FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[Mark One]
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No.: 0-15641
AMPLICON, INC.
(Exact name of registrant as specified in charter)
California 95-3162444
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5 Hutton Centre Dr., Ste. 500
Santa Ana, California 92707
(Address of principal executive offices) (ZipCode)
Registrant's telephone number, including area code: (714) 751-7551
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at April 28, 1998
Common Stock, $.005 par value 11,822,218
<PAGE>
AMPLICON, INC.
INDEX
PAGE
PART I. FINANCIAL INFORMATION NUMBER
- ----------------------------- ------
Item 1. Financial Statements
Balance Sheets - March 31, 1998
(unaudited) and June 30, 1997 (audited) 3
Statements of Earnings - Three months and nine months
ended March 31, 1998 and 1997 (unaudited) 4
Statements of Cash Flows - Nine months
ended March 31, 1998 and 1997 (unaudited) 5
Notes to Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
Signature 10
<PAGE>
AMPLICON, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED) (AUDITED)
March 31, June 30,
ASSETS 1998 1997
- ------ ------------ ------------
<S> <C> <C>
Cash and cash equivalents $ 10,013,000 $ 5,780,000
Investment securities -0- -0-
Net receivables 90,413,000 87,743,000
Inventories, primarily customer
deliveries in process 1,443,000 1,558,000
Net investment in capital leases 107,772,000 103,961,000
Net equipment on operating leases -0- 2,000
Other assets 1,306,000 1,189,000
Discounted lease rentals assigned
to lenders 295,436,000 291,222,000
------------ ------------
$506,383,000 $491,455,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Note payable to bank $ -0- $ 10,000,000
Accounts payable 27,543,000 27,609,000
Accrued liabilities 8,287,000 5,929,000
Customer deposits 11,468,000 7,872,000
Nonrecourse debt 259,340,000 258,577,000
Deferred interest income 36,096,000 32,645,000
Net deferred income 5,472,000 4,019,000
Income taxes payable, including
deferred taxes 27,499,000 27,050,000
------------ ------------
375,705,000 373,701,000
------------ ------------
Commitments and contingencies
Stockholders' equity:
Preferred stock 2,500,000 shares
authorized; none issued -0- -0-
Common stock; $.005 par value;
40,000,000 shares authorized;
11,820,718 and 11,752,518
issued and outstanding, as
of March 31, 1998 and
June 30, 1997, respectively 59,000 59,000
Additional paid in capital 6,675,000 6,110,000
Retained earnings 123,944,000 111,585,000
Investment securities valuation
adjustment -0- -0-
------------ ------------
130,678,000 117,754,000
------------ ------------
$506,383,000 $491,455,000
============ ============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
3
<PAGE>
AMPLICON, INC.
STATEMENTS OF EARNINGS (UNAUDITED)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Sales of property $ 69,566 $ 66,883 $210,389 $189,046
Interest income 11,859 9,310 32,790 27,076
Investment income 229 150 408 450
Rental income 175 349 466 1,009
-------- -------- -------- --------
81,829 76,692 244,053 217,581
-------- -------- -------- --------
Costs:
Cost of property sold 62,773 59,275 190,439 168,773
Interest expense on
nonrecourse debt 6,024 4,778 16,315 14,184
Depreciation of property
on operating leases 22 10 27 103
-------- -------- -------- --------
68,819 64,063 206,781 183,060
-------- -------- -------- --------
Gross profit 13,010 12,629 37,272 34,521
Selling, general and
administrative expenses 5,041 5,693 14,428 15,904
Interest expense-other 20 66 77 163
-------- -------- -------- --------
Earnings before income taxes 7,949 6,870 22,767 18,454
Income taxes 3,140 2,714 8,993 7,290
-------- -------- -------- --------
Net earnings $ 4,809 $ 4,156 $ 13,774 $ 11,164
======== ======== ======== ========
Basic earnings per common
share $ .41 $ .36 $ 1.17 $ .96
======== ======== ======== ========
Diluted earnings per common
share $ .39 $ .34 $ 1.12 $ .93
======== ======== ======== ========
Weighted average number of
common shares outstanding 11,810 11,673 11,792 11,671
======== ======== ======== ========
Diluted number of common
shares outstanding 12,431 12,046 12,348 11,980
======== ======== ======== ========
Dividends declared per
common share outstanding $ .04 $ .025 $ .12 $ .075
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
4
<PAGE>
AMPLICON, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended March 31,
1998 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 13,774,000 $ 11,164,000
Adjustments to reconcile net earnings
to cash flows provided by (used for)
operating activities:
Depreciation 28,000 83,000
Sales or lease of equipment previously
on operating leases, net -0- 20,000
Interest accretion of estimated
unguaranteed residual values ( 4,295,000) ( 3,391,000)
Estimated unguaranteed residual values
recorded on leases ( 8,992,000) ( 7,576,000)
Interest accretion of net deferred
income ( 3,118,000) ( 2,937,000)
Increase in net deferred income 4,571,000 4,139,000
Net increase in income taxes payable,
including deferred taxes 449,000 6,225,000
Net increase in net receivables ( 2,670,000) ( 28,251,000)
Net decrease in inventories 115,000 985,000
Net increase in accounts payable and
accrued liabilities 2,292,000 19,365,000
------------ ------------
Net cash provided by (used for)
operating activities 2,154,000 (174,000)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease (increase) in minimum
lease payments receivable 566,000 ( 5,557,000)
Purchase of available-for-sale
securities (264,209,000) (200,949,000)
Proceeds from sale of available-for-sale
securities 264,209,000 191,032,000
Purchases of equipment on operating
leases ( 26,000) ( 69,000)
Net (increase) decrease in other
assets ( 117,000) 128,000
Decrease in estimated unguaranteed
residual values 8,910,000 8,523,000
------------ ------------
Net cash provided by (used for)
investing activities 9,333,000 ( 6,892,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment on note payable to bank ( 10,000,000) -0-
Payment to repurchase common stock -0- ( 82,000)
Increase in customer deposits 3,596,000 290,000
Dividends to stockholders ( 1,415,000) ( 877,000)
Proceeds from exercise of stock
options 565,000 37,000
------------ ------------
Net cash used for financing activities ( 7,254,000) ( 632,000)
------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 4,233,000 ( 7,698,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 5,780,000 8,614,000
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,013,000 $ 916,000
============ ============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Increase (decrease) of lease rentals
assigned to lenders and related
nonrecourse debt $ 763,000 ($ 10,404,000)
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 77,000 $ 163,000
============ ============
Income taxes $ 8,544,000 $ 1,065,000
============ ============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
5
<PAGE>
AMPLICON, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1- BASIS OF PRESENTATION
- -----------------------------
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The financial
statements should be read in conjunction with the financial statements
and notes thereto included in the Company's latest Annual Report on
Form 10-K.
In the opinion of management, the unaudited financial statements contain
all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the balance sheet as of March 31, 1998
and the statements of earnings for the three and nine month periods and
cash flows for the nine month periods ended March 31, 1998 and 1997. The
results of operations for the nine month period ended March 31, 1998 are
not necessarily indicative of the results of operations to be expected
for the entire fiscal year ending June 30, 1998.
Leases
------
Effective January 1, 1997, the Company has adopted Statement of Financial
Accounting Standards No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" ("SFAS No. 125").
Under the requirements set forth in SFAS No. 125, the Company has
accounted for qualifying transfers of financial assets occurring on or
after January 1, 1997 by derecognizing all assets sold.
Common Stock
------------
On September 12, 1997, the Company's Board of Directors announced a
2-for-1 Common Stock split to be effected on October 17, 1997, to
stockholders of record as of September 26, 1997. These financial
statements have been adjusted to reflect this stock split.
NOTE 2- BALANCE SHEET
- ---------------------
At March 31, 1998, deferred interest income of $36,096,000 is offset by
deferred interest expense related to the Company's discounted lease
rentals assigned to lenders of $36,096,000.
NOTE 3- EARNINGS PER SHARE
- --------------------------
Effective with the interim period ending December 31, 1997, the Company
has adopted Statement of Financial Accounting Standards No. 128 "Earnings
per Share" ("SFAS No. 128"). SFAS No. 128 adopts a simpler calculation
methodology for determining the number of shares outstanding.
Accordingly, the earnings per share calculations for the three and nine
months ended March 31, 1997 were restated to the current standard. The
difference between weighted and diluted number of common shares
outstanding is the dilutive effect of stock options. Net income remains
the same in both calculations of earnings per share.
6
<PAGE>
AMPLICON, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Three Months Ended March 31, 1998 and 1997
- ------------------------------------------
REVENUES. Total revenues for the three months ended March 31, 1998
were $81,829,000, an increase of $5,137,000 or 7% as compared to the
three months ended March 31, 1997. The increase from the prior year was
the result of increases in sales of equipment and interest income. Sales
of equipment increased by $2,683,000 or 4% to $69,566,000 in the quarter
ended March 31, 1998 as compared to $66,883,000 in the quarter ended
March 31, 1997. The increase in sales of equipment was primarily due to
the increased volume of new lease transactions. Interest income for the
quarter ended March 31, 1998 increased by $2,549,000 or 27% to
$11,859,000 as compared to $9,310,000 in the same quarter in the prior
year. The three months ended March 31, 1998 and 1997 included amounts of
$6,024,000 and $4,778,000, respectively, of interest income on discounted
lease rentals assigned to lenders (which is offset by interest expense on
nonrecourse debt). For the three months ended March 31, 1998, interest
income, net of interest expense on discounted lease rentals assigned to
lenders, increased by $1,303,000 or 29% to $5,835,000 as compared to
$4,532,000 for the three months ended March 31, 1997. This increase is
primarily the result of increased accretion of deferred income and higher
interest income realized from lease receivables and residual values.
Investment income increased by $79,000, or 53%, to $229,000 as compared
to $150,000 for the same period in the prior year. This increase can be
attributed to higher cash balances invested in securities during the
three months ended March 31, 1998. Rental income decreased by $174,000 to
$175,000 in the three months ended March 31, 1998, compared to $349,000
for the three months ended March 31, 1997 due to a decrease in the number
of short-term lease renewals.
GROSS PROFIT. Gross profit for the quarter ended March 31, 1998 of
$13,010,000 increased by $381,000 or 3% as compared to $12,629,000 for
the quarter ended March 31, 1997. This increase reflects a 30% increase
in net interest and investment income offset by decreases in income
recognized from lease property sales and on new lease transactions.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses, as a percentage of total revenues, were 6.2% and
7.5% for the quarters ended March 31, 1998 and 1997, respectively.
Selling, general and administrative expenses decreased by $698,000 or 12%
from the prior year third quarter. The improvement is the result of
lower legal and salary and benefit expenses.
TAXES. The Company's tax rate was 39.5% for the quarters ended
March 31, 1998 and 1997, representing its estimated annual tax rate for
the years ending June 30, 1998 and 1997.
Nine Months Ended March 31, 1998 and 1997
- -----------------------------------------
REVENUES. Total revenues for the nine months ended March 31, 1998
were $244,053,000, an increase of $26,472,000 or 12% as compared to the
nine months ended March 31, 1997. The increase from the prior year was
primarily the result of increases in sales of equipment. Sales of
equipment increased by $21,343,000 or 11% to $210,389,000 in the nine
months ended March 31, 1998 as compared to $189,046,000 in the same
period ended March 31, 1997. The increase in sales of equipment was
primarily due to the increased volume of new lease transactions.
Interest income for the nine months ended March 31, 1998 increased by
$5,714,000 or 21% to $32,790,000 as compared to $27,076,000 in the same
period in the prior year. The nine months ended March 31, 1998 and 1997
included amounts of $16,315,000 and $14,184,000, respectively, of
interest income on discounted lease rentals assigned to lenders (which is
offset by interest expense on nonrecourse debt). For the nine months
ended March 31, 1998, interest income, net of interest expense on
discounted lease rentals assigned to lenders, increased by $3,583,000 or
28% to $16,475,000 as compared to $12,892,000 for the nine months ended
March 31, 1997. This increase is the result of greater accretion of
deferred income and higher interest revenue realized from lease
receivables and residual values.
(continued)
7
<PAGE>
AMPLICON, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
REVENUES (continued). Investment income decreased by $42,000 or 9%
to $408,000 as compared to $450,000 for the same period in the prior
year. This decrease can be attributed to a lower investment in securities
during the nine months ended March 31, 1998. Rental income decreased by
$543,000 or 54% to $466,000 in the nine months ended March 31, 1998 as
compared to $1,009,000 for the nine months ended March 31, 1997 due to a
decrease in the number of short-term lease renewals.
