterations, fixtures, equipment, machinery, furniture
or personal property contain asbestos and the same was used,
constructed, installed or introduced into the Premises by Lessee or
Lessee's employees, contractors, sublessees, invitees or assigns,
Lessee shall, at its cost, if and at such time as Lessor may request
in writing, promptly remove such asbestos from the Premises and take
all reasonable steps necessary to prevent exposure of the remainder of
the Building, and Lessor and Lessor's employees, invitees, Lessees,
agents and representatives, to asbestos daring such removal. If
Lessee fails to promptly and safely remove such asbestos as required
by Lessor, Lessor may, in its' sole discretion, take immediate steps
to remove such asbestos or prevent such asbestos from contaminating
the Building or the Premises, Lessor and Lessor's employees, invitees,
Lessees, agents and representatives, all at Lessee's sole cost and
expense.
15
<PAGE> 42
67. Option to Extend.
67.1 Grant. Lessee is hereby granted an option to
extend (the "Option") the Term of this Lease for an additional period of five
(5) years (the "Option Term") for the entire Premises as the Premises exist at
the end of the original term of the Lease. The rental rate shall be
ninety-five percent (95%) of the "Fair Market Rental Rate" as described in
Paragraph 67.3 below. The Option must be exercised if at all by written notice
("Option Notice") delivered by Lessee to Lessor not later than twelve (12)
months prior to the end of the original term of the Lease; provided, however,
that Lessee shall be entitled to deliver a preliminary notice to Lessor, not
earlier than fifteen (15) months prior to the end of the original term of the
Lease, of Lessee's intention to exercise the Option, following which Lessor
shall, not later than thirty (30) days after receipt of such preliminary
notice, deliver to Lessee the good faith opinion of Lessor as to the "Fair
Market Rental Rate", as described below. Lessee shall have the period of Lime
between Lessor's delivery to Lessee of Lessor's good faith estimate of the Fair
Market Rental Rate, and that date which is twelve (12) months prior to the end
of the original term of the Lease to reach agreement with Lessor as to the Fair
Market Rental Rate of the Premises. Failure to reach agreement by such twelve
(12) month date shall give Tenant the option to deliver a notice by such nine
(9) month date rescinding Lessee's preliminary election to exercise the Option,
or to provide notice requesting an arbitration pursuant to the procedures set
forth below. If Lessee does not deliver a notice rescinding its preliminary
election to extend or requesting an arbitration under this Paragraph 67, then
Lessee shall be conclusively deemed to have accepted Lessor's good faith
estimate of the Fair Market Rental Rate, and such good faith estimate shall be
the rental rate for the Option Term. If Lessee selects arbitration, the matter
shall proceed as follows:
(i) Lessor and Lessee shall each appoint one (1)
independent arbitrator who shall by profession be a real estate
professional who shall have been active over the five (5) year period
ending on the date of such appointment in the appraisal and/or leasing
of similar properties in the vicinity of the Building. The
determination of the arbitrators shall be limited solely to the issue
of whether Lessor or Lessee's submitted Fair Market Rental Rate is the
closest to the actual Fair Market Rental Rate as determined by the
arbitrators, taking into account the requirements of this Paragraph 67
above regarding same. Such decision shall be based upon the projected
prevailing Fair Market Rental Rate as of the commencement of the
Option Term. Each such arbitrator shall be appointed within fifteen
(15) days after the commencement of arbitration proceedings.
(ii) The two (2) arbitrators so appointed shall within
fifteen (15) days of the date of the appointment of the last appointed
arbitrator agree upon and appoint a third arbitrator who shall be
qualified under the same criteria set forth hereinabove for
qualification of the initial two (2) arbitrators.
(iii) The three (3) arbitrators shall within thirty (30)
days of the appointment of the third arbitrator reach a decision as to
whether the parties shall use Lessor's or Lessee's submitted Fair
Market Rental Rate, and shall notify Lessor and Lessee thereof.
16
<PAGE> 43
(iv) The decision of the majority of tile three (3)
arbitrators shall be binding upon Lessor and Lessee. If either Lessor
or Lessee fails Lo appoint an arbitrator within the time period
specified In Paragraph 67 hereinabove, the arbitrator appointed by one
of them shall reach a decision based upon the same procedures as set
forth above (i.e., by selecting either Lessor's or Lessee's submitted
Fair Market Rental Rate), and shall notify Lessor and Lessee thereof,
and such arbitrator's decision shall be binding upon Lessor and
Lessee.
(v) If the two (2) arbitrators fail to agree upon and
appoint a third arbitrator, both arbitrators shall be dismissed and
the matter to be decided shall be forthwith submitted to arbitration
under the provisions of the American Arbitration Association based
upon the same procedures as set forth above (i.e., by selecting either
Lessor's or Lessee's submitted Fair Market Rental Rate).
