<PAGE>
U. S. Securities and Exchange Commission
Washington, D. C. 20549
Amendment #1
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12 (b) or (g) of the Securities Exchange Act of 1934
FUTON WORLD, INC.
(Name of Small Business Issuer in its charter)
Nevada 88-0393503
- ------------------------------- ----------------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
145 W. Meats Ave., Orange, California 92865
--------------------------------------------
(Address of principal executive offices)
714-279-8060
---------------------------
(Issuer's Telephone Number)
714-279-0099
---------------------------
(Issuer's Fax Number)
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None
Securities to be registered under Section 12(g) of the Act:
Common Stock, $ 0.001 par value
-------------------------------
(Title of Class)
<PAGE>
DESCRIPTION OF BUSINESS
BUSINESS DEVELOPMENT
Futon World, Inc. (the "Company") was incorporated on April 6, 1998 in
the State of Nevada. Sale of futons was started by Innovative Designs which
commenced activity in 1989 and was later sold to current management in September
20, 1995 who changed the name to Futon World for the retail operation and on
March 4, 1996 Superior Designs for the manufacturing process with both dba
operations being held jointly under the California Corporate umbrella (formed in
5/1/96) of the Wollenberg Group, Inc.
BUSINESS OF THE COMPANY
The Company
o designs and manufactures for sale to wholesale and retail outlets a
complete line of high quality, trendy futon furniture and accessories for
families made up of futon frames, futon mattresses and tables made directly
from company's factory.
o retails from company's own retail outlets a complete line of high
quality, trendy futon furniture and accessories for families that are
manufactured by company.
o delivers and sets up company's own futon furniture for local
customers from company's own retail outlets.
DISTRIBUTION METHODS
--------------------
The company markets it products nationally on a wholesale basis and on
a retail and wholesale basis in the Southern California marketplace. 70% of the
company sales are on the West Coast and no one customer has over 8% of their
business. The company projects significant revenue increase from expansion of
adding additional retail outlets in various target market areas in Southern
California and later on in San Diego, San Francisco, Fresno, Sacramento
California and Las Vegas, Nevada.
PRODUCTS AND SERVICES
---------------------
The company manufactures from a well established, modern industrial
park in Orange, California. The facility is 16,000 square feet (plus an
additional 4,000 square feet of yard that handles wood working and storage) and
contains administrative offices, manufacturing and warehouse sections.
<PAGE>
The company has between 30-40 designs and produces a wide variety of
print and fabric designs that it then produces in its various manufacturing
departments of cutting, fitting and finishing from which a finished product is
produced and then shipped to customers and it's own retail stores. The company
does provide delivery in its' own trucks in a local delivery area and utilizes
private carriers for all other deliveries.
The company also currently has two retail stores of approximately 9,300
square feet total and is in the process of opening two additional stores. These
stores are located in the Southern California area. The company provides local
delivery and set-up of their product from their own retail stores though their
own trucks. The company plans on opening 24 additional stores (making a total of
30) through the year 2001.
ADVERTISING
-----------
The company has traditionally relied upon its reputation and in house
sales representatives for market penetration along with the displays created by
the retail stores. In addition, the company plans to launch an aggressive
promotional campaign aimed at supporting its' wholesale clients and increasing
its' retail customer following by:
1. Wholesale Print Advertising in furniture and decorating style
publications aimed at the buyers of the target market furniture
distribution outlets.
2. Point of purchase displays for the retail stores.
3. Increased frequency of distribution of direct mail, brochures, post
cards, and catalogs to the existing customer base, referrals,
mailing lists and reps who in turn send to their wholesale
customers.
4. Sizzling Radio Ads in target markets to attract retail buyer to
retail outlets.
5. State of the Art Internet Web Pages supported by captivating ads and
banners on "high traffic" web sites and malls. Print, and later TV
ads directing both retail and wholesale buyers to the catalogs, web
pages and retail outlets.
6. Outdoor Advertising, first from the retail outlets which are visible
from major freeways, then from strategic billboards.
COMPETITION
-----------
Most futon products are produced by large companies who mass produce
inferior products on a low budget and market them to a less sophisticated
customer without particular attention to quality or service. The company can be
classified as making up scale, high quality, trendy fashioned futon furniture
products that would blend with and compliment even the most affluent tastes in
fine furniture. The company's products offer low maintenance and higher profit
margins. Other quality futon manufactures like Elite, Big Tree, Harlee
International & August-Lotz also make a good product but do not make the
up-scale, trendy, fashionable FUTON WORLD "LOOK."
-2-
<PAGE>
SUPPLIES
--------
The company obtains its' major supplies from Cherokee Wood Products,
International Forest Products, Acme Felt, Abad Foam and Seattle Textiles. All
supplies are readily available from a large number of suppliers on a local
basis.
DEPENDENCE ON MAJOR CUSTOMERS
-----------------------------
The company is not dependent on any major customers and no one customer
has over 8% of the company's business.
PATENTS, TRADEMARKS AND LICENSES
--------------------------------
The company does not have any designs which are copyrighted,
trademarked or patented.
GOVERNMENT APPROVAL AND REGULATIONS
-----------------------------------
The company's business is subject to no government regulations other
than those of Bureau of Home Furnishings and Thermal Insulation, OSHA,
regulating safety in the workplace and South Coast Air Quality Management
District, regulating air quality and the prevention of pollution.
RESEARCH AND DEVELOPMENT
------------------------
The company has not had to expend any funds during the last two years
on research and development.
COST OF COMPLIANCE WITH ENVIRONMENTAL LAWS
------------------------------------------
The expense of complying with environmental regulations is of minimal
consequence.
EMPLOYEES
---------
The company employs 25 people, all full time.
MANAGEMENT'S PLAN OF OPERATION
The company's plan of operation for the next three years is to expand
operations, subject to availability of capital, on the retail level initially in
Southern California, then later all of California and also in the rapidly
expanding Las Vegas, Nevada market.
-3-
<PAGE>
The company is already in process of expanding by adding two more
retail outlets with each store having approximately $50,000 in retail inventory
and furnishings. In addition, the company has plans to have open, subject to
availability of capital, five stores in 1999, twelve in 2000 and thirty in 2001.
The company plans, subject to availability of capital, on adding
outside sales staff that will not only seek out new wholesale customers, but
will also develop marketing for licensing retail store outlets. The licensing of
stores by company will enable the company to expand not only geographically and
in number of stores but will also provide revenues for brand recognition
advertising and educating customers on company's product.
The company plans on acquiring, subject to availability of capital, new
computerized equipment in the manufacturing plant to help streamline, accelerate
and increase the capacity of the manufacturing operations.
Due to this expansion, the company plans, subject to availability of
capital, on adding raw materials to be able to fill projected orders. Should the
above plans be realized, the company would add approximately 90 employees to our
payroll.
PROPERTIES
The company's manufacturing operation is located in a leased facility
in a well established, modern industrial park. The company has local access to
all commercial freight systems - air, rail and truck. The company predominately
utilizes its own trucks for local deliveries and private carriers for most of
its shipments. The facility is 16,000 square feet plus an additional 4,000
square feet of yard that handles wood working and storage. This facility
contains administrative offices, manufacturing and warehouse sections and the
company estimates that this facility is adequate for the next 36 months given
the above expansion. The manufacturing facility is located at 145 W. Meats Ave.
in Orange, California 92865 and the company leases this facility for $7,520 per
month and the current lease expires in June 2002 with a renewal option.
The company currently has two retail locations; with one more store
being opened at this time and one more in negotiation, all highly visible off
major freeways with thousands of cars per hour passing. The retail stores have
easy accessibility to the freeways and are in selected target market areas with
little or no competition near. One store is located off the 405 freeway in the
City of Westminster, California. The store is over 5,000 square feet and costs
$5,707 per month and the lease expires February 2004.
-4-
<PAGE>
The other store is located off the 5 freeway in the City of Tustin,
California. That store is 4,269 square feet and costs $4,585 per month and the
lease expires in January 2000. Each store carries the full line of company's
products along with accessories such as lamps, pictures, throw rugs etc. In
addition, the company is adding two more stores, one being in the City of
Corona, California visible and off the 91 freeway, another major freeway with
thousands of cars per hour passing. That store is 4,300 square feet and costs
$6,048 per month and the lease expires in April of 2004. Another store is in
negotiation in the City of Laguna Hills, California and would be visible and off
the 5 freeway.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth, as of March 31, 1999, the number of shares
of Common Stock of the Company beneficially owned by each officer and director
of the Company, individually and as a group, and by each person known to the
Company to be the beneficial owner of more than five percent of the Common
Stock.
Number of Shares Percent
of of
Name of Officers/Directors Common Stock Outstanding
- -------------------------- ------------ -----------
Gerrit Wollenberg 5,880,000 68.4
James Wollenberg 735,000 08.5
Johanna Wollenberg 735,000 08.5
Officers and Directors as a
Group (3 persons) 7,350,000 85.4
CHANGES IN CONTROL
There are no arrangements which may result in a change in control of
the company.
-5-
<PAGE>
DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS
The Company's directors, officers and significant employees occupying
executive officer positions, their ages as of March 31, 1999, the directors'
terms of office and the period each director has served are set forth in the
following table:
<TABLE>
<CAPTION>
Director's
Director Term
Person's Name Age Positions and Offices Since Expires
- ------------- --- --------------------- ----- -------
<S> <C> <C> <C>
Gerrit Wollenberg 70 President, CEO and 1998 2000
Chairman of the Board
James Wollenberg 33 Vice President, Secretary 1998 2000
and Director
Johanna Wollenberg 56 Treasurer & Director 1998 2000
</TABLE>
GERRIT WOLLENBERG: Mr. Wollenberg has over 45 years of experience in
business and has worked hands-on in management, marketing and retail
distribution operations. He provided the capital in the acquisition of Futon
World in 1995 and helped guided its growth since, which includes 14% increase in
sales from last year. In addition, Mr. Wollenberg has successfully owned and
operated Allied Motors (1967-71), Mary's Restaurant (1956-59), distributorship
for L.A. Examiner (1956-63), a bindery (1963-65), and currently a
distributorship for a large newspaper chain (1965-present).
JAMES WOLLENBERG: Mr. J. Wollenberg is in charge of design,
administration and production. He is also key in implementation of marketing and
establishing customer relations. His 15 years of production and machinist
experience included prototype development, quality assurance and production
supervision. Mr. J. Wollenberg has an ownership position, is directly
responsible in a management capacity for the production, art/design and
marketing departments. He is responsible for creating much of the Futon World
line as it is known today and as a result of his restructuring, sales have
increased 14% over a year ago.
JOHANNA WOLLENBERG: Ms. Wollenberg has a broad general business
background that spans over 35 years of experience in the areas of quality
control, marketing and management. She managed approximately 17,000 employees
for ABC Janitorial Service in the Netherlands (1961-74). In additions to her
duties at Company, she currently is a manager of a large newspaper distribution
center (1974-present).
-6-
<PAGE>
EXECUTIVE COMPENSATION
Set forth below is the aggregate compensation during fiscal years 1997
and 1998 of the key executive officers of the Company. During the periods, no
executive officer of the Company received compensation that exceeded $100,000.
Annual Salary for Annual Salary for Compensation
Executive Officer Fiscal Year 1997 Fiscal Year 1998 Bonus
- --------------------------------------------------------------------------------
Gerrit Wollenberg, $0.00 $0.00 None
President
Annual Salary for Annual Salary for Compensation
Executive Officer Fiscal Year 1997 Fiscal Year 1998 Bonus
- --------------------------------------------------------------------------------
James Wollenberg, $36,000 $36,000 None
Vice President
Johanna Wollenberg, $0.00 $0.00 None
Treasurer
During the last two years and before, no executive officer of the
Company has been granted stock options, stock appreciation rights, or stock in
exchange for services. The Company has no long-term incentive plan intended to
serve as incentive for performance to occur over a period longer than one fiscal
year.
Directors of the Company receive no compensation for their services as
directors.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no transactions during the last two fiscal years, and there
are no proposed transactions, that involve amounts in excess of $50,000 to which
the Company was or is to be a party in which any director, executive officer,
beneficial owner of more that five percent of the Company's Common Stock, or
members of their immediate families had, or is to have, a direct or indirect
material interest, other than the following:
None.
-7-
<PAGE>
DESCRIPTION OF SECURITIES
The Company is authorized to issue twenty five million shares of Common
Stock ($0.001 par value). The presently outstanding shares of Common Stock are
fully paid and nonassessable.
COMMON STOCK
VOTING RIGHTS. Holders of shares of Common Stock have one vote a share
on all matters submitted to a vote of the shareholders. Shares of Common Stock
do not have cumulative voting rights, which means that the holders of a majority
of the shareholder votes eligible to vote and voting for the election of the
board of directors can elect all members of the board of directors.
DIVIDEND RIGHTS. Holders of record of shares of Common Stock receive
dividends when and if declared by the board of directors out of funds of the
Company legally available therefore.
LIQUIDATION RIGHTS. Upon any liquidation, dissolution or winding up of
the Company, holders of shares of Common Stock receive pro rata all of the
assets of the Company available for distribution to shareholders after
distributions are made to the holders of the Company's Preferred Stock.
PREEMPTIVE RIGHTS. Holders of Common Stock do not have any preemptive
rights to subscribe for or to purchase any stock, obligations or other
securities of the Company.
REGISTRAR AND TRANSFER AGENT. The Company's registrar and transfer
agent is Nevada Agency and Trust Company, 50 West Liberty Street, Suite 880,
Reno, Nevada 87501.
DISSENTERS' RIGHTS. Under current Nevada law, a shareholder is afforded
dissenters' rights which, if properly exercised, may require the Company to
purchase his shares. Dissenters' rights commonly arise in extraordinary
transactions such as mergers, consolidations, reorganizations, substantial asset
sales, liquidating distributions, and certain amendments to the Company's
Certificate of Incorporation.
-8-
<PAGE>
MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
There is no public trading market for the Company's Common Stock. We
will apply for OTC Bulletin Board quotation rights, and we expect our Common
Stock to be quoted by September 1999 or sooner.
On March 31, 1999 there were 8,600,000 shares of Common Stock
outstanding. An additional 1,950,000 shares of Common Stock could be sold
pursuant to Regulation D, Rule 504 under the Securities Act of 1933.
During the period from January 1, 1999 through March 31, 1999, thirty
days prior to the effective date of this Form 10-SB, we offered 1,250,000 shares
of our Common Stock to the public in only states pursuant to the exemption
from registration provided by Regulation D, Rule 504 of the Securities and
Exchange Commission. As of March 31, 1999, all of these shares had been sold.
Further, during the period from March 31, 1999 through the day prior to
the effective date of this Form 10-SB, we offered 1,950,000 shares of our Common
Stock to the public in several states pursuant to the exemption from
registration provided by Regulation D, Rule 504 of the Securities and Exchange
Commission. As of the date of this filing of this Form 10-SB, none of these
shares had been sold.
HOLDERS
As of March 31, 1999 there were approximately 8,600,000 shares of
thirty three holders of record of our Common Stock.
DIVIDENDS
We have paid no dividends to our stockholders and do not plan to pay
dividends on our Common Stock in the foreseeable future. we currently intend to
retain any earnings to finance future growth.
LEGAL PROCEEDINGS
On January 27, 1999 a lawsuit involving the Company and its principal
shareholders, alleging breach of contract was settled favorable for the Company.
The Company will have no significant liabilities as a result of this matter.
In February 1999 the Company was sued in Superior Court of California
for failure to pay $7,500 for yellow page advertising. The Company claims that
the ad was cancelled prior to running but the ad ran anyway. The Company has
been attempting to settle this matter for almost two years and is still trying
to do so. The total liability is $7,500 plus any costs associated with same.
-9-
<PAGE>
RECENT SALES OF UNREGISTERED SECURITIES
During the period from January 1, 1999 through March 31, 1999, the
Company sold 1,250,000 shares of our Common Stock in an offering exempt from
registration pursuant to the provisions of Regulation D, Rule 504 of the
Securities and Exchange Commission. No underwriters were used to effect the
sales. All sales were made in exchange for cash tendered to the Company. The
names of the persons who purchased said shares of stock, the dates the shares
were purchased and the number of shares issued and the value of the shares on
the dates of purchase are set forth below:
# of Shares Value of
Person Date Issued Shares Issued
- --------------------------------------------------------------------------------
Amparo, Myrna 2/11/99 85,000 $ 1,700
Balisalisa, Hernan 3/08/99 35,000 $ 700
Balisalisa, Michelle 2/24/99 15,000 $ 300
Boardman, Michael 1/19/99 30,000 $ 600
Espanola, Alexandria 1/06/99 45,000 $ 900
Espanola, Ginger 1/29/99 30,000 $ 600
Espanola, Mona 2/11/99 20,000 $ 400
Espinosa, Ruben 3/31/99 25,000 $ 500
Godoy, Felicisimo 3/04/99 25,000 $ 500
Hawkings, Ryan 2/05/99 15,000 $ 300
Herrera, Humberto 1/07/99 50,000 $ 1,000
Kilgore, Maryruth 1/12/99 85,000 $ 1,700
Davis, Stanley, Jr. 1/05/99 50,000 $ 1,000
Luz, Abigail 2/18/99 15,000 $ 300
Luz, Arceli 2/18/99 15,000 $ 300
Mendoza, Justin, Jr. 1/20/99 10,000 $ 200
Mendoza, Michael 2/26/99 20,000 $ 400
Pacheco, Antonio 3/03/99 40,000 $ 800
Palti, Jack 1/04/99 95,000 $ 1,900
Parkhurst, Stan 2/24/99 95,000 $ 1,900
Pham, Candice 3/23/99 15,000 $ 300
Santiago, Alexander 3/10/99 25,000 $ 500
Santiago, Clifford 3/11/99 25,000 $ 500
Santiago, Philip 2/24/99 95,000 $ 1,900
Santiago, William 3/29/99 40,000 $ 800
Santos, Ray 1/15/99 50,000 $ 1,000
Sarreal, Benjies 3/17/99 20,000 $ 400
Sutton, Jeanette 2/23/99 10,000 $ 200
Thomas, Elizabeth 2/08/99 75,000 $ 1,500
Thomas, John 1/04/99 95,000 $ 1,900
TOTALS 1,250,000 $ 25,000
All of the above persons had a preexisting relationship with the
Company and/or their executive officers and/or agents of same.
During the period from March 31, 1999 until the day before the
effective date of this Form 10-SB, the Company conducted a public offering of
1,950,000 shares of its Common Stock at $.50 per share pursuant to the exemption
from registration provided by Regulation D, Rule 504. As of the date of this
filing, none of the offered shares had been sold. The offering was made only in
states where no state registration of the securities was required.
-10-
<PAGE>
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Nevada corporation law, a corporation is authorized to indemnify
officers, directors, employees and agents who are made or threatened to be made
parties to any civil, criminal, administrative or investigative suit or
proceeding by reason of the fact that they are or were a director, officer,
employee or agent of the corporation or are or were acting in the same capacity
for another entity at the request of the corporation. Such indemnification
includes expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such persons if they acted in
good faith and in a manner reasonably believed to be in or not opposed to the
best interests of the corporation or, with respect to any criminal action or
proceeding, if they had no reasonable cause to believe their conduct was
unlawful. In the case of any action or suit by or in the right of the
corporation against such persons, the corporation is authorized to provide
similar indemnification, provided that, should any such persons be adjudged to
be liable for negligence or misconduct in the performance of duties to the
corporation, the court conducting the proceeding must determine that such
persons are nevertheless fairly and reasonably entitled to indemnification. To
the extent any such persons are successful on the merits in defense of any such
action, suit or proceeding, Nevada law provides that they shall be indemnified
against reasonable expenses, including attorney fees. A corporation is
authorized to advance anticipated expenses for such suits or proceedings upon an
undertaking by the person to whom such advance is made to repay such advances if
it is ultimately determined that such person is not entitled to be indemnified
by the corporation. Indemnification and payment of expenses provided by Nevada
law are not deemed exclusive of any other rights by which an officer, director,
employee or agent may seek indemnification or payment of expenses or may be
entitled to under any by-law, agreement, or vote of shareholders or
disinterested directors. In such regard, a Nevada corporation is empowered to,
and may, purchase and maintain liability insurance on behalf of any person who
is or was a director, officer, employee or agent of the corporation. As a result
of such corporation law, the Company may, at some future time, be legally
obligated to pay judgments (including amounts paid in settlement) and expenses
in regard to civil or criminal suits or proceedings brought against one or more
of its officers, directors, employees or agents.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Company pursuant to the foregoing provisions or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable.
-11-
<PAGE>
WOLLENBERG GROUP, INC.
BALANCE SHEET
AS OF MARCH 31, 1999
ASSETS
------
Current Assets
Cash $ 1,444
Accounts Receivable 20,085
Inventories 193,641
---------------
Total Current Assets 215,170
Fixed Assets
Property and Equipment 62,677
(Less) Accumulated Depreciation (40,291)
---------------
Total Fixed Assets 22,386
Other Assets
Other 32,578
---------------
Total Other Assets 32,578
---------------
TOTAL ASSETS $ 270,134
===============
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
Current Liabilities
Accounts Payable $ 89,110
Accrued Expenses 10,000
Taxes Payable 3,598
Customer Deposits 27,437
Notes Payable (Note 3) 551,927
---------------
Total Current Liabilities $ 682,072
Shareholders' Equity (Deficit)
Common Stock, 100,000 shares
authorized; $1.00 stated value
1,000 shares issued and outstanding 1,000
Additional Paid-in Capital 162,291
Retained Earnings (Deficit) (575,229)
Total Shareholders' Equity (Deficit) (411,938)
---------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 270,134
===============
<PAGE>
WOLLENBERG GROUP, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED MARCH 31, 1999
Revenue: $ 464,099
Cost of Sales 337,864
---------------
GROSS PROFIT 126,235
Expenses:
Distribution and Selling 43,600
General and Administrative 84,931
---------------
(Loss) From Operations (2,296)
Other Income (Expenses):
Interest (Expense) (4,321)
Other Income -
---------------
(Loss) Before Income Taxes (6,617)
Income Taxes -
NET (LOSS) $ (7,417)
===============
(LOSS) per share of Common Stock $ (7.42)
===============
Weighted Average of Shares Outstanding 1,000
===============
<PAGE>
WOLLENBERG GROUP, INC.
STATEMENTS OF CASH FLOWS
FOR THE PERIOD ENDED MARCH 31, 1999
Cash flows from (for)
Operating activities:
Net (loss) $ (7,417)
Adjustments to reconcile
net (loss) to cash flows
(for) operating activities:
Depreciation 2,334
Changes in assets and
liabilities: (3,912)
Accounts Payable 29,513
Accrued expenses -
Other (2,149)
---------------
18,369
Net cash flows (for)
operating activities: -
Cash flows from
investing activities: -
Cash flows from
financing activities: -
Notes Payable (16,925)
---------------
Increase (decrease) in cash 1,444
Cash at beginning of year 0
---------------
Cash at end of the period $ 1,444
===============
Supplemental cash
flows information:
Cash paid for interest $ 4,321
===============
<PAGE>
<TABLE>
WOLLENBERG GROUP, INC.
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
<CAPTION>
Additional Retained
Common Stock Paid-In Earning
Shares Amount Capital (Deficit) Total
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Shares Issued
for Cash inception
April 9, 1996 1,000 $ 1,000 $ 162,291 $ - $ 163,291
Net (loss) for
period April 1,
1996 to Dec. 31,
1996 - - - (384,166) (384,166)
---------- ---------- ---------- ---------- ----------
Balance
Dec. 31, 1996 1,000 1,000 162,291 (384,166) (384,166)
Net (loss) for
year ended
Dec. 31, 1997 - - - (68,958) (68,958)
---------- ---------- ---------- ---------- ----------
Balance
Dec. 31, 1997 1,000 1,000 162,291 (453,124) (289,833)
Net (loss) for
year ended Dec.
31, 1998 - - - (114,688) (114,688)
---------- ---------- ---------- ---------- ----------
Balance
Dec. 31, 1998 1,000 1,000 162,291 (567,812) (404,521)
Net (loss) for
period ended
March 31, 1999 - - - (7,417) (7,417)
---------- ---------- ---------- ---------- ----------
Balance
March 31, 1999 1,000 $ 1,000 $ 162,291 $(575,229) $(411,938)
========== ========== ========== ========== ==========
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
There appears below the following financial statements of the Company:
Independent Auditor's Report . . .. . . . . . . . . . . . . . . . . . . 13
Balance Sheets for the Years Ended
December 31, 1998 and December 31, 1997 . . . . . . . . . . . . . . . 14
Statements of Operations for the Years Ended
December 31, 1998 and December 31, 1997 . . . . . . . . . . . . . . . 15
Statement of Shareholders' Equity for the Years
from inception 1996 thru December 31, 1998. . . . . . . . . . . . . . 16
Statement of Cash Flows for the Years Ended
December 31, 1998 and December 31, 1997 . . . . . . . . . . . . . . . 17
Notes to Financial Statements, December 31, 1998. . . . . . . . . . . 18-21
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<PAGE>
JAAK (JACK) OLESK
CERTIFIED PUBLIC ACCOUNTANT
270 North Canon Drive, Suite 203
Beverly Hills, California 90210
(310) 288-0693
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and Board of Directors
Wollenberg Group, Inc.
I have audited the accompanying balance sheets of Wollenberg Group,
Inc. as of December 31, 1998 and December 31, 1997, and the related statements
of operations, shareholders' equity and cash f lows for each of the two years in
the period ended December 31, 1998. These financial statements are the
responsibility of Company's management. My responsibility is to express an
opinion on these financial statements based on my audits.
I conducted my audits in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Wollenberg Group,
Inc. as of December 31, 1998, and results of its operations and its cash flows
for each of the two years in the period ended December 31, 1998 in conformity
with generally accepted accounting principles.
/s/ JAAK OLESK CPA
Beverly Hills, California
February 4, 1999
-13-
<PAGE>
WOLLENBERG GROUP, INC.
BALANCE SHEETS
December 31,
-------------------------------
ASSETS 1998 1997
-------------- --------------
Current Assets
Cash $ -- $ 21,800
Accounts receivable 24,434 15,932
Inventories 188,377 173,523
-------------- --------------
Total current assets 212,811 211,255
Fixed assets
Property and equipment 62,677 62,677
(Less) accumulated depreciation (37,957) (28,620)
-------------- --------------
Total fixed assets 24,720 34,057
Other Assets
Other 32,578 32,578
-------------- --------------
Total other assets 32,578 32,578
-------------- --------------
$ 270,109 $ 277,890
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 59,597 $ 62,977
Accrued expenses 10,000 261
Taxes Payable 6,595 5,936
Customer deposits 29,586 26,630
Notes payable (Note 3) 568,852 471,919
-------------- --------------
Total current liabilities 674,630 567,723
Shareholders' Equity (Deficit)
Common Stock, 100,000 shares
authorized; $1.00 stated value
1,000 shares issued and
outstanding 1,000 1,000
Additional Paid-in Capital 162,291 162,291
Retained earnings (deficit) (567,812) (453,124)
-------------- --------------
Total shareholders' equity (deficit) (404,521) (289,833)
-------------- --------------
$ 270,109 $ 277,890
============== ==============
See accompanying notes to financial statements.
-14-
<PAGE>
WOLLENBERG GROUP, INC.
STATEMENTS OF OPERATIONS
For the Year Ended
-------------------------------
December 31, December 31,
------------ ------------
1998 1997
------------ ------------
Revenue $ 1,640,257 $ 1,476,624
Cost of sales 1,215,431 1,118,594
------------ ------------
Gross profit 424,826 358,030
Expenses:
Distribution and selling 178,401 135,782
General and administrative 342,480 282,037
------------ ------------
(Loss) From operations (96,055) (59,789)
------------ ------------
Other income (expense):
Interest (expense) (17,833) (19,622)
Other income - 11,253
------------ ------------
(Loss) before income taxes (113,888) (68,158)
Income taxes 800 800
------------ ------------
NET (LOSS) $ (114,688) $ (68,958)
============ ============
(LOSS) per share of
common stock $ (114.69) $ (68.96)
============ ============
Weighted average
shares outstanding 1,000 1,000
============ ============
See accompanying notes to financial statements.
-15-
<PAGE>
WOLLENBERG GROUP, INC.
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
Additional Retained
Common Stock Paid-In Earnings
Shares Amount Capital (Deficit) Total
------ --------- ---------- ------------ -----------
Shares issued
for cash
inception
Apr. 9, 1996 1,000 $ 1,000 $ 162,291 $ - $ 163,291
Net (loss) for
period Apr. 1,
1996 to
Dec. 31, 1996 (384,166) (384,166)
------ --------- ---------- ------------ -----------
Balance,
Dec. 31, 1996 1,000 1,000 162,291 (384,166) (220,875)
Net (loss) for
year ended
Dec. 31, 1997 (68,958) (68,958)
------ --------- ---------- ------------ -----------
Balance,
Dec. 31, 1997 1,000 1,000 162,291 (453,124) (289,833)
Net (loss) for
year ended
Dec. 31, 1998 - - - (114,688) (114,688)
------ --------- ---------- ------------ -----------
Balance,
Dec. 31, 1998 1,000 $ 1,000 $ 162,291 $ (567,812) $ (404,521)
====== ========= ========== ============ ===========
See accompanying notes to financial statements.
-16-
<PAGE>
WOLLENBERG GROUP, INC.
STATEMENTS OF CASH FLOWS
For the Year Ended
---------------------------
December 31, December 31,
------------ ------------
1998 1997
------------ ------------
Cash flows from (for)
Operating activities:
Net (loss) $ (114,688) $ (68,958)
Adjustments to reconcile
net (loss) to cash flows
(for) operating activities:
Depreciation 9,337 9,337
Changes in assets and
liabilities:
Accounts payable (3,380) 9,466
Accrued expenses 9,739 261
Other 2,956 --
------------ ------------
(96,036) (49,894)
Net cash flows (for)
operating activities:
Cash flows from
investing activities: -- --
Cash flows from
financing activities: -- --
Notes payable 74,236 67,527
------------ ------------
Increase (decrease) in cash (21,800) 17,633
Cash at beginning of year 21,800 4,167
------------ ------------
Cash at end of year $ -- $ 21,800
============ ============
Supplemental cash
flows information:
Cash paid for interest $ 17,833 $ 19,622
============ ============
Cash paid for taxes
$ 800 $ 800
============ ============
See accompanying notes to financial statements.
-17-
<PAGE>
WOLLENBERG GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1 - Significant Accounting Policies
NATURE OF OPERATIONS
Wollenberg Group, Inc. (the "Company"), a California corporation was
incorporated on April 9, 1996. The Company is a manufacturer and retailer of
furniture. The Company has three divisions: Superior Designs, Futon World of
Tustin and Futon World of Westminster.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
CONCENTRATIONS OF CREDIT RISK
Concentrations of credit risk with respect to trade accounts receivable
are limited due to the large number of entities comprising the Company's
customers.
LOSS PER SHARE
The computation of loss per share of common stock is based on the
weighted average number of shares outstanding during the periods presented.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in financial statements and
accompanying notes. Actual results could differ from those estimates.
INVENTORY
Inventory costs include material, labor and factory overhead. Inventory
which is valued at lower of cost or market, on the first-in, first-out basis
consists primarily of furniture, home furnishings and related items.
PROPERTY AND EQUIPMENT
Property and equipment, consisting primarily of factory equipment and
store furnishings is recorded at cost. Depreciation is computed over estimated
useful lives of approximately five to seven years primarily using the
straight-line method.
-18-
<PAGE>
WOLLENBERG GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
NOTE 1 - Significant Accounting Policies (continued)
INCOME TAXES
The Company is presently an S-Corporation for income tax purposes. An
S-Corporation passes through income or losses to its shareholders. The only tax
liability to date has been $800 annual California minimum taxes. For financial
reporting presentation see Note 2.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with 1998
classifications.
NOTE 2 - Income taxes
The Company records its income tax provision in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" which requires the use of the liability method of accounting for deferred
income taxes.
Since the Company has not generated taxable income since inception no
provision for income taxes has been provided. At December 31, 1998, the Company
did not have any significant tax net operating loss carryforwards. At December
31, 1998, the Company did not have any significant deferred tax liabilities or
deferred tax assets.
NOTE 3 - Notes payable
Notes payable consist of:
1 - Two unsecured installment notes payable to an individual with
balances totalling approximately $120,000 at December 31, 1998. The interest
rate is 9% and the monthly payments total approximately $5,700.
2 - A unsecured line of credit arrangement with a significant
shareholder of the Company, with a balance of approximately $449,000 at December
31, 1998. The interest rate is 7 1/2%.
The primary purpose for the Company's obtaining additional credit
during the year ended December 31, 1998 was to increase working capital for
purposes including building inventories, leasing/renting new equipment, and
hiring additional personnel to expand both manufacturing and sales operations.
-19-
<PAGE>
WOLLENBERG GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
NOTE 4 - Inventory
Inventory at December 31, 1998 consists of:
Finished goods $ 83,382
Work in process 23,989
Raw materials 81,006
---------
$188,377
=========
NOTE 5 - Lease Commitments
The Company's operating leases, consist of manufacturing and office
space and two retail locations with expiration dates at various times during the
next two years. Some of the operating leases stipulate that the Company can
renew the leases at their then fair rental values. The following is a schedule,
by year, of future minimum lease payments as December 31, 1998 under operating
leases,
Year Ending December
- --------------------
1999 $ 102,120
2000 $ 4,585
----------
Total minimum lease payments $ 106,705
==========
The following schedule shows the composition of total expense for all operating
leases.
Year Ended December 31,
--------------------------------
1998 1997
---------- ----------
Rent expense $ 137,871 $ 121,905
========== ==========
NOTE 6 - Subsequent Event
On January 27, 1999 a lawsuit involving the Company and its principal
shareholders, alleging breach of contract was settled favorably for the Company.
The Company will have no significant liabilities as a result of this matter.
-20-
<PAGE>
WOLLENBERG GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
NOTE 7 - SEGMENT INFORMATION
Following is condensed operations segment data for the years ended
December 31, 1998 and December 31, 1997.
1998
- ---------
FUTON FUTON
SUPERIOR WORLD OF WORLD OF
DESIGNS TUSTIN WESTMINSTER
---------- ---------- ----------
Revenue $ 341,296 $ 677,356 $ 622,605
Cost of sales 399,770 426,413 390,249
---------- ---------- ----------
Gross profit $ (8,474) 250,943 232,356
Expenses 126,176 191,717 202,987
(Other) (6,433) (6,125) (6,075)
---------- ---------- ----------
Net Income (loss) $(191,083) $ 53,101 $ 23,294
========== ========== ==========
Revenue $ 368,052 $ 616,893 $ 491,679
Cost of sales 423,342 387,462 307,790
---------- ---------- ----------
Gross profit $ (5,290) 229,431 183,889
Expenses 73,992 181,466 162,361
(Other) 1,539 (5,626) (5,082)
---------- ---------- ----------
Net income (loss) $(127,743) $ 42,339 $ 16,446
========== ========== ==========
-21-
<PAGE>
EXHIBITS
INDEX TO EXHIBITS
Exhibit Number Description
-------------- -----------
EX-3.(i) Articles of Incorporation of Futon World, Inc.
EX-3.(ii) Bylaws of Futon World, Inc.
EX-10 Orange, CA. manufacturing facility lease between
the Company and the landlord
EX-10.1 Tustin, CA. retail store lease between the Company
and the landlord
EX-10.2 Westminster, CA. retail store lease between the
Company and the landlord
EX-10.3 Corona, CA. retail store lease between the Company
and the landlord
-22-
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
FUTON WORLD, INC.
Date: April 30, 1999 By /s/ Gerrit Wollenberg
-------------------------------------
Gerrit Wollenberg, President
Date: April 30, 1999 By /s/ James Wollenberg
-------------------------------------
James Wollenberg, Secretary
Date: April 30, 1999 By /s/ Johanna Wollenberg
-------------------------------------
Johanna Wollenberg, Treasurer
-23-
<PAGE>
SECRETARY OF STATE
[GRAPHIC OF THE GREAT SEAL OF THE STATE OF NEVADA HERE]
CORPORATE CHARTER
I, DEAN HELLER, the duly elected and qualified Nevada Secretary of State, do
hereby certify that FUTON WORLD, INC. did on April 6, 1998 file in this office
the original Articles of Incorporation; that said Articles are now on file and
of record in the office of the Secretary of State of the State of Nevada, and
further, that said Articles contain all the provisions required by the law of
said State of Nevada.