GROSS PROFIT. Gross profit for the nine months ended March 31, 1998
of $37,272,000 increased by $2,751,000 or 8% as compared to $34,521,000
for the nine months ended March 31, 1997. The improvement is primarily
attributable to the 27% increase in net interest and investment income
offset by decreases in income recognized from lease property sales and
new lease transactions.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses, as a percentage of total revenues, were 5.9% and
7.4% for the nine months ended March 31, 1998 and 1997, respectively.
Selling, general and administrative expenses decreased by $1,562,000 or
10% primarily due to a reduction in legal, general office expenses and
salary and benefits.
TAXES. The Company`s tax rate was 39.5% for the nine months ended
March 31, 1998 and 1997 representing its estimated annual tax rate for
the years ending June 30, 1998 and 1997.
Financial and Capital Resources
- -------------------------------
The Company funds its operating activities through nonrecourse debt
and internally generated funds. Capital expenditures for leased property
purchases are primarily financed by assigning the lease payments to banks
or other financial institutions which are discounted at fixed rates such
that the lease payments are sufficient to fully amortize the aggregate
outstanding debt. The Company generally does not purchase property until
it has received a noncancelable lease from its customer and has
determined that the lease can be discounted on a nonrecourse basis. At
March 31, 1998, the Company had outstanding nonrecourse debt aggregating
$259,340,000 relating to property under capital and operating leases. In
the past, the Company has been able to obtain adequate nonrecourse
funding commitments, and the Company believes it will be able to do so in
the future.
From time to time, the Company retains leases in its own portfolio
rather than assigning the leases to financial institutions. During the
nine months ended March 31, 1998, the Company's net investment in leases
held in its own portfolio decreased by $566,000 from June 30, 1997. This
decrease was primarily due to fewer new lease transactions being held in
the Company's own portfolio.
The Company generally funds its equity investments in leased
equipment and interim equipment purchases with internally generated
funds, and if necessary, borrowings under a $20,000,000 general line of
credit. At March 31, 1998, the Company did not have any borrowings
outstanding on this line of credit.
In November 1990, the Board of Directors authorized management, at
its discretion to repurchase up to 300,000 shares of the Company's Common
Stock. Under this authorization 55,678 shares remain available for
repurchase.
The need for cash used for operating activities will continue to
grow as the Company expands. The Company believes that existing cash
balances, cash flows from operations, cash flows from its financing
activities, available borrowings under its existing credit facility, and
assignments (on a nonrecourse basis) of anticipated lease payments will
be sufficient to meet its foreseeable financing needs.
Inflation has not had a significant impact upon the operations of
the Company.
8
<PAGE>
AMPLICON, INC.
PAGE
PART II - OTHER INFORMATION NUMBER
- --------------------------- ------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.20 Office Lease dated September 17, 1997,
between the Company and GT Partners. 11-60
(b) 8-K Reports
There were no reports on Form 8-K for the three
months ended March 31, 1998.
9
<PAGE>
AMPLICON, INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
AMPLICON, INC. Registrant
---------------------------
DATE: April 29, 1998 BY: S. LESLIE JEWETT /s/
--------------------
S. LESLIE JEWETT
Chief Financial Officer
(Principal Financial and
Accounting Officer)
10
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000803016
<NAME> AMPLICON, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 10,013
<SECURITIES> 0
<RECEIVABLES> 154,909
<ALLOWANCES> 1,695
<INVENTORY> 1,443
<CURRENT-ASSETS> 0
<PP&E> 2,559
<DEPRECIATION> 1,453
<TOTAL-ASSETS> 506,383
<CURRENT-LIABILITIES> 74,797
<BONDS> 0
0
0
<COMMON> 59
<OTHER-SE> 130,619
<TOTAL-LIABILITY-AND-EQUITY> 506,383
<SALES> 210,389
<TOTAL-REVENUES> 244,053
<CGS> 190,439
<TOTAL-COSTS> 206,781
<OTHER-EXPENSES> 14,428
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 77
<INCOME-PRETAX> 22,767
<INCOME-TAX> 8,993
<INCOME-CONTINUING> 13,774
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,774
<EPS-PRIMARY> 1.17
<EPS-DILUTED> 1.12
</TABLE>
OFFICE LEASE
between
GT PARTNERS,
an Illinois general partnership
(Landlord)
and
AMPLICON, INC.,
a California corporation
(Tenant)
11
<PAGE>
TABLE OF CONTENTS
OFFICE LEASE
ARTICLE TITLE PAGE
- ------- ----- ----
1 Definitions 1
2 Premises 2
3 Term 2
4 Rental 2
5 Security Deposit 5
6 Use of Premises 5
7 Utilities and Services 6
8 Maintenance and Repairs 7
9 Alterations, Additions and Improvements 8
10 Indemnification and Insurance 9
11 Damage or Destruction 11
12 Condemnation 11
13 Relocation 11
14 Assignment and Subletting 11
15 Default and Remedies 13
16 Attorneys' Fees; Costs of Suit 15
17 Subordination and Attornment 15
18 Quiet Enjoyment 16
19 Rules and Regulations 16
20 Estoppel Certificates 16
21 Entry by Landlord 17
22 Landlord's Lease Undertakings-Exculpation
from Personal Liability; Transfer of
Landlord's Interest 17
23 Holdover Tenancy 17
24 Notices 18
25 Brokers 18
26 Communications and Computer Lines 18
27 Miscellaneous 18
EXHIBITS
--------
Rider to Office Lease
Exhibit A Floor Plan
Exhibit B Work Letter Agreement
Exhibit C Rules and Regulations
Exhibit D Not Used
Exhibit E Suite Acceptance Letter
12
<PAGE>
OFFICE LEASE
THIS OFFICE LEASE ("Lease"), dated 17th September, 1997, is
made and entered into by and between GT PARTNERS, an Illinois
general partnership ("Landlord") and AMPLICON, INC., a California
corporation ("Tenant") upon the following terms and conditions:
ARTICLE I - DEFINITIONS
-----------------------
Unless the context otherwise specifies or requires, the following
terms shall have the meanings specified herein;
1.01 Project; Building. The term "Project" shall mean that
certain office building project located at 5 and 6 Hutton Centre
Drive in Santa Ana, California, commonly known as Griffin Towers
together with all related land, improvements, parking facilities,
common areas, driveways, sidewalks and landscaping. If the
Project consists of more than one office building, the term
"Building" shall mean the office building in the Project in which
the Premises (as hereinafter defined) are situated.
1.02 Premises. The term "Premises" shall mean Suite(s) 200
and 500 in the Building, as more particularly outlined on the
drawing attached hereto as Exhibit A and incorporated herein by
reference. As used herein, "Premises" shall not include any
storage area in the Building, which shall be leased or rented
pursuant to separate agreement.
1.03 Rentable Area of the Premises. The term "Rentable Area
of the Premises" shall mean 48,773 square feet, which Landlord
and Tenant have stipulated as the Rentable Area of the Premises.
Tenant acknowledges that the Rentable Area of the Premises
includes the usable area, without deduction for columns or
projections, multiplied by a load factor to reflect a share of
certain areas, which may include lobbies, corridors, mechanical,
utility, janitorial, boiler and service rooms and closets,
restrooms and other public, common and service areas, of the
Building. The final rentable and usable square footage shall be
calculated by Landlord's architect or space planner in accordance
with the Standard Method for Measuring Floor Area in Office
Buildings, ANSI Z65.1-1996 ("BOMA"). Tenant or Tenant's architect
or space planner may consult with Landlord's architect or space
planner concerning the determination.
1.04 Lease Term. The term "Lease Term" shall mean the period
between the Commencement Date and the Expiration Date (as such
terms are hereinafter defined), unless sooner terminated as
otherwise provided in this Lease.
1.05 Commencement Date. Subject to adjustment as provided in
Article 3, the term "Commencement Date" shall mean February 20,
1998.
1.06 Expiration Date. Subject to adjustment as provided in
Article 3, the term "Expiration Date" shall mean February 19,
2003.
1.07 Base Rent. See Rider
1.08 Tenants Percentage Share. The term "Tenant's
Percentage Share" shall mean 17.81 percent (17.81%) of the
Building and "Tenant's Project Percentage Share" shall mean 9.12
percent (9.12%) of the Project with respect to increases in
Property Taxes and Operating Expenses (as such terms are
hereinafter defined). Landlord may reasonably redetermine
Tenant's Percentage Share from time to time to reflect
reconfigurations, additions or modifications to the Project or
Building (provided that in no event shall such redetermination
increase Tenant's share of Property Taxes and Operating
Expenses).
1.09 Security Deposit. (lined out)
1.10 Tenant's Permitted Use. The term "Tenant's Permitted
Use" shall mean general executive and administrative office and
no other use.
1.11 Business Hours. The term "Business Hours" shall mean
the hours of 8:00 A.M. to 6:00 P.M. (Pacific time) Monday through
Friday, and 8:00 A.M. to 12:00 P.M., Saturdays (federal and state
holidays excepted). Holidays are defined as the following: New
Years Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
1.12 Landlord's Address For Notices. The term "Landlord's
Address for Notices" shall mean Heitman Properties Ltd., 5 Hutton
Centre Drive, Suite 810, Santa Ana, California 92707, Attn:
Property Manager, with a copy of Heitman Properties Ltd., 180
North LaSalle Street, Suite 3600, Chicago, Illinois 60601, Attn:
Property Management.
13
<PAGE>
1.13 Tenant's Address For Notices. The term "Tenant's
Address for Notices" shall mean
5 Hutton Centre Drive, Suite 500
Santa Ana, California 92707
1.14 Broker. The term "Broker" shall mean Heitman Properties
Ltd. representing Landlord and Simmonds Realty Group representing
Tenant.
1.15 Guarantor. The term "Guarantor" shall mean N/A.
ARTICLE II - PREMISES
---------------------
2.01 Lease of Premises. Landlord hereby leases the Premises
to Tenant, and Tenant hereby leases the Premises from Landlord,
upon all of the terms, covenants and conditions contained in this
Lease. On the Commencement Date described herein, Landlord shall
deliver the Premises to Tenant in substantial conformance with
the Work Letter Agreement attached hereto as Exhibit B. See
Insert 2.01
2.02 Acceptance of Premises. Tenant acknowledges that
Landlord has not made any representation or warranty with respect
to the condition of the Premises or the Project or with respect
to the suitability or fitness of either for the conduct of
Tenant's Permitted Use or for any other purpose. Prior to
Tenant's taking possession of the Premises, Landlord or its
designee and Tenant will walk the Premises for the purpose of
reviewing the condition of the Premises (and the condition of
completion and workmanship of any tenant improvements which
Landlord is required to construct in the Premises pursuant to
this Lease); after such review, Tenant shall execute a Suite
Acceptance Letter, in the form of Exhibit E attached hereto,
accepting the Premises. Except as is expressly set forth in this
Section 2.02 or the Work Letter Agreement attached hereto, if
any, or as may be expressly set forth in Suite Acceptance Letter,
Tenant agrees to accept the Premises in its "as is" said physical
condition without any agreements, representations, understandings
or obligations on the part of Landlord to perform any
alterations, repairs or improvements (or to provide any allowance
for same). See Insert 2.02.
ARTICLE III - TERM
------------------
3.01 Except as otherwise provided in this Lease, the Lease
Term shall be for the period described in Section 1.04 of this
Lease, commencing on the Commencement Date described in Section
1.05 of this Lease and ending on the Expiration Date described in
Section 1.06 of this Lease; provided, however, that, if, for any
reason, Landlord is unable to deliver possession of the Premises
on the date described in Section 1.05 of this Lease, Landlord
shall not be liable for any damage caused thereby, nor shall the
Lease be void or voidable, but, rather, the Lease Term shall
commence upon, and the Commencement Date shall be the date that
possession of the Premises is so tendered to Tenant (except for
Tenant-caused delays which shall not be deemed to delay
commencement of the Lease Term), and, unless Landlord elects
otherwise, the Expiration Dated described in Section 1.06 of this
Lease shall be extended by an equal number of days. See Insert
3.01
ARTICLE IV - RENTAL
-------------------
4.01 Definitions. As used herein,
(A) "Base Year" shall mean calendar year 1998.
(B) "Property Taxes" shall mean the aggregate amount
of all real estate taxes, assessments (whether they be general or
special), sewer rents and charges, transit taxes, taxes based
upon the receipt of rent and any other federal, state or local
governmental charge, general, special, ordinary or extraordinary
(but not including income or franchise taxes, capital stock,
inheritance, estate, gift, or any other taxes imposed upon or
measured by Landlord's gross income or profits, unless the same
shall be imposed in lieu of real estate taxes or other ad valorem
taxes), which Landlord shall pay or become obligated to pay in
connection with the Project, the Building, or any part thereof.