(vi) The cost of arbitration shall be paid by the losing
party.
(vii) If Lessee has preliminarily exercised its Option to
Extend, and has not rescinded such exercise by the commencement of the
twelfth (12th) month prior to the end of the original term of the
Lease, then Lessee shall not be entitled to rescind its election and
the term shall be conclusively deemed to have been extended by the
addition thereto of the Option Term.
67.2 Conditions to Exercise. The Option shall not be
deemed to be properly exercised if, as of the date of the Option Notice or at
the end of the then current term, Lessee (I) is in a state of uncured default,
after applicable grace periods, under the Lease or (II) has assigned or sublet
any of its interest in this Lease of the Premises, other than to a 'Lessee
Affiliate" as described in Paragraph 12.2 of this Lease. Provided Lessee has
properly and timely exercised the Option, the term of this Lease shall be
extended by the Option Term, and all terms, covenants and conditions of this
Lease shall remain unmodified and in full force and effect, except for the Base
Rent, which shall be adjusted to ninety-five percent (95%) of the "Fair Market
Rental Rate" of the Premises, as defined in Paragraph 67.3 below.
67.3 Definition of Fair Market Rental Rate. As used
herein, "Fair Market Rental Rate" shall mean the projected prevailing rental
rate as of the first day of the Option Term for similar mixed-use "research and
development"-type tilt-up buildings with comparable parking and of comparable
age and condition, situated in the Marina del Rey/West Los Angeles area of
Southern California.
68. Approval of Lender. This Lease shall become
effective upon the full execution and delivery thereof by Lessor and Lessee and
upon the approval thereof in writing by the beneficiary under the first deed of
trust presently encumbering the Building (the "Present Lender"), which approval
must be dated following the date of completion of the negotiations presently
ongoing between Lessor and the Present Lender with respect to certain
modifications to the terms of the financing affecting the Building. If Lessor
is unable to deliver a copy of such properly dated written approval of this
Lease by the Present Lender by that date which is thirty (30) days following
the date of execution and delivery of this Lease by Lessee, then this Lease
shall terminate, at the election of either party in writing delivered to the
other party. If neither party elects to
17
<PAGE> 44
terminate, then the delays experienced by Lessor in obtaining the written
approval of this Lease by the Present Lender shall be deemed to be a "force
majeure delay" as defined in the Provisions of Paragraph 50.2.2 above. In the
event that this Lease is terminated as a result of the provisions of this
Paragraph, Lessor shall reimburse Lessee for all of its out-of-pocket costs
actually incurred by Lessee from the date the Lease is executed by Lessee until
the date of such termination, which reimbursement shall be limited to a maximum
of $10,000. Such out-of-pocket costs shall include space planning costs and
any other costs incurred during said Lime period.
69. Security for Lessee's Obligations.
69.1 Letter of Credit. In lieu of $200,000 cash, Lessee
shall have the option of supplying Lessor, not later than thirty (30) days
after the date of execution and delivery of this Lease by Lessee, with an
unconditional, irrevocable and renewable letter of credit ("Letter of Credit")
for $200,000, in favor of Lessor in form and issued by a bank located in Los
Angeles, California, reasonably satisfactory to Lessor. Prior to the issuance
of the Letter of Credit, Lessee shall deliver a draft thereof to Lessor for
review by Lessor of the form and content of the Letter of Credit, so that. once
it is issued it will be in form and substance previously approved by Lessor.
The Letter of Credit shall be held by Lessor subject Lo all terms and
conditions of Paragraph 5 of the Lease. The Letter of Credit shall state that
an authorized officer or other representative of Lessor may make demand on
Lessor's behalf for the principal amount of the Letter of Credit, or any
portion thereof, and that the issuing bank must immediately honor such demand
without qualification or satisfaction of any conditions, except the proper
identification of the party making such demand. In addition, the Letter of
Credit shall indicate that it is transferable in its entirety by Lessor as
beneficiary and that upon receiving written notice of transfer, and upon
presentation to the issuer of the original Letter of Credit, the issuer will
reissue the Letter of Credit naming such transferee as the beneficiary.