IN WITNESS WHEREOF, I have hereunto set my hand
and affixed the Great Seal of State, at my office,
in Carson City, Nevada, on April 7, 1998.
/s/ Dean Heller
[notary seal here] Secretary of State
By /s/ Marianne Lockyer
Certification Clerk
<PAGE>
FILED
IN THE OFFICE OF THE
STATE OF NEVADA
ARTICLES OF INCORPORATION
APR 06 1998 (Pursuant to NRS 78)
STATE OF NEVADA
Secretary of State
/s/ Dean Heller
NAME OF CORPORATION:
FUTON WORLD INC.
2. RESIDENT AGENT:
Name of Resident agent: Business Filings Incorporated
Street Address: 2413 S. Eastern Ave., Suite 143, Las Vegas,
NV 89104.
3. SHARES:
The corporation is authorized to issue twenty five million
(25,000,000) shares of stock. The par value of each share is
($.001).
4. GOVERNING BOARD:
The governing board shall be directors.
The initial board of directors shall consist of three director:
Gerrit Wollenberg, 1817 Capetown Circle, Costa Mesa, CA 92627
Joanna Wollenberg, 1817 Capetown Circle, Costa Mesa, CA 92627
James Wollenberg, 4901 Charlene Circle, Huntington Beach, CA 92649
5. SIGNATURE OF INCORPORATOR:
214 N. Henry Street, Suite 201, Madison, WI 53703.
/s/ Richard Oster
-------------------------------
State of Wisconsin County of Dane
This instrument was acknowledged before me on
April 3, 1998 by
Richard A. Oster
as Incorporator
/s/ signature exp. June 17, 2001
6. CERTIFICATE OF ACCEPTANCE OF APPOINTMENT OF RESIDENT AGENT:
Business Filings incorporated hereby accept appointment as resident agent
for the above corporation.
/s/ Richard Oster April 3, 1998
---------------------------
Richard Oster Vice-President of
Business Filings Incorporated
<PAGE>
BY-LAWS
OF
FUTON WORLD, INC.
ARTICLE I. OFFICES
The principal office of the corporation in the State of Nevada shall be
located at 4894 Lone Mountain Road, Suite 263; city of Las Vegas, county of
Clark for the purpose of mail and the principal office of the corporation in the
State of California shall be located at 145 W. Meats Avenue; city of Orange,
county of Orange for the purpose of its main business operation. The corporation
may have such other offices, either within or without the States of Nevada and
California as the Board of Directors may designate or as the business of the
corporation may require from time to time.
ARTICLE II. SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders shall
be held on the first business day in the month of April in each year, beginning
with the year 1999 at the hour of one o'clock p.m. for the purpose of electing
Directors and for the transaction of such other business as may come before the
meeting. If the day fixed for the annual meeting shall be a legal holiday in the
State of Nevada or California, such meeting shall be held on the next succeeding
business day. If the election of Directors shall not be held on the day
designated herein for any annual meeting of the shareholders, or at any
adjournment thereof, the Board of Directors shall cause the election to be held
at a special meeting of the shareholders as soon thereafter as conveniently may
be.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders, for
any purpose or purposes, unless otherwise prescribed by statute, may be called
by the President or by the Board of Directors, and shall be called by the
President at the request of the holders of not less than SIXTY PER CENT of all
the outstanding shares of the corporation entitled to vote at the meeting.
<PAGE>
SECTION 3. PLACE OF MEETING. The Board of Directors may designate any
place, either within or without the State of Nevada or California unless
otherwise prescribed by statute as the place of meeting for any annual meeting
or for any special meeting called by the Board of Directors. A waiver of notice
signed by all shareholders entitled to vote at a meeting may designate any
place, either within or without the State of Nevada or California, unless
otherwise prescribed by statute, as the place for the holding of such meeting.
If no designation is made, or if a special meeting be otherwise called, the
place of meeting shall be the principal office of the corporation in the State
of California.
SECTION 4. NOTICE OF MEETING. Written notice stating the place, day and
hour of the meeting and, in case of special meeting, the purpose or purposes for
which the meeting is called, shall unless otherwise prescribed by statute, be
delivered not less than ten (10) nor more than thirty (30) days before the date
of the meeting, either personally or by mail, by or at the direction of the
President, or the Secretary, or the persons calling the meeting, to each
shareholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail,
addressed to the shareholder at his address as it appears on the stock transfer
books of the corporation, with postage thereon prepaid.
SECTION 5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors of the
corporation may provide that the stock transfer books shall be closed for a
stated period but not to exceed, in any case, ninety (90) days. If the stock
transfer books shall be closed for the purpose of determining shareholders
entitled to notice of or to vote at a meeting of shareholders, such books shall
be closed for at least ten (10) days immediately preceding such meeting. In lieu
of closing the stock transfer books, the Board of Directors may fix in advance a
date as the record date for any such determination of shareholders, such date in
any case to be not more than thirty (30) days and, in case of a meeting of
shareholders, not less than ten (10) days prior to the date on which the
particular action, requiring such determination of shareholders, is to be taken.
If the stock transfer books are not closed and no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such determination shall
apply to any adjournment thereof.
-2-
<PAGE>
SECTION 6. VOTING LISTS. The officer or agent having charge of the
stock transfer books for shares of the corporation shall make a complete list of
the shareholders entitled to vote at each meeting of shareholders or any
adjournment thereof, arranged in alphabetical order, with the address of and the
number of shares held by each. Such list shall be produced and kept open at the
time and place of the meeting and shall be subject to the inspection of any
shareholder during the whole time of the meeting for the purposes thereof.
SECTION 7. QUORUM. A majority of the outstanding shares of the
corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a majority of the
outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum.
SECTION 8. PROXIES. At all meetings of shareholders, a shareholder may
vote in person or by proxy executed in writing by shareholder or by his duly
authorized attorney in fact. Such proxy shall be filed with the secretary of the
corporation before or at the time of the meeting. No proxy shall be valid after
one (1) month from the date of its execution, unless otherwise provided in the
proxy.
SECTION 9. VOTING OF SHARES. Subject to the provisions of Section 12 of
this Article II, each outstanding share entitled to vote shall be entitled to
one vote upon each matter submitted to a vote at a meeting of shareholders.
-3-
<PAGE>
SECTION 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the
name of another corporation may be voted by such officer, agent or proxy as the
by-laws of such corporation may prescribe, or, in the absence of such provision,
as the board of directors of such corporation may determine.
Shares held by an administrator, executor, guardian or conservator may
be voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority so to do be
contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose share are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to the corporation shall not be
voted, directly or indirectly, at any meeting, and shall not be counted in
determining the total number of outstanding shares at any given time.
SECTION 11. INFORMAL ACTION BY SHAREHOLDERS. Unless otherwise provided
by law, any action required to be taken at a meeting of the shareholders, or any
other action which may be taken at a meeting of the shareholders, may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the shareholders entitled to vote with respect to the
subject matter thereof.
SECTION 12. CUMULATIVE VOTING. Unless otherwise provided by law, at
each election for Directors every shareholder entitled to vote at such election
shall have the right to vote, in person or by proxy, the number of shares owned
by him for as many persons as there are Directors to be elected and for whose
election he has a right to vote, or to cumulate his votes by giving one
candidate as many votes as the number of such Directors multiplied by the number
of his shares shall equal, or by distributing such votes on the same principle
among any number of candidates.
-4-
<PAGE>
ARTICLE III. BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the corporation
shall be managed by its Board of Directors.
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The minimum number of
directors of the corporation shall be three (3). Each director shall hold office
until the second (2 years) annual meeting of shareholders and until his
successor shall have been elected and qualified.
SECTION 3. REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held without other notice than this by-law immediately after,
and at the same place as, the annual meeting of shareholders. The Board of
Directors may provide, by resolution, the time and place for the holding of
additional regular meetings without other notice than such resolution.
SECTION 4. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by or at the request of the President or any two directors. The
person or persons authorized to call special meetings of the Board of Directors
may fix the place for holding any special meeting of the Board of Directors
called by them.
SECTION 5. NOTICE. Notice of any special meeting shall be given at
least fifteen (15) days previously thereto by written notice delivered
personally or mailed to each director at his business address, or by telegram.
If mailed, such notice shall be deemed to be delivered when deposited in the
United States mail so addressed, with postage thereon prepaid. If notice be
given by telegram, such notice shall be deemed to be delivered when the telegram
is delivered to the telegraph company. Any director may waive notice of any
meeting. The attendance of a director at a meeting shall constitute a waiver of
notice of such meeting, except where a director attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened.
-5-
<PAGE>
SECTION 6. QUORUM. A majority of the number of directors fixed by
Section 2 of this Article III shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors, but if less than such
majority is present at a meeting, a majority of the directors present may
adjourn the meeting from time to time without further notice.
SECTION 7. MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.
SECTION 8. ACTION WITHOUT A MEETING. Any action that may be taken by
the Board of Directors at a meeting may be taken without a meeting if a consent
in writing, setting forth the action so to be taken, shall be signed before such
action by all of the Directors.
SECTION 9. VACANCIES. Any vacancy occurring in the Board of Directors
may be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the Board of Directors, unless otherwise provided
by law. A director elected to fill a vacancy shall be elected for the unexpired
term of his predecessor in office. Any directorship to be filled by reason of an
increase in the number of directors may be filled by election by the Board of
Directors for a term of office continuing only until the next election of
Directors by the shareholders.
SECTION 10. COMPENSATION. By resolution of the Board of Directors, each
Director may be paid his expenses, if any, of attendance at each meeting of the
Board of Directors, and may be paid a stated salary as director or a fixed sum
for attendance at each meeting of the Board of Directors or both. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefrom.
SECTION 11. PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as the secretary
of the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a Director
who voted in favor of such action.
-6-
<PAGE>
ARTICLE IV. OFFICERS
SECTION 1. NUMBER. The officers of the corporation shall be a
President, a Vice-President, a Secretary and a Treasurer, each of whom shall be
elected by the Board of Directors. Such other officers and assistant officers as
may be deemed necessary may be elected or appointed by the Board of Directors.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the corporation
to be elected by the Board of Directors shall be elected every five years by the
Board of Directors at the first meeting of the Board of Directors held after
said annual meeting of the shareholders. If the election of officers shall not
be held at such meeting, such election shall be held as soon thereafter as
conveniently may be. Each officer shall hold office until his successor shall
have been duly elected and shall have qualified or until his death or until he
shall resign or shall have been removed in the manner hereinafter provided.
SECTION 3. REMOVAL. Any officer or agent may be removed by the Board of
Directors whenever in its judgment, the best interests of the corporation will
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an officer
or agent shall not of itself create contract rights.
SECTION 4. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be
filled by the Board of Directors for the unexpired portion of the term.
-7-
<PAGE>
SECTION 5. PRESIDENT. The President shall be the principal executive
officer of the corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the corporation. He shall, when present, preside at all meetings of
the shareholders and of the Board of Directors unless he shall delegate
otherwise. He may sign, with the Secretary or any other proper officer of the
corporation thereunto authorized by the Board of Directors, certificates for
shares of the corporation, any deeds, mortgages, bonds, contracts, or other
instruments which the Board of Directors has authorized to be executed, except
in cases where the signing and execution thereof shall be expressly delegated by
the Board of Directors or by these By-Laws to some other officer or agent of the
corporation, or shall be required by law to be otherwise signed or executed; and
in general shall perform all duties incident to the office of President and such
other duties as may be prescribed by the Board of Directors from time to time.
SECTION 6. VICE-PRESIDENT. In the absence of the President or in event
of his death, inability or refusal to act, the Vice-President shall perform the
duties of the President, and when so acting, shall have all the powers of,
benefits of and be subject to all the restrictions upon the President. The
Vice-President shall perform such other duties as from time to time may be
assigned to him by the President or by the Board of Directors.
SECTION 7. SECRETARY. The Secretary shall; (a) keep the minutes of the
proceedings of the shareholders and of the Board of Directors in one or more
books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these By-Laws or a s required by law; (c) be
custodian of the corporate records and of the seal of the corporation and see
that the seal of the corporation is affixed to all documents the execution of
which on behalf of the corporation under its seal is duly authorized; (d) keep a
register of the post office address of each shareholder which shall be furnished
to the Secretary by such shareholder; (e) sign with the President, certificates
for shares of the corporation, the issuance of which shall have been authorized
by resolution of the Board of Directors; (f) have general charge of the stock
transfer books of the corporation; and (g) in general perform all duties
incident to the office of Secretary and such other duties as from time to time
may be assigned to him by the President or by the Board of Directors.
SECTION 8. TREASURER. The Treasurer shall; (a) have charge and custody
of and be responsible for all funds and securities of the corporation; (b)
receive and give receipts for moneys due and payable to the corporation from any
source whatsoever, and deposit all such moneys in the name of the corporation in
such banks, trust companies or other depositories as shall be selected in
accordance with the provisions of Article V of these By-Laws; and (c) in general
perform all the duties incidental to the office of Treasurer and such other
duties as from time to time may be assigned to him/her by the President or by
the Board of Directors. If required by the Board of Directors, the Treasurer
shall give a bond for the faithful discharge of his/her duties in such sum and
with such surety or sureties as the Board of Directors shall determine.
-8-
<PAGE>
SECTION 9. SALARIES. The salaries of the officers shall be fixed from
time to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
corporation.
ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. CONTRACTS. The Board of Directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation, shall be signed by such officer or officers, agent or
agents of the corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
SECTION 4. DEPOSITS. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositories as the Board of Directors
may select.
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. Certificates for Shares. Certificates representing shares of
the corporation shall be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by the President and by the
Secretary or by such other officers authorized by law and by the Board of
Directors so to do, and sealed with the corporate seal. All certificates for
shares shall be consecutively numbered or otherwise identified.
-9-
<PAGE>
The name and address of the person to whom the shares represented thereby are
issued, with the number of shares and date of issue, shall be entered on the
stock transfer books of the corporation. All certificates surrendered to the
corporation for transfer shall be canceled and no new certificate shall be
issued until the former certificate for a like number of shares shall have been
surrendered and canceled, except that in case of a lost, destroyed or mutilated
certificate a new one may be issued therefore upon such terms and indemnity to
the corporation as the Board of Directors may prescribe.
SECTION 2. TRANSFER OF SHARES. Transfer of shares of the corporation
shall be made only on the stock transfer books of the corporation by the holder
of record thereof or by his legal representative, who shall furnish proper
evidence of authority to transfer, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary of the corporation,
and on surrender for cancellation of the certificate for such shares. The person
in whose name shares stand on the books of the corporation shall be deemed by
the corporation to be the owner thereof for all purposes.
ARTICLE VII. CALENDAR YEAR
The calendar year shall be adopted for the corporation for tax and
reporting purposes.
ARTICLE VIII. DIVIDENDS
The Board of Directors may from time to time declare, and the
corporation may pay, dividends on its outstanding shares in the manner and upon
the terms and conditions provided by law and its articles of incorporation.
ARTICLE IX. CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation
and the state of incorporation and the words, "Corporate Seal".
-10-
<PAGE>
ARTICLE X. WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is required to be
given to any shareholder or director of the corporation under the provisions of
these By-Laws or under the provisions of the articles of incorporation or under
the provisions of the Business Corporation Act, a waiver thereof in writing,
signed by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be deemed equivalent to the giving of such
notice.
ARTICLE XI. AMENDMENTS
These By-Laws may be altered, amended or repealed and new By-Laws may
be adopted by the Board of Directors at any regular or special meeting of the
Board of Directors or by a majority vote of shareholders or by such other vote
as may be required by law.
-11-
<PAGE>
INDUSTRIAL BUILDING LEASE
1. Parties. This Lease, dated, for reference purposes only, May 6 1996, is made
by and between FOWLER PROPERTIES, INC. ____________________ (herein called
Lessor") and Wollenberg Group, A California Corp. (herein called 'Lessee")
2. 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, that
certain real property situated in the County of Orange State of California,
commonly known as 145 West Meats Avenue, Orange and described as 16,000 sq. ft.
Said real property including the land and all improvements thereon, is herein
called the Premises".
3. Term.
3.1 Term. The term of this Lease shall be for Three (3) Years commencing on
June 1, 1996 and ending on May 1, 1999 unless sooner terminated pursuant to
any provision hereof.
3.2 Delay in Commencement. Notwithstanding said commencement date, if for
any reason Lessor cannot deliver possession of the Premises to Lessee on said
date, Lessor shall not be subject to any liability therefor, nor shall such
failure affect the validity of this Lease or the obligations of Lessee here.
under or extend the term hereof, but in such case Lessee shall not be obligated
to pay rent until possession of the Premises is tendered to Lessee; Provided,
however, that if Lessor shall not have delivered possession of the Premises
within sixty 160) days from said commencement date, 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 obligation
hereunder. If Lessee occupies the Premises prior to said commencement date, such
occupancy shall be subject to all provisions hereof, such occupancy shall not
advance the termination date, and Lessee shall pay for such period at the
initial monthly rates set forth below.
4 Rent. Lessee shall pay to Lessor as rent for the Premises Two Hundred
Thirty Eight Thousand Eight Hundred ($ 238,800.00), payable in equal monthly
installments of See Addendum dollars ($ ), in advance, on the first day of each
month of the term hereof. Lessee shall pay Lessor upon the execution hereof
_________________ See Addendum dollars ($ ) AS RENT FOR THE first month's rent
and security deposit 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 rata portion of the
monthly installment. 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.
5. Security Deposit. Lessee shall deposit with Lessor upon execution hereof
$5,000.00 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 or any portion of said deposit, Lessee shall within ten (10) days after
written demand thereof or deposit cash with Lessor in an amount sufficient to
restore said deposit to the full amount hereinabove stated and Lessee's failure
to do so shall be a material breach of this Lease. Lessor shall not be required
to keep said deposit separate from its general accounts. If Lessee performs all
of Lessee's obligations hereunder, said deposit, or so much thereof as has not
theretofore been applied by Lessor, shall be returned, without payment of
interest or other increment 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. than normal
6. Use.
6.1 Use. The Premises shall be used and occupied only for Woodworking and
futon manufacturing _________________________________________________ Lessee
warrants that its use of the Premises does not involve the handling of toxic
substances or hazardous materials.
6.2 Compliance with Law. Lessee shall, at Lessee's expense, comply promptly
with all applicable statutes, ordinances, rules, regulations, orders and
requirements in effect during the term or any part of the term hereof regulating
the use by Lessee of the Premises. Lessee shall not use or permit the use of the
Premises in any manner that will tend to create waste or a nuisance or, if there
shall be more than one tenant of the building containing the Premises, which
shall tend to disturb such other tenants.
6.3 Condition of Premises. Lessee hereby accepts the Premises in their
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 Lease subject
thereto and to all matters disclosed thereby and by any exhibits attached
hereto. Lessee acknowledges that neither Lessor nor Lessor's agent has made any
representation or warranty as to the suitability of the Premises for the conduct
of Lessee's business.
7. Maintenance, Repairs and Alterations.
7.1 Lessor's Obligations. Subject to the provisions of Article 9 and except
for damage caused by any negligent or intentional act or omission of Lessee,
Lessee's agents, employees, or invitees. Lessor, at Lessor's expense, shall keep
in good order, condition and repair the foundations, exterior walls and the
exterior roof of the Premises. Lessor shall not, however, be obligated to paint
such exterior, nor shall Lessor be required to maintain the interior surface of
exterior walls, windows, doors or plate glass. Lessor shall have no obligation
to make repairs under this Paragraph 7.1 until a reasonable time after receipt
of written notice of the need for such repairs. Lessee expressly waives the
benefits of any statute now or hereafter in effect which would otherwise afford
Lessee the right to make repairs at Lessor's expense or to terminate this Lease
because of Lessor's failure to keep the Premises in good order, condition and
repair.
7.2 Lessee's Obligations.
(a) Subject to the provisions of Paragraph 9 and Paragraph 7.1, Lessee,
at Lessee's expense shall keep in good order, condition and repair the Premises
and every part thereof (regardless of whether the damaged portion of the
Premises or the means of repairing the same are accessible to Lessee),
including, without limiting the generality of the foregoing, all plumbing,
heating, air conditioning, ventilating, electrical and lighting facilities and
equipment within the Premises, fixtures, interior walls and interior surface of
exterior walls, ceilings, windows, doors, plate glass, and skylights, located
within the Premises and all sidewalks, landscaping, driveways, parking tots,
fences and signs located in the areas which are adjacent to and included with
the Premises. Lessee shall pay for all damages to Premises caused by vandalism
or forced entry. Lessee acknowledges its affirmative duty and obligation to
conduct its affairs in a way that will not interfere with the use and quiet
enjoyment of other tenants adjacent to their Premises.
(b) If Lessee fails to perform Lessee's obligations under this
Paragraph 7.2, Lessor may at Lessor's option enter upon the Premises after 10
days' prior written notice to Lessee, and put the same in good order, condition
and repair, and the cost thereof together with interest thereon at the rate of
10% per annum shall be due and payable as additional rent to Lessor together
with Lessee's next rental 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,
broom clean, ordinary wear and tear excepted, Lessee shall repair any damage to
the Premises occasioned by the removal of its trade fixtures, furnishings and
equipment pursuant to Paragraph 7.3(c), which repair shall include the patching
and filling of holes and repair of structural damage.
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. As used in this Paragraph 7.3, the term "utility installations"
shall include bus ducting, power panels, fluorescent fixtures, space heaters,
conduits and wiring. As a condition to giving such consent, Lessor may require
that Lessee agree to remove any such alterations, improvements, additions or
utility installations at the expiration of the term, and to restore the Premises
to their prior condition. As a further condition to giving such consent, 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 insure Lessor against any liability for mechanics'
and materialmen's liens and to insure completion of the work
(b) 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 mechanics' or
materialmen's lien against the Premises or any interest therein, Lessee shall
give Lessor not less than ten 110) 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 as provided by law.
(c) Unless Lessor requires their removal, as set forth in paragraph
7.3(a), all alternations, improvements, additions and utility installations
whether or not such utility installations constitute trade fixtures of Lessee),
which may be made on the Premises, shall become the property of Lessor and
remain upon and be surrendered with the Premises at the expiration of the term.
Notwithstanding the provisions of this Paragraph 7.3(c), 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, shall remain the property of
Lessee and may be removed by Lessee subject to the provisions of Paragraph
7.2(c).
8. Insurance; indemnity.
8.1 Liability Insurance. Lessee shall, at Lessee's expense, obtain and keep
in force during the term of this Lease or during the time when Lessee occupies
the Premises, whichever is longer, a policy of comprehensive public liability
insurance insuring Lessor and Lessee against any liability arising out of the
ownership, use occupancy or maintenance
MULTI-TENANCY
<PAGE>
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)I
acknowledging that there are not, to Lessee's knowledge, any uncured defaults on
the part of Lessor hereunder, 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.
(b) Lessee's failure to deliver such statement within such time shall
be conclusive upon Lessee (i) that this Lease is in full force and effect,
without modification except as may be represented by Lessor, (iii that there are
no uncured defaults in Lessor's performance, and (iii) that not more than on
month's rent has been paid in advance.
(c) If Lessor desires to finance or refinance the Premises, or any part
thereof, Lessee hereby agrees to deliver to any lender designated by Lessor such
financial statements of Lessee as may be reasonably required by such lender,
Such statements shall include the past three years' financial statement of
Lessee. All such financial statements shall be received by Lessor in confidence
and shall be used only for the purpose herein set forth.
16.2 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 Premises, and except as expressly provided in
Article 15, in the event of any transfer of such title or interest, Lessor
herein named (and in case of any subsequent transfers the then 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. No successor in interest to Lessor shall be liable for any
default occasioned by his predecessor in interest.
16.3 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,
16.4 Interest on Past due obligations. Except as expressly herein
provided, any amount due to Lessor not paid when due shall bear interest at 1O%
per annum from the date due. Payment of such interest shall not excuse or cure
any default by Lessee under this Lease.
16.5 Time of Essence. Time is of essence.
16.6 Captions. Article and paragraph captions are not a part hereof.
16.7 incorporation of Prior Agreements; Amendments. This Lease contains
all agreements of the parties with respect to any matter mentioned herein. No
prior 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.
16.8 Notices. Any notice required or permitted to be given hereunder shall
be in writing and may be served personally or by regular mail, addressed to
Lessor and Lessee respectively at the addresses set forth next to their
signatures at the end of this Lease.
16.9 Waivers. No waiver by Lessor of any provision hereof shall be deemed
a waiver of any other provision hereof or of any subsequent breach by Lessee of
the same or any other provision. Lessor's consent 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.
16.10 Recording. Lessee shall not record this Lease without Lessor's prior
written consent, and such recordation shall, at the option of Lessor, constitute
a non-curable default of Lessee hereunder. Either party shall, upon request of
the other, execute, acknowledge and deliver to the other a "short form"
memorandum of this Lease for recording purposes, provided however, that the
short-form memorandum of this lease may not be recorded without the consent of
Lessor.
16.11 Holding over. If Lessee remains in possession of the Premises or any
part thereof after the expiration of the term hereof without the express written
consent of Lessor, such occupancy shall be a tenancy from month to month at a
rental in the amount of the last monthly rental plus all other charges payable
hereunder, and upon all the terms hereof applicable to a month-to-month tenancy.
16.12 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.
16.13 Covenants and Conditions. Each provision of this Lease performable
by Lessee shall be deemed both a covenant and a condition,
16.14 Binding Effect; Choice of Law. Subject to any provisions hereof
restricting assignment or subletting by Lessee and subject to the provisions of
Paragraph 16,2, this Lease shall bind the parties, their personal
representatives, successors and assigns, This Lease shall be governed by the
laws of the State of California,
16.15 Subordination.
(a) This Lease is subordinate to any ground lease, first deed of trust,
or any other hypothecation for security now or hereafter placed upon the real
property of which the Premises are a part and to any and all advances made on
the security thereof and to all renewals, modifications, consolidations,
replacement and extensions thereof. Lessee hereby specifically agrees, as a
material consideration for the execution and delivery of this Lease by Lessor,
to attorn to the ground lessor, first mortgagee, purchasers at a foreclosure
sale, to the receiver of a deed in lieu of foreclosure, or to successors and
assigns of the above, If any mortgagee, beneficiary or ground lessor shall elect
to have this Lease prior to the lien of its mortgage, deed of trust or ground
lease, and shall give written notice thereof to Lessee, this Lease shall be
deemed prior to such mortgage, deed of trust, or ground lease whether this Lease
is 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 such
subordination or to make this Lease prior to the lien of any mortgage, deed of
trust or ground lease, as the case may be, and failing to do so within five 15)
days after written demand, does hereby make, constitute and irrevocably appoint
Lessor as Lessee's attorney in fact and in Lessee's name, place and stead, to do
so.
16.16 Attorney's Fees. If either party or the broker named herein brings
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 named
herein who seeks to enforce a right hereunder.
16.17 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, or lenders, and making such
alterations, repairs, improvements or additions to the Premises or to the
building of which they are a part as Lessor may deem necessary or desirable.
Lessor may at any time place on or about the Premises 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 without
rebate of rent or liability to Lessee,
16.18 Signs and Auctions. Lessee shall not place any sign upon the
Premises or conduct any auction thereon without Lessor's prior written consent.
16.19 Merger. The voluntary or other surrender of this Lease by Lessee, or
a mutual cancellation thereof, 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 of such subtenancies.
16.20 Corporate Authority. If Lessee is a corporation, each individual
executing this Lease on behalf of said corporation represents and warrants that
he is duly authorized to execute and deliver this Lease on behalf of said
corporation, in accordance with a duly adopted resolution of the Board of
Directors of said corporation or in accordance with the Bylaws of said
corporation, and that this
GUARANTORS
<PAGE>
Lease is binding upon said corporation in accordance with its terms. If Lessee
is a corporation Lessee shall, within thirty (301 days after execution of this
Lease, deliver to Lessor a certified copy of a resolution of the Board of
Directors of said corporation authorizing or ratifying the execution of this
Lease.
16.21 Parking Spaces. Without any additional rent obligation on the part of
Lessee, Lessee, its officers, employees and agents shall be entitled to
32 parking spaces to be assigned by Lessor. Said spaces shall be limited to
vehicles no larger than standard sized automobiles or pick-up utility vehicles
and Lessee shall not park larger trucks or other large vehicles on the Entire
Premises. Lessee shall not use more parking spaces than the number first above
set forth; if Lessee parks additional vehicles in the parking area, Lessor may
require the payment of a reasonable daily charge for each such additional
vehicle or may require Lessee to cease parking additional vehicles on the
Premises.
16.22 identification Signs.
(a) Lessee shall provide own identification sign with design and
lettering subject to Lessor approval.
(b) No other signs will be permitted on leased premises,
See Addendum 16.23--16.27
Executed on 5/8/96, 1996, at 0range County, California.
FOWLER PROPERTIES INC.
By
By /s/ Dale E. Fowler
- ----------------------------------------------------------
Wollenberg Group, A California Corp
"LESSEE"
"LESSOR"
GUARANTY
The undersigned guarantors hereby guarantee to Lessor the full performance
of each and every obligation of Lessee required to be performed under the terms
of the above INDUSTRIAL BUILDING LEASE, including the payment of all rentals and
other sums due from Lessee to Lessor. This Guaranty is entered into in order to
induce Lessor to execute the above Lease with Lessee and will continue in full
force and effect throughout the term of the above Lease or any extension
thereof, The undersigned guarantors hereby consent to and waive notice of any
and all modifications of, amendments to, or changes in the terms and conditions
of the above Lease agreed to between Lessor and Lessee,
Executed on ___________________________, 1996 at Orange County, California.
Gerrit P. Wollenberg
GUARANTORS
<PAGE>
ADDENDUM TO LEASE DATED MAY 6, 1996, BETWEEN FOWLER PROPERTIES, INC. ("LESSOR")
AND WOLLENBERG GROUP, a California Corporation ("LESSEE") OF PREMISES KNOWN AS
145 WEST MEATS AVE. ORANGE, CALIFORNIA
16.23. RENT SCHEDULE.
JUNE 1, 1996 through NOVEMBER 30, 1996 $3,440.00 per mo.
DECEMBER 1, 1996 through MAY 31, 1997 $6,880.00 per mo.
JUNE 1, l997 through MAY 3l, 1998 $7,220.OO per mo.
JUNE 1, 1998 through MAY 31, 1999 $7,520.00 per mo.
16.24. LEASE COMMENCEMENT AND POSSESSION.
Lease shall commence and Lessee shall possess premises June 1, 1996
provided Lessee has paid to Lessor all prepaid funds DUE.
16.25. PREPAID FUNDS.
On or before May 7, 1996 Lessee shall remit to Lessor the following:
$3,440.00 TO BE APPLIED TO June 1996 RENT.
$5,000.00 as a security DEPOSIT. SEE (SEC. 5.)
On OR BEFORE June 1, 1996 Lessee shall remit to Lessor the following:
$7,520.00 to be applied to May 1999 rent.
Should Lessee FAIL TO PAY TO LESSOR THE sum OF $7,520.00 ON OR BEFORE
JUNE 1, 1996 this lease shall not commence and NO possession will BE
given. Furthermore, THE JUNE 1996 RENT and security DEPOSIT totaling
$8,440.00 shall BE RETAINED BY LESSOR and given UP BY LESSEE.
16.26. TENANT IMPROVEMENTS. Lessor shall pay for and PROVIDE FOR FOLLOWING
improvements to BE made:
a. ADD OFFICES with typical electrical distribution, lighting and HVAC
as described IN EXHIBIT A.
b. Repair two WAREHOUSE DIVISION WALLS and PROVIDE FOR ONE SET OF
DOUBLE DOORS IN EACH AS DESCRIBED IN EXHIBIT A.
16.27. OPTION TO EXTEND TERM.
(a) SUBJECT TO THE CONDITIONS HEREINAFTER SET FORTH IN THIS PARAGRAPH,
LESSEE IS GIVEN THE OPTION TO EXTEND THE INITIAL THREE (3) YEAR TERM OF THIS
LEASE FOR AN ADDITIONAL PERIOD OF THREE (3) YEARS UPON THE SAME TERMS and
CONDITIONS AS ARE HEREIN CONTAINED WITH RESPECT TO THE INITIAL TERM, EXCEPT THAT
THE RENT SHALL BE ADJUSTED AS FOLLOWS:
Three (3) years at $7,680.00 Per month.
(b) the right to exercise such option is subject to each and all of the
following conditions: (1) Lessee shall give written notice to Lessor of the
exercise of such option at least 90 days
GUARANTORS
<PAGE>
Prior to the expiration of the initial three (3) year term of the
lease.
(2) The lease is in full force and effect at the time of giving the
option notice, as well as at the commencement of the extension.
(3) Lessee is in possession of the premises; and
(4) Lessee is current with all rent obligations and is not in default
at the time of exercise or commencement of the extended term.
ADDENDUM PAGE 1 Initials
GUARANTORS
<PAGE>
EXHIBIT A
[GRAPHIC OMITTED]
145 W. MEATS AVE.
[diagram of layout here]
INITIALS
GUARANTORS
<PAGE>
CRANE REALTY SERVICES
SHOPPING CENTER LEASE
---------------------
THIS LEASE is made this 25th day of January 1995 by and between Robert
Crane, Receiver under Case #713942, State of California, Superior Court, County
of Orange ("Lessor") and Leonard Liebrand, Dba; Futon World ("Lessee").
BASIC LEASE PROVISIONS
----------------------
The words and figures set forth in paragraphs A to M, inclusive, are
part of this Lease and relate to the numbered artic1es which follow:
A. Premises.
---------
The Premises shall consist of that certain area indicated on Exhibit
"A", attached hereto and made a part hereof, consisting of approximately 3,392
square feet of Ground Floor Area plus approximately 877 square feet of Mezzanine
Floor Area for an approximate Total Floor Area of 4,269 square feet, located on
real property and within that certain Shopping Center commonly known as TUSTIN
FREEWAY CENTER and located at 14061 Newport Avenue, Suite A, Tustin, CA 92680
("Building and/or Property"). (See Article 1)
B. Permitted Use of the Premises.
------------------------------
Exclusive sale of Futon furniture along with the non-exclusive sale of
other related furnishings. (See Article 2)
C. Term.
-----
The term shall be for Sixty (60) months (See Article 3)
D. Commencement Date. February 1, 1995
------------------
Expiration Date. The last day of the month of January 2000. (See
Article 4)
E. Annual Basic Rent.
------------------
$42,000.00 ($3,500.00 per month). (See Article 5)
F. Rental Adjustments. (See Rider No. 1)
-------------------
G. Percentage Rent. Intentionally Omitted from Lease.
----------------
H. Security Deposit.
-----------------
$5,609.00. Transferred and assigned from that Lease dated June 15, 1992
by and between DEV IX/TUSTIN FREEWAY CENTER ASSOCIATES, A CALIFORNIA LIMITED
PARTNERSHIP, as Landlord and Len Liebrand, as Tenant. (See Article 8)
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I. Lessor's Address for Notices and Payments.
------------------------------------------
Crane Realty Services
2201 Dupont Drive, Suite 850
Irvine, CA 92715C9998
(714) 261-7007 Fax (714) 261-8703
(See Article 60)
J. Lessee's Address for Notices.
-----------------------------
Leonard Liebrand
Futon World
14061 Newport Avenue, Suite A
Tustin, CA 92680
(714)-________ or (714) 666-2880 Fax (714) 666-2882
(See Article 60)
K. Broker.
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Crane Realty Services represents both the Lessor and Lessee in this
transaction and both parties agree thereto. (See Article 62)
L. Exhibits.
---------
The following exhibits are attached hereto and made a part hereof:
Exhibit "A" - Premises Location
Exhibit "B" - Tustin Freeway Master Sign Program
Exhibit "C" - Rules & Regulations
Exhibit "D" - Lessee Improvements
M. Riders.
-------
The following Riders are attached hereto and made a part hereof:
Rider Nos. 1 - 6
Rider No. 1 - Increases in Basic Rental
Rider No. 2 - ADA Disclosure
Rider No. 3 - Hazardous Waste
Rider No. 4 - Exclusive Use
Rider No. 5 - Option To Lease
Rider No. 6 - Early Lease Termination
Guarantee of Lease
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This Lease is subject to the terms, covenants and conditions herein set forth,
and Lessor and Lessee covenant to perform their respective obligations under
this Lease.
Article 1 - Premises.