Property Taxes shall also include all fees and costs, including
attorneys' fees, appraisals and consultants' fees, incurred by
Landlord in seeking to obtain a reassessment, reduction of, or a
limit on the increase in, any Property Taxes, regardless of
whether any reduction or limitation is obtained. Property Taxes
for any calendar year shall be Property Taxes which are due for
payment or paid in such year, rather than Property Taxes which
are assessed or become a lien during such year. Property Taxes
shall also include any personal property taxes imposed upon the
furniture, fixtures, machinery, equipment, apparatus, systems and
appurtenances of Landlord at the Project (provided however that
such personal property taxes shall not exceed nine hundred fifty
dollars ($950.00) in the Base Year or in any subsequent calendar
year).
(C) "Operating Expenses" shall mean all costs, fees,
disbursements and expenses paid or incurred by or on behalf of
Landlord in the operation, maintenance, insurance, management,
replacement and repair of the Project (excluding Property Taxes)
net of all "after Business Hours" revenue generated by Landlord
including without limitation:
(i) Premiums for property, casualty, liability,
rent interruption or other types of insurance carried by
Landlord.
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INSERT 2.01
It is hereby acknowledged that Tenant currently occupies a
portion of the Premises (the "Old Premises") as shown on Exhibit
A-3 attached hereto and will continue to occupy such Old Premises
prior to the Commencement Date. Tenant's lease and possession of
the Old Premises is pursuant to subleases that were approved by
Landlord, which approval included Landlord's approval of Tenant's
use of the Old Premises as well as all alterations, additions and
improvements in or to the Old Premises.
INSERT 2.02
Notwithstanding the foregoing, but subject to the following
sentence, Landlord shall be responsible for any costs in
connection with causing the Premises and the Project to be in
compliance with the Americans with Disabilities Act (41 U.S.C.
12101 et. seq.) as well as the regulations and accessibility
guidelines promulgated thereunder and any similar applicable
state and local (county, city) laws and/or regulations, as each
of the foregoing are supplemented or amended (collectively,
"ADA") and any similar applicable state and local (county, city)
laws and/or regulations, as of the date of this Lease. Tenant
shall be responsible for all costs necessary to cause the
Premises and the Project to comply with ADA, but only to the
extent such compliance is solely and directly triggered by (i)
Tenant's particular use of the Premises, or (ii) any alterations,
improvements or additions, (other than the Work [as defined in
the Work Letter] unless caused by Tenant's Pre-Occupancy Work)
made by or on behalf of Tenant. Landlord agrees to notify Tenant
as soon as reasonably practicable following Landlord's becoming
aware of the activity of Tenant triggering an ADA obligation of
the estimated cost to be borne by Tenant pursuant to the
immediately preceding sentence ("Landlords ADA Notice"). If
(A)(i) such estimated cost exceeds $200,000, (ii) Tenant's
particular use or the proposed alterations, improvements or
additions which trigger the ADA obligations are totally
reasonable and absolutely necessary to the conduct of Tenant's
operations from the Premises [and are not intended as a
subterfuge to allow Tenant to terminate this Lease] (such use or
alteration to be hereinafter referred to as a "Necessary Use or
Alteration"), and (iii) Landlord is unwilling to bear that
portion of the cost of such ADA obligations which exceeds
$200,000 or (B) (i) Landlord's ADA Notice occurs less than twenty
(20) months prior to the Expiration Date and such estimated costs
exceeds $200,000, (ii) Tenant's particular use or proposed
alteration, improvements or additions constitutes a Necessary Use
or Alteration, and (iii) Landlord is unwilling to bear the entire
cost of such ADA obligation, Tenant shall have the right to
terminate this Lease by notifying Landlord of such election
within ten (10) days following Tenant's receipt of Landlord's ADA
Notice, without the payment of any termination penalty or fee.
In the event of any such termination by Tenant, from and after
the effective date of such termination, neither party shall have
any further rights, obligations or liabilities under this Lease,
except to the extent they expressly survive the termination or
expiration of this Lease.
INSERT 3.01
In the event Landlord does not deliver the Premises (pursuant to
the Work Letter attached hereto as Exhibit B) on or before
February 20, 1998 (which date shall be extended for any delays in
the substantial completion of the Work which is caused by any
Tenant Delay), Landlord shall permit Tenant to continue to occupy
and use the Old Premises and the Additional Space (as defined in
Section 31 below) in their entirety at no charge whatsoever until
the Commencement Date. Notwithstanding the above, in the event
that such delay in the Commencement Date can reasonable be shown
to be due to Force Majeure (ad defined in Section 27.04 below),
Tenant shall pay to Landlord the amount of $1,500.00 per day for
each day that Landlord can reasonably prove that such delay is
due to Force Majeure.
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(ii) Salaries, wages and other amounts paid or
payable for personnel including the Project manager,
superintendent, operation and maintenance staff, and other
employees of Landlord involved in the maintenance and operation
of the Project, including contributions and premiums towards
fringe benefits, unemployment, disability and worker's
compensation insurance, pension plan contributions and similar
premiums and contributions and the total charges of any
independent contractors or property managers engaged in the
operation, repair, care, maintenance and cleaning of any portion
of the Project.
(iii) Cleaning expenses, including without
limitation janitorial services, window cleaning, and garbage and
refuse removable.
(iv) Landscaping expenses, including without
limitation irrigating, trimming, mowing, fertilizing, seeding,
and replacing plants.
(v) Heating, ventilating, air conditioning and
steam/utilities expenses, including fuel, gas, electricity,
water, sewer, telephone, and other services.
(vi) Subject to the provisions of Section
4.01(C)(xii) below, the cost of maintaining, operating, repairing
and replacing components of equipment or machinery, including
without limitation heating, refrigeration, ventilation,
electrical, plumbing, mechanical, elevator, sprinklers, fire/life
safety, security and energy management systems, including service
contracts, maintenance contracts, supplies and parts.
(vii) Other items of repair or maintenance of
elements of the Project.
(viii) The costs of policing, security and
supervision of the Project.
(ix) Fair market rental and other costs with
respect to the management office for the Project.
(x) The cost of the rental of any machinery or
equipment and the cost of supplies used in the maintenance and
operation of the Project.
(xi) Audit fees and the cost of accounting
services incurred in the preparation of statements referred to in
this Lease and financial statements, and in the computation of
the rents and charges payable by tenants of the Project.
(xii) Capital expenditures (a) made primarily
to reduce Operating Expenses only to the amount of the reasonably
anticipated savings, or to comply with any laws or other
governmental requirements, or (b) for replacements (as opposed to
additions or new improvements) of non-structural items located in
the common areas of the property required to keep such areas in
good condition; provided, all such permitted capital expenditures
(together with reasonable financing charges) shall be amortized
for purposes of this Lease over the shorter of (i) their useful
lives, or (iii) five (5) years.
(xiii) Legal fees and expenses.
(xiv) Payments under any easement, operating
agreement, declaration, restrictive covenant, or instrument
pertaining to the sharing of costs in any planned development.
(xv) A fee for the administration and management
of the Project as reasonably determined by Landlord from time to
time.
(xvi) Tenant's Percentage of Operating
Expenses shall be Tenant's Building Percentage of Building
Operating Expenses plus Tenant's Project Percentage of Project
Operating Expenses.
(xvii) Building Operating Expenses shall be all
Operating Expenses directly and separately identifiable to the
operation and maintenance of the Building.
(xviii) Project Operating Expenses shall be all
Operating Expenses incurred in the operation and maintenance of
the Project which are not (a) Building Operating Expenses or (b)
Operating Expenses directly and separately identifiable to the
operation and maintenance of the other office building in the
Project.
Operating Expenses shall not include costs of alteration of
the premises of tenants of the Project, depreciation charges,
interest and principal payments on mortgages, ground rental
payments, real estate brokerage and leasing commissions, expenses
incurred in enforcing obligations of tenants of the Project,
salaries and other compensation of executive officers of the
managing agent of the Project senior to the Project manager,
costs of any special service provided to any one tenant of the
Project but not to tenants of the Project generally, and costs of
marketing or advertising the Project.
(D) If the Project does not have one hundred percent (100%)
occupancy during an entire calendar year, including the Base
Year, then the variable cost component of "Property Taxes" and
"Operating Expenses" shall be equitably adjusted so that the
total amount of Property Taxes and Operating Expenses equals the
total amount which would have been paid or incurred by Landlord
had the Project been one hundred percent (100%) occupied for the
entire calendar year. In no event shall Landlord be entitled to
receive from Tenant and any other tenants in the Project an
aggregate amount in excess of actual Operating Expenses as a
result of the foregoing provision. In no event shall the Tax and
Operating Expense Adjustment (as defined in Section 4.02(B)
below) exceed amounts set forth in Section 4.02(B).
16
<PAGE>
4.02 Base Rent.
(A) See Rider.
(B) During each calendar year subsequent to the Base
Year, the Base Rent payable by Tenant to Landlord, as adjusted
pursuant to (A) above, shall be increased by (collectively, the
"Tax and Operating Expense Adjustment"): (i) Tenant's Percentage
Share to the total dollar increase, if any, in Property Taxes for
such year over Property Taxes for the Base Year; and (ii)
Tenant's Percentage Share of the total dollar increase, if any,
in Operating Expenses paid or incurred by Landlord during such
year over Operating Expenses paid or incurred by Landlord during
the Base Year. A decrease in Property Taxes or Operating
Expenses below the Base Year amounts shall not decrease the
amount of the Base Rent due hereunder or give rise to a credit in
favor of Tenant. See Insert 4.02(B).
4.03 Adjustment Procedure; Estimates. The Tax and Operating
Expense Adjustment specified in Section 4.02(B) shall be
determined and paid as follows:
(A) During each calendar year subsequent to the Base
Year, Landlord shall give Tenant written notice of its estimate
of any increases amounts payable under Section 4.02(B) for that
calendar year. On or before the first day of each calendar month
during the calendar year, Tenant shall pay to Landlord one-
twelfth (1/12th) of such estimated amounts; provided, however,
that, not more often than quarterly, Landlord may, by written
notice to Tenant, revise its estimate for such year, and
subsequent payments by Tenant for such year shall be based upon
such revised estimate.
(B) Within one hundred twenty (120) days after the
close of each calendar year or as soon thereafter as is
practicable, Landlord shall deliver to Tenant a reasonably
detailed statement of that year's Property Taxes and Operating
Expenses, and the actual Tax and Operating Expense Adjustment to
be made pursuant to Section 4.02(B) for such calendar year, as
determined by Landlord (the "Landlord's Statement") and such
Landlord's Statement shall be binding upon Tenant, except as
provided in Section 4.04 below. If the amount of the actual Tax
and Operating Expense Adjustment is more than the estimated
payments for such calendar year made by Tenant, Tenant shall pay
the deficiency to Landlord upon receipt of Landlord's Statement.
If the amount of actual Tax and Operating Expense Adjustment is
less than the estimated payments for such calendar year made by
Tenant, any excess shall be credited against Rent (as hereinafter
defined) next payable by Tenant under this Lease or, if the Lease
Term has expired, any excess shall be paid to Tenant. No delay
in providing the statement described in this subparagraph (B)
shall act as a waiver of Landlord's right to payment under
Section 4.02(B) above.
(C) If this Lease shall terminate on a day other than
the end of a calendar year, the amount of the Tax and Operating
Expense Adjustment to be paid pursuant to Section 4.02(B) that is
applicable to the calendar year in which such termination occurs
shall be prorated on the basis of the number of days from January
1 of the calendar year to the termination date bears to 365. The
termination of this Lease shall not affect the obligations of
Landlord and Tenant pursuant to Section 4.03(B) to be performed
after such termination.
4.04 Review of Landlord's Statement. Provided that Tenant
is not then in material default beyond any applicable cure period
of its obligations to pay Base Rent, additional rent described in
Section 4.02(B), or any other payments required to be made by it
under this Lease and provided further that Tenant strictly
complies with the provisions of this Section 4.04, Tenant shall
have the right, once each calendar year, to reasonably review
supporting data for any portion of a Landlord's Statement
(provided, however, Tenant may not have an audit right to all
documentation relating to Project operations as this would far
exceed the relevant information necessary to properly document a
pass-through billing statement, but real estate tax statements,
and information on utilities, repairs, maintenance and insurance
will be available), in accordance with the following procedure:
(A) Tenant shall, within thirty (30) business days
after any such Landlord's Statement is delivered, deliver a
written notice to Landlord specifying the portions of the
Landlord's Statement that are claimed to be incorrect, and Tenant
shall simultaneously pay to Landlord all amounts due from Tenant
to Landlord as specified in the Landlord's Statement. Except as
expressly set forth in subsection (C) below, in no event shall
Tenant be entitled to withhold, deduct, or offset any monetary
obligation of Tenant to Landlord under the Lease (including,
without limitation, Tenant's obligation to make all payments of
Base Rent and all payments of Tenant's Tax and Operating Expense
Adjustment) pending the completion of and regardless of the
results of any review of records under this Section 4.04. The
right of Tenant under this Section 4.04 may only be exercised
once for any Landlord's Statement, and if Tenant fails to meet
any of the above conditions as a prerequisite to the exercise of
such right, the right of Tenant under this Section 4.04 for a
particular Landlord's Statement shall be deemed waived.