69.2 Substitution. Provided that Lessee has not committed an
uncured event of default whose cure period has expired, then at the end of the
third (3rd) year of the Lease Term, Lessee may substitute a new Letter of
Credit for $100,000 for the remainder of the term of this Lease. The date upon
which the Letter of Credit may be reduced as aforesaid in this Paragraph 62.2
shall be tolled for that period of time during which an event of default
remains uncured-following the expiration of the applicable cure periods. If
the Letter of Credit then in effect at any point during the Term of this Lease
is due to expire on a date certain, and Lessee has not substituted a new Letter
of Credit in the appropriate principal amount within thirty (30) days prior to
the scheduled expiration of the 'then effective Letter of Credit, Lessor may
deliver written notice of such fact to Lessee, and if Lessee does not extend
the Letter of Credit or substitute a new Letter of Credit within ten (10) days
after Lessee's receipt of such notice from Lessor, Lessor shall be entitled to
make demand for the principal amount of the then applicable Letter of Credit
and, thereafter, to hold such funds in accordance with the provisions of this
Paragraph 69.2.
69.3 Default. If Lessee commits a default with respect
to any provision of this Lease, which remains uncured after the
18
<PAGE> 45
expiration of the applicable cure periods, Lessor may (but shall not be required
to) draw down on the then existing Letter of Credit as if it were cash for
Lessor's application pursuant to the provisions of Paragraph 5 of this Lease.
If any portion of the Letter of Credit is so used or applied, Lessee shall
within ten (10) days after demand therefor, post an additional Letter of Credit
in an amount sufficient to restore the Letter of Credit to the principal amount
then required under Paragraphs 53.1 or 53.2 above.
SPECIAL ADDITIONAL PROVISIONS. These special additional provisions
have been agreed upon by Lessor and Lessee and are made a part of this Addendum
to Lease as follows:
1. Credit for Unused Allowance. With reference to the Allowance set
forth in Paragraph 51.3 of this Addendum, Lessor and Lessee hereby agree that
notwithstanding any contrary provisions of said Paragraph 51.3 or any other
provisions of this Lease, any portion of the Allowance which remains unused
following the completion of the work of construction of the Lessee Building
Work shall be divided into twelve equal parts and each part shall be applied as
a rental credit for each of the first twelve months of the Term of this Lease.
2. Adjustment to Provisions Regarding Tenant's Current Rent
Obligation: Reference is made to Paragraph 62 of the Addendum to this Lease.
Notwithstanding any other provisions express or impled to the contrary in said
Paragraph 62 or any other provision of this Lease, Lessor and Lessee hereby
agree that Lessee shall be entitled to a current lease reimbursement amount of
$105,000, notwithstanding the fact that lessee may owe less than $105,000 under
the Stoner Lease and the Exposition Lease at the Commencement Date of the Term
of this Lease. The provisions of said Paragraph 62 are designated to limit
Landlord's obligation to the actual amounts of rent due and owing under the
Stoner Lease and the Exposition Lease as of the Commencement Date of the Term
of this Lease. However, by the provisions of this Paragraph 2, Lessor's and
Lessee's agreement is that to the extent that there is a balance remaining
after deducting the rental reimbursement payable pursuant to Paragraph 62 from
$105,000, such balance shall be divided into twelve equal parts and each part
shall be applied as a rental credit for each of the first twelve months of the
Term of this Lease. By way of illustration; if on the Commencement Date of the
Term of this Lease, a total rental obligation remains under the Stoner Lease
and the Exposition Lease of $46,310, the difference between such sum and
$105,000 equals $58,690, which would be divided into twelve equal parts of
$4,890.83, which would be the monthly rent credit for the first twelve months
of the Term of the Lease.
GILDA MARX INCORPORATED, AMC ASSOCIATES, a California Limited
a California corporation Partnership
By: [SIG] By: Marina Center Associates, Inc.,
------------------- a California corporation, its
Its: President general partner
---------------
By: By: William L. Tooley
-------------------- ----------------------
Its: William L. Tooley
--------------- Executive Vice President
"LESSEE" "LESSOR"
-19-
<PAGE> 46
43. Authority. If Lessee 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 behalf of said entity. If Lessee is a corporation,
trust or partnership, Lessee shall, within thirty (30) days after execution of
this Lease, deliver to Lessor evidence of such authority satisfactory to Lessor.
44. Conflict. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions, if any, shall be controlled by the
typewritten or handwritten provisions.
45. Offer. Preparation of this Lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to lease. This Lease
shall become binding upon Lessor and Lessee only when fully executed by Lessor
and Lessee.
46. Addendum. Attached hereto is an addendum or addends containing paragraphs
47 through 69 which constitute a part of this Lease.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS
LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES .
THIS LEASE HAS BEEN PREPARED FOR SUBMISSION TO YOUR ATTORNEY FOR
APPROVAL NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN
INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE BROKER OR ITS
AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX
CONSEQUENCES OF THIS LEASE OR THE TRANSACTION RELATING THERETO: THE
PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN LEGAL COUNSEL AS
TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.