- ---------------------
Lessor does hereby lease to Lessee and Lessee hereby leases from Lessor
that certain building space more particularly defined in Paragraph A of the
Basic Lease Provisions and referred to in this Lease as the "Premises" and which
are located in the Shopping Center (herein called the "Building and/or
Property"). The location of the Premises is outlined on the Plot Plan attached
hereto as Exhibit "A" and hereby incorporated herein by reference (it being
understood, however, that such Plot Plan does not constitute a representation of
the measurement of the Premises, and/or Building and/or Property). Lessee agrees
that Lessor may, at any time and from time to time, and additional. property and
improvements to the Shopping Center and that the uses and locations of the
building and parking areas shown on Exhibit "A" are subject to change, as is
hereinafter provided.
Article 2 - Use.
- ----------------
Lessee shall use the Premises for the specific use set forth in Paragraph B
of the Basic Lease Provisions and shall not use or permit the Premises to be
used for any other purpose.
Article 3 - Term.
- -----------------
The Lease shall be for the number of years, months and/or days set forth in
Paragraph C of the Basic Lease Provisions from and after the Commencement Date.
Article 4 - Commencement Date and Expiration Date
- -------------------------------------------------
Commencement Date shall be the date upon which it is presently estimated
that the Premises will be ready for Lessee's use pursuant to this Lease, as set
forth in paragraph D of the Basic Lease Provisions. If Lessor cannot deliver
possession of said Premises to Lessee at the Commencement Date, this Lease shall
not be void or voidable, nor shall Lessor be liable to Lessee for any loss or
damages resulting therefrom; provided, however, that if the described Premises
are rot available for Lessee's occupancy within ninety (90) days after the
Commencement Date, Lessee may terminate this Lease. In the event that Lessor
shall be delayed or hindered in or prevented from the performance of any act
required hereunder by reason of strikes, lockouts, labor troubles, inability to
procure materials, failure of power, restrictive government laws or regulations,
riots, insurrections, war or other reasonable like nature not the fault of
Lessor, then any such delay in the delivery of possession of the subject
Premises shall be excused for the period of said delay, and the above-mentioned
ninety (90) day period shall be extended for a period equivalent to the period
of such delay. If Lessee is not in any way responsible for such delay, then all
rent hereunder shall be abated during the period between commencement of said
term and the time when said Premises are substantially complete and Lessor
delivers possession of the Premises to Lessee. There shall be no abatement of
rent if Lessor is delayed in delivering possession of the Premises to Lessee due
to Lessee's failure to comply with any and all of the terms, conditions or
provisions contained hereafter, or if Lessor is delayed in delivering possession
of the Premises to Lessee due to any act or omission of Lessee. Notwithstanding
anything hereinabove to the contrary, it is understood and agreed that no such
delay shall extend the term of this Lease beyond the Expiration Date set forth
in paragraph D of the Basic Lease Provisions.
Article 5 - Rental.
- -------------------
Lessee shall pay to Lessor Annual Basic Rent for the Premises in the amount
set forth in paragraph E of the Basic Lease Provisions, subject to adjustment as
provided in Article 6 hereof. Said Annual Basic Rent shall be paid in advance on
or before the first day of each and every calendar month during the term hereof
in the amount per month set forth in paragraph E of the Basic Lease Provisions.
If the Commencement Date is other than the first day of a calendar month, the
rent payable hereunder shall be prorated for such partial month. All payments
requiring proration shall be prorated on the basis of a thirty (30) day month.
Any amounts payable by lessee to Lessor under this Lease in addition to the
above-described basic rent shall be deemed additional rent, regardless of
whether any such additional amounts are specifically designated as "additional
rent". However, any such additional amounts shall be deemed additional rent
solely for the purpose of clarifying that if Lessee fails to timely pay any such
additional amounts to Lessor, then Lessor shall have the same rights with
respect to such failure as it has with respect to any failure by Lessee to
timely pay basic rent.
Said rent shall be paid to Lessor without reduction or set-off, in lawful
money of the United States of America, to Lessor or its agent at the address set
forth in paragraph I of the Basic Lease Provisions, or to such other person or
at such other place as Lessor may from time to time designate in writing.
LESSOR INITIAL /S/
LESSEE INITIAL /S/
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Article 6 - Adjustment to Minimum Rent ( See Rider No. 1)
- --------------------------------------
THIS SECTION IS CROSSED OUT AND DELETED
Article 7 - Percentage Rent
- ---------------------------
THIS SECTION IS CROSSED OUT AND DELETED
LESSOR INITIAL /S/
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<PAGE>
Article 8 - Security Deposit.
- -----------------------------
Lessee has deposited with Lessor the sum set forth in Paragraph H of the
Basic Lease Provisions. Said sum shall be held by Lessor as security for the
faithful performance by Lessee of all the terms, covenants, and conditions of
this Lease to be kept and performed by Lessee during the term hereof. If Lessee
defaults with respect to any provision of this Lease, including, but not limited
to the provisions relating to the payment of rent, Lessor nay (but shall not be
required to) use, apply or retain all or any part of this security deposit for
the payment of any rent or any other sum in default, or for the payment of any
amount which Lessor may spend or become obligated to spend by reason of Lessee's
default, or to compensate Lessor for any other loss or damage which Lessor may
suffer by reason of Lessee's default. If any portion of said deposit is so used
or applied, Lessee shall, within five (5) days after written demand therefor,,
deposit cash with Lessor in an amount sufficient to restore the security deposit
to its original amount and Lessee's failure to do so shall be a default under
this Lease. Lessor shall not be required to keep this security deposit separate
from its general funds, and Lessee shall not be entitled to interest on such
deposit. If Lessee shall fully and faithfully perform every provision of this
Lease to be performed by it, the security deposit or any balance thereof shall
be returned to Lessee (or, at Lessor's option, to the last assignee of Lessee's
interest hereunder) within ten (10) days fol1owing expiration of the lease term.
In the event of termination of Lessor's interest in this Lease, Lessor shall
transfer said deposit to Lessor's successor in interest.
Article 9 - Additional Charges.
- -------------------------------
REAL PROPERTY TAXES. (a) Lessee agrees to pay, as additional rent, all real
property taxes and assessments levied or assessed upon the Premises and the
underlying real property and all improvements thereon during the term hereof.
Any tax or assessment relating to a fiscal period, a part of which is not
included within the term of this Lease, shall be prorated so Lessee shall pay
only that portion thereof which relates to the tax periods included within the
term of this Lease. In the event that said real property taxes and assessments
are not separately levied or assessed against the Premises and the underlying
land, Lessor shall prorate the real property taxes and assessments levied or
assessed against either the Shopping Center or any smaller tax parcel in which
the Premises are situated, at Lessor's sole discretion, to the Premises in any
reasonable manner. An allocation based upon a proration or information obtained
from the County Assessor, or upon construction costs, or an allocation based
upon the ratio that the total floor area within the Premises bears to the total
floor area within the relevant tax parcel or parcels, as to that portion of such
tax or assessment allocable to building improvements, and based on the ratio
between the number of square feet of floor area within the Premises to the
number of square feet of land area covered by the relevant tax statement or
statements, as to that portion of such tax or assessment allocable to land,
exclusive of building improvements, or any combination thereof, shall be cleared
to be a reasonable allocation for the purposes of this Article.
Lessee agrees to pay, as additional rent, any tax or excise on rent or
other tax, however described, that is levied or assessed by the State of
California, or any political subdivision thereof, against Lessor on account of
or measured by the rentals and/or other charges payable to Lessor hereunder. If
this lease is a sublease, Lessee further agrees to pay, as additional rent,
Lessee's pro rata share of any such tax or excise on rent or other tax paid by
Lessor based on the rental and other charges payable by Lessor, based on the
ratio between the floor area in the Premises to the floor area in the Shopping
Center, or the portion thereof demised to Lessor. If, under the laws of the
State of California, or any political subdivision thereof, at any tine during
the term hereof, the methods of taxation shall be altered so as to impose in
lieu of current methods for the assessment and taxation of real property, in
whole or in part, taxes based on other standards or in lieu of any increase
therein, such tax shall be deemed to be a real property tax and assessment
levied or assessed upon the Premises and the underlying real property for the
purposes of this Lease. Nothing contained in this Section shall obligate Lessee
to pay any net income, inheritance, estate, gift or transfer tax which nay be
assessed or levied against Lessor. Lessee shall make the payments required by
this Article directly to Lessor pursuant to Article 9 (e) below.
LESSOR INITIAL /S/
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<PAGE>
(b) INSURANCE. Lessee agrees to pay, as additional rent, Lessee's pro rata
share of all insurance premiums paid by Lessor for or with respect to the
building and improvements with which the Premises are insured. Said insurance
shall include all insurance premiums for public liability and property damage
insurance and for fire and extended coverage insurance (which shall include, if
avai1able from Lessor's insurer, a waiver of subrogation in favor of Lessee) and
rental loss and vandalism and malicious mischief endorsements and any other
insurance or endorsements that Lessor deems necessary on or with respect to the
use and occupancy of the Premises and such other buildings for Lessor's benefit.
Said insurance premiums for the purposes of this Article shall be reasonably
apportioned to the Premises in accordance with the total floor area of the
Premises as it relates to the total floor area of the building or buildings with
which the Premises are insured. Lessee shall make the payments required by this
Article directly to Lessor pursuant to Article 9 (e) below.
(c) COMMON AREA EXPENSES. Lessee agrees to pay, as additional rent,
Lessee's pro rata share of the following costs:
(1) All real estate taxes including assessments and all insurance costs
with respect to and all costs to maintain, manage, repair, and replace the
common areas of the Shopping Center, including, but not limited to, restriping,
lighting costs, police and fire protection (but Lessor shall not be required to
provide or be responsible for police or fire protection), all utility costs,
landscaping, gardening, sweeping and cleaning, real property management fees and
charges, depreciation or rental of equipment, sound and music systems, if any,
and personnel used in such operation. The term common areas as used herein shall
mean those portions of the Shopping Center which have at the time in question
been designated and improved for common use by or for the benefit of more than
one tenant or occupant of the Shopping Center, including, without limitation,
parking areas, landscaped areas, access and perimeter roads, truck passage ways
and loading platforms, driveways, service corridors and stairways, sidewalks,
elevators, directory equipment, washrooms, drinking fountains, and like areas so
designated by Lessor.
(2) All costs to supervise and administer the common areas, including
labor, payroll and taxes. Said costs shall include such fees as nay be paid to a
third party in connection with same and shall in any event include a fee to
Lessor to supervise and administer same in an amount equal to fifteen percent
(15%) of the total costs of (1) above.
(3) Any parking charges, utilities surcharges, regulatory fees or any other
costs levied, assessed or imposed by, or at the direction of, or resulting from
statutes or regulations, or interpretations thereof, promulgated by any
governmental authority in connection with the use or occupancy of the Premises
or the parking facilities serving the Premises.
Lessee's pro rata share of the above costs shall be based upon the ratio
between Lessee's floor area and the total floor area from time to tine
constructed and occupied within the Shopping Center. Lessee shall make the
payments required by this Article directly to Lessor pursuant to Article 9 (e)
below.
(d) EXTERIOR BUILDING MAINTENANCE. Lessee agrees to pay, as additional
rent, Lessee's pro rata portion of all costs incurred by Lessor pursuant to
Article 9(e) below for painting and maintaining the exterior of the building
within which the Premises are situated (the "Building") including roof repairs,
based on the ratio that the floor area within the Premises bears to the total
floor area of the Shopping Center. Lessee shall make the payments required by
this Article directly to Lessor pursuant to Article 9 (e) below.
(e) Payment of Additional Charges. Upon the commencement of the lease term,
Lessor shall submit to Lessee a statement of the anticipated charges described
in Sections 9 (a) through 9 (d) above (hereinafter collectively referred to as
"Adjustments") and of Lessee's pro rata share thereof for the period between
such commencement and the following January and Lessee shall pay such charges,
based upon such estimate, monthly in advance, in equal monthly payments,
concurrently with the payment of minimum rent. Lessee shall continue to make
said monthly payments until notified by Lessor of a change thereof. Lessor may,
at any time, increase or decrease such estimated monthly payments in the event
that Lessor reasonably determines that such estimated payments are incorrect or
the percentage to be allocated to Lessee is adjusted.
By April 1 of each year Lessor shall endeavor to give Lessee a statement
showing the total Adjustments for the prior calendar year and Lessee's allocable
share thereof, prorated from the commencement of rental. In the event the total
of the monthly payments which Lessee has made for the prior calendar year be
less than the Lessee's actual share of such Adjustments than Lessee shall pay
the difference in a lump sum within ten (10) days after receipt of such
statement from Lessor and shall concurrently pay one-twelfth (1/12) of such
difference for each monthly payment theretofore made in the then calendar year
and the amount of monthly payments which are then calculated as monthly
Adjustments based on the prior year's experience nay be appropriately adjusted
by Lessor. Any overpayment by Lessee shall be credited towards the monthly
Adjustments next coming due. The actual Adjustments for the prior year shall be
used for purposes of calculating the anticipated monthly Adjustments for the
then year with actual determination of such Adjustments after each calendar year
as above provided; excepting
LESSOR INITIAL /S/
LESSEE INITIAL /S/
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<PAGE>
that in any year in which resurfacing or repainting of building exterior is
contemplated Lessor shall be permitted to include the anticipated cost of same
as part of the estimated monthly Adjustments. Even though the term has expired
and Lessee had vacated the Premises, when the final determination is made of
Lessee's share of said Adjustments for the year in which this Lease terminates,
Lessee shall immediately pay any increase due over the estimated Adjustments
previously paid and, conversely, any overpayment made shall be immediately
rebated by Lessor to Lessee.
(f) FLOOR AREA. The term "Floor Area" as used herein means the actual
number of square feet of floor space (exclusive of any space on mezzanines, in
basements or on exterior balconies unless used for the sale or display of
merchandise) within the exterior faces of building walls and measured from the
center of common walls, but excluding any such space (i) not intended by Lessor
for the exclusive occupancy by lessees, (ii) outside sales areas whether or not
roofed and/or exposed, (iii) truck ramps and/or docks, trash storage and
compaction areas, box and bottle yards, whether or not roofed and/or enclosed,
and (iv) space within any kiosk building. For the purpose of making any
proration or allocation to be made under this Article 9, Lessor nay conclusively
assume that the floor area of the Premises is the estimated floor area specified
in Paragraph A of the Basic Lease Provisions.
(g) EXCLUSIONS. In the event and to the extent that any lessee in the
Shopping Center or any owner of any portion of the Shopping Center pays any
Adjustment with respect to that portion of the Shopping Center leased or owned
by such party, rather than an allocable share of any Adjustment, Lessor may, in
such event and to such extent, exclude the square footage of floor leased or
owned by such party for the purposes of computing Adjustments pursuant to this
Article 9. Lessor may, at Lessor's option, specially allocate parking lot
lighting charges to Lessees of the Shopping Center including Lessee, remaining
open after operating hours for the parking lot established by Lessor, on any
reasonable basis.
Article 10 - Uses Prohibited.
- -----------------------------
Lessee shall not do or permit anything to be done in or about the Premises
nor bring or keep anything therein which will in any way increase the existing
rate of or affect any fire or other insurance upon any building within the
Shopping Center or any of its contents, or cause a cancellation of any insurance
policy covering any such building or any part thereof or any of its contents,
without the consent of Lessor and the amount of such increase, if any, shall be
paid by Lessee to Lessor upon demand. Lessee shall not do or permit anything to
be done in or about the Premises which will in any way obstruct or interfere
with the rights of other Lessees or occupants of the Shopping Center or injure
or annoy them or use or allow the Premises to be used for any improper, immoral,
unlawful or objectionable purpose, nor shall Lessee cause, maintain or permit
any nuisance in, on or about the Premises. Lessee shall rot commit or allow to
be committed any waste in or upon the Premises.
Article 11 - Compliance with Law
- --------------------------------
Lessee shall not use the Premises, or permit anything to be done in or
about the Premises, which will in any way conflict with any law, statute,
ordinance or governmental rule or regulation now in force or which may hereafter
be enacted or promulgated.. Lessee shall, at its sole cost and expense, promptly
comply with all laws, statutes, ordinances arid governmental rules, regulations
or requirements now in farce or which any hereafter be in force and with the
requirements of any board of fire underwriters or other similar bodies now or
hereafter constituted relating to or affecting the condition, use or occupancy
of the Premises, excluding structural changes to related to or affected by
Lessee's improvements, acts or use of the Premises. The judgement of any court
of competent jurisdiction or the admission of Lessee in any action against
Lessee, whether Lessor be a party thereto or not, that Lessee has violated any
law, statute, ordinance or governmental rule, regulation or requirement, shall
be conclusive of that fact as between the Lessor and Lessee. Lessee has made its
own investigation as to the governmental laws, rules arid regulations applicable
to the Premises and/or to the uses to be made of the Premises by Lessee and
agrees that Lessor is to have no responsibility in connection therewith. Lessee
shall pay all license fees, levies or other governmental charges assessed or
imposed by law or ordinances upon the Premises and/or Lessee's business.
Article 12 - Alterations and Additions.
- ---------------------------------------
Lessee shall not make or allow to be made any alterations, additions or
improvements to or of the Premises or any part thereof including without
limitation, any change in the appearance or color of Lessee's store front,
without the written consent of Lessor first had and obtained. Any alterations,
additions or improvements to or of said Premises, including but not limited to,
wall covering, paneling, air conditioning and heating equipment, and built-in
cabinet work, but excepting movable furniture and trade fixtures, shall at once
became a part of the realty and belong to the Lessor and shall be surrendered
with the Premises. In the event Lessor consents to the making of any
alterations, additions or improvements to the Premises by Lessee, the same shall
be made by Lessee at Lessee's sole cost and expense. Upon the expiration or
sooner termination of the terms hereof, Lessee shall, upon written demand by
Lessor, given at least thirty (30) days prior to end of the term, at Lessee's
sole cost and expense, forthwith and with all due diligence, remove any
alterations, additions, or improvements made by Lessee,
LESSOR INITIAL /S/
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<PAGE>
designated by Lessor to be removed, and Lessee shall, forthwith and with all due
diligence, at its sole cost and expense, repair any damage to the Premises
caused by such removal. At least fifteen (15) days prior to the commencement of
any work or construction of any alterations, additions, replacements or
substantial repairs in or about the Premises, Lessee shall notify Lessor and/or
any party designated by Lessor to receive such notice in writing of the intended
work and expected data of commencement thereof, and shall, for and an behalf of
Lessor, prepare and post such notices of nonresponsibility and other similar
notices as are permitted by 1aw. Lessor may also post any such notices for
itself and any other party or parties entitled to the protection afforded by
virtue of any such notice. Any work performed by Lessee to or upon the Premises
pursuant to this Article shall be under the supervision of a competent architect
or competent licensed structural engineer and made in accordance with plans and
specifications with. respect thereto, which shall be approved in writing by
Lessor before the commencement of work. All such work must be done in good and
workmanlike manner strictly in accordance with the laws and ordinances relating
thereto. In performing any such work, Lessee shall rot obstruct the access to
the premises of any other Lessees in the Shopping Center.
Lessor reserves the right to alter and/or remodel the roof, exterior walls
including canopy, sign can and parapet of the Premises and/or the sidewalks
adjacent to the Premises in connection with any exterior remodeling of the
building of which the Premises are a portion, at Lessor's sole cost and expense;
and in such event, to require that Lessee alter and/or replace its exterior
building sign with a new sign approved by Lessor.
Article 13 - Repairs.
- ---------------------
(a) LESSEE'S REPAIRS. By entry hereunder, Lessee shall be deemed to have
accepted the Premises, including without limitation the hearing and air
conditioning system as being in good, sanitary order, condition and repair.
Lessee shall, at Lessee's sole cost and expense, keep the Premises and every
part thereof in good condition and repair (except as hereinafter provided with
respect to Lessor's obligations) including without limitation, the maintenance,
replacement and repair of any storefront, doors, window casements, glazing,
hearing and air-conditioning system (when there is an air-conditioning system,
Lessee shall obtain and maintain in full force and effect at all times during
the term of this lease a service contract for repairs amid maintenance of said
system, said maintenance contract shall conform to the requirements under the
warranty, if any, on said system and shall be in a form approved and with a
company designated by lessor, unless Lessor elects to obtain such a contract, in
which event the cost of such contract shall be included as an Adjustment under
Article 9 - upon request, Lessee shall deposit with Lessor reasonably
satisfactory evidence that any such contract to be maintained by Lessee has been
obtained by Lessee and then is in full force and effect, including without
limitation, a copy of such contract), plumbing pipes, electrical wiring and
conduits. Lessee shall, upon the expiration or sooner termination of this Lease
hereof, surrender the Premises to the Lessor in good condition, broom clean,
ordinary wear and tear and damage from causes beyond the reasonable control of
Lessee excepted. Lessee shall also sweep and maintain in a neat and sightly
condition the sidewalks adjacent to the Premises and any exterior trash
enclosure provided for Lessee's use. Any damage to adjacent premises caused by
Lessee's use of the Premises shall be repaired at the sole cost and expense of
Lessee. Lessee hereby waives any right to make repairs at the expense of Lessor
pursuant to Section 1942 of the Civil Code of the State of California and all
rights provided for by Section 1941 of said Civil Code.
(b) LESSORS REPAIRS. Notwithstanding the provision of Article 13 (a)
hereinabove, Lessor shall repair and maintain the structural portions of the
Building, and the exterior walls (except Lessee's store front) and roof of the
Building, provided that in the event such maintenance and repairs are caused in
part or in whole by the act, neglect, fault or omission of any duty by the
Lessee, its agents, servants, employees, invitees, or any damage caused by
breaking and entering into the Premises, Lessee shall pay to Lessor the
reasonable cost of such maintenance and repairs. Lessor shall not be liable for
any failure to make any such repairs or to perform any maintenance unless such
failure shall persist for an unreasonable time after written notice of the need
of such repairs or maintenance is given to Lessor by Lessee, which period shall
not be less than thirty (30) days. Except as provided in Article 26 hereof,
there shall be no abatement of rent and no liability of Lessor by reason of any
injury to or interfere with Lessee's business arising from the making of any
repairs, alterations or improvements in or to any portion of the Building or the
Premises or in or to Building or the Premises or in or to fixtures,
appurtenances and equipment therein. Lessee waives the right to make repairs at
Landlord's expense under any law, statute or ordinance now or hereafter in
effect.
(c) LIENS. Lessee shall keep the Premises and the property on which the
Premises are situated free from any liens arising out of any work performed,
material furnished or obligations incurred or to have been incurred by or under
Lessee. Lessor may require, at Lessor's sole option, that Lessee provide to
Lessor, at Lessee's sole cost and expense, a lien and completion bond in an
equal to one and one-half (1-1/2) tines the estimated cost of any improvements,
additions, or alterations in the Premises which the Lessee desires to make1,
issued by a surety satisfactory to Lessor, to insure Lessor against any
liability for mechanics' and materialmen's liens and to insure completion of
such work.
LESSOR INITIAL /S/
LESSEE INITIAL /S/
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<PAGE>
Article 14 - Assignment and Subletting.
- ---------------------------------------
(a) LESSOR'S CONSENT REQUIRED. Lessee shall not, either voluntarily or by
operation of law, assign, sell, encumber, p1edge or otherwise transfer all or
any part of Lessee's leasehold estate hereunder, or permit the Premises to be
occupied by anyone other than Lessee or Lessee's employees or sublet the
Premises or any portion thereof, without Lessor's prior written consent in each
instance. Consent by Lessor to the or more assignments of this Lease or to one
or more sublettings of the Premises shall not operate to exhaust Lessor's rights
under this Paragraph. The voluntary or other surrender of this Lease by Lessee
or a mutual cancellation hereof shall not work a merger, and shall at the option
of Lessor, terminate all or any existing subleases or subtenancies or shall
operate as an assignment to Lessor of such subleases or subtenancies. If Lessee
is a corporation which, under the then current guidelines published by the
Commissioner of the Corporations of the State of California, is not deemed a
public corporation, or is an unincorporated association or partnership, the
transfer, assignment or hypothecation of any stock or interest in such
corporation, association or partnership in the aggregate in excess of
twenty-five percent (25%) shall be deemed an assignment within the meaning and
provisions of this Article. Lessee agrees to reimburse Lessor for Lessor's
reasonable accounting and attorney's fees incurred in connection with the
processing and documentation of any such requested assignment, subletting,
transfer, change of ownership or hypothecation of this Lease or Lessee's
interest in and to the Premises, together with a minimum fixed fee equal to the
greater of FIVE HUNDRED DOLLARS ($500.00) or one-half (1/2) of the then minimum
monthly rent.
(b) REQUEST FOR CONSENT. If Lessee desires at any tine to assign this lease
or to sublet tie Premises or any portion thereof, it shall first notify Lessor
of its desire to do so and shall submit in writing to Lessor (i) the name of the
proposed sublessee or assignee; (ii) the nature of the proposed sublessee or
assignee's business to be carried on in the Premises; (iii) the proposed
sublease or assignment and all of the contracts, instruments and agreements
relating to the proposed sublease or assignment; and (iv) such reasonable
financial and other information as Lessor any request concerning the proposed
sublessee or assignee.
(c) LESSOR'S RIGHTS. At any tine within thirty (30) days after Lessor's
receipt of the information specified in Article 14 (b) above, Lessor may by
written notice to Lessee elect to (i) consent to the subletting or assignment
upon the terms and to the sublessee or assignee proposed; (ii) refuse to give
its consent; (iii) sublease the Premises or the portion thereof so proposed to
be subleased by Lessee or take an assignment of Lessee's leasehold estate
hereunder upon the same terms (excluding terms relating to the use of Lessee's
name or the continuation of Lessee's business) as those offered to the proposed
sublessee or assignee, as the case may be; or (iv) terminate this Lease
effective as of the date such proposed assignment or sublease would have become
effective, but not more than sixty (60) days nor less than thirty (30) days
following Lessor's receipt of such information, in its entirety, in the case of
an assignment, or as to the portion (including all) of the Premises so proposed
to be subleased, with a proportionate abatement in the rent payable hereunder
effective upon the last to occur of (1) the date that Lessee installs a
partition wall separating such portion of the Premises proposed to be subleased
and the ba1ance of the Premises satisfying Lessor's reasonable requirements for
such work, which work shall be so completed by Lessee within sixty (60) days of
such election by Lessor, or (2) the effective date of such termination, in the
case of a sublease. Lessee agrees that Lessor nay refuse to consent to any
proposed assignment for any reason or reasons deemed sufficient by Lessor
without regard to any objective standard of reasonableness and may consent to a
proposed assignment subject to such conditions as Lessor, in its sole
discretion, deems appropriate, including without limitation the requirement that
the assignees assume in writing the obligations of Lessee under this Lease. If
Lessor does not elect alternative (iii) or (iv) above following Lessee's request
that Lessor consent to a sublease, Lessor's consent to any such proposed
sublease shall not unreasonably be withheld. In the event this Lease is
terminated pursuant to this article, the rents and other charges payable
hereunder shall be prorated and paid to and from the date of such termination.
If lessor consents to such assignment or subletting, Lessee nay, within ninety
(90) days after the date of Lessor's consent, enter into a valid assignment or
subletting, of the Premises or portion thereof upon the terms and conditions
described in the information required to be furnished by Lessee to Lessor
pursuant to Article 14 (b) above, or under other terms not more favorable to
Lessee; provided, however, that any material change in such terms shall be
subject to Lessor's consent as provided in this Article 14. Failure of Lessor to
exercise any option set forth in clauses (i) through (iv) above within such
thirty (30) day period shall be deemed refusal of Lessor to consent to the
proposed subletting or assignment.
(d) NO RELEASE. No subletting or assignment, even with the consent of
Lessor,, shall relieve Lessee of its obligations to pay the rent and to perform
all of the other obligations to be performed by Lessee hereunder. The acceptance
by Lessor of any payment due hereunder from any other person shall not be deemed
to be a waiver by Lessor of any provision of this Lease or to be a consent to
any assignment or subletting.
LESSOR INITIAL /S/
LESSEE INITIAL /S/
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<PAGE>
(e) PAYMENTS BY LESSEE. In the event Lessor consents to a sublease, Leases
shall pay Lessor the excess if any, of the rent reserved in such sublease over
the allocable portion of the rent for that portion of the Premises subject to
such sublease, as determined by Lessor, in any reasonable manner For the
purposes of this Article, the rent reserved in such sublease shall be deemed to
include any lump sum payment or other consideration given to Lessee in
consideration for such sublease. Lessee shall, pay this additional rent together
with the monthly installments of rent due hereunder, in advance, based upon such
excess sublease rental payable during each calendar month. In the event that any
assignment, sublease or other occupancy proposed by Lessee would result in the
Shopping Center, or any portion thereof other than the Premises, being
reassessed by the County Assessor at a higher full cash value than would
otherwise be permissible under Article XIII-A of the California Constitution,
Lessor may also condition its consent thereto upon Lessee and the proposed
assignee, sublessee or occupant agreeing to pay that portion of the ad valorem
tax levied or assessed against the Shopping Center from and after and resulting
from such reassessment and higher full cash value.
(f) SUBLEASE RENTALS. If a default under this Lease should occur while the
Premises or any portion thereof are then subleased, Lessor, in addition to any
other remedies provided herein or by law or in equity, may at its option have a
receiver appointed to collect, or itself collect, directly from the sublessee
under which sublease all rent or other consideration then due or becoming due to
Lessee from such sublessee and apply such rent or other consideration against
any sums due to Lessor by Lessee hereunder; and Lessee hereby authorizes and
directs any such sublessee to make such payments of rent or other consideration
directly to Lessor upon receipt of notice from Lessor. For this purpose, Lessor
has authorized and empowered, on behalf of Lessee, to endorse the name of Lessee
upon any check, draft or other instrument payable to Lessee evidencing payment
of such rent or other consideration and to receive and apply the proceeds
therefrom in accordance with the terms hereof. No direct collection by Lessor
from any such sublessee shall be construed to constitute a novation or a release
of Lessee or any guarantor of Lessee from the further performance of its
obligations under or in connection with this Lease. Lessor shall not be liable
to Lessee for any failure or inability to collect such rents or other charges
from any such sublessee.
Article 15- Hold Harmless.
- --------------------------
Lessee shall indemnify and hold harmless Lessor against and from and hereby
waives any claims against and agrees that Lessor shall not be liable for any and
all claims, demands, liabilities and/or obligations arising from the use or
occupancy of the Premises by or under Lessee or from the conduct of Lessee's
business or from any activity, work, or other things done, permitted or suffered
by the Lessee in or about the Premises or from any state or condition of the
Premises or the adjacent sidewalks, and shall further indemnify and hold
harmless Lessor against and from any and all claims, demands, liabilities and/or
obligations 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 negligence of the Lessee, or any officer, agent,
employee, guest, or invites of Lessee, and from all, costs, attorney's fees, and
liabilities incurred in or about the defense thereof or any action or proceeding
brought thereon and in any case any action or proceeding be brought against
Lessor by reason thereof, Lessee upon notice from Lessor shall defend the same
at Lessee's expense by counsel reasonable satisfactory to Lessor. Lessee as a
material part of the consideration to Lessor hereby assigns all risk of damage
to property or injury to persons in, upon or about due Premises, from any cause
other than Lessor's active negligence, and Lessee hereby waives all claims in
respect thereof against Lessor.
Lessor or its agents shall not be liable for any loss or damage to persons
or property resulting from fire, explosion, falling plaster, steam, gas,
electricity, water or rain which may leak from any part of the Building or from
the pipes, appliances or plumbing works therein or from the roof, street or
subsurface or from any other place resulting from dampness or any other cause
whatsoever, unless caused by or due to the active negligence of the Lessor, its
agents, servants or employees. Lessor or its agent shall not be liable for
interference with the light, air, or for any latent defect in the Premises.
Lessee shall give prompt notice to Lessor in case of casualty or accidents in
the Premises.
Article 16 - Insurance.
- -----------------------
(a) LIABILITY INSURANCE. Lessee shall, at Lessee's expense, obtain and keep
in force during the term of this Lease a policy of comprehensive public
liability insurance insuring Lessor and Lessee against any Liability arising out
of the ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be in the amount of not less than
$500,000.00 for injury or death of one person in any one accident or occurrence
and in the amount of not less than $1,000,000.00 for injury or death of more
than one person in any one accident or occurrence. Such insurance shall further
insure Lessor and Lessee against liability for property damage of at least
$50,000.00. The limit of any such insurance shall not, however, limit the
liability of the Lessee hereunder. All such policies shall be written as primary
policies not contributing with and not in excess of coverage which Lessor may
carry and shall provide for payment of loss to Lessor notwithstanding any act or
negligence of Lessee which might otherwise result in forfeiture of said
insurance.
LESSOR INITIAL /S/
LESSEE INITIAL /S/
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<PAGE>
Not more frequently than each three (3) years, if in the opinion of Lessor's
lender or of the insurance broker retained by Lessor, the amount of public
liability and property damage insurance coverage required by this Article at
that time is not adequate, Lessee shall increase the insurance coverage as
required or recommended by elder Lessor's Lender or Lessor's insurance broker.
(b) PROPERTY INSURANCE. Lessee agrees to procure and maintain fire and
extended coverage insurance in an amount equal to at least ninety percent (90%)
of the replacement cost of Lessee's fixtures, signs, equipment and personal
property located in, on or about the Premises. Lessee shall procure an
appropriate clause in or an endorsement on any such policy of insurance pursuant
to which the insurance company waives subrogation or consents to a waiver of the
right of recovery against Lessor, and Lessee does hereby agree that it shall not
make any claim against or seek to recover from Lessor any loss or damage to its
property or the property of others, resulting from any hazard insured against by
such policy.
(c) INSURANCE POLICIES. All Insurance to be obtained by Lessee pursuant to
this Article 16 shall be provided by Companies rated A-15 or better in "Best's
Insurance Guide", or, in the event Best's Insurance Guide", is no longer
published,, any comparable rating in any similar guide selected by Lessor.
Lessee shall deliver to Lessor copies of the insurance policies required by this
Article or certificates evidencing the existence and amount of such insurance
with loss payable clause satisfactory to Lessor. No policy shall be cancellable
or subject to reduction of coverage without thirty (30) days' prior notice to
Lessor, and each such certificate shall so provide. On or before ten (10) days'
prior to the expiration of any such insurance policy, Lessee will deliver to
Lessor written notification in the form of a receipt or other similar document
from the applicable insurance company that said policy has been renewed, or
deliver certificates of coverage or the policies from another insurance company
to evidence such coverage.
Article l7 - Utilities.
- -----------------------
Lessee shall pay, as additional rent, for all water, gas, heat, light,
power, sewer charges, telephone service and all other services and utilities
supplied to the Premises, together with any taxes thereon. If any such services
are rot separately metered to Lessee, Lessee shall pay a reasonable proportion
to be determined by Lessor of all charges jointly metered with other premises.
Lessee shall. also pay for trash removal services provided to the Premises,
unless such services are provided to the Shopping Center as a whole and the cost
of such service included as an Adjustment.
Article 18 - Personal Property Taxes.
- -------------------------------------
Lessee shall pay, or cause to be paid, before de1inquency any and all taxes
levied or assessed and which become payable during the during the term hereof
upon all Lessee's leasehold improvements, equipment, furniture, fixtures, and
any other personal property located in the Premises. In the event any or all of
the Lessee's leasehold improvements, equipment, furniture, fixtures and other
personal property shall be assessed and taxed with the real property, Lessee
shall pay to Lessor its share of such taxes within ten (10) days after delivery
to Lessee by Lessor of a statement in writing setting forth the amount of such
taxes applicable to Lessee's property.
Article 19 - Rules and Regulations.
- -----------------------------------
Lessee shall faithfully observe and comply with such reasonable rules and
regulations that Lessor may from time to time promulgate and/or modify relating
to the use and operation of the Shopping Center and/or any adjustment properties
which Lessor may from time to time make available for use by Lessee and/or the
protection of the improvements upon such properties. The rules and regulations
shall be binding upon Lessee upon delivery of a copy of then to Lessee. Lessor
shall not be responsible to Lessee for the nonperformance of any said rules and
regulations by any other lessees or occupants. Such rules arid regulations shall
apply and be enforced as to all lessees in the Shopping Center on a uniform
basis.
Article 20 - Holding Over.
- --------------------------
If Lessee remains in possession of the Premises or any part thereof after
the expiration of the term hereof with the express written consent of Lessor,
such occupancy shall be a tenancy from month to month at a rental in the amount
of the last monthly minimum rent increased by fifty percent (50%), plus all
other charges payable hereunder, and upon all the terms hereof applicable to a
month to month tenancy, which tenancy shall be terminable by Lessor upon ten
(10) days' notice. Should Lessee hold over the Premises without the express
written consent of Lessor, Lessee shall indemnify and hold Lessor harmless from
loss or liability resulting from such holding over, including, without
limitation, any claims made by any succeeding lessee.