(B) Tenant acknowledges that Landlord maintains its
records for the Project at Landlord's manager's corporate offices
presently located at the address set forth in Section 1.12 and
Tenant agrees that any review of records under this Section 4.04
shall be at the sole expense of Tenant and shall be conducted by
an independent firm of certified public accountants of national
standing. Tenant acknowledges and agrees that any records
reviewed under this Section 4.04 constitute confidential
information of Landlord, which shall not be disclosed to anyone
other than the accountants performing the review and the
principals of Tenant who receive the results of the review. The
disclosure of such information to any other person by the Tenant,
shall constitute a material breach of this Lease.
(C) Any errors disclosed by the review shall be
promptly corrected by Landlord, provided, however, that if
Landlord disagrees with any such claimed errors, Landlord shall
have the right to cause another review to be made by an
independent firm of certified public accountants of national
standing. In the event of a disagreement
17
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INSERT 4.02(B)
Notwithstanding the foregoing, the amount of Property Taxes
and Operating Expenses payable by Tenant under Section 4 of the
Lease, due to Tenant's percentage share of increases in Property
Taxes and Operating Expenses, shall not be increased by more than
six percent (6%) cumulative per Tax and Operating Expense
Adjustment period on a compound basis.
For example and not by way of limitation, if for any
adjustment period, the increase in Property Taxes and Operating
Expenses is nine percent (9%) greater than Tenant's share of
Property Taxes and Operating Expenses for the immediately
preceding adjustment period, Tenant shall only be responsible for
its percentage share of Property Taxes and Operating Expenses up
to six percent (6%) greater than the previous adjustment period;
provided that Tenant shall be responsible for the three percent
(3%) difference in subsequent adjustment periods to the extent
Tenant does not pay Property Taxes and Operating Expenses for a
particular adjustment period which is more than six percent (6%)
greater than that paid by Tenant for the immediately preceding
adjustment period but only to the extent that such increase in
subsequent adjustment period does not exceed six percent (6%).
18
<PAGE>
between the two accounting firms, the review that discloses the
least amount of deviation from the Landlord's Statement shall be
deemed to be correct. In the event that the results of the
review of records (taking into account, if applicable, the
results of any additional review caused by Landlord) reveal that
Tenant has overpaid obligations for a preceding period, the
amount of such overpayment shall be credited against Tenant's
subsequent installment obligations to pay the estimated Tax and
Operating Expense Adjustment. In the event that such results
show that Tenant has underpaid its obligations for a preceding
period, Tenant shall be liable for Landlord's actual accounting
fees, and the amount of such underpayment shall be paid by Tenant
to Landlord with the next succeeding installment obligation of
estimated Tax and Operating Expense Adjustment. Should the
review reveal that Tenant overpaid its obligations by more than
five percent (5%), then Landlord will be responsible for paying
Tenant's out-of-pocket accounting fees incurred in connection
with Tenant's review of Landlord's records.
4.05 Payment. Concurrently with the execution hereof,
Tenant shall pay Landlord Base Rent for the first calendar month
of the Lease Term. Thereafter the Base Rent described in Section
1.07, as adjusted in accordance with Section 4.02, shall be
payable in advance on the first day of each calendar month. If
the Commencement Date is other than the first day of a calendar
month, the prepaid Base Rent for such partial month shall be
prorated in the proportion that the number of days this Lease is
in effect during such partial month bears to the total number of
days in the calendar month. All Rent, and all other amounts
payable to Landlord by Tenant pursuant to the provisions of this
Lease, shall be paid to Landlord, without notice, demand,
abatement, deduction or offset, in lawful money of the United
States at Landlord's office in the Project or to such other
person or at such other place as Landlord may designate from time
to time by written notice given to Tenant. No payment by Tenant
or receipt by Landlord of a lesser amount than the correct Rent
due hereunder shall be deemed to be other than a payment on
account; nor shall any endorsement or statement on any check or
any letter accompanying any check or payment be deemed to effect
or evidence an accord and satisfaction; and Landlord may accept
such check or payment without prejudice to Landlord's right to
recover the balance or pursue any other remedy in this Lease or
at law or in equity provided.
4.06 Late Charge; Interest. See Insert 4.06
4.07 Additional Rent. For purposes of this Lease, all
amounts payable by Tenant to Landlord pursuant to this Lease,
whether or not denominated as such, shall constitute additional
rental hereunder. Such additional rental, together with the Base
Rent and Rent Adjustments, shall sometimes be referred to in the
Lease as "Rent".
4.08 Additional Taxes. Notwithstanding anything in Section
4.01(B) to the contrary, Tenant shall reimburse Landlord upon
demand for any and all taxes payable by or imposed upon Landlord
upon or with respect to: any fixtures or personal property
located in the Premises; any leasehold improvements made in or to
the Premises by or for Tenant; the Rent payable hereunder,
including, without limitation, any gross receipts tax, license
fee or excise tax levied by any governmental authority; the
possession, leasing, operation, management, maintenance,
alteration, repair, use or occupancy of any portion of the
Premises (including without limitation any applicable possessory
interest taxes); or this transaction or any document to which
Tenant is a party creating or transferring an interest or an
estate in the Premises. In no event shall any taxes due under
this Section 4.08 include any income, gross receipts, franchise
or any tax based on the revenue, gross income or net income of
Landlord or Tenant.
ARTICLE V - SECURITY DEPOSIT
----------------------------
5.01 - (lined out)
ARTICLE VI - USE OF PREMISES
----------------------------
6.01 Tenant's Permitted Use. Tenant shall use the Premises
only for Tenant's Permitted Use as set forth in Section 1.10
above and shall not use or permit the Premises to be used for any
other purpose. Tenant shall, at its sole cost and expense,
obtain all governmental licenses and permits required to allow
Tenant to conduct Tenant's Permitted Use. Landlord disclaims any
warranty that the Premises are suitable for Tenant's use and
Tenant acknowledges that it has had a full opportunity to make
its own determination in this regard.
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INSERT 4.06
Tenant acknowledges that the late payment of Base Rent or
any other amounts payable by Tenant to Landlord hereunder (all of
which shall constitute additional rental to the same extent as
Base Rent) will cause Landlord to incur administrative costs and
other damages, the exact amount of which would be impracticable
or extremely difficult to ascertain. Landlord and Tenant agree
that if Landlord does not receive any such payment on or before
five (5) days after written notice from Landlord that such
payment has not been received, Tenant shall pay to Landlord as
additional rent a late charge equal to four percent (4%) of the
overdue amount to cover such additional administrative costs
(such late charge to be imposed only once with respect to each
delinquent sum due and owing by Tenant under this Lease).
Notwithstanding the foregoing, no late charge shall be assessed
with respect to the first two (2) payments (but not any
subsequent payments) of Base Rent or any other amounts payable by
Tenant in any successive twelve (12) month period which are not
timely paid unless Tenant fails to make such payment within eight
(8) days after written notice from Landlord.
20
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6.02 Compliance With Laws and Other Requirements.
(A) After Lease commencement, Tenant shall cause the
Premises to comply in all material respects with all laws,
ordinances, regulations and directives of any governmental
authority having jurisdiction including, without limitation, any
certificate of occupancy and any law, ordinance, regulation,
covenant, condition or restriction affecting the Building or the
Premises which in the future may become applicable to the
Premises (collectively "Applicable Laws").
(B) Tenant shall not use the Premises, or permit the
Premises to be used, in any manner which: (a) violates any
Applicable Law; (b) causes or is reasonable likely to cause
damage to the Building or the Premises; (c) violates a
requirement or condition of any fire and extended insurance
policy covering the Building and/or the Premises, or increases
the cost of such policy; (d) constitutes or is reasonably likely
to constitute a nuisance, annoyance or inconvenience to other
tenants or occupants of the Building or its equipment, facilities
or systems; (e) interferes with, or is reasonably likely to
interfere with, the transmission or reception of microwave,
television, radio, telephone or other communication signals by
antennae or other facilities located in the Building; or (f)
violates the Rules and Regulations described in Article XIX.
6.03 Hazardous Materials.
(A) No Hazardous Materials, as defined herein, shall be
Handled, as also defined herein, upon, about, above or beneath
the Premises or any portion of the Building by or on behalf of
Tenant, its subtenants or its assignees, or their respective
contractors, clients, officers, directors, employees, agents, or
invitees. Any such Hazardous Materials so Handled shall be known
as Tenant's Hazardous Materials. Notwithstanding the foregoing,
normal quantities of Tenant's Hazardous Materials customarily
used in the conduct of general administrative and executive
office activities (e.g., copier fluids and cleaning supplies) may
be Handled at the Premises without Landlord's prior written
consent. Tenant's Hazardous Materials shall be Handled at all
times in compliance with the manufacturer's instructions therefor
and all applicable Environmental Laws, as defined herein.
(B) Notwithstanding the obligation of Tenant to
indemnify Landlord pursuant to this Lease, Tenant shall, at its
sole cost and expense, promptly take all actions required by any
Regulatory Authority, as defined herein, or necessary for
Landlord to make full economic use of the Premises or any portion
of the Project, which requirements or necessity arises from the
Handling of Tenant's Hazardous Materials upon, about, above or
beneath the Premises or any portion of the Project. Such actions
shall include, but not be limited to, the investigation of the
environmental condition of the Premises or any portion of the
Project, the preparation of any feasibility studies or reports
and the performance of any cleanup, remedial, removal or
restoration work. Tenant shall take all actions necessary to
restore the Premises or any portion of the Project to the
condition existing prior to the introduction of Tenant's
Hazardous Materials, notwithstanding any less stringent standards
or remediation allowable under applicable Environmental Laws.
Tenant shall nevertheless obtain Landlord's written approval
prior to undertaking any actions required by this Section, which
approval shall not be unreasonably withheld so long as such
actions would not potentially have a material adverse long-term
or short-term effect on the Premises or any portion of the
Project.
(C) Tenant agrees to execute affidavits,
representations, and the like from time to time at Landlord's
request stating Tenant's best knowledge and belief regarding the
presence of Hazardous Materials on the Premises.
(D) "Environmental Laws" means and includes all now and
hereafter existing statutes, laws, ordinances, codes,
regulations, rules, rulings, orders, decrees, directives,
policies and requirements by any Regulatory Authority regulating,
relating to, or imposing liability or standards of conduct
concerning public health and safety or the environment.
(E) "Hazardous Materials" means: (a) any material or
substance: (i) which is defined or becomes defined as a
"hazardous substance", "hazardous waste," "infectious waste,"
"chemical mixture or substance," or "air pollutant" under
Environmental Laws; (ii) containing petroleum, crude oil or any
fraction thereof; (iii) containing polychlorinated biphenyls
(PCB's); (iv) containing asbestos; (v) which is radioactive; (vi)
which is infectious; or (b) any other material or substance
displaying toxic, reactive, ignitable or corrosive
characteristics, as all such terms are used in their broadest
sense, and are defined, or become defined by Environmental Laws;
or (c) materials which cause a nuisance upon or waste to the
Premises or any portion of the Project.
(F) "Handle," "handle" "Handled," "handled,"
"Handling," or "handling" shall mean any installation, handling,
generation, storage, treatment, use, disposal, discharge,
release, manufacture, refinement, presence, migration, emission,
abatement, removal, transportation, or any other activity of any
type in connection with or involving Hazardous Materials.
(G) "Regulatory Authority" shall mean any federal,
state or local governmental agency, commission, board or
political subdivision.
ARTICLE VII - UTILITIES AND SERVICES
------------------------------------
7.01 Building Services. As long as Tenant is not in
monetary default under this Lease, Landlord agrees to furnish or
cause to be furnished to the Premises the following utilities and
services, subject to the conditions and standards set forth
herein:
(A) Non-attended automatic elevator service (if the
Building has such equipment serving the Premises), in common with
Landlord and other tenants and occupants and their agents and
invitees.