LESSOR LESSEE
AMC ASSOCIATES, a California Limited Partnership
BY: Marina Center Associates, Inc., a California
corporation, its general partner GILDA MARX INCORPORATED,
- ------------------------------------------------ ------------------------
a California Corporation
By WILLIAM L. TOOLEY By [SIG]
-------------------------------------------- ----------------------
William L. Tooley
Its Executive Vice President By
-------------------------------------------- ----------------------
Executed on 8-3-92 Executed on 7/27/92
-------------------------------------- --------------
[Corporate Seal] [Corporate Seal]
ADDRESS FOR NOTICES AND RENT ADDRESS
3303 Wilshire Boulevard, Suite 1200
- ------------------------------------------------- ----------------------
Los Angeles, CA 90010
- ------------------------------------------------- ----------------------
Attn: Mr. Bruce Beatty Attn:
- ------------------------------------------------- ----------------------
American Industrial Real Estate Association, Los Angeles, CA 90071 (213)
687-8777
<PAGE> 47
EXHIBIT "A"
(1 OF 2)
[Floor Plan of First Floor of Premises.]
<PAGE> 48
EXHIBIT "A"
(2 OF 2)
[Floor Plan of Second Floor of Premises.]
<PAGE> 49
EXHIBIT "B"
[Parking Plan.]
<PAGE> 50
COVENANTS AND RESTRICTIONS
It is agreed between Lessor and Lessee that Lessor shall have the
exclusive right to authorize buildings, exterior signs and to approve plans and
specifications as to landscaping and architectural conformity to a garden type
office-industrial center.
It is further agreed that no variations from the restrictions
hereinafter set forth shall be permitted without the consent in writing of
Lessor.
1. No building shall be constructed upon the Premises within tan
(10) feet of any street in existence at the time of such
construction or within ten (10) feet of any other site, nor
have exterior walls constructed other than of tilt-up concrete
or equal material, nor shall any building be constructed upon
the Premises with a roof having a difference in elevation of
more than two (2) feet unless approved in the manner
hereinabove provided.
2. Within the required set-back area from streets there shall be
maintained on the Premises only paved walks, paved driveways,
lawns and landscaping, and the surface of so much of the
remainder of the Premises as is not covered by buildings, by
lawns or by landscaping shall be treated so as to be dust
free.
3. There shall be maintained on the Premises facilities for
parking, loading and unloading sufficient to serve the
business conducted thereon; without using adjacent streets
therefor; and no use shall be made of the Premises which will
attract parking in excess of the parking spaces then available
thereon.
4. The Premises shall be used only for manufacturing, processing,
storage, wholesale, office, laboratory, professional, research
and development activities; and there shall not be permitted
any junk or salvage yard or any other use which will be
offensive or dangerous to the community by reason of odor,
fumes, dust, smoke, noise, toxic waste or radiation or any
other pollution, or will be hazardous by reason of such
pollution or by danger of fire or explosion.
5. The exterior of all structures and all walks, driveways, lawns
and landscaping on the Premises shall be maintained in good
order, repair and condition, and all exterior painted surfaces
shall be maintained in first-class condition and shall be
repainted at least once in every four (4) years.
6. No open storage shall be permitted on the Premises unless
protected by screening to a height of not more than eight (8)
feet approved in the manner hereinabove provided.
EXHIBIT "C"
<PAGE> 51
EXHIBIT "D"
LESSOR'S WORK
1. Construction of new demising partition in the ground floor
area of the Premises not currently demised. Construction to
match existing demising partition. Any special security
provisions to be at Lessee's sole cost.
2. Retrofitting of existing restrooms in the Premises to conform
to current codes including Title 24. Preliminary floor plans
and finishes delineating the proposed retrofit delivered to
Lessee for Lessee's reasonable approval.
3. Separate metering or sub-metering of all electrical service to
the Premises.
4. Separate HVAC Systems for the exclusive use of the Premises.
Distribution within the Premises to be by Lessee. HVAC
Systems to be adequate for the uses described in Paragraph 6.1
of this Lease. Lessor to move the existing HVAC units on the
second floor of the Building to the roof. Lessor to maintain
HVAC equipment during the Lease term at Lessee's expense,
provided, however, Lessor will negotiate maintenance contracts
using food faith, reasonable service standards and pricing and
ensuring Lessee of reasonably prompt service in the event of
emergencies.
5. Contractor's overhead and profit and construction management
fees, and cost for demolition, reworking of conduit, and work
related thereto of a portion of the second floor to provide
for high-bay warehouse.
6. Construction of an interior passenger elevator in the
Building's main lobby, to be operational on or as soon as
commercially reasonably possible after the Commencement Date.