LESSOR INITIAL /S/
LESSEE INITIAL /S/
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<PAGE>
Article 21 - Entry by Lessor.
- -----------------------------
Lessor reserves, and shall at any and all times have, the right for itself
and its designees to enter the Premises to inspect the same, to submit said
Premises to prospective purchasers or lessees, to post notices of
nonresponsibility, to repair the Premises and any portion of the Building that
Lessor may deem necessary or desirable, without abatement of rent, and may for
that purpose erect scaffolding and other necessary structures there reasonably
required by the character of the work to be performed, always providing that the
entrance to the Premises shall not be blocked thereby, and further providing
that the business of the Lessee shall not be interfered with unreasonably.
Lessee hereby waives any claim for damages or for any injury or improvements to
or interference with Lessee's business, any loss of occupancy or quiet enjoyment
of the Premises, and any other loss occasioned thereby. For each of the
aforesaid purposes, Lessor shall at all tines have and retain a key with which
to unlock all of the doors in, upon and about the Premises, excluding Lessee's
vaults, safes and files, and Lessor shall have the right to use any and all
means which Lessor may deem proper to open said doors in an emergency, in order
to obtain entry to the Premises without liability to Lessee except for any
failure to exercise due care for Lessee's property an any entry to the Premises
obtained by Lessor by any of said means, or otherwise, shall not under any
circumstances be construed or deemed to be a forceable or unlawful entry into,
or a detainer of, the Premises, or an eviction of Lessee from the Premises or
any portion thereof.
Article 22 - Lessee's Default.
- ------------------------------
The occurrence of any one or more of the following events shall constitute
a default and breach 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 by
Lessor to Lessee.
(c) 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 (a) or (b) above, where such failure shall continue for
a period of ten (10) days after written notice thereof by Lessor to Lessee;
provided, however, that if the nature of Lessee's default is such that more than
ten (10) days are reasonably required for its cure, then Lessee shall not be
deemed to be in default if Lessee commences such cure within said ten (10) day
period and thereafter diligently prosecutes such cure to completion.
(d) The making by Lessee of any general assignment or general arrangement
for the benefit of creditors; or the filing by or against Lessee of a petition
to have lessee adjudged a bankrupt, or a petition for reorganization or
arrangement under any law relating to bankruptcy (unless, in the case of
petition filed against Lessee, the same is dismissed within sixty (60) days); or
the appointment of a trustee or a receiver to take possession of substantially
all of Lessee's assets located at the Premises or of Lessee's interest in this
Lease, there possession is not restored to Lessee within thirty (30) days; or
the attachment, execution or other judicial seizure of substantially all of
Lessee's assets located at the Premises or of Lessee's interest in this Lease,
where such seizure is not discharged in thirty (30) days.
Article 23 - Remedies in Default.
- ---------------------------------
In the event of any such default or breach by Lessee, Lessor may at any
tine thereafter, with or without notice or demand and without limiting Lessor in
the exercise of a right or remedy which Lessor any have by reason of such
default or breach:
(a) Immediately terminate Lessee's right to possession of the Premises, and
repossess the same by summary proceedings or other appropriate action, and
Lessor shall thereupon be entitled to receive from Lessee all damages specified
in California Civil Code Section 1951.2(a), including (1) the worth at the tine
of award of the unpaid rent which had been earned at the time of termination (2)
the worth at the time of award of the amount by which the unpaid rent which
would have been earned exceeds the amount of such rental loss that Lessee proves
could have been reasonably avoided; (3) the worth at the tine of award of the
amount by which the unpaid rent for the balance of the term after the time of
award exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (4) any other amount necessary to compensate Lessor for
all the detriment approximately by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom. All of such damages to the extent specified in
Section 1951.2(b) shall be computed by allowing interest at the rate of ten
(10%) per annum; or
LESSOR INITIAL /S/
LESSEE INITIAL /S/
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<PAGE>
(b) Continue this Lease in effect without terminating Lessee's right to
possession even though Lessee has breached this Lease and abandoned the Premises
and to enforce all, of Lessor's rights and remedies under this Lease, including
the right to recover the rent as it becomes due under this Lease; provided,
however, that Lessor may at any time thereafter elect to terminate this Lease
for such breach by modifying Lessee in writing that Lessee's right to possession
of the Premises has been terminated; or
(c) Pursue any other remedy now or hereafter available to Lessor under the
laws or judicial decisions of the State of California.
Lessor's failure to take advantage of any default or breach of covenant on
the part of Lessee shall not be or be construed to be a waiver thereof, nor
shall any custom or practice which may grow up between the parties in the course
of administering this Lease he construed to waive or to lessen the right of
Lessor to insist upon the performance by Lessee of any term, covenant or
condition hereof, or to exercise any rights given him on account of any such
default. A waiver of a particular breach, or default, shall not be deemed to be
a waiver of the same or any subsequent breach or default. The acceptance of rent
hereunder shall not be, or be construed to be, a waiver of any term, covenant or
condition of this Lease or breach thereof.
For the purposes of this Article 23, the term "rent: shall be deemed to be
the minimum rent and all other sums required to be paid by Lessee pursuant to
the terms of this Lease, including, without limitation, percentage rent and
Adjustments. In computing damages or rental due under this Lease, the value of
percentage rent for any period subsequent to the termination of this Lease or of
Lessee's right of possession shall be an amount per year equal to one-third
(1/3) of the total percentage rent paid by Lessee for the last three (3) full
lease years immediately preceding such termination and if less than three (3)
full years have lapsed, such value shall be an amount per year equal to the
average yearly percentage rent theretofore paid by Lessee.
The voluntary or other surrender of this Lease by Lessee, or a mutual
cancellation of this Lease, shall, at Lessor's option, either not result in a
merger and shall operate as an assignment to Lessor of any and all subleases
made by Lessee, or shall terminate all such existing subleases.
Artic1e 24 - Default by Lessor.
- -------------------------------
Lessor shall not be in default unless Lessor fails to perform obligations
required of Lessor within a reasonable rime, 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 therefore 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 Lessor shall not be in default if Lessor commences
performance within such thirty (30) day period and thereafter diligently
prosecutes the same to completion. In no event shall Lessee have the right to
terminate this Lease as a result of Lessor's default and Lessee's remedies shall
be limited to damages and/or an injunction.
Article 25 - Cure of Lessee's Default.
- --------------------------------------
Should Lessee fail to pay and discharge, when due and payable any lien or
claim for labor or materials employed or used in, or any claim for labor or
materials employed or used in, or any claim for damages arising out of the
repair, alteration, maintenance and use of the Premises, or should Lessee fail
to provide or evidence the provision of any insurance policy as required by this
Lease, or should Lessee fail to fully pay or perform any sun to be paid or any
covenant or agreement to be performed by Lessee, as provided for in this Lease,
after ten (10) days' written notice from Lessor, then Lessor may, at its option
and without waiving or releasing Lessee from any of Lessee's obligation
hereunder, pay any such Lien, claim, or charge, or settle or discharge any
action therefore or satisfy any judgement thereon, or obtain any such insurance,
or pay any such sum or perform any such covenant or agreement. All costs,
expenses and other sums incurred or paid by Lessor in connection therewith,
together with interest at the rate of ten percent (10%) per annum on such costs,
expenses, and sums from the date incurred or paid by Lessor, shall be deemed to
be additional rent hereunder and shall be paid by Lessee with and at the same
time as the next installment of minimum rent hereunder, and any default therein
shall constitute a breach of the covenants and conditions of this Lease.
Article 26 - Reconstruction.
- ----------------------------
In the event that the Premises, or any portion thereof, shall be damaged by
fire, explosion, windstorm or any other casualty, then Lessor shall repair such
damage (other than damage to glass, which shall be the responsibility of Lessee
as rapidly as reasonably possible, allowing sufficient time for Lessor to settle
with any applicable insurer, and Lessee shall be entitled to an equitable
abatement of the fixed minimum rent, based upon the extent to which the damage
and Lessor's making of such repairs shall interfere with the business carried on
by Lessee in the Premises, unless Lessor shall establish that such damage was
occasioned by the negligence of Lessee, its agents or employees.
LESSOR INITIAL /S/
LESSEE INITIAL /S/
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<PAGE>
If by reason of fire or casualty damage to buildings in the Shopping
Center, any Lessee or other occupant occupying more than ten thousand (10,000)
square feet of building area in the Shopping Center cancels its lease or
abandons its premises, then Lessor nay cancel this Lease by giving written
notice to Lessee within sixty (60) days after said Lessee or occupant occupying
use then ten thousand (10,000) square feet of building area cancels its lease or
abandons its premises.
Notwithstanding any other provision of this Article to the contrary, if the
Premises shall be damaged by any casualty which Lessor is otherwise obligated to
repair, and such damage shall be to the extent of more than twenty-five percent
(25%) of the value of the Premises at the tine of such damage, or should such
damage occur during the last twelve (12) months of the term of this lease, or
should such damage be caused by a casualty not covered by standard fire and
extended coverage insurance and any other insurance carried by Lessor pursuant
to Article 9 and should Lessee, not elect to repair such uninsured damage at
Lessee's sole cost and expense, then Lessor may, in any of such events, at its
election notice to Lessee given within ninety (90) days after such damage,
terminate this Lease effective as of the date of the giving of such notice.
Lessor shall not be required to repair any injury or damage by fire or
other cause, or to make any repairs or replacements of any leasehold
improvements, fixtures or other personal property of Lessee. All insurance
proceeds except those allocable to these items, shall be paid to Lessor.
During the period of any restoration and repair of casualty damage by
Lessor, Lessee agrees to continue the operation of its business on the Premises
to the extent reasonably practical and to forthwith replace or fully repair all
exterior signs, trade fixtures, equipment display cases or other installations
originally installed by Lessee.
Article 27- Eminent Domain.
- ---------------------------
If more than twenty percent (20%) of the Premises shall be taken or
appropriated by any public or quasi-public authority under the power of eminent
domain, either party hereto shall have the right, at its option, within sixty
(60) days after said taking, to terminate this lease upon thirty (30) days'
written notice. If this Lease is not terminated by reason of any taking or
appropriation under the power of eminent domain, this Lease shall terminate as
to the portion of the Premises taken or appropriated and Lessor, to the extent
of any severance damages available to Lessor, shall repair and restore the
remaining portions of the Premises and the mini nun rent thereafter to be paid
shall be equitably relived following the completion of such restoration and
repair by Lessor. Lessor shall be entitled to any and all awards and/or
settlement which may be given and Lessee shall have no claims against Lessor for
the value of any unexpired term of this Lease, except that Lessee shall be
entitled to that portion of any such award, if any, allocated to the taking of
or damage to Lessee's fixtures and equipment. If, by reason of any exercise of
the power of eminent domain, any Lessee or occupant occupying more than ten
thousand (10,000) square feet of building area in the Shopping Center cancels
its lease or abandons its premises, then Lessor may cancel this lease by giving
written notice to the Lessee within sixty (60) days after said Lessee or after
said Lessee or occupant occupying more than ten thousand (10,000) square feet of
building area cancels, its lease or abandons its premises.
Article 28 - Lessee's Statement.
- --------------------------------
Lessee shall at any tine and from time to time upon not less than three (3)
days' prior written notice from Lessor execute, acknowledge and deliver to
Lessor a statement in writing, (a) 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 rental and other charges are paid in advance,
if any, and (b) acknowledging that there are not, to Lessee's knowledge, any
uncured defaults on the part of the Lessor hereunder or specifying such default
if any are claimed, and (c) setting forth the date of commencement of rents and
expiration of the term hereof. Any such statement may be relied upon by any
prospective purchaser or encumbrancer of all or any portion of the real property
or leasehold estate of which the Premises are a part.
Article 29 - Parking and Common Areas.
- -------------------------------------
Lessee, for the use and benefit of Lessee, its agents, employees,
customers, licensees and sublessees, shall have the nonexclusive right in common
with Lessor and others authorized by Lessor to use the portion of the Shopping
Center from time to tine established by Lessor as common and parking areas
during the term of this Lease for ingress, egress and automobile parking;
provided that the condemnation or other taking, restriction or regulation by any
public authority, or sale in lieu of condemnation, of any or all, of such
parking areas shall rot constitute a violation of this covenant. Lessor reserves
the right to change the entrances, exits, traffic lanes and the boundaries and
locations of such parking and common area or areas from that shown on the
attached Exhibit "A" and to redesignate such parking and common areas as
building area or such building areas as parking and common areas; provided,
however, that anything to the contrary notwithstanding contained in this
sentence, said common and parking area or areas shall, subject to governmental
action, at all tines provide at least three parking spaces for each one thousand
(1,000) square feet of floor area.
LESSOR INITIAL /S/
LESSEE INITIAL /S/
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<PAGE>
Lessee shall also have the right to use such parking areas, driveways and
traffic ailes for ingress, egress and parking purposes as Lessor may from tine
to time provide for Lessee's use, in common with others, upon, over and across
property adjacent to the Shopping Center, provided that Lessor reserves the
right to regulate, restrict, alter and/or terminate, in whole or in part, such
right, at any time during the term of this Lease.
Lessor shall keep the automobile parking and common areas within the
Shopping Center in a neat, clean and orderly condition, and shall repair any
damage to the facilities thereof, but all expenses in connection with said
automobile parking and common areas shall be charged and prorated in the manner
as set forth in Article 9 (c) hereof. Lessor shall not be liable for any
interference with Lessee's business resulting from Lessors maintenance, repair,
alteration and/or reconstruction of the automobile parking and common areas.
Lessee, in the use of said common and parking areas, agrees to comply with
such reasonable rules, regulations and charges for parking as the Lessor may
adopt from time to time for the orderly and proper operation of said common and
parking area. Such rules may include but shall not be limited to the following:
(1) The restricting of employee parking to a limited, designated area or areas
or the prohibition of employee parking within the Shopping Center, (2) the
regulation of the removal, storage and disposal of Lessee's refuse and other
rubbish; (3) the access routes and hours for delivery to the Premises by trucks
and trailer; and (4) the restriction of designated areas for drive-through
banking, savings, restaurant or other drive-through facilities, promotional
and/or seasonal sales activities and/or loading, trash and other storage areas,
whether or not such storage areas are roofed and/or enclosed. All common and
parking areas shall be subject to the exclusive control and management of Lessor
or such other persons or nominees as Lessor may designate to exercise such
management or control, in whole or in part, in Lessor's place and stead. If
requested by Lessor, Lessee will furnish Lessor with license numbers of the
vehicles of Lessee and its concessionaires and their respective officers, agents
and employees. If Lessee or its concessionaires or their respective employees
fail to park their cars in designated parking areas, then Lessor may charge
Lessee TEN DOLLARS ($10,00) per day for each day or partial day per car parked
in any areas other than those designated; provided, however, Lessor agrees to
give Lessee written notice of the first violation of this provision and Lessee
shall have two (2) days thereafter within which to cause the violation to be
discontinued; and if not discontinued within said two (2) day period then the
TEN DOLLAR ($10.00) per day fine shall commence. After notice of such first
violation, no prior notice of any subsequent violation shall be required. All
amounts due under the provisions of this Paragraph shall be payable by Lessee
within ten (10) days after demand therefor as additional rent hereunder. Lessee
hereby authorizes Lessor to tow away from the Shopping Center any car or cars
belonging to Lessee, its employees or its concessionaires or their respective
employees, and/or to attach violation stickers or notices to such cars.
Lessor shall have the right to close, if necessary, all or any portion of
the common areas to such extent as any in the opinion of Lessor, or Lessor's
counsel, be Legally necessary to prevent a dedication thereof or the accrual of
any rights of any person or of the public therein; to close temporarily all or
any portion of the common areas to discourage noncustomer use; to use portions
of the common areas while engaged in making improvements or repairs or
alterations to the Shopping Center, an to do and perform such other acts in, to,
and with respect to, the common areas as in the use of good business judgement
Lessor shall determine to be appropriate for the Shopping Center.
Lessee shall not cause or permit distribution in or at approaches to common
areas of handbills, circulars, advertisements or papers, or other matters which
if discarded would tend to litter such areas, and Lessee shall not discard
sweeping in the parking or common areas but will dispose of the same in refuse
cans or other appropriate containers. In no event shall Lessee park or permit to
be parked within the common area or the streets adjacent to the Shopping Center,
cars, truck or other vehicles for advertising purposes which display or employ
advertising devises.
In the event that any party other than Lessor is required to maintain the
automobile parking and common areas within the Shopping Center, or any portion
thereof, pursuant to any written agreement or instrument, Lessor shall not be
deemed to be in default hereunder and Lessee shall rot be permitted to pursue
any remedy under this Lease or at law or in equity for any failure of such party
to maintain the automobile parking and common areas within the Shopping Center,
or any portion thereof, required to be maintained by such party, provided that
Lessor agrees to take reasonable action to enforce its remedies under any such
agreement or instrument to perform or to require that such maintenance be
performed within any reasonable period of time after Lessor shall receive
written notification from Lessee that such maintenance is not being performed.
Article 30 - Signs. ( See Exhibit "B")
- -------------------
Lessee shall obtain necessary permits and install an exterior building sign
on the Premises satisfying Lessor's requirements at a location designated by
Lessor prior to the commencement of the term of this Lease. Except for said
sign, Lessee shall not affix or maintain upon the exterior of the Premises,
LESSOR INITIAL /S/
LESSEE INITIAL /S/
-13-
<PAGE>
including glass panes and supports of show windows and doors, any signs,
advertising plackets, names insignias, trademarks, descriptive material or any
other such like item or items except such as shall have first received the
written approval of Lessor as to size, type, color, location, copy, nature and
display qualities. Anything to the contrary in this Lease notwithstanding,
Lessee shall not affix any sign to or otherwise use or penetrate the roof of the
Premises nor install any exterior plumbing fixtures, shade or awning, nor make
any exterior decoration or painting or change to the store front of the
Premises.
Article 31 - Displays - Lights.
- -------------------------------
Lessee may not display or sell merchandise or allow grocery carts, vending
machines, or other similar devices within the control of Lessee to be stored or
to remain outside the defined exterior walls and permanent doorways of the
Premises. Lessee further agrees not to install any exterior lighting, amplifiers
or similar devices or use in or about the Premises any advertising medium which
may be heard or seen outside the Premises, such as flashing lights,
searchlights, loudspeakers, phonographs or radio broadcasts. Lessee shall
maintain all show windows in the Premises in a neat, clean and sightly condition
and shall keep Lessee's windows and exterior marquee lights on during such
nighttime hours as Lessor may from time to time designate.
Article 32 - Auctions.
- ----------------------
Lessee shall not conduct or permit to be conducted any sale by auction in,
upon or from the Premises, whether said auction be voluntary, involuntary,
pursuant to any assignment for the payment of creditors or pursuant to any
bankruptcy other insolvency proceeding.
Article 33 - Hours of Business.
- -------------------------------
Subject to the provisions of Article 26 hereof, Lessee shall continuously
during the entire term hereof conduct and carry on Lessee's business in the
Premises and shall keep the Premises open for business and cause Lessee's
business to be conducted therein during the usual business hours of each and
every business day as is customary for businesses of like character in the
County in which the Premises are located to be open for business; provided,
however, that this provision shall not apply if the Premises should be closed
and the business of Lessee temporarily discontinued therein on account of
strikes, lockouts or similar causes beyond the reasonable control of Lessee or
closed for not more than three (3) days out of respect to the memory of any
deceased officer or employee of Lessee, or the relative of any such officer or
employee. Lessee shall keep the Premises adequately stocked with merchandise,
and with sufficient sales personnel to care for the patronage, and to conduct
said business in accordance with sound business practice.
In the event of breach by Lessee of any of the conditions in this Article
contained, Lessor shall have, in addition to any and all remedies herein
provided, the right at its option to collect not only the minimum rent herein
provided, but additional rent at the rate of one thirtieth (1/30) of the minimum
rent herein provided for each and every day that Lessee shall fail to conduct
its business as herein provided; said additional rent shall be deemed to be in
lieu of any percentage rent that might have been earned during such period of
Lessee's failure to conduct its business as herein provided.
Article 34 - Competition.
- -------------------------
During the first two (2) years of the term of this Lease, Lessee shall not
directly or indirectly engage in any similar or competing business within a
driving radius of three (3) miles from the outside boundary of the Shopping
Center. Should Lessee thereafter engage in any such competing business within
such driving radius, the gross sales from such other business shall be included
with the gross sales from the Premises for the purposes of computing percentage
rental pursuant to Article 7 above and all obligations of Lessee to report and
maintain records with respect to gross sales from the Premises and all rights of
Lessor under Article 7 shall apply equally to the gross sales and Lessee's
records and reporting of gross from such other business.
Article 35 - Trade Fixtures.
- ----------------------------
All trade fixtures and equipment installed by Lessee in the Premises shall
be new and of good quality. So long as Lessee shall not be in default hereunder,
all trade fixtures and equipment installed by Lessee in the Premises, shall
remain the personal property of Lessee and may be removable by Lessee at any
time prior to the termination of this Lease. The expiration of the term of this
Lease or upon any earlier termination hereof, Lessee shall remove at its own
expense all trade fixtures, equipment and personal property upon the Premises,
provided that if Lessee is in default, Lessor may prohibit such removal by
notice in writing to Lessee. If, at the end of the lease term or earlier
termination as is herein provided, Lessee has left any merchandise, furniture,
equipment, trade fixtures or other personal property on or about the Premises,
Lessor may give Lessee written notice to remove such property. In the event such
property is not removed within ten (10) days of the sending of said notice,
Lessor nay dispose of
LESSOR INITIAL /S/
LESSEE INITIAL /S/
-14-
<PAGE>
said property in any manner whatsoever and Lessee hereby waives any claim or
right to said property or any proceeds derived from the sale thereof. Any damage
to the Premises resulting from the installation or removal of any of said trade
fixtures or equipment shall be repaired by or at the cost of Lessee.
Article 36 - Nonrepresentations as to Building Site.
- ----------------------------------------------------
The designation of any type of use or tenancy with respect to any building
site on the attached plot plan of the Shopping Center is not intended as a
covenant or representation that said building site shall be constructed or
devoted to such a use or tenancy nor shall Lessor be responsible or liable to
Lessee should any other lessee fail to open or to continue to be open for
business during the term of this Lease.
Article 37 - Parking Surcharge.
- -------------------------------
In the event that a parking surcharge or regulatory fee, however
designated, is imposed upon or levied or assessed against the Shopping Center or
on, or account of, the parking spaces thereon by any governmental agency or
authority pursuant to the "Clean Air Act" or any plan implemented pursuant to
such Act, or any enactment amenatory or in substitution thereof, Lessee agrees
that Lessor may, at Lessor's option and Lessor shall not be obligated so to do,
institute a system of pay parking and, in such event, the proceeds of such
system will be used to pay any such surcharge or fee and the cost of
implementing and administering such system.
Article 38 - Relationship of Parties.
- -------------------------------------
The relationship of the parties hereto is that of Lessor and Lessee, and it
is expressly understood and agreed that Lessor does not in any way or for any
purpose become a partner of Lessee in the conduct of Lessee's business or
otherwise, or a joint venturer with Lessee, and that the provisions of this
Lease and the agreements relating to rent payable hereunder are included solely
for the purpose of providing a method whereby rental payments are to be measured
and ascertained.
Article 39 - Change in Lessor's Interest.
- -----------------------------------------
Lessee acknowledges that Lessor may not in the future own or control all of
the Shopping Center and agrees that Lessor shall not be deemed to be in default
hereunder and that Lessee may not pursue any remedies under this Lease or at law
or in equity for any violation of this Lease occurring by virtue of any act or
omission on or with respect to any portion of the Shopping Center, other than
the Premises, not owned or controlled by Lessor; provided that Lessor agrees,
promptly upon receipt of written notice from Lessee of the occurrence of any act
or omission, to promptly perform all acts reasonably required in order to cure
such default. In the event of any sale or exchange of the Premises by Lessor and
the assignment by Lessor of this Lease, in the event Lessor's interest in the
Premises is otherwise terminated and this Lease continues in effect, Lessor
shall be and is hereby entirely freed and relieved of all obligations under any
and all of its covenants and obligations contained in or derived from this Lease
and arising out of any act, occurrence or omission relating to the Premises or
this Lease occurring after the consummation of such sale or exchange and
assignment or other termination of such interest.
Article 40 - Merchant's Association.
- ------------------------------------
Lessee agrees to become a member of, and participate fully in, and remain
in good standing in any association (in the event such an association is
formed), organized for lessees occupying the Shopping Center, and Lessee will
abide by the regulations of such association; provided that lessees occupying
not less than sixty percent (60%) of the floor area in the Slopping Center are
members of the association. Default in payment of dues or assessments shall be
treated in similar manner to default in rent with like rights of Lessor at its
option to the collection thereof on behalf of the association.
Article 41 - Force Majeure.
- ---------------------------
If either party, except as otherwise herein specifically provided, shall be
delayed or hindered in or prevented from the performance of any act required
hereunder by reason of strikes, lockouts, labor troubles, inability to procure
materials, failure of power, restrictive governmental laws or regulations,
riots, insurrection, war or other reason of a like nature not the fault of the
party delayed in performing work or doing acts required under the terms of this
Lease, then performance of such act shall be excused for the period of delay and
the period for the performance of any such act shall be extended for a period
equivalent to the period of such delay. In the event of any existence between
this Article and Exhibit "B" of this Lease, the provisions of this Article 41
shall prevail. The provisions of this Article shall not operate to excuse Lessee
from the prompt payment of basic rent, additional rent or any other payments
required by the terms of this Lease.
LESSOR INITIAL /S/
LESSEE INITIAL /S/
-15-
<PAGE>
Article 42 - Plats and Riders.
- ------------------------------
Clauses, plats, riders and addendums if any, affixed to this lease are a
part thereof.
Article 43 - Authorization.
- ---------------------------
If a corporation executes this Lease as Lessee, Lessee shall promptly
furnish Lessor certified corporate resolutions attesting to the authority of the
officer to execute this Lease on behalf of such corporation or in the
alternative, Lessee shall deliver this lease executed by two duly authorized
officers of Lessee's Corporation. Any parties executing this Lease on behalf of
Lessee hereby represent and warrant their full authorization and authority to
execute this Lease on behalf of Lessee hereby represent and warrant their full
authorization and authority to execute this Lease am behalf of Lessee and that
this Lease shall be binding and enforceable against Lessee.
Article 44 - Joint Obligation.
- ------------------------------
If there be more than one Lessee the obligations hereunder imposed shall be
joint and several.
Article 45 - Marginal Headings.
- -------------------------------
The headings and titles to the Articles of this Lease are not a part of
this Lease and shall have no effect upon the construction or interpretation of
any part hereof.
Article 46 - Time.
- ------------------
Time is of the essence of this Lease and each and all of its provisions in
which performance is a factor.
Article 47 - Successors and Assigns.
- ------------------------------------
The covenants and conditions herein contained, subject to the provision as
to assignments, apply to and bind the heirs, successors, executors,
administrators and assigns of the parties hereto.
Article 48 - Recordation.
- -------------------------
Neither Lessor nor Lessee shall record this Lease, but a short form
memorandum hereof any be recorded it the request of Lessor.
Article 49 - Quiet Possession.
- ------------------------------
Upon Lessee paying the rent reserved hereunder 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, free of interference by Lessor or those claiming by or
under Lessor, subject, however, to all of the provisions of this Lease.
Article 50 - Late Charges.
- --------------------------
Lessee hereby acknowledges that late payment by Lessee to Lessor of minimum
rent 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 any be imposed upon Lessor by
terms of any mortgage or trust deed covering the Premises. Accordingly, if any
installment of rent or any, sum due from Lessee shall not be received by Lessor
or Lessor's designee within ten (10) days after written notice that said amount
is past due, then, Lessee shall pay to Lessor a late charge equal to ten percent
(10%) of such overdue amount, plus any attorney's fees incurred by Lessor by
reason of Lessee's failure to pay rent and/or other charges when due hereunder.
The parties hereby agree that such late charges represent a fair and reasonable
estimate of the cost that Lessor will incur by reason of the late payment by
Lessee. Acceptance of such late charges by the 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. Lessor's election not to include a demand for the payment of any such
late charge in any notice to pay rent or quit shall not constitute a waiver by
Lessor of its right to collect any such late charge.
Article 51 - Prior Agreements.
- ------------------------------
This Lease contains all of the agreements between the parties hereto with
respect to any matter covered or mentioned in this Lease, and no prior
agreements or understanding pertaining to any such matters shall be effective
for any purpose. No provision of this Lease may be amended or added to except an
agreement in writing signed by the parties hereto or their respective successors
in interest. This Lease shall not be effective or binding on any party until
fully executed by both parties hereto.
LESSOR INITIAL /S/
LESSEE INITIAL /S/
-16-
<PAGE>
Article 52 - Inability to Perform.
- ----------------------------------
This Lease and the obligations of Lessee hereunder shall not be affected or
impaired because Lessor is unab1e to fulfill any of its obligations hereunder or
is delayed in doing so, if such inability or delay is caused by reason of
strike, labor troubles, acts of God, or any other cause beyond the reasonable
contro1 of Lessor.
Article 53 - Partial Invalidity.
- --------------------------------
Any provision of this Lease which shall prove to be invalid, void, or
illegal shall in no way affect, impair or invalidate any other provision hereof
and such other provision shall remain in full force and effect.
Article 54 - 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.
Article 55 - Choice of Law.
- ---------------------------
This Lease shall be governed by the laws of the State of California.
Article 56 - Legal Expenses.
- ----------------------------
Lessee shall pay to Lessor all amounts for costs (including reasonable
attorneys' fees) incurred by Lessor in connection with any breach or default by
Lessee under this Lease or incurred in order to enforce or interpret the terms
or provisions of this Lease. Such amounts shall be payable upon demand. In
addition, if any action shall be instituted by either of the parties hereto for
the enforcement or interpretation of any of its rights or remedies in or under
this Lease, the prevailing party shall be entitled to recover from the losing
party all costs incurred by the prevailing party in said action and any appeal
therefrom, including reasonable attorneys' fees to be fixed by the court
therein. Said costs and attorneys' fees shall be included as part of the
judgement in any such action. For purposes of this provision, in any unlawful
detainer or other action or proceeding instituted by Lessor based upon any
default or alleged default by Lessee hereunder, Lessor shall be deemed the
prevailing party if (a) judgement is entered in favor of Lessor or (b) prior to
trial or judgment Lessee pays all or any portion of the rent and charges claimed
by Lessor, eliminates the condition(s), ceases the act(s), condition(s) or
omission(s) claimed by Lessor to constitute a default by Lessee hereunder.
Further, should Lessor be made a party to any litigation between Lessee and any
third party, then Lessee shall pay all costs and attorneys' fees incurred by or
imposed upon Lessor in connection with such litigation. The obligation for legal
fees and expenses, hereunder, shall extend to any claim or action filed by
Lessor as a result of a bankruptcy or insolvency proceeding filed by or on
behalf of Lessee.
Article 57 - Annexation.
- ------------------------
Lessor reserves the right from time to time to annex additional real
property in the Shopping Center by giving written notice of such annexation to
Lessee, and, in such event, the term "Shopping Center" as used herein shall mean
both the real property shown on the attached Exhibit "A" and any such additional
property.
Article 58 - Subdivision.
- -------------------------
Lessee acknowledges that Lessor may attempt to obtain the recordation of a
parcel or final map dividing the Shopping Center into lots or parcels and agrees
to join in executing any certificates or other documents required in connection
therewith; provided that this Article shall not be construed as obligating
Lessee to incur any expense or to agree to incur any expense in connection
therewith.
Article 59 - Subordination, Attornment.
- ---------------------------------------
Upon request of the Lessor, Tenant will in writing subordinate its rights
hereunder to the lien of any mortgage, or deed of trust, to any bank, insurance
company or other lending institution, now or hereafter in force against the
Premises, and to all advances made or hereafter to be made upon the security
thereof.
In the event any proceedings are brought for foreclosure, or in the event
of the exercise of the power of sale under any mortgage or deed of trust made by
the Lessor covering the Premises, the Lessee shall. attorn to the purchaser upon
any such foreclosure of sale and recognize such purchaser as the Lessor
LESSOR INITIAL /S/
LESSEE INITIAL /S/
-17-
<PAGE>
under this Lease. In the event that this lease is a sublease, Lessee further
agrees to attorn to any lessor of Lessor upon a termination of Lessor's
leasehold estate.
The provisions of this Article to the contrary notwithstanding, and so long
as Lease is not in default hereunder, this Lease shall remain in full force and
effect for the full term hereof, notwithstanding the foreclosure of any deed
trust or mortgage to which Lessee has subordinated this Lease.
Article 60 - Notices.
- ---------------------
All notices and demands which may or are to be required or permitted to be
given by either party on the other hereunder shall be in writing. All, notices
and demands by the Lessor to the Lessee shall be sent by registered or certified
mail, postage prepaid, addressed to the Lessee at the address set forth in
Paragraph I of the Basic Lease Provisions, or to such other place as Lessee may
from time to time designate in a notice to the Lessor. All notices and demands
by the Lessee to the Lessor shall be sent by registered or certified mail,
postage prepaid, addressed to the Lessor at the addressees set forth in
Paragraph I of the Basic Lease Provisions, and to such other persons or places
as the Lessor may from time to time designate in a notice to the Lessee.
Article 61- Restriction on Rental Increase.
- -------------------------------------------
In the event that at any time during the term of this Lease, any
governmental law, rule or regulation prohibits or postpones, in whole or in
part, any increase in the minimum rent or other sums payable by Lessee hereunder
to be made pursuant to this Lease, then, and in either of such events, such
increase shall be made to the maximum extent permissible by law at the time
provided in this Lease, and/or at any or times thereafter such increase, or any
portion thereof, any lawfully be made and any such increase in the minimum rent,
or any portion thereof, or other sums payable hereunder, or portions thereof,
the payment of which has been so prohibited or postponed, shall thereafter
become due and payable to the maximum extent and at the earliest time or times
permitted by law.
Article 62 - Broker.
- --------------------
The parties recognize as the broker(s) who negotiated this Lease the party
or parties whose name or names are stated in paragraph K of the Basic Lease
Provisions, and agree that Lessor shall be solely responsible for the payment of
brokerage commissions to said broker(s) and that Lessee shall have no
responsibility therefor unless written provision to the contrary has been made.
Lessees represents and warrants that it has not dealt with or employed any
broker or agent as its representative in the negotiation for or the obtaining of
this Lease other then the broker, if any, listed in said paragraph K as its sole
and exclusive agent (if any), and agrees to indemnify and hold harmless Lessor
against all costs or liability for compensation claimed by any broker or agent
(other than the broker, if any, listed in said paragraph K as it sole and
exclusive agent (if any) and all attorneys' fees expended in connection
therewith.
Article 63 - Limited Liability.
- -------------------------------
Notwithstanding anything in this Lease to the contrary, from and after the
commencement date of the term of this Lease, Lessee agrees that it shall look
solely to the estate and property of Lessor in the land and buildings comprising
the Shopping Center and, subject to prior rights of any holder of any mortgage
or deed of trust, for the collection, satisfaction or enforcement of any
judgement (or other judicial or administrative process) requiring the payment of
money or the performance or nonperformance of certain acts by Lessor in the
event of any default or breach by Lessor with respect to any of the terms,
covenants and conditions of this Lease to be observed and/or performed by
Lessor, and not other assets of Lessor shall be subject to levy, execution or
other procedures for the satisfaction of any remedy, judgement, or order of
Lessee.
Article 64 - Entire Agreement.
- ------------------------------
This Lease constitutes the entire agreement between Lessor and Lessee and
all prior negotiation, representations and understandings are merged into and
superseded by this Lease. No amendment or modification of this lease shall be
binding unless in writing and signed by the parties hereto.
LESSOR INITIAL /S/
LESSEE INITIAL /S/
-18-
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this Lease as of the
day and year first above written.
THIS LEASE SHALL NOT BECOME EFFECTIVE UNTIL EXECUTED BY LESSOR AND DELIVERED TO
LESSEE AND THE SUBMISSION OF THIS FORM OF LEASE TO LESSEE BY LESSOR, OR LESSOR'S
AGENT, DOES NOT CONSTITUTE AN OFFER TO LEASE. NO EMPLOYEE OR AGENT OF LESSOR OR
ANY PERSON WITH WHOM LESSEE MAY HAVE NEGOTIATED THIS LEASE HAS ANY AUTHORITY TO
MODIFY THE TERMS HEREOF OR TO MAKE ANY AGREEMENTS, 1~EPRESENTATIONS, OR PROMISES
UNLESS THE SAME ARE CONTAINED HEREIN OR ADDED HERETO IN WRITING.