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(B) During Business Hours, such air conditioning,
heating and ventilation as, in Landlord's reasonable judgment,
are required for the comfortable use and occupancy of the
Premises; provided, however, that if Tenant shall require
heating, ventilation or air conditioning in excess of that which
Landlord shall be required to provide hereunder, Landlord may
provide such additional heating, ventilation or air conditioning
at such rates as agreed to herein.
(C) Water for drinking and rest room purposes.
(D) Reasonable janitorial and cleaning services,
provided that the Premises are used exclusively for office
purposes and are kept reasonably in order by Tenant. If the
Premises are not used exclusively as offices, Landlord, at
Landlord's sole discretion, may require that the Premises be kept
clean and in order by Tenant, at Tenant's expense, to the
satisfaction of Landlord and by persons approved by Landlord;
and, in all events, Tenant shall pay to Landlord the cost of
removal of Tenant's refuse and rubbish, to the extent that the
same exceeds the refuse and rubbish attendant to normal office
usage.
(E) At all reasonable times, electric current as
required for building standard lighting and fractional
horsepower office machines; provided, however, that: (i) without
Landlord's consent, Tenant shall not install, or permit the
installation, in the Premises of any computers, word processors,
electronic data processing equipment or other type of equipment
or machines which will increase Tenant's use of electric current
in excess of that which Landlord is obligated to provide
hereunder (provided, however, that the foregoing shall not
preclude the use of personal computers or similar office
equipment); (ii) if Tenant shall require electric current which
may disrupt the provision of electrical service to other
tenants, Landlord may refuse to grant its consent or may
condition its consent upon Tenant's payment of the cost of
installing and providing any additional facilities required to
furnish such excess power to the Premises and upon the
installation in the Premises of electric current meters to
measure the amount of electric current consumed, in which latter
event Tenant shall pay for the cost of such meter(s) and the
cost of installation, maintenance and repair thereof, as well as
for all excess electric current consumed at the rates charged by
the applicable local public utility, plus a reasonable amount to
cover the additional expenses incurred by Landlord in keeping
account of the electric current so consumed; and (iii) if
Tenant's increased electrical requirements will materially
affect the temperature level in the Premises or the Project,
Landlord's consent may be conditioned upon Tenant's requirement
to pay such amounts as will be incurred by Landlord to install
and operate any machinery or equipment necessary to restore the
temperature level to that otherwise required to be provided by
Landlord, including but not limited to the cost of modifications
to the air conditioning system. Landlord shall not, in any way,
be liable or responsible to Tenant for any loss or damage or
expense which Tenant may incur or sustain if, for any reasons
beyond Landlord's reasonable control, either the quantity or
character of electric service is changed or is no longer
available or suitable for Tenant's requirements. Tenant
covenants that at all times its use of electric current shall
never exceed the capacity of the feeders, risers or electrical
installations of the Project. If submetering of electricity in
the Building will not be permitted under future laws or
regulations, the Rent will then be equitably and periodically
adjusted to include an additional payment to Landlord reflecting
the cost to Landlord for furnishing electricity to Tenant in the
Premises. See Insert 7. 01 (E)
Any amounts which Tenant is required to pay to Landlord
pursuant to this Section 7.01 shall be payable upon demand by
Landlord and shall constitute additional rent.
7.02 Interruption of Services. Landlord shall not be
liable for any failure to furnish, stoppage of, or interruption
in furnishing any of the services or utilities described in
Section 7.01, when such failure is caused by accident, breakage,
repairs, strikes, lockouts, labor disputes, labor disturbances,
governmental regulation, civil disturbances, acts of war,
moratorium or other governmental action, or any other cause
beyond Landlord's reasonable control, and, in such event, Tenant
shall not be entitled to any damages nor shall any failure or
interruption abate or suspend Tenant's obligation to pay Base
Rent and additional rent required under this Lease or constitute
or be construed as a constructive or other eviction of Tenant.
Further, in the event any governmental authority or public
utility promulgates or revises any law, ordinance, rule or
regulation, or issues mandatory controls or voluntary controls
relating to the use or conservation of energy, water, gas, light
or electricity, the reduction of automobile or other emissions,
or the provision of any other utility or service, Landlord may
take any reasonably appropriate action to comply with such law,
ordinance, rule, regulation, mandatory control or voluntary
guideline and Tenant's obligations hereunder shall not be
affected by any such action of Landlord. The parties
acknowledge that safety and security devices, services and
programs provided by Landlord, if any, while intended to deter
crime and ensure safety, may not in given instances prevent
theft or other criminal acts, or ensure safety of persons or
property. The risk that any safety or security device, service
or program may not be effective, or may malfunction, or be
circumvented by a criminal, is assumed by Tenant with respect to
Tenant's property and interests, and Tenant shall obtain
insurance coverage to the extent Tenant desires protection
against such criminal acts and other losses, as further
described in this Lease. Tenant agrees to cooperate in any
reasonable safety or security program developed by Landlord or
required by Law. See Insert 7.02
ARTICLE VIII - MAINTENANCE AND REPAIRS
--------------------------------------
8.01 Landlord's Obligations. Except as provided in
Sections 8.02 and 8.03 below, Landlord shall maintain the Project
in reasonable order and repair throughout the Lease Term;
provided, however, that Landlord shall not be liable for any
failure to make any repairs or to perform any maintenance unless
such failure shall persist for an unreasonable time after written
notice of the need for such repairs or maintenance is given to
Landlord by Tenant. Except as provided in Article XI, there
shall be no abatement of Rent, nor shall there be any liability
of Landlord, by reason of any injury or inconvenience to, or
interference with, Tenant's business or operations arising from
the making of, or failure to make, any maintenance or repairs in
or to any portion of the Project. See Insert 8.01
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INSERT 7.01E
It is hereby acknowledged that Landlord has installed a
separate meter on the air conditioning unit in Tenant's fifth
(5th) floor computer room.
INSERT 7.02
Notwithstanding the foregoing, Tenant shall be entitled to a
proportionate abatement of Rent (based upon the extent to which
Tenant's business operations from the Premises are materially
impaired) to the extent any interruption in services shall
continue for a period in excess of five (5) consecutive business
days after Landlord's receipt of notice from Tenant of such
interruption. Any such abatement shall commence immediately
after such five (5) consecutive business day period and continue
until the services or utilities have been restored.
INSERT 8.01
Notwithstanding the foregoing, Tenant shall be entitled to a
proportional abatement of Rent (based upon the extent to which
Tenant's business operations from the Premises are materially
impaired) to the extent Landlord (i) has failed to commence to
make any repairs required to be made by Landlord within ten (10)
days after Landlord's receipt of notice from Tenant of the need
for such repair work or (ii) fails to complete such repair work
once commenced, with reasonable diligence.
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<PAGE>
8.02 Tenant's Obligations. During the Lease Term, Tenant
shall, at its sole cost and expense, maintain the Premises in
good order and repair (including, without limitation, the carpet,
wall-covering, doors, equipment, alterations and improvements,
whether installed by Landlord or Tenant). Further, Tenant shall
be responsible for, and upon demand by Landlord shall promptly
reimburse Landlord for, any damage to any portion of the Project
or the Premises caused by (a) Tenant's activities in the Project
or the Premises; (b) the performance or existence of any
alterations, additions or improvements made by Tenant in or to
the Premises; (c) the installation, use, operation or movement
of Tenant's property in or about the Project or the Premises; or
(d) any act or omission by Tenant or its officers, partners,
employees, agents, contractors or invitees.
8.03 Landlord's Rights. Landlord and its contractors shall
have the right, at all reasonable times and upon prior oral or
telephonic notice to Tenant at the Premises, other than in the
case of any emergency in which case no notice shall be required,
to enter upon the Premises to make any repairs to the Premises
or the Project reasonably required or deemed reasonably necessary
by Landlord and to erect such equipment, including scaffolding,
as is reasonably necessary to effect such repairs.
ARTICLE IX - ALTERATIONS, ADDITIONS AND IMPROVEMENTS
----------------------------------------------------
AFTER LEASE COMMENCEMENT
------------------------
9.01 Landlord's Consent; Conditions. Tenant shall not make or
permit to be made any alterations, additions, or improvements in
or to the Premises ("Alterations") without the prior written
consent of Landlord, which consent, with respect to non-
structural alterations, shall not be unreasonably withheld.
Landlord may impose as a condition to making any Alterations such
requirements as Landlord in its sole discretion deems necessary
or desirable including without limitation: Tenant's submission to
Landlord, for Landlord's prior written approval, of all plans and
specifications relating to the Alterations; Landlord's prior
written approval of the time or times when the Alterations are to
be performed; Landlord's prior written approval of the
contractors and subcontractors performing work in connection with
the Alterations; Tenant's receipt of all necessary permits and
approvals from all governmental authorities having jurisdiction
over the Premises prior to the construction of the Alterations;
Tenant's delivery to Landlord of such bonds and insurance as
Landlord shall reasonably require (provided that no bonds shall
be required in connection with Alterations which cost less than
$500,000 unless Landlord's contractor performs the Alterations in
which case no bonds shall be required); and Tenant's payment to
Landlord of all reasonable costs and expenses incurred by
Landlord because of Tenant's Alterations, including but not
limited to costs incurred in reviewing the plans and
specifications for, and the progress of, the Alterations. Tenant
is required to provide Landlord written notice of whether the
Alterations include the Handling of any Hazardous Materials and
whether these materials are of a customary and typical nature for
industry practices. Upon completion of the Alterations, Tenant
shall provide Landlord with copies of as-built plans. Neither the
approval by Landlord of plans and specifications relating to any
Alterations nor Landlord's supervision or monitoring of any
Alterations shall constitute any warranty by Landlord to Tenant
of the adequacy of the design for Tenant's intended use or the
proper performance of the Alterations. See Insert 9.01
9.02 Performance of Alterations Work. All work relating to
the Alterations shall be performed in compliance with the plans
and specifications approved by Landlord, all applicable laws,
ordinances, rules regulations and directives of all governmental
authorities having jurisdiction (including without limitation
Title 24 of the California Administrative Code) and the
requirements of all carriers of insurance on the Premises and the
Project, the Board of Underwriters, Fire Rating Bureau, or
similar organization. All work shall be performed in a
diligent, first class manner and so as not to unreasonably
interfere with any other tenants or occupants of the Project.
All reasonable costs incurred by Landlord relating to the
Alterations shall be payable to Landlord by Tenant as additional
rent upon demand. No asbestos-containing materials shall be used
or incorporated in the Alterations. No lead-containing surfacing
material, solder, or other construction materials or fixtures
where the presence of lead might create a condition of exposure
not in compliance with Environmental Laws shall be incorporated
in the Alterations.
9.03 Liens. Tenant shall pay when due all costs for work
performed and materials supplied to the Premises. Tenant shall
keep Landlord, the Premises and the Project free from all liens,
stop notices and violation notices relating to the Alterations or
any other work performed for, materials furnished to or
obligations incurred by or for Tenant and Tenant shall protect,
indemnify, hold harmless and defend Landlord, the Premises and
the Project of and from any and all loss, cost, damage, liability
and expense, including attorneys' fees, arising out of or related
to any such liens or notices. Further, Tenant shall give Landlord
not less than seven (7) business days prior written notice before
commencing any Alterations in or about the Premises to permit
Landlord to post appropriate notices of non-responsibility.
Subject to the limitations set forth in Section 9.01 above,
Tenant shall also secure (upon Landlord's request), prior to
commencing any Alterations, at Tenant's sole expense, a
completion and lien indemnity bond satisfactory to Landlord for
such work. During the progress of such work, Tenant shall, upon
Landlord's request, furnish Landlord with sworn contractor's
statements and lien waivers covering all work theretofore
performed. Tenant shall satisfy or otherwise discharge all
liens, stop notices or other claims or encumbrances within ten
(10) days after Landlord notifies Tenant in writing that any such
lien, stop notice, claim or encumbrance has been filed. If
Tenant fails to pay and remove such lien, claim or encumbrance
within such ten (10) days, Landlord, at its election, may pay and
satisfy the same and in such event the sums so paid by Landlord,
with interest from the date of payment at the rate set forth in
Section 4.06 hereof for amounts owed Landlord by Tenant shall be
deemed to be additional rent due and payable by Tenant at once
without notice or demand.