7. Slurry coat and restripe the parking lot.
8. Construction of one truck loading dock and ramp, dock-high, to
be located in the middle of the north side of the Building,
pursuant to the depiction and the outline specifications
described in Schedule I to this Exhibit "D", with Lessor to be
responsible for one-half of the total cost of said truck
loading dock and ramp, which construction is subject to the
prior written consent of an existing tenant of the Building,
which tenant will lose the use of a truck door as a result of
the construction of such truck loading dock and ramp. Lessee
shall pay its share of the costs of such truck loading dock
and, ramp promptly upon receipt of invoices therefor, which
shall be delivered to Lessee when Lessor is invoiced therefor,
and with the final payment due upon receipt of the
contractor's final invoice stating that the work has been
substantially completed. Lessor and Lessee shall meet to
discuss the bid for such work, which will be submitted ,by
Lessor's general contractor in charge of construction, in
order to use their best commercially reasonable good faith
efforts to "value engineer" the work of construction of such
dock high truck door to attempt to bring the costs with
respect thereto to under $24,000.
<PAGE> 52
SCHEDULE 1 TO EXHIBIT "D"
(1 OF 2)
[Diagram of Lessor's Work.]
<PAGE> 53
SCHEDULE 1 OF EXHIBIT "D"
(2 OF 2)
[Diagram of Lessor's Work (continued).]
<PAGE> 54
EXHIBIT "E"
LIST OF HAZARDOUS MATERIALS
None, except as permitted by the exclusions set forth in Paragraph 53.1 of this
Lease.
<PAGE> 55
NOTICE OF LEASE TERM DATES
To: Gilda Marx Incorporated
11755 Exposition Boulevard Date: May 3, 1993
Los Angeles, CA 90064 -----------
Re: Lease dated July 29, 1992, as amended by that certain First Amendment
to Lease dated August 28, 1992 and as further amended by that certain Second
Amendment to Lease dated January 18, 1993 between AMC Associates Landlord, and
Gilda Marx Incorporated, Tenant, concerning 53,963 rentable square feet located
at 5340 Alla Road, California 90066
Gentlemen:
In accordance with the subject Lease, we wish to advise and/or confirm as
follows:
1. That the Premises have been accepted herewith by the Tenant as
being substantially complete in accordance with the subject
Lease, and that there is no deficiency in construction.
2. That the tenant has possession of the subject Premises and
acknowledges that under the provisions of the subject Lease, the
term of said Lease shall commence as of April 22, 1993 for a
term of 10 years ending on April 30, 2003.
3. That in accordance with the subject Lease, rental commenced to
accrue on April 22, 1993.
4. If the commencement date of the subject Lease is other than the
first day of the month, the first billing will contain a pro
rata adjustment. Each billing thereafter shall be for the full
amount of the monthly installment as provided for in said Lease.
5. Rent is due and payable in advance on the first day of each and
every month during the term of said Lease. Your rent checks
should be made payable to
AMC Associates
at c/o Tooley & Company
3303 Wilshire Boulevard, 12th floor
Los Angeles, CA 90010
AGREED AND ACCEPTED
Gilda Marx Incorporated, a California
corporation AMC Associates, a California limited
partnership
By: /s/
------------------------------
By: Marina Center Associates, Inc.
a California corporation
Print Name: ROBERT MARX Its: General Partner
---------------------
Its: Co-CEO
By: /s/ By: /s/
------------------------------- --------------------------------
Print Name: Mitchell Guzik Print Name: William L. Tooley
----------------------- -------------------------
Its: President Its: Executive Vice President
----------------------- -----------------------------
Date: 5/21/93 Date: 5/25/93
--------------------------- -----------------------------
(Tenant) (Landlord)
<PAGE> 56
FIRST AMENDMENT TO LEASE
This FIRST AMENDMENT TO LEASE ("First Amendment") is made and entered
into as of the 28th day of August, 1992, by and between AMC ASSOCIATES, a
California limited partnership ("Landlord"), and GILDA MARX INCORPORATED, a
California corporation ("Tenant").
RECITALS:
A. Landlord and Tenant entered into that certain
Standard Industrial Lease - Multi-Tenant, dated July 29, 1992 ("Lease") ,
wherein Landlord leased to Tenant, and Tenant leased from Landlord,
approximately 53,000 rentable square feet of space on the ground floor and
second floor of that certain building ("Building") located and addressed at
5340 Alla Road, Los Angeles, California, as more particularly described on
Exhibit "A' attached to the Lease.
B. Landlord and Tenant desire to amend the Lease to (i) delay
the date within which Lessor is required to deliver to Lessee notice of the
Present Lender's approval of the Lease (as discussed in Paragraph 68 of the
Addendum to Lease attached to the Lease ("Addendum")), (ii) increase the
maximum amount for which Lessor shall reimburse Lessee if Lessor is unable
to timely deliver such notice to Lessee (as discussed in Paragraph 68 of the
Addendum) and (iii) to otherwise amend the Lease as hereinafter provided.