LESSOR: Robert Crane, Receiver, under Case No. 713942, State of California,
superior Court, County of Orange
BY: /s/ Robert Crane DATE: 2-8-95
--------------------------- -------------------
Robert Crane, Receiver
LESSEE: Leonard Liebrand, Dba; Futon World
BY: /s/ Leonard Liebrand DATE: 2-7-95
--------------------------- -------------------
Leonard Liebrarid
-19-
<PAGE>
Exhibit "A"
-----------
Premises Location
&
Project Site Map
[picture of premises location here]
LESSOR INITIAL /S/
LESSEE INITIAL /S/
<PAGE>
Exhibit "B"
TUSTIN FREEWAY CENTER
MASTER SIGN PROGRAM
I. INTRODUCTION:
The purpose of the attached criteria is to establish sign standards
necessary to balance maximum tenant identification within an overall harmony of
design for the project.
The criteria has been designed to give tenants flexibility in personalizing
their own identity and to allow for creativity in sign design. However, since
deviations from the criteria would be on injustice to all other tenants who
comply, conformance to the criteria will be strictly enforced. In the interest
of the center, any installed non-conforming or unapproved signs shall be brought
into conformance at the expense of the tenant.
II. SIGNAGE:
A. General Requirements:
1. All work to be performed by a professional sign company. Said sign
company must be in possession of a current contractors license to perform such
work. (C-45 License).
2. Each tenant shall submit or cause to be submitted to the Landlord
for approval before fabrication at least two copies of detailed drawings
indicating the location, size, layout, design and color of the proposed signs,
including all lettering and/or graphics. These drawings should be submitted
along with plot plan and elevation.
3. All permits required by the City of Tustin for signs and their
installation must be obtained by the tenant or the tenant's representative prior
to installation.
4. All signs must comply with the City of Tustin zoning, building, and
electrical codes.
5. All signs shall be reviewed and approved in writing by the Landlord
for conformance with this criteria and overall design quality as well as
tenant's lease agreement. Approval or disapproval of sign submittal based on
aesthetics of a design shall remain the sole right of the Landlord.
6. All building signs shall be constructed and installed at tenant's
expense. Tenant is also responsible for the maintenance of building signs.
7. Co-operative tenant advertising, signing or seasonal event signing
shall be considered special event signs and require separate sign permits from
the City of Tustin.
8. In the event a tenant vacates his premises, the tenant shall provide
a blank panel for any monument sign occupied by the tenant. Tenant shall also be
responsible for the removal of any wall sign, with all holes being repaired and
repainted to match the building exterior.
9. Wording of signs shall not include the product sold except as part
of the tenant name, insignia, or dba.
10. Tenant's sign contractor shall repair any damage to any work caused
by his actions. Incomplete repairs become the responsibility of the tenant.
11. Upon notice of the City of Tustin or the Landlord, a tenant shall
be required to repair or refurbish their own structure, sign face and/or sign
illumination within seven (7) working days.
l2. No animated, flashing, audible off-premise or vehicle signs are
permitted.
13. No exposed lamps or tubes will be permitted.
14. Window signing will be allowed, per Landlord's approval.
15. All conduits, raceways, transformers, junction boxes, openings in
the building surface, etc. shall be concealed. If canopy architecture prohibits
concealing hardware, it shall be enclosed in a manner consistent with quality
fabrication practices, and painted-out to match the building color. The method
of installation shall be approved by the City of Tustin and the Landlord.
16. Tenant's contractor shall completely install and connect sign
display including primary wiring, from Tenant's electrical sub-panel to J-box at
sign location. J-box will be installed by the Landlord.
17. All exterior letters exposed to the weather will not be directly
flush mounted to wall surface, but will be pegged-off (1/2") typically, while
maintaining a level, consistent right angle to the wall surface. They shall be
neatly in a watertight condition and all bolts, fastenings, and clips shall be
of hot- dipped galvanized iron, stainless steel, or other non-corrosive
material.
18. Internal illumination to be a minimum of 30 mill-amp neon gas
system, labeled in accordance with the "National Board of Fire Underwriters
Specifications".
19. No labels or other identification will be permitted on the exposed
surface of the sign except those required by local ordinance.
20. The tenant shall be fully responsible for the operations of his
sign contractor and shall indemnify, defend and hold harmless the Landlord and
his agents from damages or liabilities resulting from his contractor's work.
-1-
<PAGE>
Exhibit "B"
-----------
Sign Type C:
Double face sandblasted wood arcade sign. For all "in-line" tenants within the
project where covered arcade exists. Signs to be installed perpendicular to
respective shop entrance, on-center to the primary entry door(s). Sign to be
suspended by means of a typical metal bracket (as shown of exhibits, page 1) and
finished it, a typical manner as specified on exhibits. Size: 1'-O" x 2'-6".
Size and shape of sign, as well as sign colors, to be typical as specified on
exhibits.
Graphics/letterstyle open to tenant, subject to Landlord approval.
Tenant shall have the option to be included on the monument sign if space is
available.
II. TENANT SIGN TYPES
B. Tenant Sign Types:
Sign Type A:
Internally illuminated lens sign at North & East facing elevations of Buildings
A, B, & D. Installed on center with the respective shop entrance, centered
horizontally and vertically on building fascia. Size: 2'-0" x 12'-0".
Simulated ceramic tile sign face, pointed with automotive enamels in a typical
color as specified on exhibits. Dimensional, decorative border typical color as
shown on exhibits, sheet 1.
Sign Type A-1:
One interior illuminated "custom" lens sign at Tower locations facing the
parking lot; of buildings A, B, & D. (See sample elevation exhibit, sheet 1).
Installed on center of the respective tower. Size: 3'-0" x 16'-0".
Simulated ceramic tile sign face, pointed with automotive enamels in a typical
color as specified on exhibits.
Sign Type B:
One interior illuminated pan channel letters with translucent faces for direct
illumination for freeway-facing elevations for buildings A & B. Signs will be
installed on both the parapet towers (one sign per tower), and the tower fascia
band (see elevation exhibit, sheet 1). At parapet locations, sign length is not
to exceed 20 feet, with letters centered both horizontally end vertically as
shown on exhibits. At fascia bond locations, sign will be centered horizontally
on each stretch of architecturally unbroken fascia (see building contour on site
plan exhibit, sheet 2), one sign per section. (Total of 3 signs, building A; 4
signs building B). Length of signs at fascia band are not to exceed 50% of the
unbroken fascia length, or 35 feet, whichever is less.
In all cases, letter size Is not to exceed 30 inches. No stacked letters; one
line of copy only. Sign Letters will typically have a 5 inch deep sheet metal
return with pointed anodized bronze finish, Dupont 42863-D.
LESSOR INITIAL /S/
LESSEE INITIAL /S/
<PAGE>
EXHIBIT "C"
RULES AND REGULATIONS
SHOPPING CENTER
Lessor hereby established the following rules and regulations for the safety,
core and cleanliness of (i) the store areas (hereinafter referred to as the
"demised premises") of any lessee or lessees of the Shopping Center (hereinafter
referred to as the "Lessee"), (ii) the common area; and (iii) the Shopping
Center in general, or for the preservation of good order:
A. FOR THE STORE AREAS:
1. All floor areas of the demised premises (including vestibules,
entrances, and air returns), doors, fixtures, windows, and plate glass shall be
maintained in a clean, safe and good condition.
2. All trash, refuse, and waste materials shall be stored in adequate
containers and regularly removed from the demised premises. These containers
shall not be visible to the general public and shall not constitute a health or
fire hazard, or a nuisance to any other Lessee. In the event that any lessee
shall fail to remedy such a health or fire hazard, or nuisance, within five (5)
days after written notice by Lessor, Lessor may remedy and/or correct such
health or fire hazard or nuisance at the expense of the Lessee involved.
3. No portion of the demised premises shall be used for lodging
purposes.
4. Neither sidewalks nor walkways shall, be used to display, store, or
place any merchandise, equipment or devices, except in connection with sidewalk
sales held with Lessor's prior written approval. The roof of the demised shall
not be used for the storage of merchandise or equipment.
5. No public telephone, newsstand, shoeshine stand, refreshment,
vending or other coin operated machine shall be installed or placed on the
sidewalk or walkway area adjacent to the demised premises or on the common areas
without Lessor's prior written approval in each instance.
6. No person or persons shall use the demised premises, or any port
thereof, for conducting therein a second-hand store, auction, distress or fire
sale or bankruptcy sale, or "going-out-of-business" sale or "lost our lease"
sale, without Lessor's prior written consent.
7. No portion of the demised premises shall be used for the storage of
any merchandise, materials or other properties, other than those reasonably
necessary for the operation of a Lessee's business. Lessor may, from time to
time, inspect the demised premises to insure compliance with the foregoing
provisions.
8. Except for professionally prepared signs, lessee shall not black out
or otherwise obstruct the windows of the demised premises, without Lessor's
prior written consent.
9. If a tenant provides its customers with the use of shopping carts
and/or baskets, such Lessee shall be responsible for causing said carts and/or
baskets to be stored only in areas designated by Lessor. If such Lessee fails to
routinely collect and store said carts as necessary (at least twice on a daily
basis), Lessor may assume the responsibility of same and may bill the Lessee
involved on an estimated monthly basis for such service.
B. FOR THE COMMON AREAS:
1. All Lessees and their authorized representatives and invitees shall
use any roadway, walkway, or mail (including the enclosed mail if any) only for
ingress and egress from the stores in the Shopping Center. Use of the common
areas shall be in an orderly manner in accordance with directional or other
signs or guides. Roadways small not be used at a speed in excess of ten (10)
miles per hour and shall not be used for parking or stopping except for the
immediate loading or unloading of passengers. Walkways and malls (including the
enclosed mall, if any) shall be used only for pedestrian travel.
2. All Lessees and their authorized representatives and invitees shall
not use the parking areas for anything but parking motor vehicles. All motor
vehicles shall be parked in an orderly manner within the painted lines defining
the individual parking places. During peak periods of business activity, Lessor
can impose any and all controls Lessor deems necessary to operate the parking
lot including but not limited to the length of time for parking use.
3. No person shall use any utility area or truck loading area reserved
for use in conducting business, except for the specific purpose for which
portion salon to use these areas has been given.
4. No employee shall use any area for motor vehicle parking except the
area specifically designated for employee parking for the particular period of
time the use of to be made. No Lessee shall designate an area for employee
parking except the area designated in writing by Lessor.
5. Without the prior written consent of Lessor, no person shall use any
of the common areas for:
a. Vending, peddling or soliciting orders for sale or distributing
of any merchandise, devices, services periodical, book, pamphlet, or other
matter;
1
<PAGE>
Exhibit "C"
-----------
b. Exhibiting any non-professional sign, placard, banner, notice
or other written material;
c. Distributing any circular, booklet, handbill, placard, or other
material;
d. Soliciting membership in any organization, group, or
association, or soliciting contributions for any purpose;
e. Parading, patrolling, picketing, demonstrating, or engaging in
conduct that might interfere with the use of the common areas or be detrimental
to any of the business establishments in the Shopping Center;
f. Using the common areas for any purpose when none of the
business establishments in the shopping Center is open for business;
g. Discarding any paper, glass, or extraneous litter of any kind
except in designated receptacles
h. Except for normal and customary sound devices for Lessee's
drive-thru facilities, using a sound-making device that is grossly annoying or
unpleasant to the general public; or
i. Damaging any sign, light standard, or fixture, landscaping
material or other improvement or property within the Shopping Center.
The above listing of specific prohibitions is not intended to be exclusive, but
is intended to indicate the manner in which the right to use the common areas
solely as a means of access and convenience in shopping at the business
establishments in the Shopping Center is limited and controlled by Lessor.
Lessee acknowledges receipt of those roles and regulations as of this 7th day of
February, 1995
LESSOR INITIAL /S/
LESSEE INITIAL /S/
2
<PAGE>
EXHIBIT D
There are no improvements to be made and Lessee accepts the premises in "As Is"
condition, with the exception of the following:
a) Lessor shall repair any existing roof leaks and replace damaged ceiling
tiles for the Premises.
Lessor acknowledges Lessee's desire to construct an interior storage room in the
Premises as well as a paved exterior access sidewalk running from the rear
(freeway side) of the Premises in a westerly direction along the rear (freeway
side) of the Project, to west side of the Project at B Street/Nisson Road.
All costs associated with the design, permits and construction of this, or any
additional, improvements shall be at the sole cost and expense of the Lessee.
Lessee shall obtain Lessor's prior written approval on all plans and permits of
any work to be performed on or about the Premises.
Lessee, at its sole cost and expense for installation, maintenance and removal,
shall be allowed to replace its' existing parking lot tenant sign with a sign
similar to that sign(s) facing the freeway. Any sign replacement shall be
subject to obtaining the written approval from the city of Tustin and the lessor
prior to installation.
LESSOR INITIAL /S/
LESSEE INITIAL /S/
<PAGE>
RIDER NO. 1
-----------
Increases in Basic Rental
- -------------------------
Notwithstanding anything in the Lease to the contrary, the monthly rental
as set forth in paragraph E of the Basic Lease Provisions shall be increased in
the following manner:
(a) To Three Thousand Six Hundred Seventy Five and No/100 Dollars
($3,675.00) commencing with the thirteenth (13th) month of the Lease term.
(b) To Three Thousand Eight Hundred Ninety Five and 50/100 Dollars
($3,895.50) commencing with the twenty fifth (25th) month of the Lease
term.
(c) To Four Thousand One Hundred Sixty Eight and 19/100 Dollars
($4,168.19) commencing with the thirty seventh (37th) month of the Lease
term.
(d) To Four Thousand Five Hundred Eighty Five and No/100 Dollars
($4,585.00) commencing with the forty ninth (49th) month of the Lease term
and continuing thereafter until termination of the Basic Lease Term.
LESSOR INITIAL /S/
LESSEE INITIAL /S/
<PAGE>
RIDER NO. 2
-----------
Americans with Disabilities Act Disclosure
- ------------------------------------------
The United States Congress has recently enacted the Americans With
Disabilities Act. Among other things, this act is intended to make many business
establishments equally accessible to persons with a variety of disabilities;
modifications to real property may be required. State and local laws also may
mandate changes.
Mandated changes may be required now, or in the future. Lessees should
consult attorneys and qualified design professionals of their choice for
information regarding these matters.
"Without limiting the generality of the foregoing, Lessee acknowledges he
shall comply with all governmental rules, regulations, or requirements regarding
environmental laws within the rentable space they currently occupy and Americans
with Disabilities Act."
LESSOR INITIAL /S/
LESSEE INITIAL /S/
<PAGE>
RIDER NO. 3
-----------
Hazardous Waste
- ---------------
Lessee, at is sole cost and expense, shall comply with all laws, rules,
regulations, orders and the like relating to the storage, use and/or disposal of
hazardous, toxic or radioactive matter, including those materials identified in
Sections 66680 through 66685 of Title 22 of the California Administrative Code,
Division 4, Chapter 30 ("Title 22") as amended from time to time (collectively
"Toxic Materials"). Lessee shall not cause or permit any Toxic Materials to be
brought upon, kept, stored, used or disposed of in or about the Premises or the
parking facilities or common areas serving the Premises by Lessee, its agents,
employees, contractors or invitees, without the prior written consent of
Landlord, which consent Lessor may withhold in its sole discretion. Lessee's
breach of the covenants contained herein shall constitute a material default
under this Lease. Lessee shall be solely responsible for and shall defend,
indemnify and hold Lessor, Lessor's agents and the Premises harmless from and
against all claims, costs and liabilities, including attorney's fees and costs,
arising out of or in connection with the removal of Toxic Materials from the
Premises arid/or any adjacent property or the clean-up of the Premises and/or
any adjacent property, including without limitation, to any and all restoration
work and materials necessary to return the Premises and any other property of
whatever nature to their condition existing prior to the appearance of the Toxic
Materials on the Premises. Lessee's obligations hereunder shall survive the
termination of this Lease.
LESSOR INITIAL /S/
LESSEE INITIAL /S/
<PAGE>
RIDER NO. 4
-----------
Exclusive Use:
- --------------
Lessor agrees that it shall not lease any other premises on the Property, or
portion of the Property, shown on Exhibit "A", to another business whose primary
function would directly conflict with Lessee's permitted use of the Premises as
outlined in Paragraph "B" of the "Basic Lease Provisions".
The Exclusive Use shall not apply to a Furniture retailer who also sell bedroom
furnishings, but shall exclude such a user from selling Futon bedding and
frames.
LESSOR INITIAL /S/
LESSEE INITIAL /S/
<PAGE>
RIDER NO. 5
-----------
Option to Lease.
- ----------------
This option to extend is personal to Lessee and not to any assignee or
sublessee. Lessee shall have the option to lease the Premises for the thirty six
(36) month period immediately following the expiration of the term of this Lease
upon the same terms, provisions, and conditions except rent. This option shall
be binding on and effective between the parties hereto, provided that:
(i) Lessee shall give Lessor one hundred eighty (180) days and not less
then ninety (90) days written notice prior to the expiration of the term of
this Lease of Lessee's election to exercise the option;
(ii) No "Event of Default" (as defined in Article 24 of this Lease) exists
or occurs after the delivery of the Notice given pursuant to (1) above; and
(iii) Rent Determination During Option Period. All provisions of the Lease,
this Rider and all other exhibits to this Lease shall continue in full
force and effect during the Option Period; provided, however that the Basic
Monthly Rent for the initial year of the Option Period shall be the
"Prevailing Market Rent" (as such term is defined below). Lessor and Lessee
shall have thirty (30) days following the exercise of the Option in which
to agree as to the Prevailing Market Rent for the Premises as of the first
month of the Option Period. In the event Lessor and Lessee are unable to
agree on the Prevailing Market Rent within such thirty (30) day period, the
Prevailing Market Rent shall be determined as follows:
A. Within fifteen (l5) days following the expiration of such thirty
(30) day period for Lessor and Lessee to agree on the Prevailing Market
Rent for the Premises, Lessor and Lessee shall each give written notice to
the other designating by name, address and telephone number an MAI
appraiser familiar with office building rentals in the "Comparison Area"
described below. Within fifteen (15) days following the selection of the
second appraiser to be designated, the first two (2) appraisers shall
select a third MAI appraiser. The employment of each appraiser shall be
conditioned on such appraiser's agreement
LESSOR INITIAL /S/
LESSEE INITIAL /S/
-1-
<PAGE>
(Rider No. 5 continued)
to comply with the provisions of this Rider. Within thirty (30) days after the
selection of the third appraiser, the three (3) appraisers so selected shall
determine the Prevailing Market Rent for the Premises and each shall notify
Lessor and Lessee in writing within such thirty (30) day period of the
Prevailing Market Rent for the Premises determined by such appraisal. The
Prevailing Market Rent for the Premises shall be determined by such appraisal.
The Prevailing Market Rent for the Premises shall be determined by applying the
following criteria:
(i) The Prevailing Market. Rent shall be based on the gross monthly
rent projected to be paid by tenants as of the first day of the Option
Period, based on the leases executed not earlier than six (6) months prior
to the date the appraisers shall meet, for buildings comparable to the
Building in size, quality, age and amenities, for premises which are
comparable to the Premises in size (plus or minus 20%), height, location,
and cosmetic condition, and with comparable tenant improvements as are in
the Premises (regardless of whether paid for by Lessor or Lessee),
(collectively referred to herein as "PMR Criteria"), for buildings which
are within the geographic area of the Building (the "Comparison Area")
(ii) Following the first year of the Option Period, the Basic Monthly
Rent then in effect shall be subject to Rent escalation, if any, based on
formulae being employed at the time of such appraisal in comparable
buildings within the comparison Area, such as but not limited to cost of
living increases.
B. The two MAI appraisals for the Prevailing Market Rent which
arithmetically are the closest shall be added together and divided by two (2).
The third appraisal shall be disregarded. The quotient so derived shall be the
initial Basic Monthly Rent for the Option Period. Notwithstanding any provision
of this Rider, however, the Basic Monthly Rent during the first month of the
Option Period shall in no event be less than the Basic Monthly Rent during the
last month of the original Lease Term.
LESSOR INITIAL /S/
LESSEE INITIAL /S/
-2-
<PAGE>
(Rider No. 5 continued)
C. In addition to Basic Monthly Rent, Lessee shall be obligated to pay
Lessee's Proportionate Share of the Costs of Operation and Maintenance of the
Building during the Option Period. The Base Costs shall be reestablished for the
Option Period as Lessor's actual Costs of Operation and Maintenance of the
Building per square foot during the calendar year that the Option Period
commences.
D. Lessor and Lessee shall each pay the cost and fees of the appraiser
selected by it. Lessor and Lessee shall share equally the cost and fees of the
third appraiser. In the event that either Lessor or Lessee does not identify an
appraiser within the first fifteen day (15) period set forth in A above, the
appraiser appropriately and timely identified shall alone render the appraisal
based on the PMR Criteria.
LESSOR INITIAL /S/
LESSEE INITIAL /S/
-3-
<PAGE>
RIDER NO. 6
-----------
Previous Lease Termination.
- ---------------------------
That certain Lease dated June 15, 1992 by and between DEV IX/TUSTIN FREEWAY
CENTER ASSOCIATES, A CALIFORNIA LIMITED PARTNERSHIP, as Landlord and Len
Liebrand, as Tenant shall terminate upon the commencement date of this Lease.
Lessor agrees to allow Lessee to continue to use 14061 Newport Avenue, Suite C,
Tustin, CA for an additional sixty (60) days, from the execution date of this
Lease by Lessor, at n~ charge for the exclusive use of storage facilities only.
Lessor reserves the right to gain access for the express purpose of marketing
Suite C to any prospective users. Lessee shall agree to keep a key available to
Lessor in the Premises at all times during Lessee's normal business hours for
Lessor's use to show Suite C.
In the event the Lessor enters into a lease with a prospective user for Suite C,
within the aforementioned sixty (60) day period, Lessee shall be allowed to
relocate its storage requirements to a vacant suite as designated by Lessor for
the balance of time remaining on the original sixty (60) day period.
LESSOR INITIAL /S/
LESSEE INITIAL /S/
<PAGE>
GUARANTEE OF LEASE
- ------------------
WHEREAS, a certain Lease dated January 25, 1995 herewith has been, or
will be executed by and between Robert Crane, Receiver, under Case No. 713942,
State of California, superior Court, County of Orange, therein and herein
referred to as "Lessor", and Leonard Liebrand, Dba; Futon World therein referred
to as "Lessee" covering certain premises in the City of Tustin, County of
Orange, State of California; known as Tustin Freeway Center, located at 14061
Newport Avenue, Suite A, consisting of Total Floor Area of approximately 4,269
square feet.
WHEREAS, the Lessor under said Lease required as a condition to its
execution of said Lease that the undersigned guarantee the cull performance of
the obligations of Lessee under said Lease; and
NOW, THEREFORE, in consideration of the execution of said Lease by
Lessor, the undersigned hereby unconditionally guarantees the full performance
of each and all of the terms, covenants and conditions of said Lease to be kept
and performed by said Lessee, including the payment of all rentals and other
charges to accrue thereunder. The undersigned further agrees as follows:
1. That this covenant and agreement on its part shall continue in favor
of the Lessor, notwithstanding any extension, modification or alteration of said
Lease entered into by and between the parties thereto or their successors or
assigns, or notwithstanding any assignment of said Lease, with or without the
consent of the Lessor, and no extension, modification, alteration or assignment
of the above referred to Lease shall in any manner release or discharge the
undersigned, and it does hereby consent thereto.
2. This Guarantee will continue unchanged by any bankruptcy,
reorganization or insolvency of the Lessee or any successor or assignee thereof
or by any disaffirmance or abandonment by a trustee of Lessee.
3. Lessor may, without notice, assign this Guarantee of Lease in whole
or in part and no assignment or transfer of the Lease shall operate to
extinguish or diminish the liability of the undersigned hereunder.
Page of 1 of 2
LESSOR INITIAL /S/
LESSEE INITIAL /S/
<PAGE>
4. The liability of the undersigned under this Guarantee of Lease shall
be primary and that in any right of action which shall accrue to Lessor under
the Lease, the Lessor may, at its option, proceed against the undersigned
without having commenced any action or having obtained any judgment against the
Lessee.
5. To pay Lessor's reasonable attorney's fees and all costs and other
expenses incurred in any collection or attempted collection or in any
negotiations relative to the obligations hereby guaranteed or enforcing this
Guarantee of Lease against the undersigned, individually and jointly.
6. That it does hereby waive notice of any demand by the Lessor as well
as any notice of default in the payment of rent or any other amounts contained
or reserved in the Lease.
The use of the singular herein shall include the plural. The obligation
of two or more parties shall be joint and several. The terms and provisions of
this Guarantee shall be binding upon and inure to the benefit of the respective
successors and assigns of the parties herein named.
IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be executed as
of the date first written above.
GUARANTOR:
BY: /s/ Leonard Liebrand DATE: 3-7-95
------------------------------- --------------------
Leonard Liebrand
Residence:
114 Roosevelt Street
Irvine, CA 92720
(714) 786-4506
Page 2 of 2
<PAGE>
LEASE
(GENERAL FORM)
1. PARTIES. This Lease, dated, for reference purposes only, October 11, 1993, is
made by and between PERLIN DEVELOPMENT & ENGINEERING CORP. (herein called
"Landlord" or "Lessor") LEONARD LIEBRAND, AN INDIVIDUAL DBA "FUTON WORLD"
(herein "Tenant" or "Lessee").
2. PREMISES. Landlord hereby leases to Tenant and Tenant leases from Landlord
for the term at the rental, and upon all of the conditions set forth herein,
that certain real property situated in the City of Westminster, County of
Orange, State of California commonly (known as 16591 Magnolia Street and
described as SEE ATTACHED LEGAL DESCRIPTION (EXHIBIT "A")
Said real property, including the land and all improvements thereon, is herein
called "the Premises".
3. TERM.
3.1 Term. The term of this Lease shall be for Five years, commencing on
March 1, 1994 and ending on February 28, 1999 unless sooner terminated pursuant
to any provision hereof.
3.2 Delay in Commencement. Notwithstanding said commencement date, if for
any reason Landlord cannot deliver possession of the Premises to Tenant on said
date, Landlord shall not be subject to any liability therefor, nor shall such
failure affect the validity of this Lease or the obligations of Tenant hereunder
or extend the term hereof, but in such case Tenant shall not be obligated to pay
rent until possession of the Premises is tendered to Tenant;
See Article 26 for option to renew
3.3 Early Possession. In the event that Landlord shall permit Tenant to
occupy the Premises prior to the commencement date of the term, such occupancy
shall be subject to all of the provisions of this Lease. Said early possession
shall not advance the termination date of this Lease.
3.4 Delivery of Possession. Tenant shall be deemed to have taken possession
of the Premises when any of the following occur: (a) Landlord delivers
possession of the premises to Tenant and a Certificate of Occupancy is granted
by the proper governmental agency, or (b) upon a Certificate from the Landlord's
architect or contractor that the Premises are ready for occupancy.
4. RENT.
4.1 Tenant shall pay to Landlord as rent for the Premises equal monthly
installments of Four Thousand Seven Hundred Fifty Dollars & 00/100 ($4750.00)
Dollars, in advance, on the first day of each month of the term hereof. Tenant
shall pay Landlord upon the execution hereof the sum of Four Thousand Seven
Hundred Fifty ($4750.00) Dollars as rent for Rental for early possession, if
any, is waived.
Rent for any period during the term hereof which is for less than one month
shall be a pro rata portion of the monthly installment. Rent shall be payable
without notice or demand and without any deduction, offset, or abatement in
lawful money of the United States of America to Landlord at the address stated
herein or to such other persons or at such other places as Landlord may
designate in writing.
4.2 Additional Charges. This Lease is what is commonly called a "net
lease", it being understood that Landlord shall receive the rent set forth in
Article 4.1 free and clear of any and all impositions, taxes, real estate taxes,
liens, charges or expenses of any nature whatsoever in connection with the
ownership and operation of the Premises. In addition to the rent reserved by
Article 4.1, Tenant shall pay to the parties respectively entitled thereto all
impositions, insurance premiums, operating charges, maintenance charges,
construction costs, and any other charges, costs and expenses which arise or may
be contemplated under any provisions of this Lease during the term hereof. All
of such charges, costs and expenses shall constitute additional charges, and
upon the failure of Tenant to pay any of such costs, charges or expenses,
Landlord shall have the same rights and remedies as otherwise provided in this
Lease for the failure of Tenant to pay rent. It is the intention of the parties
hereto that this Lease shall not be terminable for any reason by the Tenant and
that the Tenant shall in no event be entitled to any abatement of or reduction
in rent payable hereunder, except as herein expressly provided. Any present or
future law to the contrary shall not alter this agreement of the parties.
5. SECURITY DEPOSIT. Tenant shall deposit with Landlord upon opening for
business the sum of FOUR THOUSAND SEVEN HUNDRED FIFTY DOLLARS & 00/100 (4750.00)
Dollars as security for Tenant's faithful performance of Tenant's obligations
hereunder. If Tenant fails to pay rent or other charges due hereunder or
otherwise defaults with respect to any provision of this Lease, Landlord 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
Landlord may become obligated by reason of Tenant's default, or to compensate
Landlord for any loss or damage which Landlord may suffer thereby. If Landlord
so uses or applies all or any portion of said deposit Tenant shall within ten
(10) days after written demand therefor deposit cash with Landlord in an amount
to restore said deposit full amount hereinabove stated and Tenant's failure to
do so shall be a breach of this Lease, and Landlord may at his option terminate
this Lease. Landlord shall not be required to keep said deposit separate from
its general accounts. If Tenant performs all of Tenant's obligations hereunder,
said deposit or so much thereof as had not theretofore been applied by Landlord,
shall be returned, without payment of interest or other increment for its use,
to Tenant (or, at Landlord's option, to the last assignee, if any, of Tenant's
interest hereunder) within fifteen (15) days after the expiration of the term
hereof, or after Tenant has vacated the Premises, whichever is later.
6.1 Use. The Premises shall be used and occupied only for FUTON AND RELATED
FURNITURE &/OR ACCESSORIES STORE.
6.2 Compliance with Law. Tenant shall, at Tenant's expense comply promptly
with all applicable statutes, ordinances rules, regulations, orders and
requirements in effect during the term or any part of the term hereof regulating
the use by Tenant of the Premises. Tenant shall not use or permit the use of the
Premises in any manner that will tend to create waste or nuisance or, if there
shall be more than one tenant of the building con
[PAGE 1 NET-NET-NET]
<PAGE>
the Premises, which shall tend to unreasonably disturb such other tenants.
6.3 Condition of Premises. Tenant hereby accepts the Premises in their
condition existing as of the date of the possession hereunder, subject to
applicable zoning, municipal, county and state laws, ordinances and regulations
governing and regulating the use of the Premises, and accepts this lease subject
thereto and to all matters disclosed thereby and by any exhibits attached
hereto. Tenant acknowledges that neither Landlord nor Tenant's rent has made any
representation or warranty as to the suitability of the Premises for the conduct
of Tenant's business.
6.4 Insurance Cancellation. Notwithstanding the provisions of Article 6.1
hereinabove, no use shall be made or permitted to be made of the Premises no
acts done which will cause the cancellation of any insurance policy covering
said Premises or any building of which the Premises may be a part, and if
Tenant's use of the Premises causes an increase in said insurance rates, Tenant
shall pay any such increase.
6 5 Landlord's Rules and Regulations. Tenant shall faithfully observe and
comply with the rules and regulations that Landlord shall from time to time
promulgate. Landlord reserves the right from time to time to make all reasonable
modifications to said rules and regulations. The additions and modifications to
those rules and regulations shall be binding upon Tenant upon delivery of a copy
of them to Tenant. Landlord shall not be responsible to Tenant for the
nonperformance of any of said rules and regulations by any other tenants or
occupants.
7. MAINTENANCE REPAIRS AND ALTERATIONS.
7.1 Tenant's Obligations. Tenant shall, during the term of this Lease, keep
in good order, condition and repair, the Premises and every part thereof
structural or non-structural and all adjacent sidewalks, landscaping, driveways,
parking lots, fences and signs located in the areas which are adjacent to and
included with the Premises. Landlord shall incur no expense nor have any
obligation of any kind whatsoever in connection with maintenance of the Premises
and Tenant expressly waives the benefits of any statute now or hereafter in
effect which would otherwise afford Tenant the right to make repairs at
Landlord's expense or to terminate this Lease because of Landlord's failure to
keep the Premises in good order, condition and repair.
7.2 Surrender. On the last day of the term hereof, or on any sooner
termination, Tenant shall surrender the Premises to Landlord in good condition,
broom clean, ordinary wear and tear excepted. Tenant shall repair any damage to
the Premises occasioned by its use thereof, or by the removal of tenant's trade
fixtures, furnishings and equipment pursuant to Article 7.4(c), which repair
shall include the patching and filling of holes and (except in case of
emergency, in which case no notice is required.)
7.3 Landlord's Rights. If tenant fails to perform Tenant's obligations
under this Article 7, Landlord may at it's option (but shall not be required to)
enter upon the Premises, after ten (10) days' prior written notice to Tenant and
put the same in good order, condition and repair, and the cost thereof together
with interest thereon at the rate of ten (10%) percent per annum shall become
due and payable is additional rental to Landlord together with Tenant's next
rental installment.
7.4 Alterations and Additions.
(a) Tenant shall not, without Landlord's prior written consent, make
any alterations, improvements, or additions, in, on or about the Premises,
except for non-structural alterations not exceeding $100 in cost. As a condition
to giving such consent. Landlord may require that Tenant remove any such
alterations, improvements, additions or utility installations at the expiration
of the term, and to restore the Premises to their prior condition.
(b) Before commencing any work relating to alterations, additions and
improvements affecting the Premises, Tenant shall notify Landlord in writing of
the expected date of commencement thereof. Landlord shall then have the right at
any time and from time to time to post and maintain on the Premises such notices
as Landlord reasonably deems necessary to protect the Premises and Landlord from
mechanics' liens, materialmen's liens or any other liens. In any event, Tenant
shall pay, when due, all claims for labor or materials furnished to or for
Tenant at or for use in the Premises. Tenant shall not permit any mechanics or
materialmen's liens to be levied against the Premises for any labor or material
furnished to Tenant or claimed to have been furnished to Tenant or to Tenant's
agents or contractors in connection with work of any character performed or
claimed to have been performed on the Premises by or at the direction of Tenant.
(c) Unless Landlord requires their removal, as set forth in Article
7.4(a), all alterations, improvements or additions which may be made on the
Premises, shall become the property of Landlord and remain upon and be
surrendered with the Premises at the expiration of the term. Notwithstanding the
provisions of this Article 7.4(c), Tenant's machinery, equipment and other trade
fixtures other than that which is affixed to the Premises so that it cannot be
removed without material damage to the Premises, shall remain the property of
Tenant and may be removed by Tenant subject to the provisions of Article 7.2.
8. INSURANCE INDEMNITY. (Lessee = Tenant Lessor = Landlord)
8.1 Insuring Party. As used in this Paragraph 8, the term "insuring party"
shall mean the party who has the obligation to obtain the Property insurance
required hereunder. The insuring party shall be designated in Paragraph 46
hereof. In the event Lessor is the insuring party, Lessor shall also maintain
the liability insurance described in paragraph 8.2 hereof, in addition to, and
not in lieu of, the insurance required to be maintained by Lessee under said
paragraph 8.2, but Lessor shall not be required to name Lessee as an additional
insured on such policy. Whether the insuring party is the Lessor or the Lessee,
Lessee shall, as additional rent for the Premises, pay the cost of all insurance
required hereunder, except for that portion of the cost attributable to Lessor's
liability insurance coverage in excess of $1,000,000 per occurrence. If Lessor
is the insuring party Lessee shall, within ten (10) days following demand by
Lessor, reimburse Lessor for the cost of the insurance so obtained.
8.2 Liability Insurance. Lessee shall, at Lessees 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 Lessor and Lessee against any
liability arising out of the ownership, use, occupancy or maintenance of the
Premises and all areas appurtenant thereto Such insurance shall be a combined
single limit policy in an amount not less than $2,000,000 occurrence. The policy
shall insure 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.