9.04 Lease Termination. Except as provided in this Section
9.04, upon expiration or earlier termination of this Lease Tenant
shall surrender the Premises to Landlord in the same condition as
existed on the date Tenant first occupied the Premises subject to
reasonable wear and tear. All Alterations shall become a part of
the Premises and shall become the property of Landlord upon the
expiration or earlier termination of this Lease, unless Landlord
shall, by written notice given to Tenant, at the time Landlord
consents to such Alterations require Tenant to
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<PAGE>
INSERT 9.01
Notwithstanding the foregoing, Tenant shall have the right,
without Landlord's consent but upon at least ten (10) days prior
written notice to Landlord, to make strictly cosmetic, non-
structural Alterations to the Premises that (i) cost less than
$25,000.00 per separate Alteration, and (ii) do not (a) affect
the foundation, structure or roof of the Building or the exterior
appearance of the Building, (b) adversely affect the mechanical,
electrical, life safety, plumbing, sprinkler systems, or HVAC
systems in the Building, or (c) violate any Applicable Laws.
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<PAGE>
remove some or all of Tenant's Alterations, in which event Tenant
shall promptly remove the designated Alterations and shall
promptly repair any resulting damage, all at Tenant's sole
expense. All business and trade fixtures, machinery and
equipment, furniture, movable partitions and items of personal
property owned by Tenant or installed by Tenant at its expense
in the Premises shall be and remain the property of Tenant; upon
the expiration or earlier termination of this Lease, Tenant
shall, at its sole expense, remove all such items and repair any
damage to the Premises or the Project caused by such removal. If
Tenant fails to remove any such items or repair such damage
promptly after the expiration or earlier termination of the
Lease, Landlord may, but need not, do so with no liability to
Tenant, and Tenant shall pay Landlord the cost thereof upon
demand. Notwithstanding the foregoing to the contrary, in the
event that Landlord gives its consent, pursuant to the provisions
of Section 9.01 of this Lease, to allow Tenant to make an
Alteration in the Premises, Landlord agrees, upon Tenant's
written request, to notify Tenant in writing at the time of
the giving of such consent whether Landlord will require Tenant,
at Tenant's cost, to remove such Alteration at the end of the
Lease Term.
ARTICLE X - INDEMNIFICATION AND INSURANCE
-----------------------------------------
10.01 Indemnification.
(A) Tenant agrees to protect, indemnify, hold
harmless and defend Landlord and any Mortgagee, as defined
herein, and each of their respective partners, directors,
officers, agents and employees, successors and assigns, (except
to the extent of the losses described below are caused by the
gross negligence of Landlord, its agents and employees), from
and against:
(i) any and all loss, cost, damage, liability or
expense as incurred (including but not limited to reasonable
attorneys' fees and legal costs) arising out of or related to any
claim, suit or judgment brought by or in favor of any person or
persons for damage, loss or expense due to, but not limited to,
bodily injury, including death, or property damage sustained by
such person or persons which arises out of, is occasioned by or
is in any way attributable to the use or occupancy of the
Premises or any portion of the Project by Tenant or the acts or
omissions of Tenant or its agents, employees, contractors,
clients, invitees or subtenants except that caused by the
negligence or willful acts or omissions of Landlord or its agents
or employees. Such loss or damage shall include, but not be
limited to, any injury or damage to, or death of, Landlord's
employees or agents or damage to the Premises or any portion of
the Project.
(ii) any and all environmental damages which
arise from: (i) the Handling of any Tenant's Hazardous Materials,
as defined in Section 6.03 or (ii) the breach of any of the
provisions of this Lease. For the purpose of this Lease,
"environmental damages" shall mean (a) all claims, judgments,
damages, penalties, fines, costs, liabilities, and losses
(including without limitation, diminution in the value of the
Premises or any portion of the Project, damages for the loss of
or restriction on use of rentable or usable space or of any
amenity of the Premises or any portion of the Project, and from
any adverse impact of Landlord's marketing of space); (b) all
reasonable sums paid for settlement of claims, attorneys' fees,
consultants' fees and experts' fees; and (c) all costs incurred
by Landlord in connection with investigation or remediation
relating to the Handling of Tenant's Hazardous Materials, whether
or not required by Environmental Laws, necessary for Landlord to
make full economic use of the Premises or any portion of the
Project, or otherwise required under this Lease. To the extent
that Landlord is held strictly liable by a court or other
governmental agency of competent jurisdiction under any
Environmental Laws, Tenant's obligation to Landlord and the other
indemnities under the foregoing indemnification shall likewise be
without regard to fault on Tenant's part with respect to the
violation of any Environmental Law which results in liability to
the indemnitee. Tenant's obligations and liabilities pursuant to
this Section 10.01 shall survive the expiration or earlier
termination of this Lease.
(B) Landlord agrees to protect, indemnify, hold
harmless and defend Tenant and its partners, directors,
officers, agents, employees, successors, and assigns from and
against any and all loss, cost, damage, liability or expense,
including reasonable attorneys' fees, with respect to any claim
of damage of injury to persons or property at the Premises, the
Project and/or the Building, caused by the gross negligence or
willful acts or omissions of Landlord or its authorized agents or
employees.
(C) Notwithstanding anything to the contrary contained
herein, nothing shall be interpreted or used to in any way
affect, limit, reduce or abrogate any insurance coverage provided
by any insurers to either Tenant or Landlord.
(D) Notwithstanding anything to the contrary contained
in this Lease, nothing herein shall be construed to infer or
imply that Tenant is a partner, joint venturer, agent, employee,
or otherwise acting by or at the direction of Landlord.
10.02 Property Insurance.
(A) At all times during the Lease Term, Tenant shall
procure and maintain, at its sole expense, "all-risk" property
insurance, for damage or other loss caused by fire or other
casualty or cause including, but not limited to, vandalism and
malicious mischief, theft, water damage of any type, including
sprinkler leakage, bursting of pipes, explosion, in an amount
not less than ninety percent (90%) of the replacement cost
covering Tenant's trade fixtures, equipment and other personal
26
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property from time to time situated in the Premises.
(B) Landlord shall, at all times during the Lease Term,
procure and maintain "all-risk" property insurance in the amount
not less than ninety percent (90%) of the insurable replacement
cost covering the Building in which the Premises are located and
such other insurance as may be required by a Mortgagee or
otherwise desired by Landlord.
10.03 Liability Insurance.
(A) At all times during the Lease Term, Tenant shall
procure and maintain, at its sole expense, commercial general
liability insurance applying to the use and occupancy of the
Premises and the business operated by Tenant. Such insurance
shall have a minimum combined single limit of liability of at
least Two Million Dollars ($2,000,000) per occurrence and a
general aggregate limit of at least Two Million Dollars
($2,000,000). All such policies shall be written to apply to all
bodily injury, property damage, personal injury losses and shall
be endorsed to include Landlord and its agents, beneficiaries,
partners, employees, and any deed of trust holder or mortgagee of
Landlord or any ground lessor as additional insureds. Such
liability insurance shall be written as primary policies, not
excess or contributing with or secondary to any other insurance
as may be available to the additional insureds.
(B) Prior to the sale, storage, use or giving away of
alcoholic beverages on or from the Premises by Tenant or another
person, Tenant, at its own expense, shall obtain a policy or
policies of insurance issued by a responsible insurance company
and in a form acceptable to Landlord saving harmless and
protecting Landlord and the Premises against any and all damages,
claims, liens, judgments, expenses and costs, including actual
attorneys' fees, arising under any present or future law,
statute, or ordinance of the State of California or other
governmental authority having jurisdiction of the Premises, by
reason of any storage, sale, use or giving away of alcoholic
beverages on or from the Premises. Such policy or policies of
insurance shall have a minimum combined single limit of One
Million Dollars ($1,000,000) per occurrence and shall apply to
bodily injury, fatal or nonfatal; injury to means of support; and
injury to property of any person. Such policy or policies of
insurance shall name Landlord and its agents, beneficiaries,
partners, employees and any mortgagee of Landlord or any ground
lessor of Landlord as additional insureds.
(C) Landlord shall, at all times during the Lease
Term, procure and maintain commercial general liability insurance
for the Building in which the Premises are located. Such
insurance shall have minimum combined single limit of liability
of at least Two Million Dollars ($2,000,000) per occurrence, and
a general aggregate limit of at least Two Million Dollars
($2,000,000).
10.04 Workers' Compensation Insurance. At all times during
the Lease Term, Tenant shall procure and maintain Workers'
Compensation Insurance in accordance with the laws of the State
of California, and Employer's Liability insurance with a limit
not less than One Million Dollars ($1,000,000) Bodily Injury Each
Accident; One Million Dollars ($1,000,000) Bodily Injury By
Disease - Each Person; and One Million Dollars ($1,000,000)
Bodily Injury to Disease - Policy Limit.
10.05 Policy Requirements. All insurance required to be
maintained by Tenant shall be issued by insurance companies
authorized to do insurance business in the State of California
and rated not less than A-VIII in Best's Insurance Guide. A
certificate of insurance (or, at Landlord's option, copies of the
applicable policies) evidencing the insurance required under this
Article X shall be delivered to Landlord not less than thirty
(30) days prior to the Commencement Date. No such policy shall
be subject to cancellation or modification without thirty (30)
days prior written notice to Landlord and to any deed of trust
holder, mortgagee or ground lessor designated by Landlord to
Tenant. Tenant shall furnish Landlord with a replacement
certificate with respect to any insurance not less than thirty
(30) days prior to the expiration of the current policy. Tenant
shall have the right to provide the insurance required by this
Article X pursuant to blanket policies, but only if such blanket
policies expressly provide coverage to the Premises and Landlord
as required by this Lease.
10.06 Waiver of Subrogation. Each party hereby waives any
right of recovery against the other for injury or loss due to
hazards covered by insurance or required to be covered, to the
extent of the injury or loss covered thereby. Any policy of
insurance to be provided by Tenant or Landlord pursuant to this
Article X shall contain a clause denying the applicable insurer
any right of subrogation against the other party.
10.07 Failure to Insure. If Tenant fails to maintain any
insurance which Tenant is required to maintain pursuant to this
Article X, Tenant shall be liable to Landlord for any loss or
cost resulting from such failure to maintain. Tenant may not
self-insure against any risks required to be covered by insurance
without Landlord's prior written consent.
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ARTICLE XI - DAMAGE OR DESTRUCTION
----------------------------------
11.01 Total Destruction. Except as provided in Section
11.03 below, this Lease shall automatically terminate if the
Building is totally destroyed.
11.02 Partial Destruction of Premises. If the Premises are
damaged by any casualty and, in Landlord's opinion, the Premises
(exclusive of any Alterations made to the Premises by Tenant) can
be restored to its preexisting condition within two hundred ten
(210) days after the date of the damage or destruction, Landlord
shall, upon written notice from Tenant to Landlord of such
damage, except as provided in Section 11.03, promptly and with
due diligence repair any damage to the Premises (exclusive of any
Alterations to the Premises made by Tenant, which shall be
promptly repaired by Tenant at its sole expense) and, until such
repairs are completed, the Rent shall be abated from the date of
damage or destruction in the same proportion that the rentable
area of the portion of the Premises which is unusable by Tenant
in the conduct of its business bears to the total rentable area
of the Premises. If such repairs cannot, in Landlord's opinion,
be made within said two hundred ten (210) day period, then either
Landlord or Tenant shall have the right, by written notice given
to the other within sixty (60) days after the date of the damage
or destruction, to terminate this Lease as of the date of the
damage or destruction. See Insert 11.02
11.03 Exceptions to Landlord's Obligations. Notwithstanding
anything to the contrary contained in this Article XI, Landlord
shall have no obligation to repair the Premises if either: (a)
the Building in which the Premises are located is so damaged as
to require repairs to the Building exceeding twenty percent (20%)
of the full insurable value of the Building; or (b) Landlord
elects to demolish the Building in which the Premises are
located; or (c) the damage or destruction occurs less than one
(1) year prior to the Termination Date, exclusive of option
periods. Further, Tenant's Rent shall not be abated if either
(i) the damage or destruction is repaired within five (5)
business days after Landlord receives written notice from Tenant
of the casualty, or (ii) Tenant, or any officers, partners,
employees, agents or invitees of Tenant, or any assignee or
subtenant of Tenant, is, in whole or in part, responsible for
the damage or destruction.
11.04 Waiver. The provisions contained in this Lease shall
supersede any contrary laws (whether statutory, common law or
otherwise) now or hereafter in effect relating to damage,
destruction, self-help or termination, including California Civil
Code Sections 1932 and 1933.
ARTICLE XII - CONDEMNATION
--------------------------
12.01 Taking. If the entire Premises or so much of the
Premises as to render the balance unusable by Tenant shall be
taken by condemnation, sale in lieu of condemnation or in any
other manner for any public or quasipublic purpose (collectively
"Condemnation"), and if Landlord, at its option, is unable or
unwilling to provide substitute premises containing at least as
much rentable area as described in Section 1.02 above, then this
Lease shall terminate on the date that title or possession to the
Premises is taken by the condemning authority, whichever is
earlier.