NOW, THEREFORE, incorporating the foregoing recitals and in
consideration of the mutual covenants contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Capitalized Terms. All capitalized terms when used herein
shall have the same meaning as is given such terms in the Lease unless
expressly superseded by the terms of this First Amendment.
2. Present Lender Approval Date. Notwithstanding the terms of
Paragraph 68 of the Addendum, neither party shall have the right to terminate
the Lease as a result of Lessor's failure to deliver to Lessee a notice of the
Present Lender's approval of the Lease unless Lessor fails to deliver such
notice to Lessee on or before 5:00 p.m. on Friday, September 11, 1992.
3. Reimbursement of Expenses . Notwithstanding the terms of
Paragraph 68 of the Addendum, in the event that the Lease is terminated as a
result of the provisions of Paragraph 68
<PAGE> 57
of the Addendum, as amended by Paragraph 2 above, Lessor shall reimburse
Lessee, in addition to Lessor's reimbursement obligations set forth in
Paragraph 68 of the Addendum, for all reasonable, documented and out-of-pocket
expenses incurred by Lessee solely with respect to space planning during the
period of August 31, 1992 through and including September 11, 1992; provided,
however, in no event shall Lessor's liability under this Paragraph 3 exceed
Five Thousand Dollars ($5,000.00).
4. No Further Modification. Except as set forth in this First
Amendment, all of the terms and provisions of the Lease shall apply and shall
remain unmodified and in full force and effect.
IN WITNESS WHEREOF, this First Amendment has been executed as of the
day and year first above written.
LANDLORD:
AMC ASSOCIATES, a California limited
partnership
By: Marina Center Associates, Inc.,
California corporation, its
general partner
By: William L. Tooley
-----------------------
William L. Tooley, its
executive vice president
TENANT:
GILDA MARX INCORPORATED, a
California corporation
By: Mitchell Gill
-------------------
Its: President
------------
By: Ronald Ozen
-----------------
Its: CFO
-----------
<PAGE> 58
SECOND AMENDMENT TO LEASE
This SECOND AMENDMENT TO LEASE ("Second Amendment") is made and
entered into as of the 18th day of January,1993, by and between AMC ASSOCIATES,
a California limited partnership ("Lessor") , and GILDA MARX INCORPORATED,
a California corporation ("Lessee").
RECITALS:
A. Lessor and Lessee entered into that certain Standard
Industrial Lease - Multi-Tenant, dated July 29, 1992, as amended by that
certain First Amendment to Lease dated as of the 28th day of August, 1992
(together hereafter collectively the "Lease") wherein Landlord leased to
Lessee, and Lessee leased from Lessor, approximately 53,000 rentable square
feet of space on the ground floor and second floor of that certain building
("Building") located and addressed at 5340 Alla Road, Los Angeles, California,
as more particularly described on Exhibit "A" attached to the Lease.
B. Lessor and Lessee desire to amend the Lease to (i) confirm
the usable and rentable square footage of the Premises and (ii) to otherwise
amend the Lease as hereinafter provided.
NOW, THEREFORE, incorporating the foregoing recitals and in
consideration of the mutual covenants contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Capitalized Terms. All capitalized terms when used herein
shall have the same meaning as is given such terms in the Lease unless
expressly superseded by the terms of this First Amendment.
2. Rentable and usable Square Footage. Based on Lessee's Final
Plans, the rentable square footage of the Premises as defined in Paragraph 48
of the Addendum to Lease is determined to be 53,963, as set forth on the sheet
entitled "Area Calculation for Gilda Marx" and the floor plan attached hereto
and made a part hereof as Exhibit "A" and "A-1". The usable square footage of
the Premises is determined to be 52,088 square feet, which includes the
following portions of the calculations shown on Exhibit "A-1" (46,036, 5,092,
720 and 240 square feet, respectively).
3. Base Rent. Based on the rentable square footage set forth in
Paragraph 2 above, the initial monthly Base Rent as defined in Paragraph 4.1 of
the Lease is subject to rent adjustments and set forth in Paragraph 52 of the
Addendum to Lease.
4. Lessee's Share. Based on the Building rentable square
footage of 109,107, Lessee's Share as set forth in Paragraph 4.2(a) of the
Lease is defined as 49.46% (109,107 divided by 53,963).
<PAGE> 59
EXHIBIT A - 1
[Floor Plan of Premises.]
<PAGE> 60
EXHIBIT B
[Parking Plan.]
<PAGE> 61
Exhibit F
List of Hazardous Materials
Sublessee hereby warrants and represents that to the best of its knowledge
Subleases does not use in its business any hazardous materials as set forth in
paragraph 53.1 in the Master Lease and defined in subparagraph 53.2 in the
Master Lease.