8.3 Property insurance.
(a) The insuring party shall obtain and keep in force during the term
of this Lease a policy or policies of insurance covering loss or damage to the
Premises, in the amount of the full replacement value thereof, as the same may
exist from time to time, but in no event less than the total amount required by
lenders having liens on the Premises, 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), and
special extended perils ("all risk" as such term is used in the insurance
industry). Said insurance shall provide for payment of loss thereunder to Lessor
or to the holders of mortgages or deeds of trust on the Premises. The insuring
party shall, in addition, 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 real estate taxes and
insurance costs for said period. A stipulated value or agreed amount endorsement
deleting the coinsurance provision of the policy shall be procured with said
insurance as well as an automatic increase in insurance endorsement causing the
increase in annual property insurance coverage by 2% per quarter. If the
insuring party shall fail to procure and maintain said insurance the other party
may but shall not be required to procure and maintain the same, but at the
expense of Lessee. If such insurance coverage has a deductible clause, the
deductible amount shall not exceed $1,000 per occurrence, and Lessee shall be
liable for such deductible amount.
(b) If the Premises are part of a larger building, or if the Premises
are part of a group of buildings owned by Lessor which are adjacent to the
Premises, then Lessee shall pay for any increase in the property insurance of
such other building or buildings if said increase is caused by Lessee's acts,
omissions, use or occupancy of the Premises.
(c) If the Lessor is the insuring party the Lessor will not insure
Lessee's fixtures, equipment or tenant improvements unless the tenant
improvements have become a part of the Premises under paragraph 7, hereof. But
if Lessee is the insuring party the Lessee shall insure its fixtures, equipment
and tenant improvements.
8.4 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". The insuring
party shall deliver to the other party copies of policies of such insurance or
certificates evidencing the existence and amounts of such insurance with loss
payable clauses as required by this paragraph 8 No such policy shall be
cancelable or subject to reduction of coverage or other modification on except
after thirty (30) days' prior written notice to Lessor. If Lessee is the
insuring party Lessee shall, at least thirty (30) days prior to the expiration
of such policies, furnish Lessor with renewals or "binders" thereof, or Lessor
may order such insurance and charge the cost thereof to Lessee which amount
shall be by Lessee Upon demand Lessee shall not do or permit to be done anything
which shall invalidate the insurance policies referred to in Paragraph 8.3. If
Lessee does or permits to be done anything which shall increase the cost of the
insurance policies referred to in Paragraph 8.3, then Lessee shall forthwith
upon Lessor's demand reimburse Lessor for any additional premiums attributable
to any act or omission or operation of Lessee causing Such increase in the cost
of insurance. If Lessor is the insuring party, and if the insurance policies
maintained hereunder cover other improvements in addition to the Premises,
Lessor shall deliver to Lessee a written statement setting forth the amount of
any such insurance cost increase and showing in reasonable detail the manner in
which it has been computed.
8.5 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
under paragraph 8.3, 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 hereunder, give notice to the insurance carrier
or carriers that the foregoing mutual waiver of subrogation is contained in this
Lease.
8.6 Indemnity. Lessee shall indemnify and hold harmless Lessor from and
against any and all claims arising from Lessee's use of the Premises 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 Premise's or elsewhere and shall
further indemnify and hold harmless Lessor from and against any and all claims
arising from any breech or default in the performance of any obligation on
Lessee's part to be performed under the term of this Lease, or arising from any
negligence of the 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 satisfactory to Lessor. Lessee, as a material
part of the consideration to Lessor, hereby assumes all risk of damage to
property or injury to persons, in, upon or about the Premises arising from any
cause and Lessee hereby waives all claims in respect thereof against Lessor.
[PAGE 2 NET-NET-NET]
<PAGE>
8.7 Exemption of Lessor from Liability. Lessee hereby agrees that Lessor
shall not be liable for injury to Lessee's business or any loss of 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, 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 the said damage or injury results from conditions arising upon
the Premises or upon other portions of the building of which the Premises area
part, or from other sources or places and regardless of whether the cause of
such damage or injury or the means of repairing the same is inaccessible to
Lessee. Lessor shall not be liable for any damages arising from any act or
neglect of any other tenant, if any, of the building in which the Premises are
located.
9. DAMAGE OR DESTRUCTION
9.1 In the event the improvements on the Premises are damaged or destroyed,
partially or totally, from any cause whatsoever, whether or not such damage or
destruction is covered by any insurance required to be maintained under Article
8, the Tenant shall repair, restore, and rebuild the Premises to their condition
existing immediately prior to such damage or destruction and this Lease shall
continue in full force and effect. Such repair, restoration and rebuilding [all
of which are herein called the "repair"] shall be commenced within a reasonable
time after such damage or destruction and shall be diligently prosecuted to
completion. There shall be no abatement of rent or of any other obligation of
Tenant hereunder by reason of such damage or destruction. The proceeds of any
insurance maintained under Article 8.3 shall be made available to Tenant for
payment of the cost and expense of the repair, provided, however, that such
proceeds may be made available to Tenant subject to reasonable conditions
including, but not limited to, architect's certification of costs and retention
of a percentage of such proceeds pending final notice of completion. In the
event that such proceeds are not made available to Tenant within ninety (90)
days after such damage or destruction, Tenant shall have the option for thirty
(30) days, commencing on the expiration of such ninety (90) day period of
canceling this Lease. If Tenant shall exercise such option, Tenant shall have
no further obligation hereunder and shall have no further claim against
Landlord; provided, however, that Landlord shall return to Tenant so much of
Tenant's security deposit as has not theretofore been applied by Landlord.
Tenant shall exercise such option by written notice to Landlord within said
thirty (30) day period. In the event that the insurance proceeds are
insufficient to cover the cost of the repair, then any amount in excess thereof
required to complete the repair shall be paid by Tenant.
9.2 Damage Near End of Term. If the Premises are partially destroyed or
damaged during the last six (6) months of the term of this Lease, Landlord may,
at Landlord's option, cancel and terminate this Lease as of the date of
occurrence of such damage by giving written notice to Tenant of Landlord's
election to do so within thirty (30) days after the date of occurrence of such
damage.
9.3 Prorations. Upon termination of this Lease pursuant to this Article 9,
a pro rata adjustment of rent based upon thirty (30) day month shall be made.
Landlord shall, in addition, return to Tenant so much of Tenant's security
deposit as has not theretofore been applied by Landlord.
10. REAL PROPERTY TAXES. (Lessee = Tenant, Lessor = Landlord)
10.1 Payment of Taxes. Lessee shall pay the real property tax, as defined
in paragraph 10.2, applicable to the Premises during the term of this Lease. All
such payments shall be made at least ten (10) days prior to the delinquency date
of such payment. Lessee shall promptly furnish Lessor with satisfactory evidence
that such taxes have been paid. If any such taxes paid by Lessee shall cover any
period of time prior to or after the expiration of the term hereof, Lessee's
share of such taxes shall be equitably prorated to cover only the period of time
within the tax fiscal year during which this Lease shall be in effect, and
Lessor shall reimburse Lessee to the extent required. If Lessee shall fail to
pay any such taxes, Lessor shall have the right to pay the same, in which case
Lessee shall repay such amount to Lessor with Lessee's next rent installment
together with interest at the maximum rate then allowable by law.
10.2 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 Premises by any authority having the direct or
indirect power to tax, including any city, state or federal government, or any
school, agricultural, sanitary, fire, street, drainage or other improvement
district thereof, as against any legal or equitable interest of Lessor in the
Premises or in the real property of which the Premises are a part, as against
Lessor's right to rent or other income therefrom, and as against Lessor's
business of leasing the Premises. 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 hereinabove
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) which
is imposed as a result of a transfer, either partial or total, of Lessor's
interest in the Premises or which is added to a tax or charge hereinbefore
included within the definition of real property tax by reason of such transfer,
or (v) which is imposed by reason of this transaction, any modifications or
changes hereto, or any transfers hereof.
10.3 Joint Assessment. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the real property taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be determined by Lessor from the respective valuations
assigned in the assessor's work sheets, or such other information as may be
reasonably available. Lessor's reasonable determination thereof, in good
faith, shall be conclusive. Payment shall be made to Lessor within 10 days of
submittal of a copy of paid tax bill.
10.4 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 Lessor the taxes attributable to Lessee
within 10 days after receipt of a written statement setting forth the taxes
applicable to Lessee's property.
11. COMMON AREAS & RECIPROCAL PARKING; See page 3(a) attached hereto.
<PAGE>
12. UTILITIES. Tenant 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
Tenant, Tenant shall pay a reasonable proportion to be determined by Landlord of
all charges jointly metered with other premises.
13. Assignment AND SUBLETTING.
13.1 Landlord's Consent Required. Tenant shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Tenant's interest in this Lease or in the Premises
without Landlord's prior written consent, which Landlord shall not unreasonably
withhold. Any attempted assignment transfer mortgage encumbrance, or subletting
without such consent shall be void and shall constitute a breach of the Lease.
Any transfer of Tenant's interest in this Lease or in the Premises from Tenant
by merger, consolidation, or liquidation,
[PAGE 3 NET-NET-NET]
<PAGE>
14. COMMON AREAS AND RECIPROCAL PARKING:
Parking, landscaping and other areas common with other tenants within the same
building or other buildings on the property in the Lease from the State of
California to Landlord shall be maintained in good and clean condition by said
tenants, or at Landlord's option, Landlord may perform this work and after the
end of the first month of the term hereof and monthly thereafter Tenant agrees
to reimburse Landlord for Tenant's pro rata share of the expenses incurred by
Landlord in so maintaining said common areas. Tenant's pro rata share shall be
determined on the basis of the ratio between the area of the leased premises and
the total area of the building in which the leased premises are located.*
Common area maintenance shall include, but not be limited to, all outside
lighting and common signs (including electricity costs), irrigation (including
water costs), asphalt and concrete paving, stripes, curbs and bumpers.
Tenant shall have the right to mark each of eight parking spaces marked in
orange on Exhibit "B" with Tenant's name, but only after Tenant has determined
reasonably that such marking is necessary in order to provide parking space for
its customers. Landlord shall have the right to designate for other tenants of
Landlord on any of the property described in Exhibit "A" no more than a total of
38 spaces for parking. The remaining spaces shall all be maintained as available
to all tenants interchangeably.
Landlord agrees to cause all tenants to agree that employee' parking spaces
shall be restricted, at the request of any tenant, to two such spaces for each
Tenant.
Landlord agrees to cause all tenants of the property described in Exhibit "A" to
conform to a reciprocal parking understanding whereby the tenant will be bound
to the parking space limits and employee parking limits herein set forth.
<PAGE>
STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE--MODIFIED NET
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. Basic Provisions ("Basic Provisions").
1.1 PARTIES: This Lease ("Lease"), dated for reference purposes only, March
09, 1999, is made by and between SHOOK DEVELOPMENT CORPORATION ("Lessor") and
WOLLENBERG GROUP INC. ("DBA" FUTON WORLD) ("Lessee"), (collectively, the
"parties," or individually a "party").
1.2(a) Premises: That certain portion of the Building, including all
improvements therein or to be provided by Lessor under the terms of this Lease,
commonly known by the street address of 280 TELLER STREET, SUITE 170 , located
in the City of CORONA County of RIVERSIDE, State of CA, with zip code 91719, as
outlined on Exhibit C attached hereto ("Premises"). The "Building" is that
certain building containing the Premises and generally described as (describe
briefly the nature of the Building) A bldg. within the New McKinley Crossroads,
commonly known as McKinley Frwy. Ctr., consisting of approx. 73,033 Sq. Feet
("SF") of net rentable area ("NRA"). Premises consists of one unit containing
approx. 4,320 SF of NRA. In addition to Lessee's rights to use and occupy the
Premises as hereinafter specified, Lessee shall have non-exclusive rights to the
Common Areas (as defined in Paragraph 2.7 below) as hereinafter specified, but
shall not have any rights to the roof, exterior walls or utility raceways of the
Building or to any other buildings in the Industrial Center. The Premises, the
Building, the Common Areas, the land upon which they are located, along with all
other buildings and improvements thereon, are herein collectively referred to as
the "Industrial Center," (Also see Paragraph 2.)
1.2(b) Parking: TWELVE (12) unreserved vehicle parking spaces ("Unreserved
Parking spaces"); and NONE reserved vehicle parking spaces ("Reserved Parking
Spaces"). (Also see Paragraph 2.6)
1.3 Term: 5 years and 0 months ("Original Term") commencing May 01, 1999
("Commencement Date") and ending April 30, 2004 ("Expiration Date"). (Also see
Paragraph 3.)
1.4 Early Possession: April 21, 1999 ("Early Possession Date"). (Also see
Paragraphs 3.2 and 3.3.)
1.5 Base RENT: $6,048.00 per month ("Base Rent"), payable on the 1ST day of
each month commencing August 01, 1999. (Also see Paragraph 4.)
[x] If this box is checked, this Lease provides for the Base Rent to be adjusted
per Addendum 49, attached hereto.
1.6(a) Base Rent Paid Upon Execution: $6,048.00 as Base Rent for the period
AUG. 1, 1999 through Aug. 31. 1999
1.6(b) Lessee's share of common area operating expenses: 5,915/100 percent
(5.915%) ("Lessee's Share") as determined by
[x] prorata square footage of the Premises as compared to the total square
footage of the Building or [ ] other criteria as described in Addendum ________
1.7 Security Deposit: $7,500.00 ("Security Deposit"). (Also see Paragraph
5.)
1.8 Permitted Use: RETAIL FURNITURE SALES AND ACCESSORIES ("Permitted
Use"). (Also see Paragraph 6.)
1.9 Insuring Party. Lessor is the "Insuring Party." (Also see Paragraph 8.)
1.10(a) Real Estate Brokers. The following real estate broker(s)
(collectively, the "Brokers") and brokerage relationships exist in this
transaction and are consented to by the Parties (check applicable boxes):
[ ] ____________________ represents Lessor exclusively ("Lessor's Broker"),
[ ] ____________________ represents Lessee exclusively ("Lessee's Broker"); or
[ ] ITC REAL ESTATE GROUP represents both Lessor and Lessee ("Dual Agency").
(Also see Paragraph 15.)
1.10(b) Payment to Brokers. Upon the execution of this Lease by both
Parties, Lessor shall pay to said Broker(s) jointly, or in such separate shares
as they may mutually designate in writing, a fee as set forth in a separate
written agreement between Lessor and said Broker(s) (or in the event there is no
separate written agreement between Lessor and said Broker(s), the sum of $PER
LISTING (for brokerage services rendered by said Broker(s) in connection with
this transaction.
1.11 Guarantor. The obligations of the Lessee under this Lease are to be
guaranteed by GERRIT WOLLENBERG (ALSO SEE ATTACHED GUARANTY OF LEASE)
("Guarantor"). (Also see Paragraph 37.)
1.12 Addenda and Exhibits. Attached hereto is an Addendum or Addenda
consisting of Paragraphs 49 through 54 and Exhibits A through E, all of which
constitute a part of this Lease.
2. Premises, Parking and Common Areas,
2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby leases from
Lessor, the Premises, for the term, at the rental, and upon all of the terms,
covenants and conditions set forth in this Lease. Unless otherwise provided
herein, any statement of square footage set forth in this Lease, or that may
have been used in calculating rental and/or Common Area Operating Expenses, is
an approximation which Lessor and Lessee agree is reasonable and the rental and
Lessee's Share (as defined in Paragraph 1.6(b)) based thereon is not subject to
revision whether or not the actual square footage is more or less.
2.2 Condition. Lessor shall deliver the Premises to Lessee clean and free
of debris on the Commencement Date and warrants to Lessee that the existing
plumbing, electrical systems, fire sprinkler system, lighting, air conditioning
and heating systems and loading doors, if any, in the Premises, other than those
constructed by Lessee, shall be in good operating condition on the Commencement
Date. If a non-compliance with said warranty exists as of the Commencement Date,
Lessor shall, except as otherwise provided in this Lease, promptly after receipt
of written notice from Lessee setting forth with specificity the nature and
extent of such non-compliance, rectify same at Lessor's expense. If Lessee does
not give Lessor written notice of a non-compliance with this warranty within
thirty (30) days after the Commencement Date, correction of that non-compliance
shall be the obligation of Lessee at Lessee's sole cost and expense.
2.3 Compliance with Covenants, Restrictions and Building Code. Lessor
warrants that any improvements (other than those constructed by Lessee or at
Lessee's direction) on or in the Premises which have been constructed or
installed by Lessor or with Lessor's consent or at Lessor's direction shall
comply with all applicable covenants or restrictions of record and applicable
building codes, regulations and ordinances in effect on the Commencement Date.
Lessor further warrants to Lessee that Lessor has no knowledge of any claim
having been made by any governmental agency that a violation or violations of
applicable building codes, regulations, or ordinances exist with regard to the
Premises as of the Commencement Date. Said warranties shall not apply to any
Alterations or Utility Installations (defined in Paragraph 7.3(a)) made or to be
made by Lessee. If the Premises do not comply with said warranties, Lessor
shall, except as otherwise provided in this Lease, promptly after receipt of
written notice from Lessee given within six (6) months following the
Commencement Date and setting forth with specificity the nature and extent of
such non-compliance, take such action, at Lessor's expense, as may be reasonable
or appropriate to rectify the non-compliance. Lessor makes no warranty that the
Permitted Use in Paragraph 1.8 is permitted for the Premises under Applicable
Laws (as defined in Paragraph 2.4).
2.4 Acceptance of Premises. Lessee hereby acknowledges: (a) that it has
been advised by the Broker(s) to satisfy itself with respect to the condition of
the Premises (including but not limited to the electrical and fire sprinkler
systems, security, environmental aspects, seismic and earthquake requirements,
and compliance with the Americans with Disabilities Act and applicable zoning,
municipal, county, state and federal laws, ordinances and regulations and any
covenants or restrictions o record (collectively, "Applicable Laws") and the
present and future suitability of the Premises for Lessee's intended use; (b)
that Lessee has made such investigation as it deems necessary with reference to
such matters, is satisfied with reference thereto, and assumes all
responsibility therefore as the same relate to Lessee's occupancy of the
Premises and/or the terms of this Lease; and (c) that neither Lessor, nor any of
Lessor's agents, has made any oral or written representations or warranties with
respect to said matters other than as set forth in this lease.
2.5 Lessee as Prior Owner/Occupant. The warranties made by Lessor in this
Paragraph 2 shall be of no force or effect if immediately prior to the date set
forth in Paragraph 1.1 Lessee was the owner or occupant of the Premises. In such
event, Lessee shall, at Lessee's sole cost and expense, correct any
noncompliance of the Premises with said warranties.
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION 1993
MULTI-TENANT--MODIFIED NET
<PAGE>
2.6 Vehicle Parking. Lessee shall be entitled to use the number of
Unreserved Parking Spaces and Reserved Parking Spaces specified in Paragraph
1.2(b) on those portions of the Common Areas designated from time to time by
Lessor for parking. Lessee shall not use more parking spaces than said number.
Said parking spaces shall be used for parking by vehicles no larger than
full-size passenger automobiles or pick-up trucks. Hereby called "Permitted Size
Vehicles." Vehicles other than Permitted Size Vehicles shall be parked and
loaded or unloaded as directed by Lessor in the Rules any Regulations (as
defined in Paragraph 40) issued by Lessor. (Also see Paragraph 2.9.)
(a) Lessee shall not permit or allow any vehicles that belong to or
arc controlled by Lessee or Lessee's employees, suppliers, shippers, customers.
contractors or invitees to be loaded, unloaded, or parked in areas other than
those designated by Lessor for such activities,
(b) If Lessee permits or allows any of the prohibited activities
described in this Paragraph 2.6, then Lessor shall have the right, without
notice, in addition to such other rights and remedies that it may have, to
remove or tow away the vehicle involved and charge the cost to Lessee, which
cost shall be immediately payable upon demand by Lessor.
(c) Lessor shall at the Commencement Date of this Lease, provide the
parking facilities required by Applicable Law.
2.7 Common Areas Definition. The term "Common Areas" is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the Industrial Center and interior utility raceways within the Premises that
are provided and designated by the Lessor from time to time for the general
non-exclusive use of Lessor, Lessee and other lessees of the Industrial Center
and their respective employees, suppliers, shippers, customers, contractors and
invitees, including parking areas, loading and unloading areas, trash areas,
roadways, sidewalks, walkways, parkways. driveways and landscaped areas.
2.8 Common Areas Lessee's Rights. Lessor hereby grants to Lessee, for the
benefit of Lessee and its employees, suppliers, shippers. contractors, customers
and invitees. during the term of this Lease, the non-exclusive right to use. in
common with others entitled to such use, the Common Areas as they exist from
time to time, subject to any rights, powers. and privileges reserved by Lessor
under the terms hereof or under the terms of any rules and regulations or
restrictions governing the use of the Industrial Center. Under no circumstances
shall the right herein granted to use the Common Areas be deemed to include the
right to store any property, temporarily or permanently. in the Common Areas.
Any such storage shall be permitted only by the prior written consent of Lessor
or Lessor's designated agent, which consent may be revoked at any time. In the
event that any unauthorized storage shall occur then Lessor shall have the
right, without notice. in addition to such other rights and remedies that it may
have, to remove the property and charge the cost to Lessee, which cost shall be
immediately payable upon demand by Lessor.
2.9 Common Areas Rules and Regulations, Lessor or such other person(s) as
Lessor may appoint shall have the exclusive control and management of the Common
Areas and shall have the right, from time to time, to establish, modify, amend
and enforce reasonable Rules and Regulations with respect thereto in accordance
with Paragraph 40. Lessee agrees to abide by and conform to alt such Rules and
Regulations, and to cause its employees, suppliers, shippers, customers,
contractors and invitees to so abide and conform. Lessor shall not be
responsible to Lessee for the non-compliance with said rules and regulations by
other lessees of the Industrial Center,
2.10 Common Areas -Changes. Lessor shall have the right, in Lessor's sole
discretion, from time to time:
(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 areas, loading and unloading areas, ingress,
egress, direction of traffic, landscaped areas, walkways and utility raceways,
(b) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available;
(c) To designate other land outside the boundaries of the Industrial
Center to be a part of the Common Areas;
(d) To add additional buildings and improvements to the Common Areas;
(e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Industrial Center, or any portion
thereof; and
(f) To do and perform such other acts and make such other changes in,
to or with respect to the Common Areas and Industrial Center as Lessor may, in
the exercise of sound business judgment, deem to be appropriate.
3. Term
3.1 Term. The Commencement Date, Expiration Date and Original Term of this
Lease are as specified in Paragraph 1.3.
3.2 Early Possession. If an Early Possession Date is specified in Paragraph
1.4 and if Lessee totally or partially occupies the Premises after the Early
Possession Date but prior to the Commencement Date, the obligation to pay Base
Rent shall be abated for the period of such early occupancy. All other terms of
this Lease, however, (including but not limited to the obligations to pay
Lessee's Share of Common Area Operating Expenses and to carry the insurance
required by Paragraph 8) shall be in effect during such period. Any such early
possession shall not affect nor advance the Expiration Date of the Original
Term.
3.3 Delay in Possession. If for any reason Lessor cannot deliver possession
of the Premises to Lessee by the Early Possession Date, if one is specified in
Paragraph 1.4, or if no Early Possession Date is specified, by the Commencement
Date, Lessor shall not be subject to any liability therefor, nor shall such
failure affect the validity of this Lease, or the obligations of Lessee
hereunder, or extend the term hereof, but in such case, Lessee shall not, except
as otherwise provided herein, be obligated to pay rent or perform any other
obligation of Lessee under the terms of this Lease until Lessor delivers
possession of the Premises to Lessee. If possession of the Premises is not
delivered to Lessee within sixty (60) days after the Commencement Date, Lessee
may, at its option, by notice in writing to Lessor within ten (10) days after
the end of said sixty (60) day period, cancel this Lease, in which event the
Parties shall be discharged from all obligations hereunder; provided further,
however that if such written notice of Lessee is not received by Lessor within
said ten (10) day period, Lessee's right to cancel this Lease hereunder shall
terminate and be of no further force or effect. Except as may be otherwise
provided, and regardless of when the Original Term actually commences, if
possession is not tendered to Lessee when required by this Lease and Lessee does
not terminate this Lease, as aforesaid, the period free of the obligation to pay
Base Rent, if any, that Lessee would otherwise have enjoyed shall run from the
date of delivery of possession and continue for a period equal to the period
during which the Lessee would have otherwise enjoyed under the terms hereof, but
minus any days of delay caused by the acts, changes or omissions of Lessee.
4. Rent.
4.1 Base Rent. Lessee shall pay Base Rent and other rent or charges, as the
same may be adjusted from time to time, to Lessor in lawful money of the United
States, without offset or deduction, on or before the day on which it is due
under the terms of this Lease. Base Rent and all other rent and charges for any
period during the term hereof which is for less than one full month shall be
prorated based upon the actual number of days of the month involved. Payment of
Base Rent and other charges shall be made to Lessor at its address stated herein
or to such other persons or at such other addresses as Lessor may from time to
time designate in writing to Lessee.
4.2 Common Area Operating Expenses. Lessee shall pay to Lessor during the
term hereof, in addition to the Base Rent, Lessee's Share (as specified in
Paragraph 1.6(b)) of all Common Area Operating Expenses, as hereinafter defined,
during each calendar year of the term of this Lease, in accordance with the
following provisions:
(a) "Common Area Operating Expenses" are defined, for purposes of this
Lease, as all costs incurred by Lessor relating to the ownership and operation
of the Industrial Center, including, but not limited to, the following:
(i) The operation, repair and maintenance, in neat, clean, good
order and condition, of the following:
(aa) The Common Areas, including parking areas, loading and
unloading areas, trash areas, roadways. sidewalks, walkways, parkways.
driveways, landscaped areas, striping, bumpers, irrigation systems, Common Area
lighting facilities, fences and gates, elevators and roof.
(bb) Exterior signs and any tenant directories.
(cc) Fire detection and sprinkler systems.
(ii)The cost of water, gas, electricity and telephone to service
the Common Areas.
(iii) Trash disposal, property management and security services
and the costs of any environmental inspections.
(iv) Reserves set aside for maintenance and repair of Common
Areas.
(v) Real Property Taxes (as defined in Paragraph 10.2) to be paid
by Lessor for the Building and the Common Areas under Paragraph 10 hereof.
(vi) The cost of the premiums for the insurance policies
maintained by Lessor under Paragraph 8 hereof.
(vii) Any deductible portion of an insured loss concerning the
Building or the Common Areas.
(viii) Any other services to be provided by Lessor that are
stated elsewhere in this Lease to be a Common Area Operating Expense.
(b) Any Common Area Operating Expenses and Real Property Taxes that
are specifically attributable to the Building or to any other building in the
Industrial Center or to the operation, repair and maintenance thereof, shall be
allocated entirely to the Building or to such other building. However, any
Common Area Operating Expenses and Real Property Taxes that are not specifically
attributable to the Building or to any other building or to the operation,
repair and maintenance thereof, shall be equitably allocated by Lessor to all
buildings in the industrial Center.
(c) The inclusion of the improvements, facilities and services set
forth in Subparagraph 4.2(a) shall not be deemed to impose an obligation upon
Lessor to either have said improvements or facilities or to provide those
services unless the industrial Center already has the same, Lessor already
provides the services, or Lessor has agreed elsewhere in this Lease to provide
the same or some of them.
(d) Lessee's Share of Common Area Operating Expenses shall be payable
by Lessee within ten (10) days after a reasonably detailed statement of actual
expenses is presented to Lessee by Lessor. At Lessors option, however, an amount
may be estimated by Lessor from time to time of Lessee's Share of annual Common
Area Operating Expenses and the same shall be payable monthly or quarterly, as
Lessor shall designate, during each 12-month period of the Lease term, on the
same day as the Base Rent is due hereunder. Lessor shall deliver to Lessee
within sixty (60) days after the expiration of each calendar year a reasonably
detailed statement showing Lessee's Share of the actual Common Area Operating
Expenses incurred during the preceding year. If Lessee's payments under this
Paragraph 4.2(d) during said preceding year exceed
MULTI-TENANT--MODIFIED NET
<PAGE>
Lessee's share as indicated on said statement, Lessee shall be credited the
amount of such over-payment against Lessee's share of Common Area operating
expenses becoming due if Lessee's payments under this paragraph 4.2(d) during
said preceding year were less than Lessee's share as indicated on said
statement. Lessee shall pay to Lessor the amount of the deficiency within ten
(10) days after delivery by Lessor to Lessee of said statement.
5. Security deposit. Lessee shall deposit with Lessor upon Lessee's execution
hereof the security deposit set forth in paragraph 1.7 as security for Lessee's
faithful performance of Lessee's obligations under this lease if Lessee fails to
pay base rent or other rent or charges due hereunder, or otherwise defaults
under this lease (as defined in paragraph 13.1). Lessor may use, apply or
retain all or any portion of said security deposit for the payment of any amount
due lessor or to reimburse or compensate lessor for any liability, cost,
expense, loss or damage (including attorneys' fees) which lessor may suffer or
incur by reason thereof. If lessor uses or applies all or any portion of said
security deposit, lessee shall within ten (10) days after written request
therefor deposit monies with lessor sufficient to restore said security deposit
to the full amount required by this lease. Any time the base rent increases
during the term of this lease, lessee shall, upon written request from lessor,
deposit additional monies with lessor as an addition to the security deposit so
that the total amount of the security deposit shall at all times bear the same
proportion to the then current base rent as the initial security deposit bears
to the initial base rent set forth in paragraph 1.5. Lessor shall not be
required to keep all or any part of the security deposit separate from its
general accounts, lessor shall, at the expiration or earlier termination of the
term hereof and after lessee has vacated the premises, return to lessee (or, at
lessor's option, to the last assignee, if any, of lessee's interest herein),
that portion of the security deposit not used or applied by lessor. Unless
otherwise expressly agreed in writing by lessor, no part of the security deposit
shall be considered to be held in trust, to bear interest or other increment for
its use, or to be prepayment for any monies to be paid by lessee under this
lease.
6. Use.
6.1 Permitted use.
(a) Lessee shall use and occupy the premises only for the permitted
use set forth in paragraph 1.8, or any other legal use which is reasonably
comparable thereto, and for no other purpose. Lessee shall not use or permit the
use of the premises in a manner that is unlawful, creates waste or a nuisance,
or that disturbs owners and/or occupants of, or causes damage to the premises or
neighboring premises or properties.
(b) lessor hereby agrees to not unreasonably withhold or delay its
consent to any written request by Lessee, Lessee's assignees or subtenants, and
by prospective assignees and subtenants of Lessee, its assignees and subtenants,
for a modification of said permitted use, so long as the same will not impair
the structural integrity of the improvements on the premises or in the building
or the mechanical or electrical systems therein. Does not conflict with uses by
other Lessees, is not significantly more burdensome to the premises or the
building and the improvements thereon, and is otherwise permissible pursuant to
this paragraph 6. If Lessor elects to withhold such consent, Lessor shall within
five (5) business days after such request give a written notification of same,
which notice shall include an explanation of Lessor's reasonable objections to
the change in use.
6.2 Hazardous substances.
(a) Reportable Uses Require Consent. The term "hazardous substance" as
used in this lease shall mean any product, substance, chemical, material or
waste whose presence, nature, quantity and/or intensify of existence, use,
manufacture, disposal, transportation, spill, release or effect, either by
itself or in combination with other materials expected to be on the premises, is
either: (i) potentially injurious to the public health, safety or welfare, the
environment, or the premises; (ii) regulated or monitored by any governmental
authority; or (iii) a basis for potential liability of lessor to any
governmental agency or third party under any applicable statute or common law
theory. Hazardous substance shall include, but not be limited to, hydrocarbons,
petroleum, gasoline, crude oil or any products or by-products thereof, Lessee
shall not engage in any activity in or about the premises which constitutes a
reportable use (as hereinafter defined) of hazardous substances without the
express prior written consent of Lessor and compliance in a timely manner (at
Lessee's sole cost and expense) with all applicable requirements (as defined in
paragraph 6.3). "Reportable use" shall mean (i) the installation or use of any
above or below ground storage tank, (ii) the generation, possession, storage,
use, transportation, or disposal of a hazardous substance that requires a permit
from, or with respect to which a report, notice, registration or business plan
is required to be filed with, any governmental authority, and (vi) the presence
in, on or about the premises of a hazardous substance with respect to which any
applicable laws require that a notice be given to persons entering or occupying
the premises or neighboring properties. Notwithstanding the foregoing, lessee
may, without Lessor's prior consent, but upon notice to Lessor and in compliance
with all applicable requirements, use any ordinary and customary materials
reasonably required to be used by lessee in the normal course of the permitted
use, so long as such use is not a reportable use and does not expose the
premises or neighboring properties to any meaningful risk of contamination or
damage or expose lessor to any liability therefor. In addition, lessor may (but
without any obligation to do so) condition its consent to any reportable use of
any hazardous substance by lessee upon lessee's giving lessor such additional
assurances as lessor, in its reasonable discretion, deems necessary to protect
itself, the public, the premises and the environment against damage,
contamination or injury and/or liability therefor, including but not limited to
the installation (and, at lessor's option, removal on or before lease expiration
or earlier termination) of reasonably necessary protective modifications to the
premises (such as concrete encasements) and/or the deposit of an additional
security deposit under paragraph 5 hereof.
(b) Duty to Inform Lessor. If Lessee knows, or has reasonable cause
to believe, that a hazardous substance has come to be located in, on, under or
about the premises or the building, other than as previously consented to by
Lessor, Lessee shall immediately give Lessor written notice thereof, together
with a copy of any statement, report, notice, registration, application, permit,
business plan, license, claim, action, or proceeding given to, or received from,
any governmental authority or private party concerning the presence, spill,
release, discharge of, or exposure to, such hazardous substance including but
not limited to all such documents as may be involved in any reportable use
involving the premises. Lessee shall not cause or permit any hazardous substance
to be spilled or released in, on, under or about the premises (including,
without limitation, through the plumbing or sanitary sewer system).
(c) Indemnification. Lessee shall indemnify, protect, defend and hold
Lessor, its agents, employees, lenders and ground lessor, if any, and the
premises, harmless from and against any and all damages, liabilities, judgments,
costs, claims, liens, expenses, penalties, loss of permits and attorneys' and
consultants' fees arising out of or involving any hazardous substance brought
onto the premises by or for Lessee or by anyone under Lessee's control. Lessee's
obligations under this paragraph 6.2(c) shall include, but not be limited to,
the effects of any contamination or injury to person, property or the
environment created or suffered by lessee and the cost of investigation
(including consultants' and attorneys' fees and testing), removal, remediation,
restoration and/or abatement thereof, or of any contamination therein involved,
and shall survive the expiration or earlier termination of this lease. No
termination, cancellation or release agreement entered into by Lessor and Lessee
shall release Lessee from its obligations under this lease with respect to
hazardous substances, unless specifically so agreed by lessor in writing at the
time of such agreement.
6.3 Lessee's Compliance with Requirements. Lessee shall, at Lessee's sole
cost and expense, fully, diligently and in a timely manner, comply with all
"Applicable Requirements," which term is used in this lease to mean all laws,
rules, regulations, ordinances, directives, covenants, easements and
restrictions of record, permits, the requirements of any applicable fire
insurance underwriter or rating bureau, and the recommendations of lessor's
engineers and/or consultants. Relating in any manner to the premises (including
but not limited to matters pertaining to (i) industrial hygiene, (ii)
environmental conditions on, in, under or about the premises, including soil and
groundwater conditions, and (iii) the use, generation, manufacture, production,
installation, maintenance, removal, transportation, storage, spill, or release
of any hazardous substance), now in effect or which may hereafter come into
effect. Lessee shall, within five (5) days after receipt of lessor's written
request, provide lessor with copies of all documents and information, including
but not limited to permits, registrations, manifests, applications, reports and
certificates, evidencing lessee's compliance with any applicable requirements
specified by lessor, and shall immediately upon receipt, notify lessor in
writing (with copies of any documents involved) of any threatened or actual
claim, notice, citation, warning, complaint or report pertaining to or involving
failure by lessee or the premises to comply with any applicable requirements.