12.02 Award. In the event of any condemnation, Tenant shall
have no claim against Landlord or the award for the value of any
unexpired term of this Lease or otherwise. Tenant shall only be
entitled to independently pursue a separate award in a separate
proceeding for Tenant's relocation costs loss of good will and
loss of personal property directly associated with the taking.
12.03 Temporary Taking. No temporary taking of the Premises
shall terminate this Lease or entitle Tenant to any abatement of
the Rent payable to Landlord under this Lease; provided, further,
that any award for such temporary taking shall belong to Tenant
to the extent that the award applies to any time period during
the Lease Term and to Landlord to the extent that the award
applies to any time period outside the Lease Term.
ARTICLE XIII - RELOCATION
-------------------------
13.01 Relocation - (lined out)
ARTICLE XIV - ASSIGNMENT AND SUBLETTING
---------------------------------------
14.01 Restriction. Without the prior written consent of
Landlord, which shall not be unreasonably withheld, Tenant shall
not, either voluntarily or by operation of law, assign, encumber,
or otherwise transfer this Lease or any interest herein, or
sublet the Premises or any part thereof, or permit the Premises
to be occupied by anyone other than Tenant or Tenant's employees
(any such assignment, encumbrance, subletting, occupation or
transfer is hereinafter referred to as a "Transfer"). For
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INSERT 11.02
Notwithstanding the foregoing, if Landlord commences the
restoration of the damage or destruction to the Premises in
accordance with this Section 11.02, but Landlord fails to
substantially complete said restoration by the two hundred tenth
(210th) day after the date of the damage or destruction, Tenant
shall have the right to terminate this Lease by providing
Landlord at least ten (10) days written notice of such
termination, unless Landlord has completed at least seventy
percent (70%) of the restoration work as of such two hundred
tenth (210th) day (in which event Tenant shall have no further
right to terminate this Lease unless the restoration is not
substantially complete within an additional forty-five (45)
days).
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purposes of this Lease, the term "Transfer" shall also include
(a) if Tenant is a partnership, the withdrawal or change,
voluntary, involuntary or by operation of law, of a majority of
the partners, or a transfer of a majority of partnership
interests, within a twelve month period, or the dissolution of
the partnership, and (b) if Tenant is a closely held corporation
(i.e. whose stock is not publicly held and not traded through an
exchange or over the counter) or a limited liability company, the
dissolution, merger, consolidation, division, liquidation or
other reorganization of Tenant, or within a twelve month period:
(i) the sale or other transfer of more than an aggregate of 50%
of the voting securities of Tenant (other than to immediate
family members by reason of gift or death) or (ii) the sale,
mortgage, hypothecation or pledge of more than an aggregate of
50% of Tenant's net assets. An assignment, subletting or other
action in violation of the foregoing shall be void and, at
Landlord's option, shall constitute a material breach of this
Lease. Notwithstanding anything contained in this Article XIV to
the contrary, Tenant shall have the right to assign the Lease or
sublease the Premises, or any part thereof, to an "Affiliate"
without the prior written consent of Landlord, but upon at least
twenty (20) days' prior written notice to Landlord, provided that
said Affiliate is not in default under any other lease for space
in a property that is managed by Heitman Properties Ltd. or any
of its affiliates. For purposes of this provision, the term
"Affiliate" shall mean any corporation or other entity
controlling, controlled by, or under common control with
(directly or indirectly) Tenant, including, without limitation,
any parent corporation controlling Tenant or any subsidiary that
Tenant controls. The term "control," as used herein, shall mean
the power to direct or cause the direction of the management and
policies of the controlled entity through the ownership of more
than fifty percent (50%) of the voting securities in such
controlled entity. Notwithstanding anything contained in this
Article XIV to the contrary, Tenant expressly covenants and
agrees not to enter into any lease, sublease, license, concession
or other agreement for use, occupancy or utilization of the
Premises which provides for rental or other payment for such use,
occupancy or utilization based in whole or in part on the net
income or profits derived by any person from the property leased,
used, occupied or utilized (other than an amount based on a fixed
percentage or percentages of receipts or sales), and that any
such purported lease, sublease, license, concession or other
agreement shall be absolutely void and ineffective as a
conveyance of any right or interest in the possession, use,
occupancy or utilization of any part of the Premises.
14.02 Notice to Landlord. If Tenant desires to assign this
Lease or any interest herein, or to sublet all or any part of the
Premises, then at least thirty (30) days but not more than one
hundred eighty (180) days prior to the effective date of the
proposed assignment or subletting, Tenant shall submit to
Landlord in connection with Tenant's request for Landlord's
consent:
(A) A statement containing (i) the name and address of
the proposed assignee or subtenant; (ii) such financial
information with respect to the proposed assignee or subtenant as
Landlord shall reasonably require; (iii) the type of use proposed
for the Premises; and (iv) all of the principal terms of the
proposed assignment or subletting; and
(B) Four (4) originals of the assignment or sublease on
a form approved by Landlord and four (4) originals of the
Landlord's Consent to Sublease or Assignment and Assumption of
Lease and Consent.
14.03 Landlord's Recapture Rights. At any time within twenty
(20) business days after Landlord's receipt of all (but not less
than all) of the information and documents described in Section
14.02 above, Landlord may, at its option by written notice to
Tenant, elect to: terminate the Lease in its entirety or as to
the portion of the Premises proposed to be sublet, with a
proportionate adjustment in the Rent payable hereunder if the
Lease is terminated as to less than all of the Premises. If
Landlord does not exercise any of the options described in the
preceding sentence, then, during the above-described twenty (20)
business day period, Landlord shall either consent or deny its
consent to the proposed subletting. Notwithstanding the
foregoing, Landlord shall have no right to terminate this Lease
as set forth above in connection with a sublease or subleases, in
the aggregate, for less than fifty percent (50%) of the rentable
square feet of the Premises.
14.04 Landlord's Consent, Standards. Landlord's
consent to a proposed assignment or subletting shall not be
unreasonably withheld; but, in addition to any other grounds for
denial, Landlord's consent shall be deemed reasonably withheld
if, in Landlord's good faith judgment: (i) the proposed assignee
or subtenant does not have the financial strength to perform its
obligations under this Lease or any proposed sublease; (ii) the
business and operations of the proposed assignee or subtenant are
not of comparable quality to the business and operations being
conducted by other tenants in the Project; (iii) the proposed
assignee or subtenant intends to use any part of the Premises for
a purpose not permitted under this Lease; (iv) either the
proposed assignee or subtenant, or any person which directly or
indirectly controls, is controlled by, or is under common control
with the proposed assignee or subtenant occupies space in the
Project, or is negotiating with Landlord to lease space in the
Project, provided that with respect to any prospective subtenant
or assignee with whom Landlord has been negotiating with to lease
space in the Project (the "Negotiating Party"), Landlord shall
have notified Tenant in writing of such Negotiating Party within
three (3) business days after receiving Tenant's Notice to
Landlord under Section 14.02 above; (v) the proposed assignee or
subtenant is disreputable; or (vi) the use of the Premises or the
Project by the proposed assignee or subtenant would, in
Landlord's reasonable judgment, impact the Project in a negative
manner including but not limited to significantly increasing the
pedestrian traffic in and out of the Project or requiring any
alterations to the Project to comply with applicable laws; (vii)
the subject space is not regular in shape with appropriate means
of ingress and egress suitable for normal renting purposes;
(viii) the transferee is a government (or agency or
instrumentality thereof) or (ix) Tenant has failed to cure a
material default at the time Tenant requests consent to the
proposed Transfer.
14.05 Additional Rent. See Insert 14.05
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INSERT 14.05
If Landlord consents to any such assignment or subletting,
one-half (1/2) of the amount by which all sums or other economic
consideration received by Tenant in connection with such
assignment or subletting, whether denominated as rental or
otherwise, exceeds, in the aggregate, the total sum which Tenant
is obligated to pay Landlord under this Lease (prorated to
reflect obligations allocable to less than all of the Premises
under a sublease) after deducting all out-of-pocket expenses
related to such assignment or subletting including expenses
incurred by Tenant in connection with any Alterations or any
Excess Costs (as defined in the Work Letter), and any Sublease
Negative (as defined below), [The term Sublease Negative shall
mean the amount by which the rental paid by Tenant to Landlord on
a per square foot basis for any portion of the Premises which is
subleased to a third party exceeds the rental received by Tenant
on a per square foot basis from such subtenant with respect to
such subleased space] shall be paid to Landlord promptly after
receipt as Additional Rent under the Lease without affecting or
reducing any other obligation of Tenant hereunder.
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14.06 Landlord's Costs. If Tenant shall Transfer this
Lease or all or any part of the Premises or shall request the
consent of Landlord to any Transfer, Tenant shall pay to Landlord
as additional rent Landlord's costs related thereto, including
Landlord's reasonable attorneys' fees not to exceed one thousand
five hundred dollars ($1,500.00).
14.07 Continuing Liability of Tenant. Notwithstanding any
Transfer, Tenant shall remain as fully and primarily liable for
the payment of Rent and for the performance of all other
obligations of Tenant contained in this Lease to the same extent
as if the Transfer had not occurred; provided, however, that any
act or omission of any transferee, other than Landlord, that
violates the terms of this Lease shall be deemed a violation of
this Lease by Tenant.
14.08 Non-Waiver. The consent by Landlord to any
Transfer shall not relieve Tenant, or any person claiming through
or by Tenant, of the obligation to obtain the consent of
Landlord, pursuant to this Article XIV, to any further Transfer.
In the event of an assignment or subletting, Landlord may collect
rent from the assignee or the subtenant without waiving any
rights hereunder and collection of the rent from a person other
than Tenant shall not be deemed a waiver of any of Landlord's
rights under this Article XIV, an acceptance of assignee or
subtenant as Tenant, or a release of Tenant from the performance
of Tenant's obligations under this Lease. If Tenant shall
default under this Lease and fail to cure within the time
permitted, Landlord is irrevocably authorized, as Tenant's agent
and attorney-in-fact, to direct any transferee to make all
payments under or in connection with the Transfer directly to
Landlord (which Landlord shall apply towards Tenant's obligations
under this Lease) until such default is cured.
ARTICLE XV - DEFAULT AND REMEDIES
---------------------------------
15.01 Events of Default By Tenant. The occurrence of any
of the following shall constitute a material default and breach
of this Lease by Tenant:
(A) The failure by Tenant to pay Base Rent or make any
other payment required to be made by Tenant hereunder within
seven (7) days after written notice thereof from Landlord is
received by Tenant. The seven (7) day notice described herein
shall be in lieu of, and not in addition to, any notice required
under Section 1161 of the California Code of Civil Procedure or
any other law now or hereafter in effect requiring that notice of
default be given prior to the commencement of an unlawful
detainer or other legal proceeding.
(B) The abandonment of the Premises by Tenant or the
vacation of the Premises by Tenant for fourteen (14) consecutive
days (with or without the payment of Rent)
(C) The failure by Tenant to observe or perform any
material provision of this Lease to be observed or performed by
Tenant, other than those described in Sections 15.01(A) and
15.01(B) above, if such failure continues for ten (10) days after
written notice thereof by Landlord to Tenant; provided, however,
that if the nature of the default is such that it cannot be cured
within the twenty (20) day period, no default shall exist if
Tenant commences the curing of the default within the (20) day
period and thereafter diligently prosecutes the same to
completion. The twenty (20) day notice described herein shall be
in lieu of, and not in addition to, any notice required under
Section 1161 of the California Code of Civil Procedure or any
other law now or hereafter in effect requiring that notice of
default be given prior to the commencement of an unlawful
detainer or other legal proceeding.
(D) The making by Tenant or its Guarantor of any
general assignment for the benefit of creditors, the filing by or
against Tenant or its Guarantor of a petition under any federal
or state bankruptcy or insolvency laws (unless, in the case of a
petition filed against Tenant or its Guarantor the same is
dismissed within thirty (30) days after filing); the appointment
of a trustee or receiver to take possession of substantially
all of Tenant's assets at the Premises or Tenant's interest in
this Lease or the Premises, when possession is not restored to
Tenant within thirty (30) days; or the attachment, execution or
other seizure of substantially all of Tenant's assets located at
the Premises or Tenant's interest in this Lease or the Premises,
if such seizure is not discharged within thirty (30) days.
(E) Any material misrepresentation herein, or material
misrepresentation or omission in any financial statements or
other materials provided by Tenant or any Guarantor in connection
with negotiating or entering into this Lease or in connection
with any Transfer under Section 14.01.