<PAGE> 62
EXHIBIT "G"
[Diagram of Expansion Space.]
<PAGE> 63
THIRD AMENDMENT TO LEASE
This Third Amendment to Lease ("Third Amendment") is made and entered
into as of the 18th day of July, 1994 by and between AMC ASSOCIATES, a
California limited partnership ("Lessor") and GILDA MARX INCORPORATED, a
California corporation ("Lessee").
RECITALS
A. Lessor and Lessee entered into that certain Standard Industrial
Lease-Multi-Tenant dated July 29,1992, as amended by that certain First
Amendment to Lease dated as of August 28,1992, and by that certain Second
Amendment to Lease dated as of January 18,1993, and by a letter agreement
dated February 4, 1994 (hereinafter collectively the "Lease") wherein Lessor
leased to Lessee and Lessee leased from Lessor approximately 53,963 rentable
square feet of space on the ground floor and second floor of that certain
building ("Building") located and addressed at 5340 Alla Road, Los Angeles,
California, as more particularly described on Exhibit A attached to the Lease.
B. Lessor and Lessee desire to further amend the Lease to (i)
extinguish the option to extend and the option to expand, (ii) abate the right
of first offer, (iii) revised provisions related to the letter of credit, and
(iv) otherwise modify the Lease as hereinafter provided.
NOW, THEREFORE, incorporating the foregoing recitals and in
consideration of the mutual covenants contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Capitalized Terms. All capitalized terms as used herein shall
have the same meaning as is given such terms in the Lease unless expressly
superseded by the terms of this Third Amendment.
2. Option to Expand. The option to expand set forth in Paragraph 58
of the Addendum is hereby deleted and of no further force and effect.
3. Right of First Offer. The right of first offer described in
Paragraph 63 of the Addendum is hereby suspended for a period of time
commencing with the full execution and delivery of this Third Amendment to
Lease and end August 1, 1996, at which time the provisions of said Paragraph 63
shall be reinstated and shall be applicable from such date of reinstatement
forward. Further, the penultimate sentence of said Paragraph 63 is hereby
revised by adding the following clause thereto: "and may not be exercised
unless Gilda Marx Incorporated is in occupancy of the entire Premises."
4. Option to Extend. The option to extend set forth in Paragraph 67
of the Addendum to the Lease is hereby deleted and shall be of no further force
and effect.
5. Letter of Credit. The $200,000 letter of credit referred to in
Paragraph 69 of the Addendum to the Lease is scheduled for substitution with a
new letter of credit for
<PAGE> 64
$100,000 as of the end of the third year of the term of the Lease Paragraph 69.2
of the Addendum is hereby amended to provide that the letter of credit shall
remain at the $200,000 level through the seventh (7th) year of the term of the
Lease, i.e., through April 22, 2000, and after such date, if Lessee has
qualified for a reduction in the letter of credit under the terms of Paragraph
64.2 of the Addendum, a $100,000 letter of credit may be substituted with for
the $200,000 letter of credit for the remainder of the term of the Lease.
6. No Further Modification. Except as set forth in this
Third Amendment, all of the terms and conditions of the Lease shall apply and
shall remain unmodified and in full force and effect.
IN WITNESS WHEREOF, this Third Amendment has been executed as
of the day and year first above written.
LESSOR: LESSEE:
AMC ASSOCIATES, a California limited GILDA MARX INCORPORATED, a
partnership California corporation
By: Marina Center Associates, Inc.,a By: [SIG]
California corporation, its ------------------------
general partner
Its: President
-----------------
By: [SIG]
------------------------
By:_________________________
Its: Title
William L. Tooley -----------------
Executive Vice President
-2-
<PAGE> 65
[TOOLEY & COMPANY
DEVELOPMENT - LEASING - MANAGEMENT]
February 4, 1994
Mr. Ronald Ozur
Chief Financial Officer
Gilda Marx Incorporated
5340 Alla Road
Los Angeles, CA 90066-7004
Dear Ron:
This letter is to confirm Airport Marina Center Associates willingness to
reduce Gilda Marx's rent at Airport Marina Center, $10,000 per month for the
period May through August 1994, for a total $40,000. In exchange for this
concession Gilda Marx agrees to move the November 1, 1995 rental adjustment
date forward to July 1, 1995 and adjust their rent to $.72 per square foot per
month at that time.
If you are in agreement with this arrangement please indicate your acceptance
in the space provided below and return a copy to the undersigned at your
earliest convenience.