6.4 Inspection; Compliance with Law, Lessor, Lessor's agents, employees,
contractors and designated representatives. And the holders of any mortgages,
deeds of trust or ground leases on the premises ("lenders") shall have the right
to enter the premises at any time in the case of an emergency, and otherwise at
reasonable times, for the purpose of inspecting the condition of the premises
and for verifying compliance by lessee with this lease and all applicable
requirements (as defined in paragraph 6.3), and lessor shall be entitled to
employ experts and/or consultants in connection therewith to advise Lessor with
respect to lessee's activities, including but not limited to Lessee's
installation, operation, use, monitoring, maintenance, or removal of any
hazardous substance on or from the premises. The costs and expenses of any such
inspections shall be paid by the party requesting same, unless a default or
breach of this lease by lessee or a violation of applicable requirements or a
contamination, caused or materially contributed to by Lessee, is found to exist
or to be imminent, or unless the inspection is requested or ordered by a
governmental authority as the result of any such existing or imminent violation
or contamination. In such case, Lessee shall upon request reimburse Lessor or
Lessor's lender, as the case may be, for the costs and expenses of such
inspections.
7. Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations.
7.1 Lessee's Obligations.
(a) Subject to the provisions of Paragraphs 2.2 (Condition), 2.3
(Compliance with Covenants, Restrictions and Building Code), 7.2 (Lessor's
Obligations), 9 (Damage or Destruction), and 14 (Condemnation), Lessee shall, at
Lessee's sole cost and expense and at all times, keep the premises and every
part thereof in good order, condition and repair (whether or not such portion of
the premises requiring repair, or the means of repairing the same, are
reasonably or readily accessible to Lessee, an whether or not the need for such
repairs occurs as a result of Lessee's use, any prior use, the elements or the
age of such portion of the premises), including, without limiting the generality
of the foregoing, all equipment or facilities specifically serving the premises,
such as plumbing, heating, air conditioning, ventilating, electrical, lighting
facilities, boilers, fired or unfired pressure vessels, fire hose connections if
within the premises, fixtures, interior walls, interior surfaces of exterior
walls, ceilings, floors, windows, doors, plate glass, and skylights, but
excluding any items which are the responsibility of lessor pursuant to paragraph
7.2 Below. Lessee, in keeping the premises in good order, condition and repair,
shall exercise and perform good maintenance practices. Lessee's obligations
shall include restorations, replacements or renewals when necessary to keep the
premises and all improvements thereon or a part thereof in good order, condition
and state of repair.
(b) Lessee shall, at Lessee's sole cost and expense, procure and
maintain a contract, with copies to Lessor, in customary form and substance for
and with a contractor specializing and experienced in the inspection,
maintenance and service of the heating, air conditioning and ventilation system
for the premises. However, Lessor reserves the right, upon notice to Lessee, to
procure and maintain the contract for the heating, air conditioning and
ventilating systems, and if Lessor so elects, Lessee shall reimburse Lessor,
upon demand, for the cost thereof.
(c) If Lessee fails to perform Lessee's obligations under this
paragraph 7.1, Lessor may enter upon the premises after ten (10) days' prior
written notice to Lessee (except in the case of an emergency, in which case no
notice shall be required), perform such obligations on Lessee's behalf, and put
the premises in good order, condition and repair, in accordance with Paragraph
13.2 below.
7.2 Lessor's Obligations. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance with Covenants, Restrictions and Building Code),
4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee's Obligations), 9
(Damage or Destruction), and 14 (Condemnation). Lessor, subject to reimbursement
pursuant to paragraph 4.2. Shall keep in good order, condition and repair the
foundations, exterior walls, structural condition of interior bearing walls,
exterior roof, fire sprinkler and/or standpipe and hose (if located in the
common areas) or other automatic fire extinguishing system including fire alarm
and/or smoke detection systems and equipment, fire hydrants, parking lots.
<PAGE>
walkways, parkways, driveways, landscaping, fences, signs and utility systems
serving the Common Areas and all parts thereof, as well as providing the
services for which there is a Common Area Operating Expense pursuant to
Paragraph 4 2. Lessor shall not be obligated to paint the exterior or interior
surfaces of exterior walls nor shall Lessor be obligated to maintain, repair or
replace windows, doors or plate glass of the Premises Lessee expressly waives
the benefit of any statute now or hereafter in effect which would otherwise
afford Lessee the right to make repairs at Lessor's expense or to terminate
'Iris lease because of Lessor's failure to keep the Building, Industrial Center
or Common Areas in good order. condition and repair.
7.3 Utility Installations, Trade Fixtures, Alterations.
(a) Definitions; Consent Required. The term "utility Installations" is
used in this Lease to refer to all air lines, power panels, electrical
distribution, security, fire protection systems, communications systems,
lighting fixtures, heating, ventilating and air conditioning equipment.
plumbing, and fencing in, on or about the Premises, The term "Trade Fixtures"
shall mean Lessee's machinery and equipment which can be removed without doing
material damage to the Premises. The term "Alteration " shall mean any
modification of the improvements on the Premises which are provided by Lessor
under the terms of this Lease, other than Utility Installations or Trade
Fixtures. "Lessee. Owned Alterations and/or Utility Installations" are defined
as Alterations and/or Utility Installations made by Lessee that are not yet
owned by Lessor pursuant to Paragraph 7.4(a). Lessee shall not make nor cause to
be made any Alterations or Utility Installations in, on, under or about the
Premises without Lessor's prior written consent. Lessee may, however, make
non-structural Utility Installations to the interior of the Premises (excluding
the roof) without Lessor's consent but upon notice to Lessor, so long as they
are not visible from the outside of the Premises, do not involve puncturing,
relocating or removing the roof or any existing walls, or changing or
interfering with the fire sprinkler or fire detection systems and the cumulative
cost thereof during the term of this Lease as extended does not exceed $2,500.00
(b) Consent, Any Alterations or Utility Installations that Lessee
shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with detailed plans. All consents given by
Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific consent,
shall be deemed conditioned upon: (I) Lessee's acquiring all applicable permits
required by governmental authorities; (ii) the furnishing of copies of such
permits together with a copy of the plan and specifications for the Alteration
or Utility Installation to Lessor prior to commencement of the work thereon; and
(iii) the compliance by Lessee with all conditions of said permits in a prompt
and expeditious manner Any Alterations or Utility Installations by Lessee during
the term of this Lease shall be done in a good and workmanlike manner, with good
and sufficient materials, and be in compliance with all Applicable Requirements.
Lessee shall promptly upon completion thereof furnish Lessor with as-built plans
and specifications therefor. Lessor may (but without obligation to do so)
condition its consent to any requested Alteration or Utility Installation that
costs $2,500.00 or more upon Lessee's providing Lessor with a lien and
completion bond in an amount equal to one and one-half limes the estimated cost
of such Alteration or Utility Installation.
(c) Lien Protection. Lessee shall pay when due all claims for labor or
materials furnished or alleged to have been furnished to or for Lessee at or for
use on the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of any
work in, on, or about the Premises, and Lessor shall have the right to post
notices of non-responsibility in or on the Premises as provided by law. If
Lessee shall, in good faith. contest the validity of any such lien, claim or
demand, then Lessee shall, at its sole expense, defend and protect itself,
Lessor and the Premises against the same and shall pay and satisfy any such
adverse judgment that may be rendered thereon before the enforcement thereof
against the Lessor or the Premises, If Lessor shall require, Lessee shall
furnish to Lessor a surety bond satisfactory to Lessor in an amount equal to one
and one-half times the amount of such contested lien claim or demand,
indemnifying Lessor against liability for the same, as required by law for the
holding of the Premises free from the effect of such lien or claim. In addition,
Lessor may require Lessee to pay Lessor's attorneys' fees and costs in
participating in such action if Lessor shall decide it is to its best interest
to do so.
7.4 Ownership, Removal, Surrender, and Restoration,
(a) Ownership. Subject to Lessor's right to require their removal and
to cause Lessee to become the owner thereof as hereinafter provided in this
Paragraph 7.4, all Alterations and Utility Installations made to the Premises by
Lessee shall be the property of and owned by Lessee. but considered a part of
the Premises, Lessor may, at any time and at its option, elect in writing to
Lessee to be the owner of all or any specified part of the Lessee-Owned
Alterations and Utility Installations Unless otherwise instructed per
Subparagraph 7.4(b) hereof, all Lessee-Owned Alterations and Utility
Installations shall, at the expiration or earlier termination of this Lease.
become the property of Lessor and remain upon the Premises and be surrendered
with the Premises by Lessee.
(b) Removal. Unless otherwise agreed in writing. Lessor may require
that any or all Lessee-Owned Alterations or Utility Installations be removed by
the expiration or earlier termination of this Lease, notwithstanding that their
installation may have been consented to by Lessor. Lessor may require the
removal at any time of all or any part of any Alterations or Utility
Installations made without the required consent of Lessor.
(c) Surrender/Restoration. Lessee shall surrender the Premises by the
end of the last day of the Lease term or any earlier termination date, clean and
free of debris and in good operating order, condition and state of repair,
ordinary wear and tear excepted. Ordinary wear and tear shall not include any
damage or deterioration that would have been prevented by good maintenance
practice or by Lessee performing all of its obligations under this Lease. Except
as otherwise agreed or specified herein, the Premises, as surrendered, shall
include the Alterations and Utility Installations. The obligation of Lessee
shall include the repair of any damage occasioned by the installation,
maintenance or removal of Lessee's Trade Fixtures, furnishings, equipment, and
Lessee-Owned Alterations and Utility Installations, as well as the removal of
any storage tank installed by or for Lessee, and the removal, replacement, or
remediation of any soil, material or groundwater contaminated by Lessee. all as
may then be required by Applicable Requirements and/or good practice. Lessee's
Trade Fixtures shall remain the property of Lessee and shall be removed by
Lessee subject to its obligation to repair and restore the Premises per this
Lease.
8. Insurance; Indemnity.
8.1 Payment of Premiums. The cost of premiums for the insurance policies
maintained by Lessor under this Paragraph 8 shall be a Common Area Operating
Expense pursuant to Paragraph 4.2 hereof. Premiums for policy periods commencing
prior to, or extending beyond, the term of this Lease shall be prorated to
coincide with the corresponding Commencement Date or Expiration Date.
8.2 Liability Insurance.
(a) Carried by Lessee, Lessee shall obtain and keep in force during
the term of this Lease a Commercial General Liability policy of insurance
protecting Lessee, Lessor and any Lender(s) whose names have been provided to
Lessee in writing (as additional insured(s) against claims for bodily injury,
personal injury and property damage based upon, involving or arising out of the
ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be on an occurrence basis providing
single limit coverage in an amount not less than $1,000,000 per occurrence with
an "Additional Insured-Managers or Lessors of Premises" endorsement and contain
the "Amendment of the Pollution Exclusion" endorsement for damage caused by
heat, smoke or fumes from a hostile fire. The policy shall not contain any
intra-insured exclusions as between insured persons or organizations, but shall
include coverage for liability assumed under this Lease as an "Insured contract"
for the performance of Lessee's indemnity obligations under this Lease. The
limits of said insurance required by this Lease or as carried by Lessee shall
not. however, limit the liability of Lessee nor relieve Lessee of any obligation
hereunder. All insurance to be carried by Lessee shall be primary to and not
contributory with any similar insurance carried by Lessor, whose insurance shall
be considered excess insurance only
(b) Carried by Lessor. Lessor shall also maintain liability insurance
described in Paragraph 8.2(a) above, in addition to and not in lieu of, the
insurance required to be maintained by Lessee. Lessee shall not be named as an
additional insured therein.
8.3 Property Insurance-Building, Improvements and Rental Value,
(a) Building and Improvements. Lessor shall obtain and keep in force
during the term of this Lease a policy or policies in the name of Lessor. with
loss payable to Lessor and to any Lender(s), insuring against loss or damage to
the Premises Such insurance shall be for full replacement cost, as the same
shall exist from time to time, or the amount required by any Lender(s), but in
no event more than the commercially reasonable and available insurable value
thereof if, by reason of the unique nature or age of the improvements involved.
such latter amount is less than full replacement cost. Lessee-Owned Alterations
and Utility Installations, Trade Fixtures and Lessee's personal property shall
be insured by Lessee pursuant to Paragraph 8.4. If the coverage is available and
commercially appropriate, Lessor's policy or policies shall insure against all
risks of direct physical loss or damage (except the perils of flood and/or
earthquake unless required by a Lender). including coverage for any additional
costs resulting from debris removal and reasonable amounts of coverage for the
enforcement of any ordinance or law regulating the reconstruction or replacement
of any undamaged sections of the Building required to be demolished or removed
by reason of the enforcement of any building, zoning, safety or land use laws as
the result of a covered loss, but not including plate glass insurance. Said
policy or policies shall also contain an agreed valuation provision in lieu of
any co-insurance clause, waiver of subrogation. and inflation guard protection
causing an increase in the annual property insurance coverage amount by a factor
of not less than the adjusted U.S. Department of Labor Consumer Price Index for
All Urban Consumers for the one nearest to where the Premises are located.
(b) Rental Value. Lessor shall also obtain and keep in force during
the term of this Lease a policy or policies in the name of Lessor, with loss
payable to Lessor and any Lender(s), insuring the loss of the full rental and
other charges payable by all lessees of the Building to Lessor for one year
(including all Real Property Taxes, insurance costs, all Common Area Operating
Expenses and any scheduled rental increases). Said insurance may provide that in
the event the Lease is terminated by reason of an insured loss, the period of
indemnity for such coverage shall be extended beyond the date of the completion
of repairs or replacement of the Premises. to provide for one full year's loss
of rental revenues from the date of any such loss. Said insurance shall contain
an agreed valuation provision in lieu of any co-insurance clause, and the amount
of coverage shall be adjusted annually to reflect the projected rental income,
Real Property Taxes, insurance premium costs and other expenses, if any,
otherwise payable, for the next 12-month period. Common Area Operating Expenses
shall include any deductible amount in the event of such loss.
(c) Adjacent Premises. Lessee shall pay for any increase in the
premiums for the property insurance of the Building and for the Common Areas or
other buildings in the Industrial Center if said increase is caused by Lessee's
acts, omissions, use or occupancy of the Premises.
(d) Lessee's Improvements. Since Lessor is the Insuring Party, Lessor
shall not be required to insure Lessee-Owned Alterations and Utility
Installations unless the item in question has become the properly of Lessor
under the terms of this Lease.
8.4 Lessee's Property Insurance. Subject to the requirements of Paragraph
8.5, Lessee at its cost shall either by separate policy or, at Lessor's option,
by endorsement to a policy already carried, maintain insurance coverage on all
of Lessee's personal property, Trade Fixtures and Lessee-Owned Alterations and
Utility Installations in, on, or about the Premises similar in coverage to that
carried by Lessor as the insuring Party under Paragraph 8.3(a). Such insurance
shall be full replacement cost coverage with a deductible not to exceed
$1,000.00 per occurrence. The proceeds from any such insurance shall be used by
Lessee for the replacement of personal property and the restoration of Trade
Fixtures and Lessee-Owned Alterations and Utility Installations. Upon request
from Lessor, Lessee shall provide Lessor with written evidence that such
insurance is in force.
8.5 Insurance Policies. Insurance required hereunder shall be in companies
duly licensed to transact business in the state where the Premises are located,
and maintaining during the policy term a "General Policyholders Rating" of at
least B+, V. or such other rating as may be required by a Lender. as set forth
in the most current issue of "Best's Insurance Guide." Lessee shall not do or
permit to be done anything which shall invalidate the insurance policies
referred to in this Paragraph 8. Lessee shall cause to
<PAGE>
be delivered to Lessor, within seven (7) days alter the earlier of the Early
Possession Date or the Commencement Date, certified copies of. or certificates
evidencing the existence and amounts of, the insurance required under Paragraph
8.2(a) and 8.4. No such policy shall be cancelable or subject to modification
except after thirty (30) days' prior written notice to Lessor. Lessee shall at
least thirty (30) days prior to the expiration of such policies, furnish Lessor
with evidence of renewals or "insurance binders" evidencing renewal thereof, or
Lessor may order such insurance and charge the cost thereof to Lessee, which
amount shall be payable by Lessee to Lessor upon demand.
8.8 Waiver of Subrogation. Without affecting any other rights or remedies,
Lessee and Lessor each hereby release and relieve the other, and waive their
entire right to recover damages (whether in contract or in tort) against the
other. for loss or damage to their property arising out of or incident to the
perils required to be insured against under Paragraph 8. The effect of such
releases and waivers of the right to recover damages shall not be limited by the
amount of insurance carried or required, or by any deductibles applicable
thereto, Lessor and Lessee agree to have their respective insurance companies
issuing property damage insurance waive any right to subrogation that such
companies may have against Lessor or Lessee, as the case may be, so long as the
insurance is not invalidated thereby.
8.7 Indemnity. Except for Lessor's negligence and/or breach of express
warranties, Lessee shall indemnity, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor, partners and
Lenders, from and against any and all claims, loss of rents and/or damages,
costs, liens, judgments, penalties, loss of permits, attorneys' and consultants'
fees, expenses and/or liabilities arising out of, involving, or in connection
with, the occupancy of the Premises by Lessee, the conduct of Lessee's business,
any act, omission or neglect of Lessee, its agents, contractors, employees or
invitees, and Out of any Default or Breach by Lessee in the performance in a
timely manner of any obligation on Lessee's part to be performed under this
Lease. The foregoing shall include. but not be limited to, the defense or
pursuit of any claim or any action or proceeding involved therein, and whether
or not (in the case of claims made against Lessor) litigated and/or reduced to
judgment. In case any action or proceeding be brought against Lessor by reason
of any of the foregoing matters, Lessee, upon notice from Lessor, shall defend
the same at Lessee's expense by counsel reasonably satisfactory to Lessor and
Lessor shall cooperate with Lessee in such defense. Lessor need not have first
paid any such claim in order to be so indemnified.
8.8 Exemption of Lessor from Liability. Lessor shall not be liable for
injury or damage to the person or goods, wares. merchandise or other property of
Lessee, Lessee's employees, contractors, invitees, customers, or any other
person in or about the Premises, whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the breakage.
leakage. obstruction or other defects of pipes, fire sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause. whether said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building of which the Premises are a
part, from other sources or places, and regardless of whether the cause of such
damage or injury or the means of repairing the same is accessible or not. Lessor
shall not be liable for any damages arising from any act or neglect of any other
lessee of Lessor nor from the failure by Lessor to enforce the provisions of any
other lease in the Industrial Center Notwithstanding Lessor's negligence or
breach of this Lease, Lessor shall under no circumstances be liable for injury
to Lessee's business or for any loss of income or profit therefrom.
9. Damage Or Destruction.
9.1 Definitions,
(a) "Premises Partial Damage" shall mean damage or destruction to the
Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is less than fifty percent (50%) of
the then Replacement Cost (as defined in sub-paragraph 9.1(d)) of the Premises
(excluding Lessee-Owned Alterations and Utility Installations and Trade
Fixtures) immediately prior to such damage or destruction.
(b) "Premises Total Destruction" shall mean damage or destruction to
the Premises, other than Lessee-Owned Alterations and Utility Installations. the
repair cost of which damage or destruction is fifty percent (50%) or more of the
then Replacement Cost of the Premises (excluding Lessee-Owned Alterations and
Utility Installations and Trade Fixtures) immediately prior to such damage or
destruction, In addition, damage or destruction to the Building, other than
Lessee-Owned Alterations and Utility installations and Trade Fixtures of any
lessees of the Building, the cost of which damage or destruction is fifty
percent (50%) or more of the then Replacement Cost (excluding Lessee-Owned
Alterations and Utility Installations and Trade Fixtures of any lessees of the
Building) of the Building shall, at the option of Lessor, be deemed to be
Premises Total Destruction.
(c) "Insured Loss" shall mean damage or destruction to the Premises,
other than Lessee-Owned Alterations and Utility Installations and Trade
Fixtures, which was caused by an event required to be covered by the insurance
described in Paragraph 8.3(a) irrespective of any deductible amounts or coverage
limits involved.
(d) "Replacement Cost" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of applicable building codes, ordinances or
laws, and without deduction for depreciation.
(e) "Hazardous Substance Condition" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.
9.2 Premises Partial Damage -- Insured Loss. If Premises Partial Damage
that is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair
such damage (but not Lessee's Trade Fixtures or Lessee-Owned Alterations and
Utility installations) as soon as reasonably possible and this Lease shall
continue in full force and effect. In the event, however, that there is a
shortage of insurance proceeds and such shortage is due to the fact that, by
reason of the unique nature of the improvements i the Premises. full replacement
cost insurance coverage was not commercially reasonable and available, Lessor
shall have no obligation to pay for the shortage in insurance proceeds or to
fully restore the unique aspects of the Premises unless Lessee provides Lessor
with the funds to cover same, or adequate assurance thereof, within ten (10)
days following receipt of written notice of such shortage and request therefor.
If Lessor receives said funds or adequate assurance thereof within said ten (10)
day period, Lessor shall complete them as soon as reasonably possible and this
Lease shall remain in full force and effect. If Lessor does not receive such
funds or assurance within said period, Lessor may nevertheless elect by written
notice to Lessee within ten (10) days thereafter to make such restoration and
repair as is commercially reasonable with Lessor paying any shortage in
proceeds, in which case this Lease shall remain in full force and effect. If
Lessor does not receive such funds or assurance within such ten (10) day period,
and if Lessor does not so elect to restore and repair, then this Lease shall
terminate sixty (60) days following the occurrence of the damage or destruction.
Unless otherwise agreed, Lessee shall in no event have any right to
reimbursement from Lessor for any funds contributed by Lessee to repair any such
damage or destruction. Premises Partial Damage due to flood or earthquake shall
be subject to Paragraph 9.3 rather than this Paragraph 9.2, notwithstanding that
there may be some insurance coverage, but the net proceeds of any such insurance
shall be made available for the repairs if made by either Party.
9.3 Partial Damage Uninsured Loss. If Premises Partial Damage that is not
an Insured Loss occurs, unless caused by a negligent or willful act of Lessee
(in which event Lessee shall make the repairs at Lessee's expense and this Lease
shall continue in full force and effect), Lessor, may at Lessor's option, either
(i) repair such damage as soon as reasonably possible at Lessor's expense, in
which event this Lease shall continue in full force and effect, or (ii) give
written notice to Lessee within thirty (30) days after receipt by Lessor of
knowledge of the occurrence of such damage of Lessor's desire to terminate this
Lease as of the date sixty (60) days following the date of such notice. In the
event Lessor elects to give such notice of Lessor's intention to terminate this
Lease. Lessee shall have the right within ten (10) days after the receipt of
such notice to give written notice to Lessor of Lessee's commitment to pay for
the repair of such damage totally at Lessee's expense and without reimbursement
from Lessor. Lessee shall provide Lessor with the required funds or satisfactory
assurance thereof within thirty (30) days following such commitment from Lessee.
In such event this Lease shall continue in full force and effect, and Lessor
shall proceed to make such repairs as soon as reasonably possible after the
required funds are available. if Lessee does not give such notice and provide
the funds or assurance thereof within the limes specified above, this Lease
shall terminate as of the date specified in Lessor's notice of termination.
9.4 Total Destruction. Notwithstanding any other provision hereof, if
Premises Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction. whether or not the damage
or destruction is an Insured Loss or was caused by a negligent or willful act of
Lessee. In the event, however, that the damage or destruction was caused by
Lessee, Lessor shall have the right to recover Lessor's damages from Lessee
except as released and waived in Paragraph 9.7.
9.5 Damage Near End of Term. If at any time during the last six (6) months
of the term of this Lease there is damage for which the cost to repair exceeds
one month's Base Rent, whether or not an insured Loss, Lessor may, at Lessor's
option, terminate this Lease effective sixty (60) days following the date of
occurrence of such damage by giving written notice to Lessee of Lessor's
election to do so within thirty (30) days after the date of occurrence of such
damage. Provided, however, if Lessee at that time has an exercisable Option to
extend this Lease or to purchase the Premises, then Lessee may preserve this
Lease by (a) exercising such option, and (b) providing Lessor with any shortage
in insurance proceeds (or adequate assurance thereof) needed to make the repairs
on or before the earlier of (i) the date which is ten (10) days after Lessee's
receipt of Lessor's written notice purporting to terminate this Lease, or (ii)
the day prior to the date upon which such option expires. If Lessee duly
exercises such option during such period and provides Lessor with funds (or
adequate assurance thereof) to cover any shortage in insurance proceeds, Lessor
shall, at Lessor's expense, repair such damage as soon as reasonably possible
and this Lease shall continue in full force and effect, If Lessee fails to
exercise such option and provide such funds or assurance during such period,
then this Lease shall terminate as of the date set forth in the first sentence
of this Paragraph 9.5.
9.6 Abatement of Rent; Lessee's Remedies,
(a) In the event of (i) Premises Partial Damage or (ii) Hazardous
Substance Condition for which Lessee is not legally responsible, the Base Rent.
Common Area Operating Expenses and other charges, if any, payable by Lessee
hereunder for the period during which such damage or condition, its repair,
remediation or restoration continues, shall be abated in proportion to the
degree to which Lessee's use of the Premises is impaired, but not in excess of
proceeds from insurance required to be carried under Paragraph 8.3(b). Except
for abatement of Base Rent, Common Area Operating Expenses and other charges, if
any, as aforesaid, all other obligations of Lessee hereunder shall be performed
by Lessee, and Lessee shall have no claim against Lessor for any damage suffered
by reason of any such damage, destruction, repair. remediation or restoration.
(b) if Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Premises within
ninety (90) days after such obligation shall accrue, Lessee may, at any time
prior to the commencement of such repair or restoration, give written notice to
Lessor and to any Lenders of which Lessee has actual notice of Lessee's election
to terminate this Lease on a date not less than sixty (60) days following the
giving of such notice. If Lessee gives such notice to Lessor and such Lenders
and such repair or restoration is not commenced within thirty (30) days after
receipt of such notice. this Lease shall terminate as of the date specified in
said notice. If Lessor or a Lender commences the repair or restoration of the
Premises within thirty (30) days after the receipt of such notice, this Lease
shall continue in full force and effect. "Commence" as used in this Paragraph
9.6 shall mean either the unconditional authorization of the preparation of the
required plans, or the beginning of the actual work on the Premises, whichever
occurs first.
9.7 Hazardous Substance Conditions. If a Hazardous Substance Condition
occurs. unless Lessee is legally responsible therefor (in which case Lessee
shall make the Investigation and remediation thereof required by Applicable
Requirements and this Lease shall continue in full force and effect, but subject
to Lessor's rights under
<PAGE>
Paragraph 6.2(c) and Paragraph 13), Lessor may. at Lessors option. either (i)
investigate and, remediate such Hazardous Substance Condition. if required, as
soon as reasonably possible at Lessors expense. in which event this Lease shall
continue in full force and effect, or (ii) if the estimated Cost to investigate
and remediate such condition exceeds twelve (12) times the then monthly Base
Rent or $100,000.00 whichever is greater, give written notice to Lessee within
thirty (30) days after receipt by Lessor of knowledge of the occurrence of Such
Hazardous Substance Condition of Lessors desire to terminate this Lease as of
the date sixty (60) days following the date of such notice. In the event Lessor
elects to give such notice of Lessors intention to terminate this Lease, Lessee
shall have the right within ten (10) days after the receipt of such notice to
give written notice to Lessor of Lessee's commitment to pay for the excess costs
of (a) investigation and remediation of such Hazardous Substance Condition to
the extent required by Applicable Requirements, over (b) an amount equal to
twelve (12) times the then monthly Base Rent of $__00,000, whichever is greater.
Lessee shall provide Lessor with the funds required of Lessee or satisfactory
assurance thereof within thirty (30) days following said commitment by Lessee.
In such event this Lease shall continue in full force and effect, and Lessor
shall proceed to make Such investigation and remediation as soon as reasonably
possible after the required funds are available. If Lessee does not give such
notice and provide the required funds or assurance thereof within the time
period specified above. this Lease shall terminate as of the date specified in
Lessor's notice of termination
9.8 Termination -- Advance Payments. Upon termination of this Lease
pursuant to this Paragraph 9, Lessor shall return to Lessee any advance payment
made by Lessee to Lessor and so much of Lessee's Security Deposit as has not
been, or is not then required to be, used by Lessor under the terms of this
Lease.
9.9 Waiver of Statutes. Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the Premises
and the Building with respect to the termination of this Lease and hereby waive
the provisions of any present or future statute to the extent it is inconsistent
herewith.
10. Real Property Taxes.
10.1 Payment of Taxes. Lessor shall pay the Real Property Taxes, as defined
in Paragraph 10.2, applicable to the Industrial Center, and except as otherwise
provided in Paragraph 10.3, any Such amounts shall be included in the
calculation of Common Area Operating Expenses in accordance with the provisions
of Paragraph 4.2.
10.2 Real Property Tax Definition. As used herein, the term 'Real Property
Taxes shall include any form of real estate lax or assessment, general, special,
ordinary or extraordinary, and any license fee, commercial rental tax,
improvement bond or bonds, levy or tax (Other than inheritance, personal income
or estate taxes) imposed upon the industrial Center by any authority having the
direct or indirect power to tax, including any city, state or federal
government, or any school, agricultural, sanitary, fire, street, drainage, or
other improvement district thereof, levied against any legal or equitable
interest of Lessor in the Industrial Center or any portion thereof, Lessor's
right to rent or other income therefrom, and/or Lessor's business of leasing the
Premises. The term "Real Property Taxes' shall also include any tax, fee, levy,
assessment or charge, or any increase therein, imposed by reason of events
occurring, or changes in Applicable Law taking effect, during the term of this
Lease, including but not limited to a change in the ownership of the Industrial
Center or in the improvements thereon, the execution of this Lease, or any
modification, amendment or transfer thereof, and whether or not contemplated by
the Parties. In calculating Real Property Taxes for any calendar year, the Real
Property Taxes for any real estate tax year shall be included in the calculation
of Real Property Taxes for such calendar year based upon the number of days
which such calendar year and tax year have in common.
10.3 Additional Improvements. Common Area Operating Expenses shall not
include Real Property Taxes specified in the tax assessor's records and work
sheets as being caused by additional improvements placed upon the Industrial
Center by other lessees or by Lessor for the exclusive enjoyment of such other
lessees. Notwithstanding Paragraph 10.1 hereof, Lessee shall, however, pay to
Lessor at the time Common Area Operating Expenses are payable under Paragraph
4.2, the entirety of any increase in Real Property Taxes IF assessed solely by
reason of Alterations, Trade Fixtures or Utility Installations placed upon the
Premises by Lessee or at Lessee's request.
10.4 Joint Assessment. If the Building is not separately assessed, Real
Property Taxes allocated to the Building shall be an equitable proportion of the
Real Properly Taxes for all of the land and improvements included within the tax
parcel assessed, such proportion to be determined by Lessor from the respective
valuations assigned in the assessor's work sheets or such other information as
may be reasonably available. Lessor's reasonable determination thereof, in good
faith, shall be conclusive.
10.5 Lessee's Property Taxes. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or stored within the Industrial Center. When
possible, Lessee shall cause its Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of Lessor.
If any of Lessee's said property shall be assessed with Lessor's real property,
Lessee shall pay Lessor the taxes attributable to Lessee's property within ten
(10) days after receipt of a written statement setting forth the taxes
applicable to Lessee's property.
11. UTILITIES. Lessee shall pay directly for all utilities and services supplied
to the Premises, including but not limited to electricity, telephone, security,
gas and cleaning of the Premises, together with any taxes thereon. If any such
utilities or services are not separately metered to the Premises or separately
billed to the Premises, Lessee shall pay to Lessor a reasonable proportion to be
determined by Lessor of all such charges jointly metered or billed with other
premises in the Building, in the manner and within the time periods set forth in
Paragraph 4.2(d).
12. Assignment and Subletting.
12.1 Lessor's Consent Required.
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or otherwise transfer or encumber (collectively, "assign") or
sublet all or any part of Lessee's interest in this Lease or in the Premises
without Lessor's prior written consent given under and subject to the terms of
Paragraph 36.
(b) A change in the control of Lessee shall constitute an assignment
requiring Lessor's consent. The transfer, on a cumulative basis, of twenty-five
percent (25%) or more of the voting control of Lessee shall constitute a change
in control for this purpose.
(c) The involvement of Lessee or its assets in any transaction, or
series of transactions (by way of merger, sale, acquisition, financing,
refinancing, transfer, leveraged buy-out or otherwise), whether or not a formal
assignment or hypothecation of this Lease or Lessee's assets occurs, which
results or will result in a reduction of the Net Worth of Lessee, as hereinafter
defined, by an amount equal to or greater than twenty-five percent (25%) of such
Net Worth of Lessee as it was represented to Lessor at the time of full
execution and delivery of this Lease or at the time of the most recent
assignment to which Lessor has consented. or as it exists immediately prior to
said transaction or transactions constituting such reduction, at whichever time
said Net Worth of Lessee was or is greater, shall be considered an assignment of
this Lease by Lessee to which Lessor may reasonably withhold its consent. "Net
Worth of Lessee" for purposes of this Lease shall be the net worth of Lessee
(excluding an Guarantors) established under generally accepted accounting
principles consistently applied.
(d) An assignment or subletting of Lessee's interest in this Lease
without Lessor's specific prior written consent shall, at Lessor's option, be a
Default curable after notice per Paragraph 13.1, or a non-curable Breach without
the necessity of any notice and grace period. If Lessor elects to treat such
consent to assignment or subletting as a non-curable Breach, Lessor shall
have the right to either: (i) terminate this Lease, or (ii) upon thirty (30)
days' written notice ("Lessor's Notice"), increase the monthly Base Rent for the
Premises to the greater of the then fair market rental value of the Premises, as
reasonably determined by Lessor, or one hundred ten percent (110%) of the Base
Rent then in effect. Pending determination of the new fair market rental value,
if disputed by Lessee, Lessee shall pay the amount set forth in Lessor's Notice,
with any overpayment credited against the next installment(s) of Base Rent
coming due, and any underpayment for the period retroactively to the effective
dale of the adjustment being due and payable immediately upon the determination
thereof. Further, in the event of such Breach and rental adjustment, (i) the
purchase price of any option to purchase the Premises held by Lessee shall be
subject to similar adjustment to the then fair market value as reasonably
determined by Lessor (without the Lease being considered an encumbrance or any
deduction for depreciation or obsolescence, and considering the Premises at its
highest and best use and in good condition) or one hundred ten percent (11 0%)
of the price previously in effect, (ii) any index-oriented rental or price
adjustment formulas contained in this Lease shall be adjusted to require that
the base index be determined with reference to the index applicable to the time
of such adjustment, and (iii) any fixed rental adjustments scheduled during the
remainder of the Lease term shall be increased in the same ratio as the new
rental bears to the Base Rent in effect immediately prior to the adjustment
specified in Lessor's Notice.
(e) Lessee's remedy for any breach of this Paragraph 12.1 by Lessor
shall be limited to compensatory damages and/or injunctive relief
12.2 Terms and Conditions Applicable to Assignment and Subletting.
(a) Regardless of Lessor's consent, any assignment or subletting shall
not (i) be effective without the express written assumption by such assignee or
sublessee of the obligations of Lessee under this Lease, (ii) release Lessee of
any obligations hereunder, nor (iii) alter the primary liability of Lessee for
the payment of Base Rent and other sums due Lessor hereunder or for the
performance of any other obligations to be performed by Lessee under this Lease.
(b) Lessor may accept any rent or performance of Lessee's obligations
from any person other than Lessee pending approval or disapproval of an
assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of any rent for performance shall constitute a waiver or
estoppel of Lessor's right to exercise its remedies for the Default or Breach by
Lessee of any of the terms, covenants or conditions of this Lease.
(c) The consent of Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or to
any subsequent or successive assignment or subletting by the assignee or
sublessee. However, Lessor may consent to subsequent sublettings and assignments
of the sublease or any amendments or modifications thereto without notifying
Lessee or anyone else liable under this Lease or the sublease and without
obtaining their consent, and such action shall not relieve such persons from
liability under this Lease or the sublease. (d) In the event of any Default or
Breach of Lessee's obligation under this Lease, Lessor may proceed directly
against Lessee, any Guarantors or anyone else responsible for the performance of
the Lessee's Obligations under this Lease, including any sublessee, without
first exhausting Lessor's remedies against any other person or entity
responsible therefor to Lessor, or any security held by Lessor.
(e) Each request for consent to an assignment or subletting shall be
in writing, accompanied by information relevant to Lessor's determination as to
the financial and operational responsibility and appropriateness of the proposed
assignee or sublessee, including but not limited to the intended use and/or
required modification of the Premises, if any, together with a non-refundable
deposit of $1,000.00 or ten percent (10%) of the monthly BASE RENT APPLICABLE to
the portion of the Premises which is the subject of the proposed assignment or
sublease, whichever is greater, as reasonable consideration for Lessor's
considering and processing the request for consent. Lessee agrees to provide
Lessor with such other or additional information and/or documentation as may be
reasonably requested by Lessor.
(f) Any assignee of, or sublessee under, this Lease shall, by reason
of accepting such assignment or entering into such sublease, be deemed, for the
benefit of Lessor, to have assumed and agreed to conform and comply with each
and every term, covenant, condition and obligation herein to be observed or
performed by Lessee during the term of said assignment or sublease, other than
such obligations as are contrary to or inconsistent with provisions of an
assignment or sublease to which Lessor has specifically consented in writing.
<PAGE>
(g) The occurrence of a transaction described in Paragraph 12.2(c)
shall give Lessor the right (but not the obligation) to require that the
Security Deposit increased by an amount equal to six (6) times the then monthly
Base Rent, and Lessor may make the actual receipt by Lessor of the Security
Deposit increase a condition of, Lessor's consent to such transaction.
(h) Lessor, as a condition to giving its consent to any assignment or
subletting, may require that the amount and adjustment schedule of the rent
payable under this Lease be adjusted to what is then the market value and/or
adjustment schedule for property similar to the Premises as then constituted, as
determined by Lessor
12.3 Additional Terms and Conditions Applicable to Subletting. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease of all or a portion
of the Premises heretofore or hereafter made by Lessee, and Lessor may collect
such rent and income and apply same toward Lessee's obligations under this
Lease: provided. however, that until a Breach (as defined in Paragraph 13.1)
shall occur in the performance of Lessee's obligations under this Lease. Lessee
may, except as otherwise provided in this Lease, receive, collect and enjoy the
rents accruing under such sublease. Lessor shall not, by reason of the foregoing
provision or any other assignment of such sublease to Lessor, nor by reason of
the collection of the rents from a sublessee, be deemed liable to the sublessee
for any failure of Lessee to perform and comply with any of Lessee's obligations
to such sublessee under such sublease. Lessee hereby irrevocably authorizes and
directs any such sublessee, upon receipt of a written notice from Lessor slating
that a Breach exists in the performance of Lessee's obligations under this
Lease, to pay to Lessor the rents and other charges due and to become due under
the sublease. Sublessee shall rely upon any such statement and request from
Lessor and shall pay such rents and other charges to Lessor without any
obligation or right to inquire as to whether such Breach exists and
notwithstanding any notice from or claim from Lessee to the contrary. Lessee
shall have no right or claim against such sublessee. or, until the Breach has
been cured, against Lessor, for any such rents and other charges so paid by said
sublessee to Lessor.
(b) In the event of a Breach by Lessee in the performance of its
obligations under this Lease, Lessor, at its option and without any obligation
to do so, may require any sublessee to attorn to Lessor, in which event Lessor
shall undertake the obligations of the sublessor under such sublease from the
time of the exercise of said option to the expiration of such sublease;
provided, however, Lessor shall not be liable for any prepaid rents or security
deposit paid by such sublessee to such sublessor or for any other prior defaults
or breaches of such sublessor under such sublease.
(c) Any matter or thing requiring the consent of the sublessor under a
sublease shall also require the consent of Lessor herein.
(d) No sublessee under a sublease approved by Lessor shall further
assign or sublet all or any part of the Premises without Lessor's prior written
consent.
(e) Lessor shall deliver a copy of any notice of Default or Breach by
Lessee to the sublessee, who shall have the right to cure the Default of Lessee
within the grace period, if any, specified in such notice. The sublessee shall
have a right of reimbursement and offset from and against Lessee for any such
Defaults cured by the sublessee.
13. Default; Breach; Remedies.
13.1 Default; Breach. Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence
for legal services and costs in the preparation and service of a notice of
Default, and that Lessor may include the cost of such services and costs in said
notice as rent due and payable to cure said default A "Default" by Lessee is
defined as a failure by Lessee to observe, comply with or perform any of the
terms, covenants, conditions or rules applicable to Lessee under this Lease. A
"Breach" by Lessee is defined as the occurrence of any one or more of the
following Defaults, and, where a grace period for cure after notice is specified
herein, the failure by Lessee to cure such Default prior to the expiration of
the applicable grace period, and shall entitle Lessor to pursue the remedies set
forth in Paragraphs 13.2 and/or 13.3: The vacating of the Premises without the
intention to reoccupy same, or the abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease, the failure
by Lessee to make any payment of Base Rent, Lessee's Share of Common Area
Operating Expenses, or any other monetary payment required to be made by Lessee
hereunder as and when due, the failure by Lessee to provide Lessor with
reasonable evidence of insurance or surety bond required under this Lease, or
the failure of Lessee to fulfill any obligation under this Lease which endangers
or threatens life or property, where such failure continues for a period of
three (3) days following written notice thereof by or on behalf of Lessor to
Lessee.
(c) Except as expressly otherwise provided in this Lease, the failure
by Lessee to provide Lessor with reasonable written evidence (in duly executed
original form, if applicable) 01(i) compliance with Applicable Requirements per
Paragraph 6.3, (ii) the inspection, maintenance and service contracts required
under Paragraph 7.1(b). (iii) the rescission of an unauthorized assignment or
subletting per Paragraph 12.1, (iv) a Tenancy Statement per Paragraphs 16 or 37,
(v) the subordination or non subordination of this Lease per Paragraph 30, (vi)
the guaranty of the performance of Lessee's obligations under this Lease if
required under Paragraphs 1.11 and 37, (vii) the execution of any document
requested under Paragraph 42 (easements), or (viii) any other documentation or
information which Lessor may reasonably require of Lessee under the terms of
this Lease, where any such failure continues for a period of ten (10) days
following written notice by or on behalf of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40 hereof that
are to be observed, complied with or performed by Lessee, other than those
described in Subparagraphs 13.1(a), (b) or (c) above, where such Default
continues for a period of thirty (30) days after written notice thereof by or on
behalf of Lessor to Lessee; provided, however, that if the nature of Lessee's
Default is such that more than thirty (30 days are reasonably required for its
cure, then it shall not be deemed to be a Breach of this Lease by Lessee if
Lessee commences such cure within said thirty (30) day period and thereafter
diligently prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) the making by
Lessee of any general arrangement or assignment for the benefit of creditors;
(H) Lessee's becoming a "debtor" as defined in 11 U.S. Code Section 101 or any
successor statute thereto (unless, in the case of a petition filed against
Lessee. the same is dismissed within sixty (60) days); (iii) the appointment of
a trustee or receiver to take possession of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease. where possession
is not restored to Lessee within thirty (30) days: or (iv) the attachment,
execution or other judicial seizure of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where such
seizure is not discharged within thirty (30) days: provided, however, in the
event that any provision of this Subparagraph 13.1(e) is contrary to any
applicable law, such provision shall be of no force or effect. and shall not
affect the validity of the remaining provisions.
(f) The discovery by Lessor that any financial statement of Lessee or
of any Guarantor, given to Lessor by Lessee or any Guarantor, was materially
false.
(g) If the performance of Lessee's obligations under this Lease is
guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor's
liability with respect to this Lease other than in accordance with the terms of
such guaranty, (iii) a Guarantor's becoming insolvent or the subject of a
bankruptcy filing, (iv) a Guarantor's refusal to honor the guaranty, or (v) a
Guarantor's breach of its guaranty obligation on an anticipatory breach basis,
and Lessee's failure, within sixty (60) days following written notice by or on
behalf of Lessor to Lessee of any such event. to provide Lessor with written
alternative assurances of security which, when coupled with the then existing
resources of Lessee, equals or exceeds the combined financial resources of
Lessee and the Guarantors that existed at the time of execution of this Lease.
13.2 Remedies. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written notice
to Lessee (or in case of an emergency, without notice), Lessor may. at its
option (but without obligation to do so), perform such duty or obligation on
Lessee's behalf, including but not limited to the obtaining of reasonably
required bonds, insurance policies, or governmental licenses, permits or
approvals. The costs and expenses of any such performance by Lessor shall be due
and payable by Lessee to Lessor upon invoice therefor. If any check given to
Lessor by Lessee shall not be honored by the bank upon which it is drawn,
Lessor, at its own option, may require all future payments to be made under this
Lease by Lessee be made Only by cashier's check. In the event of a Breach of
this Lease by Lessee (as defined in Paragraph 13.1). with or without further
notice or demand, and without limiting Lessor in the exercise of any right or
remedy which Lessor may have by reason of such Breach, Lessor may:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Lessee shall immediately surrender possession of the Premises to Lessor. In such
event Lessor shall be entitled to recover from Lessee. (i) the worth at the time
of the award of the unpaid rent which had been earned at the time of
termination; (ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that the Lessee proves could have
been reasonably avoided; (iii) the worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided: and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and that
portion of any leasing commission paid by Lessor in connection with this Lease
applicable to the unexpired term of this Lease. The worth at the time of award
of the amount referred to in provision (iii) of the immediately preceding
sentence shall be computed by discounting such amount at the discount rate of
the Federal Reserve Bank of San Francisco or the Federal Reserve Bank District
in which the Premises are located at the time of award plus one percent (1%).
Efforts by Lessor to mitigate damages caused by Lessee's Default or Breach of
this Lease shall not waive Lessor's right to recover damages under this
Paragraph 13.2. if termination of this Lease is obtained through the provisional
remedy of unlawful detainer. Lessor shall have the right to recover in such
proceeding the unpaid rent and damages as are recoverable therein, or Lessor may
reserve the right to recover all or any part thereof in a separate suit for such
rent and/or damages. If a notice and grace period required under Subparagraph
13.1(b), (c) or (d) was not previously given. a notice to pay rent o quit. or to
perform or quit, as the case may be, given to Lessee under any statute
authorizing the forfeiture of leases for unlawful detainer shall also constitute
the applicable notice for grace period purposes required under sub-paragraph
13.1(b), (c) or (d). In such case, the applicable grace period under the
unlawful detainer statute shall run concurrently after the one such statutory
notice, and the failure of Lessee to cure the Default within the greater of the
two (2) such grace periods shall constitute both an unlawful detainer and a
Breach of this Lease entitling Lessor to the remedies provided for in this Lease
and/or by said statute.
(b) Continue the Lease and Lessee's right to possession in effect (in
California under California Civil Code Section 1951.4) after Lessee's Breach and
recover the rent as it becomes due, provided Lessee has the right to sublet or
assign, subject only to reasonable limitations. Lessor and Lessee agree that the
limitations on assignment and subletting in this Lease are reasonable, Acts of
maintenance or preservation, efforts to relet the Premises, or the appointment
of a receiver to protect the Lessor's interest under this Lease, shall not
constitute a termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available to Lessor under
the laws or judicial decisions of the state wherein the Premises are located.
(d) The expiration or termination of this Lease and/or the termination
of Lessee's right to possession shall not relieve Lessee from liability under
any indemnity provisions of this Lease as to matters occurring or accruing
during the term hereof or by reason of Lessee's occupancy of the Premises.
<PAGE>
13.3 Inducement Recapture In Event of Breach. Any agreement by Lessor for
free or abated rent or other charges applicable to the Premises, or for the
giving or paying by Lessor to or for Lessee of any cash or other bonus,
inducement or consideration for Lessee's entering into this Lease, all of which
concessions are hereinafter referred to as "Inducement Provisions" shall be
deemed conditioned upon Lessee's full and faithful performance of all of the
terms, covenants and conditions of this Lease to be performed or observed by
Lessee during the term hereof as the same may be extended. Upon the occurrence
of a Breach (as defined in Paragraph 13.1) of this Lease by LESSEE, ANY SUCH
Inducement Provision shall automatically be deemed deleted from this Lease and
of no further force or effect. and any rent, other charge, bonus: inducement or
consideration theretofore abated, given or paid by Lessor under such an
Inducement Provision shall be immediately due and payable by Lessee to Lessor,
and recoverable b Lessor, as additional rent due under this Lease,
notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by
Lessor of rent or the cure of the Breach which initiated the operation of this
Paragraph 13.3 shall not be deemed a waiver by Lessor of the provisions of this
Paragraph 13.3 unless specifically so staled in writing by Lessor at the lime of
such acceptance.
13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee
to Lessor of rent and other sums due hereunder will cause Lessor to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed upon Lessor by the
terms of any ground lease, mortgage or deed of trust covering the Premises.
Accordingly, if any installment of rent or other sum due from Lessee shall not
be received by Lessor or Lessor's designee within ten (10) days after such
amount shall be due, then, without any requirement for notice to Lessee, Lessee
shall pay to Lessor a late charge equal to six percent (6%) of such overdue
amount. The Parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of late payment by
Lessee. Acceptance of such late charge by Lessor shall in no event constitute a
waiver of Lessee's Default or Breach with respect to such overdue amount, nor
prevent Lessor from exercising any of the other rights and remedies granted
hereunder. In the event that a late charge is payable hereunder, whether or not
collected, for three (3) consecutive installments of Base Rent, then
notwithstanding Paragraph 4.1 or any other provision of this Lease to the
contrary, Base Rent shall, at Lessor's option, become due and payable quarterly
in advance.
13.5 Breach by Lessor. Lessor shall not be deemed in breach of this Lease
unless Lessor fails within a reasonable time to perform an obligation required
to be performed by Lessor. For purposes of this Paragraph 13.5, a reasonable
time shall in no event be less than thirty (30) days after receipt by Lessor,
and by any Lender(s) whose name and address shall have been furnished to Lessee
in writing for such purpose, of written notice specifying wherein such
obligation of Lessor has not been performed: provided, however, that IF the
nature of Lessor's obligation is such that more than thirty (30) days after such
notice are reasonably required for its performance, then Lessor shall not be in
breach of this Lease if performance is commenced within such thirty (30) day
period and thereafter diligently pursued to completion.
14. Condemnation. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(all of which are herein called "condemnation"), this Lease shall terminate as
to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than ten percent (10%) of the floor
area of the Premises, or more than twenty-five percent (25%) of the portion of
the Common Areas designated for Lessee parking, is taken by condemnation. Lessee
may, at Lessee's option, to be exercised in writing within ten (10) days after
Lessor shall have given Lessee written notice of such taking (or in the absence
of such notice, within ten (10) days after the condemning authority shall have
taken possession) terminate this Lease as of the date the condemning authority
takes such possession. If Lessee does not terminate this Lease in accordance
with the foregoing, this Lease shall remain in full force and effect as t the
portion of the Premises remaining, except that the Base Rent shall be reduced in
the same proportion as the rentable floor area of the Premises taken bears to
the total rentable floor area of the Premises. No reduction of Base Rent shall
occur if the condemnation does not apply to any portion of the Premises. Any
award for the taking of all or any part of the Premises under the power of
eminent domain or any payment made under threat of the exercise of such power
shall be the property of Lessor, whether such award shall be made as
compensation for diminution of value of the leasehold or for the taking of the
fee, or as severance damages; provided, however, that Lessee shall be entitled
to any compensation. separately awarded to Lessee for Lessee's relocation
expenses and/or loss of Lessee's Trade Fixtures, in the event that this Lease is
not terminated by reason of such condemnation, Lessor shall to the extent of its
net severance damages received, over and above Lessee's Share of the legal and
other expenses incurred by Lessor in the condemnation matter, repair any damage
to the Premises caused by such condemnation authority. Lessee shall be
responsible for the payment of any amount in excess of such net severance
damages required to complete such repair.
15. BROKERS' FEES.
15.1 Procuring Cause. The broker(s) named in Paragraph 1.10 is/are the
procuring cause of this Lease.
15.2 Additional Terms. Unless Lessor and Broker(s) have otherwise agreed in
writing, Lessor agrees that: (a) if Lessee exercises any Option (as defined in
Paragraph 39.1) granted under this Lease or any Option subsequently granted, or
(b) IF Lessee acquires any rights to the Premises or other premises in which
Lessor has an interest, or (c) if Lessee remains in possession of the Premises
with the consent of Lessor after the expiration of the term of this Lease after
having failed to exercise an Option, or (d) if said Brokers are the procuring
cause of any other lease or sale entered into between the Parties pertaining to
the Premises and/or any adjacent property in which Lessor has an interest, or
(e) if Base Rent is increased, whether by agreement or operation of an
escalation clause herein, then as to any of said transactions. Lessor shall pay
said Broker(s) a fee in accordance with the schedule of said Broker(s) in effect
at the time of the execution of this Lease.
15.3 Assumption of Obligations. Any buyer or transferee of Lessor's
interest in this Lease, whether such transfer is by agreement or by operation of
law. shall be deemed to have assumed Lessor's obligation under this Paragraph
15. Each Broker shall be an intended third party beneficiary of the provisions
of Paragraph 1.10 and of this Paragraph 15 to the extent of its interest in any
commission arising from this Lease and may enforce that right directly against
Lessor arid its successors.
15.4 Representations and Warranties. Lessee and Lessor each represent and
warrant to the other that it has had no dealings with any person, firm, broker
or finder other than as named in Paragraph 1.10(a) in connection with the
negotiation of this Lease and/or the consummation of the transaction
contemplated hereby, and that no broker or other person, firm or entity other
than said named Broker(s) is entitled to any commission or finder's fee in
connection with said transaction. Lessee and Lessor do each hereby agree to
indemnify, protect, defend and hold the other harmless from and against
liability for compensation or charges which may be claimed by any such unnamed
broker. finder or other similar party by reason of any dealings or actions of
the indemnifying Party, including any costs, expenses, and/or attorneys' fees
reasonably incurred with respect thereto.
16. Tenancy and Financial Statements.
16.1 Tenancy Statement. Each Party (as "Responding Party") shall within ten
(10) days after written notice from the other Party (the "Requesting Party")
execute, acknowledge and deliver to the Requesting Party a statement in writing
in a form similar to the then most current "Tenancy Statement" form published by
the American Industrial Real Estate Association, plus such additional
information, confirmation and/or statements as may be reasonably requested by
the Requesting Party.
16.2 Financial Statement. If Lessor desires to finance, refinance, or sell
the Premises or the Building, or any part thereof. Lessee and alt Guarantors
shall deliver to any potential lender or purchaser designated by Lessor such
financial statements of Lessee and such Guarantors as may be reasonably required
by such lender or purchaser. including but not limited to Lessee's financial
statements for the past three (3) years. All such financial statements shall be
received by Lessor and such lender o purchaser in confidence and shall be used
only for the purposes herein set forth.
17. Lessor's Liability. The term "Lessor" as used herein shall mean the owner or
owners at the time in question of the fee title to the Premises, In the event of
a transfer of Lessor's title or interest in the Premises or in this lease,
Lessor shall deliver to the transferee or assignee (in cash or by credit) any
unused Security Deposit held by Lessor at the time of such transfer or
assignment. Except as provided in Paragraph 15.3, upon such transfer or
assignment and delivery of the Security Deposit, as aforesaid, the prior Lessor
shall be relieved of all liability with respect to the obligations and/or
covenants under this Lease thereafter to be performed by the Lessor, Subject to
the foregoing, the obligations and/or covenants in this Lease to be performed by
the Lessor shall be binding only upon the Lessor as hereinabove defined.
18. Severability. The invalidity of any provision of this Lease, as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof
19. Interest On Past-due Obligations. Any monetary payment due Lessor hereunder,
other than late charges, not received by Lessor within ten (10) days following
the date on which it was due, shall bear interest from the date due at the prime
rate charged by the largest state chartered bank in the state in which the
Premises are located plus four percent (4%) per annum, but not exceeding the
maximum rate allowed by law, in addition to the potential late charge provided
for in Paragraph 13.4.
20. Time of Essence. Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under this Lease.
21. Rent Defined. All monetary obligations of Lessee to Lessor under the terms
of this Lease are deemed to be rent.
22. No Prior or Other Agreements; Broker Disclaimer. This lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.
Lessor and Lessee each represents and warrants to the Brokers that it has made,
and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the other Party TO this Lease and as
to the nature. quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party. Each Broker shall be an intended third party beneficiary
of the provisions of this Paragraph 22.
23. NOTICES.
23.1 Notice Requirements. All notices required or permitted by this Lease
shall be in writing and may be delivered in person (by hand or by messenger or
courier service) or may be sent by regular, certified or registered mail or U.S.
Postal Service Express Mail, with postage prepaid, or by facsimile transmission
during normal business hours, and shall be deemed sufficiently given if served
in a manner specified in this Paragraph 23. The addresses noted adjacent to a
Party's signature on this Lease shall be that Party's address for delivery or
mailing of notice purposes. Either Party may by written notice to the other
specify a different address for notice purposes, except that upon Lessee's
taking possession of the Premises, the Premises shall constitute Lessee's
address for the purpose of mailing or delivering notices to Lessee. A copy of
all notices required or permitted to be given to Lessor hereunder shall be
concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate by written notice to Lessee.
23.2 Date of Notice. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown on
the receipt card. or if no delivery date is shown, the postmark thereon, If sent
by regular mail, the notice shall be deemed given forty-eight (48) hours after
the same is addressed as required herein and mailed with postage prepaid.
Notices delivered by United States Express Mail or overnight courier that
guarantees next day delivery shall
<PAGE>
twenty-four (24) hours after delivery of the same to the United Stales Postal
Service or courier. If any notice is transmitted by facsimile transmission or
similar means. the shall be deemed served or delivered upon telephone or
facsimile confirmation of receipt of the transmission thereof, provided a copy
is also delivered via delivery or r___ notice is received on a Saturday or a
Sunday or a legal holiday, it shall be deemed received on the next business day.
24. Waivers. No waiver by Lessor of the Default or Breach of any term, covenant
or condition hereof by Lessee. shall be deemed a waiver of any other term.
covenant of Condition hereof, or of any subsequent Default or Breach by Lessee
of the same or any other term. covenant or condition hereof Lessor's consent to.
or approval of, any such act shall not be deemed to render unnecessary the
obtaining of Lessor's consent to, or approval of, any subsequent or similar act
by Lessee. or be construed as the basis of an estoppel to enforce the provision
or provisions of this Lease requiring such consent. Regardless of Lessor's
knowledge of a Default or Breach at the time of accepting rent, the acceptance
of rent by Lessor shall not be a waiver of any Default or Breach by Lessee of
any provision hereof Any payment given Lessor by Lessee may be accepted by
Lessor on account of monies or damages due Lessor, notwithstanding any
qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment.
25. Recording. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.
26. No Right To Holdover, Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease, In the event that Lessee holds over in violation of this Paragraph
26 then the Base Rent payable from and after the time of the expiration or
earlier termination of this Lease shall be increased to two hundred percent
(200%) of the Base Rent applicable during the month immediately preceding such
expiration or earlier termination. Nothing contained herein shall be construed
as a consent by Lessor to any holding over by Lessee.
27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible. be cumulative with all other remedies at
law or in equity.
28. Covenants and Conditions. All provisions of this Lease to be observed or
performed by Lessee are both covenants and conditions.
29. Binding Effect; Choice of Law. This Lease shall be binding upon the Parties,
their personal representatives. successors and assigns and be governed by the
laws of the state in which the Premises are located. Any litigation between the
Parties hereto concerning this Lease shall be initiated in the county in which
the Premises are located.
30. Subordination; Attornment; Non-Disturbance.
30.1 Subordination. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage. deed of trust, or other
hypothecation or security device (collectively, "Security Device"), now or
hereafter placed by Lessor upon the real property of which the Premises are a
part. to any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. Lessee
agrees that the Lenders holding any such Security Device shall have no duty,
liability or obligation to perform any of the obligations of Lessor under this
Lease, but that in the event or Lessor's default with respect to any such
obligation. Lessee will give any Lender whose name and address have been
furnished Lessee in writing for such purpose notice of Lessor's default pursuant
to Paragraph 13.5. If any Lender shall elect to have this Lease and/or any
Option granted hereby superior to the lien of its Security Device and shall give
written notice thereof to Lessee, this Lease and such Options shall be deemed
prior to such Security Device, notwithstanding the relative dates of the
documentation or recordation thereof
30.2 Attornment, Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure. such new owner shall not: (i) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership, (H) be subject to any offsets or defenses
which Lessee might have against any prior lessor, or (xi) be bound by prepayment
of more than one month's rent.
30.3 Non-Disturbance. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this Lease
shall be subject to receiving assurance (a "non-disturbance agreement") from the
Lender that Lessee's possession and this Lease, including any options to extend
the term hereof, will not be disturbed so long as Lessee is not in Breach hereof
and attorns to the record owner of the Premises.
30.4 Self-Executing. The agreements contained in this Paragraph 30 shall be
effective without the execution of any further documents; provided. however,
that upon written request from Lessor or a Lender in connection with a sale,
financing or refinancing of Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any such
subordination or non-subordination, attornment and/or non-disturbance agreement
as is provided for herein.
31. Attorneys' Fees. If any Party or Broker brings an action or proceeding to
enforce the terms hereof or declare rights hereunder, the Prevailing Party (as
hereafter defined) in any such proceeding, action, or appeal thereon, shall be
entitled to reasonable attorneys' fees. Such fees may be awarded in the same
suit or recovered in a separate suit. whether or not such action or proceeding
is pursued to decision or judgment. The term "Prevailing Party" shall include,
without limitation, a Party or Broke who substantially obtains or defeats the
relief sought, as the case may be, whether by compromise, settlement, judgment,
or the abandonment by the other Party or Broker of its claim or defense. The
attorneys' fee award shall not be computed in accordance with any court fee
schedule, but shall be such as to fully reimburse all attorneys' fees reasonably
incurred. Lessor shall be entitled to attorneys' fees, costs and expenses
incurred in preparation and service of notices of Default and consultations in
connection therewith, whether or not a legal action is subsequently commenced in
connection with such Default or resulting Breach. Broker(s) shall be intended
third party beneficiaries of this Paragraph 31.
32. Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's agents shall
have the right to enter the Premises at any time, in the case of an emergency,
and otherwise at reasonable times for the purpose of showing the same to
prospective purchasers, lenders, or lessees, and making such alterations.
repairs. improvements or additions to the Premises or to the Building, as Lessor
may reasonably deem necessary. Lessor may at any time place on or about the
Premises or Building any ordinary "For Sale signs and Lessor may at any time
during the last one hundred eighty (180) days of the term hereof place on or
about the Premises any ordinary "For Lease" signs. All such activities of Lessor
shall be without abatement of rent or liability to Lessee.
33. Auctions. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
34. Signs. Lessee shall not place any sign upon the exterior of the Premises or
the Building, except that Lessee may, with Lessor's prior written consent,
install (but not on the root) such signs as are reasonably required to advertise
Lessee's own business so long as such signs are in a location designated by
Lessor and comply with Applicable Requirements and the signage criteria
established for the Industrial Center by Lessor. The installation of any sign on
the Premises by or for Lessee shall be subject to the provisions of Paragraph 7
(Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations).
Unless otherwise expressly agreed herein, Lessor reserves all rights to the use,
of the roof of the Building, and the right to install advertising signs on the
Building, including the roof, which do not unreasonably interfere with the
conduct of Lessee's business; Lessor shall be entitled to all revenues from such
advertising signs.
35. Termination; Merger. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee. the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee. shall automatically terminate any sublease or lesser estate in the
Premises: provided, however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies. Lessor's failure within ten (10) days following any such
event to make a written election to the contrary by written notice to the holder
of any such lesser interest, shall constitute Lessor's election to have such
event constitute the termination of such interest.
36. Consents.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise provided
herein, wherever in this Lease the consent of a Party is required to an act by
or for the other Party, such consent shall not be unreasonably withheld or
delayed. Lessor's actual reasonable costs and expenses (including but not
limited to architects', attorneys', engineers and other consultants' fees)
incurred in the consideration of, or response to, a request by Lessee for any
Lessor consent pertaining to this Lease or the Premises, including but not
limited to Consents to an assignment, a subletting, or the presence or use of a
Hazardous Substance, shall be paid by Lessee to Lessor upon receipt of an
invoice and supporting documentation therefor. In addition to the deposit
described in Paragraph 12.2(e), Lessor may, as a condition to considering any
such request by Lessee, require that Lessee deposit with Lessor an amount of
money (in addition to the Security Deposit held under Paragraph 5) reasonably
calculated by Lessor to represent the cost Lessor will incur in considering and
responding to Lessee's request. Any unused portion of said deposit shall be
refunded to Lessee without interest, Lessor's consent to any act. assignment of
this Lease or subletting of the Premises by Lessee shall not constitute an
acknowledgment that no Default or Breach by Lessee of this Lease exists, nor
shall such consent be deemed a waiver of any then existing Default or Breach,
except as may be otherwise specifically stated in writing by Lessor at the time
of such consent.
(b). All conditions to Lessor's consent authorized by this Lease are
acknowledged by Lessee as being reasonable. The failure to specify herein any
particular condition to Lessors consent shall not preclude the impositions by
Lessor at the time of consent of such further or other conditions as are then
reasonable with reference to the particular matter for which consent is being
given.
37. Guarantor.
37.1 Form of Guaranty. If there are to be any Guarantors of this Lease per
Paragraph 1.11, the form of the guaranty to be executed by each such Guarantor
shall be in the form most recently published by the American Industrial Real
Estate Association, and each such Guarantor shall have the same obligations as
Lessee under this Lease, including but not limited to the obligation to provide
the Tenancy Statement and information required in Paragraph 16,
37.2 Additional obligations of Guarantor, it shall constitute a Default of
the Lessee under this Lease if any such Guarantor fails or refuses, upon
reasonable request by Lessor to give. (a) evidence of the due execution of the
guaranty Called for by this Lease, including the authority of the Guarantor (and
of the party signing on Guarantor's behalf) to obligate such Guarantor on said
guaranty, and resolution of us board of directors authorizing the making of such
guaranty, together with a certificate of incumbency showing the signatures of
the persons authorized to sign on its behalf, (b) current financial statements
of Guarantor as may from time to time be requested by Lessor (c) a Tenancy
Statement, or (d) written confirmation that the guaranty is still in effect.
<PAGE>
39. Quiet possession upon payment by Lessee of the rent for the Premises and the
performance of all of the covenants, conditions and provisions on Lessee's part
to be observed and performed under this lease, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease.
39. Options.
39.1 Definition. As used in this Lease, the word "Option" has the following
meaning' (a) The right to extend the term of this Lease or to renew this Lease
or to extend or renew any lease that Lessee has on other property of Lessor: (b)
the right of first refusal to lease the Premises or the right of first offer to
lease the Premises or the right of first refusal to lease other property of
Lessor or the right of first offer to lease other property of Lessor: (c) the
right to purchase the Premises, or the right of first refusal to purchase the
Premises, or the right of first offer to purchase the Premises, or the right to
purchase other property of Lessor, or the right of first refusal to purchase
other property of Lessor, or the right of first offer to purchase other property
of Lessor.
39.2 Options Personal to Original Lessee. Each Option granted to Lessee in
this tease is personal to the original Lessee named in Paragraph 1.1 hereof. and
cannot be voluntarily or involuntarily assigned or exercised by any person or
entity other than said original Lessee while the original Lessee is in full and
actual possession of the Premises and without the intention of thereafter
assigning or subletting. The Options. if any, herein granted to Lessee are not
assignable, either as a part of an assignment of this Lease or separately or
apart therefrom, and no Option may be separated from this Lease in any manner,
by reservation or otherwise.
39.3 multiple Options. In the event that Lessee has any multiple Options to
extend or renew this Lease, a later option cannot be exercised unless the prior
Options to extend or renew this Lease have been validly exercised.
39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option, notwithstanding
any provision in the grant of Option to the contrary' (i) during the period
commencing with the giving of any notice of Default under Paragraph 13.1 and
continuing until the noticed Default is cured, or (u) during the period of time
any monetary obligation due Lessor from Lessee is unpaid (without regard to
whether notice thereof is given Lessee). or (xi) during the time Lessee is in
Breach of this Lease, or (iv) in the event that Lessor has given to Lessee three
(3) or more notices of separate defaults under Paragraph 13.1 during the twelve
(12) month period immediately preceding the exercise of the option, whether or
not the Defaults are cured.
(b) The period of lime within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect. notwithstanding Lessee's due and
timely exercise of the Option, if, after such exercise and during the term of
this Lease: (i) Lessee fails to pay to Lessor a monetary obligation of Lessee
for a period of thirty (30) days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee), or (ii) Lessor gives to
Lessee three (3) or more notices of separate Defaults under Paragraph 13.1
during any twelve (12) month period, whether or not the Defaults are cured, or
(iii) if Lessee commits a Breach of this Lease.
40. Rules and Regulations. Lessee agrees that it will abide by, and keep and
observe all reasonable rules and regulations ("Rules and Regulations") which
Lessor may make from time to time for the management, safety, care, and
cleanliness of the grounds. the parking and unloading of vehicles and the
preservation of good order, as well as for the convenience of other occupants or
tenants of the Building and the Industrial Center and their invitees,
41. Security Measures. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures. and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.
42. Reservations. Lessor reserves the right. from time to time, to grant,
without the consent or joinder of Lessee, such easements, rights of way. utility
raceways, and dedications that Lessor deems necessary, and to cause the
recordation of parcel maps and restrictions, so long as such easements, rights
of way, utility raceways, dedications, maps and restrictions do not reasonably
interfere with the use of the Premises by Lessee. Lessee agrees to sign any
documents reasonably requested by Lessor to effectuate any such easement rights.
dedication, map or restrictions.
43. Performance Under Protest. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to institute suit for recovery of such sum. If it shall be adjudged
that there was no legal obligation on the part of said Party to pay such sum or
any part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay under the provisions of this
Lease.
44. Authority. If either Party hereto is a corporation, trust, or general or
limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on its behalf. If Lessee is a corporation, trust or
partnership. Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.
45. Conflict. Any conflict between the printed provisions of this Lease and the
typewritten or handwritten provisions shall be controlled by the typewritten or
handwritten provisions.
46. Offer. Preparation of this Lease by either Lessor or Lessee or Lessor's
agent or Lessee's agent and submission of same to Lessee or Lessor shall not be
deemed an offer to lease. This Lease is not intended to be binding until
executed and delivered by alt Parties hereto.
47. Amendments. This Lease may be modified only in writing. signed by the
Parties in interest at the time of the modification. The Parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional insurance company or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the property
of which the Premises are a part.
48. Multiple Parties. Except as otherwise expressly provided herein, if more
than one person or entity is named herein as either Lessor or Lessee, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.
<PAGE>
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR YOUR ATTORNEY'S
REVIEW AND APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED TO EVALUATE THE
CONDITION OF THE PROPERTY FOR THE POSSIBLE PRESENCE OF ASBESTOS,
UNDERGROUND STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO REPRESENTATION OR
RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
OR BY THE REAL ESTATE BROKERS OR THEIR CONTRACTORS, AGENTS OR EMPLOYEES AS
TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE
OR THE TRANSACTION TO WHICH IT RELATES, THE PARTIES SHALL RELY SOLELY UPON
THE ADVICE OF THEIR OWN COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF
THIS LEASE. IF THE SUBJECT PROPERTY IS IN A STATE OTHER THAN CALIFORNIA, AN
ATTORNEY FROM THE STATE WHERE THE PROPERTY IS LOCATED SHOULD BE CONSULTED.
The Parties hereto have executed this Lease at the place and on the dates
specified above to their respective signatures.
Executed at: Executed at:
on: on:
BY LESSOR: BY LESSEE:
SHOOK DEVELOPMENT CORPORATION WOLLENBERG GROUP INC.
By: /s/ Gene Shook By: /s/ Gerrit Wollenberg
Name Printed: GENE SHOOK Name Printed: GERRIT WOLLENBERG
Title: PRESIDENT Title: PRESIDENT
By: By: /s/ James Wollenberg
Name Printed: Name Printed: JAMES WOLLENBERG
Title: Title: VICE PRESIDENT
Address: 220 TECHNOLOGY DRIVE, STE. 110 Address: 145 W. MEATS AVENUE
IRVINE, CA 92618 ORANGE, CA 92665
Telephone: (949) 450-0100 Telephone: (714) 279-8060
Facsimile: (949) 450-0500 Facsimile: (714) 279-0099
BROKER: BROKER:
Executed at: Executed at:
on: on:
ITC REAL ESTATE GROUP
By: By:
Name Printed: Name Printed:
Title: Title:
Address: 220 TECHNOLOGY DRIVE, STE. 110 Address:
IRVINE, CA 92618
Telephone: (949) 450-0100 Telephone:
Facsimile: (949) 450-0500 Facsimile:
NOTICE: These forms are often modified to meet Changing requirements of law and
industry needs. Please Write or call us to make sure that you are utilizing the
most Current form. We can be reached at the American Industrial Real Estate
Association, 700 South Flower, Suite 600, Los Angeles, CA 90017. (213) 687-8777
Fax (213) 687-8616
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