Cordially,
[sig]
BRUCE A. BEATTY
ACCEPTED:
GILDA MARX INCORPORATED
By [sig]
---------------------------------
Date 2-7-94
---------------------------------
BAB: ss
cc: Bill Tooley
Craig Ruth
Kent Jakobsen
John Pittman
Robin Rice
[3303 WILSHIRE BLVD - LOS ANGELES, CALIFORNIA 90010-213/382-8211-FAX
213/382-9505]
<PAGE> 66
EXHIBIT "D"
Customary Substances In Customary
Quantities Customarily Used In Offices
<PAGE> 67
EXHIBIT "E"
[Floor Plan of Second Floor of Premises.]
<PAGE> 1
EXHIBIT 11.1
LEGACY SOFTWARE, INC.
COMPUTATION OF WEIGHTED AVERAGE
COMMON STOCK SHARES OUTSTANDING
COMPUTATION OF WEIGHTED AVERAGE COMMON STOCK SHARES OUTSTANDING:
<TABLE>
<CAPTION>
Total Number Three Months Ended Six Months Ended
Of Shares June 30, 1996 June 30, 1996
-------------- --------------------- ----------------
<S> <C>
Weighted average shares calculated under
SAB 83(1) . . . . . . . . . . . . . . . . . 1,396,218 705,781 1,049,092
Outstanding shares as of
January 1, 1996 . . . . . . . . . . . . . . 741,000 366,429 184,227
Common Stock issued on
January 23, 1996 . . . . . . . . . . . . . 7,200 3,560 1,790
Common Stock issued on
May 10, 1996 . . . . . . . . . . . . . . . 534,351 264,240 132,850
Initial public offering shares
issued on May 17, 1996 . . . . . . . . . . 1,150,000 568,681 285,912
--------- ---------
Weighted Average Shares Outstanding 1,908,691 1,653,871
========= =========
WEIGHTED AVERAGE COMMON STOCK SHARES OUTSTANDING All Periods Presented
UNDER SAB 83(2): in the Quarterly Report
Common Stock and Common Stock equivalents on Form 10Q
-----------------------
Common Stock granted during the period . . . . . . 7,200
Stock options granted subsequent to
January, 1996 . . . . . . . . . . . . . . . . . . . 210,000
Warrants granted prior to
January, 1996 . . . . . . . . . . . . . . . . . . . 200,000
Convertible debt to be converted prior to the Public
Offering . . . . . . . . . . . . . . . . . . . . . 534,351
---------
Total securities . . . . . . . . . . . . . . . . 951,551
Assumed buyback of Common Stock
shares(3) . . . . . . . . . . . . . . . . . . . (296,333)
---------
Total Common Stock equivalents . . . . . . . . . . 655,218
Weighted average shares issued(4) . . . . . . . . . 741,000
---------
Weighted average shares outstanding . . . . . . . . 1,396,218
- -------------------- =========
</TABLE>
(1) The Company has elected to calculate its weighted average Common Stock
shares outstanding under SAB 83 until the completion of its initial
public offering.
(2) Weighted average shares outstanding are computed using the treasury
stock method, by which the number of shares outstanding reflects an
assumed use of proceeds, from the assumed exercise of possible Common
Stock equivalents, to repurchase shares of the Company's Common Stock
at the Public Offering price.
(3) Assumed buyback of Common Stock shares:
Common Stock is assumed to be repurchased at the Public Offering price
<PAGE> 2
Weighted average purchase price per share of Common Stock $0.00
Weighted average exercise price per share of stock options $3.89
Weighted average exercise price per share of warrants $1.31
Weighted average conversion per share of convertible debt $1.31
(4) Gives retroactive effect to the Company's Common Stock split on a 144
shares to 1 share basis. In addition, common shares assumed to be
issued within one year of the Public Offering have been included in the
above calculation and not in this line item.
-2-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEETS AS OF JUNE 30, 1996 (UNAUDITED), AND DECEMBER 31, 1995, STATEMENTS OF
OPERATIONS (UNAUDITED) FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND
1995, AND STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30,
1996 AND 1995 FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 4,157,324
<SECURITIES> 0
<RECEIVABLES> 53,985
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,450,717
<PP&E> 238,607
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,195,605
<CURRENT-LIABILITIES> 776,220
<BONDS> 0
0
0
<COMMON> 2,433
<OTHER-SE> 3,856,200
<TOTAL-LIABILITY-AND-EQUITY> 5,195,605
<SALES> 5,404
<TOTAL-REVENUES> 8,739
<CGS> 5,160
<TOTAL-COSTS> 56,160
<OTHER-EXPENSES> 276,206
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 426,204
<INCOME-PRETAX> (1,231,658)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,231,658)
<EPS-PRIMARY> (.74)
<EPS-DILUTED> 0
</TABLE>