15.02 Landlord's Right To Terminate Upon Tenant Default.
In the event of any default by Tenant as provided in Section
15.01 above, Landlord shall have the right to terminate this
Lease and recover possession of the Premises by giving written
notice to Tenant of Landlord's election to terminate this Lease,
in which event Landlord shall be entitled to receive from Tenant:
(A) The worth at the time of award of any unpaid Rent
which had been earned at the time of such termination; plus
(B) 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 Tenant proves could have been reasonably avoided;
plus
(C) 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 Tenant
proves could be reasonably avoided; plus
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(D) Any other amount necessary to compensate Landlord
for all the detriment proximately caused by Tenant's failure to
perform its obligations under this Lease or which in the ordinary
course of things would be reasonably likely to result therefrom;
and
As used in subparagraphs (A) and (B) above, "worth at the time
of award" shall be computed by allowing interest on such amounts
at the then highest lawful rate of interest, but in no event to
exceed one percent (1 %) per annum plus the rate established by
the Federal Reserve Bank of San Francisco on advances made to
member banks under Sections 13 and 13a of the Federal Reserve Act
("discount rate") prevailing at the time of the award. As used
in paragraph (C) above, "worth at the time of award" shall be
computed by discounting such amount by (i) the discount rate of
the Federal Reserve Bank of San Francisco prevailing at the time
of award plus (ii) one percent (1%).
15.03 Mitigation of Damages. If Landlord terminates this
Lease or Tenant's right to possession of the Premises, Landlord
shall have no obligation to mitigate Landlord's damages except to
the extent required by applicable law. If Landlord is required
to mitigate damages as provided herein: (i) Landlord shall be
required only to use reasonable efforts to mitigate, which shall
not exceed such efforts as Landlord generally uses to lease other
space in the Project, (ii) Landlord will not be deemed to have
failed to mitigate if Landlord or its affiliates lease any other
portions of the Project or other projects owned by Landlord or
its affiliates in the same geographic area, before reletting all
or any portion of the Premises, and (iii) any failure to mitigate
as described herein with respect to any period of time shall only
reduce the Rent and other amounts to which Landlord is entitled
hereunder by the reasonable rental value of the Premises during
such period.
15.04 Landlord's Right To Continue Lease Upon Tenant
Default. In the event of a default of this Lease and abandonment
of the Premises by Tenant, if Landlord does not elect to
terminate this Lease as provided in Section 15.02 above, Landlord
may from time to time, without terminating this Lease, enforce
all of its rights and remedies under this Lease. Without
limiting the foregoing, Landlord has the remedy described in
California Civil Code Section 1951.4 (Landlord may continue this
Lease in effect after Tenant's default and abandonment and
recover Rent as it becomes due, if Tenant has the right to
Transfer, subject only to reasonable limitations). In the event
Landlord re-lets the Premises, to the fullest extent permitted
by law, the proceeds of any reletting shall be applied first to
pay to Landlord all costs and expenses of such reletting
(including without limitation, costs and expenses of retaking
or repossessing the Premises, removing persons and property
therefrom, securing new tenants, including expenses for
redecoration, alterations and other costs in connection with
preparing the Premises for the new tenant, and if Landlord shall
maintain and operate the Premises, the costs thereof) and
receivers' fees incurred in connection with the appointment of
and performance by a receiver to protect the Premises and
Landlord's interest under this Lease and any necessary or
reasonable alterations; second, to the payment of any
indebtedness of Tenant to Landlord other than Rent due and
unpaid hereunder; third, to the payment of Rent due and unpaid
hereunder; and the residue, if any, shall be held by Landlord and
applied in payment of other or future obligations of Tenant to
Landlord as the same may become due and payable, and Tenant
shall not be entitled to receive any portion of such revenue.
15.05 Right of Landlord to Perform. All covenants and
agreements to be performed by Tenant under this Lease shall be
performed by Tenant at Tenant's sole cost and expense. If Tenant
shall fail to pay any sum of money, other than Rent, required to
be paid by it hereunder or shall fail to perform any other act on
its part to be performed hereunder, Landlord may, but shall not
be obligated to, make any payment or perform any such other act
on Tenant's part to be made or performed, without waiving or
releasing Tenant of its obligations under this Lease. Any sums
so paid by Landlord and all necessary incidental costs, together
with interest thereon at the lesser of the maximum rate permitted
by law if any or twelve percent (12%) per annum from the date of
such payment, shall be payable to Landlord as additional rent on
demand and Landlord shall have the same rights and remedies in
the event of nonpayment as in the case of default by Tenant in
the payment of Rent.
15.06 Default Under Other Leases - (lined out)
15.07 Non-Waiver. Nothing in this Article shall be
deemed to affect Landlord's rights to indemnification for
liability or liabilities arising prior to termination of this
Lease or Tenant's right to possession of the Premises for
personal injury or property damages under the indemnification
clause or clauses contained in this Lease. No acceptance by
Landlord of a lesser sum than the Rent then due shall be deemed
to be other than on account of the earliest installment of such
rent due, nor shall any endorsement or statement on any check
or any letter accompanying any check or payment as rent be
deemed an accord and satisfaction, and Landlord may accept such
check or payment without prejudice to Landlord's right to recover
the balance of such installment or pursue any other remedy
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<PAGE>
in the Lease provided. The delivery of keys to any employee of
Landlord or to Landlord's agent or any employee thereof shall not
operate as a termination of this Lease or a surrender of the
Premises.
15.08 Cumulative Remedies. The specific remedies to which
Landlord may resort under the terms of the Lease are
cumulative and are not intended to be exclusive of any other
remedies or means of redress to which it may be lawfully entitled
in case of any breach or threatened breach by Tenant of any
provisions of the Lease. In addition to the other remedies
provided in the Lease, Landlord may be entitled to a restraint by
injunction of the violation or attempted or threatened violation
of any of the covenants, conditions or provisions of the Lease or
to a decree compelling specific performance of any such
covenants, conditions or provisions.
15.09 Default by Landlord. Landlord's failure to perform or
observe any of its material obligations under this Lease shall
constitute a default by Landlord under this Lease only if such
failure shall continue for a period of thirty (30) days (or the
additional time, if any, that is reasonably necessary to promptly
and diligently cure the failure) after Landlord receives written
notice from Tenant specifying the default. The notice shall give
in reasonable detail the nature and extent of the failure and
shall identify the Lease provision(s) containing the
obligation(s). If Landlord shall default in the performance of
any of its obligations under this Lease (after notice and
opportunity to cure as provided herein), Tenant may pursue
any remedies available to it under the law and this Lease,
except, as otherwise set forth hererin. In recognition that
Landlord must receive timely payments of Rent and operate the
Project, Tenant shall have no right of self-help to perform
repairs or any other obligation of Landlord, and shall have no
right to withhold, set-off, or abate Rent. See Insert 15 .09
ARTICLE XVI - ATTORNEYS FEES: COSTS OF SUIT
-------------------------------------------
16.01 Attorneys Fees. If either Landlord or Tenant shall
commence any action or other proceeding against the other arising
out of, or relating to, this Lease or the Premises, the
prevailing party shall be entitled to recover from the losing
party, in addition to any other relief, its reasonable attorneys
fees and costs; provided that the hourly billing rates paid by
Landlord to its attorneys shall be deemed to be reasonable so
long as they are comparable to the rates charged by Latham &
Watkins or another firm of similar quality and size.
16.02 Indemnification. Should Landlord be made a party to
any litigation instituted by Tenant against a party other than
Landlord, or by a third party against Tenant, Tenant shall
indemnify, hold harmless and defend Landlord from any and all
loss, cost, liability, damage or expense incurred by Landlord,
including attorneys' fees, in connection with the litigation,
unless such litigation arises from any claim, damage or injury to
persons or property caused by the negligent acts and/or
omissions of Landlord or its agents or employees.
ARTICLE XVII - SUBORDINATION AND ATTORNMENT
-------------------------------------------
17.01 Subordination. This Lease, and the rights of
Tenant hereunder, are and shall be subject and subordinate
to the interests of (i) all present and future ground leases and
master leases of all or any part of the Project; (ii) present
and future mortgages and deeds of trust encumbering all or any
part of the Project; (iii) all past and future advances made
under any such mortgages or deeds of trust; and (iv) all
renewals, modifications, replacements and extensions of any such
ground leases, master leases, mortgages and deeds of trust;
provided, however, that any lessor under any such ground lease or
master lease or any mortgagee or beneficiary under any such
mortgage or deed of trust (any such lessor, mortgagee or
beneficiary is hereinafter referred to as a "Mortgagee") shall
have the right to elect, by written notice given to Tenant, to
have this Lease made superior in whole or in part to any such
ground lease, master lease, mortgage or deed of trust (or
subject and subordinate to such ground lease, master lease,
mortgage or deed of trust but superior to any junior mortgage or
junior deed of trust). Upon demand, Tenant shall execute,
acknowledge and deliver any instruments reasonably requested by
Landlord or any such Mortgagee to effect the purposes of this
Section 17.01. Any obligations of any Successor Landlord under
its respective lease shall be non-recourse as to any assets of
such Successor Landlord other than its interest in the Project.
See Insert 17.01
17.02 Attornment. If the interests of Landlord under the
Lease shall be transferred to any superior Mortgagee or other
purchaser or person taking title to the Project by reason of the
termination of any superior lease
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INSERT 15.09
Notwithstanding anything contained in this Lease to the
contrary, if Landlord has failed to make any repair required to
be made by Landlord ("Required Repair") within two (2) days
following Landlord's receipt of notice from Tenant of the need of
such repair, then Landlord shall have up to two (2) additional
days following Landlord's receipt of a second written notice from
Tenant stating that such Required Repair remains uncured to
deliver written notice to Tenant of Landlord's good faith dispute
that it is obligated under this Lease to make the Required Repair
("Landlord's Objection Notice"). Upon delivery of any such
Landlord's Objection Notice, Tenant shall have the right, but not
the obligation, to make such Required Repair, but shall not be
entitled to seek reimbursement from Landlord or to deduct or
offset from Rent the cost of any expenditures incurred by Tenant
to perform a Required Repair unless and until such time as the
dispute is resolved in favor of Tenant. Upon delivery of any
such Landlord's Objection Notice, Landlord or Tenant shall be
entitled to require such dispute to be settled by binding
arbitration in accordance with the Commercial Rules of the
American Arbitration Association.
(i) If Landlord does not timely deliver to Tenant a
Landlord's Objection Notice and Landlord fails to commence or
complete any such Required Repair within the time period set
forth above, Tenant shall be entitled to cause the Required
Repair to be performed and Landlord shall reimburse Tenant for
the reasonable cost thereof, within ten (10) days following
presentation to Landlord of paid invoices for all such Required
Repairs.
(ii) If (a) Landlord does not timely deliver to Tenant a
Landlord's Objection Notice, (b) Tenant has thereafter performed
such Required Repair, and (c) Landlord has failed to reimburse
Tenant in accordance with Section 8.2(i) above, Tenant shall be
entitled to deduct and offset from Rent all reasonably necessary
expenses and sums incurred by Tenant in completing such Required
Repair.
(iii) Notwithstanding the fact that Landlord may have timely
delivered to Tenant a Landlord's Objection Notice, if the dispute
is resolved by arbitration in favor of Tenant, but Landlord does
not pay such award to Tenant within ten (10) days of such final
resolution, Tenant shall have the right to deduct and offset Rent
up to the amount of the final arbitration award resolved in favor
of Tenant.
INSERT 17.01
Notwithstanding anything to the contrary contained herein,
Tenant's agreement to subordinate this Lease to any future
mortgages or deeds of trust and Tenant's agreement to attorn to
and recognize as Tenant's Landlord under this Lease, the holder
of any future mortgage or deed of trust is conditioned upon the
delivery to Tenant of a Subordination, Non-Disturbance and
Attornment Agreement executed by the Mortgagee in favor of
Tenant, on such Mortgagee's customary form of Subordination, Non-
Disturbance and Attornment Agreement.
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or the foreclosure of any superior mortgage or deed of trust,
Tenant shall be bound to such Successor Landlord under all of the
terms, covenants and conditions of the Lease for the balance of
the term thereof remaining and any extensions or renewals thereof
which may be effected in accordance with any option therefor in
the Lease, with the same force and effect as if Successor
Landlord were the landlord under the Lease, and Tenant shall
attorn to and recognize as Tenant's landlord under this Lease
such Successor Landlord, as its landlord, said attornment to be
effective and self-operative without the execution of any further
instruments upon Successor Landlord's succeeding to the interest
of Landlord under the Lease. Tenant shall, upon demand, execute
any documents reasonably requested by any such person to evidence
the attornment described in this Section 17.02.
17.03 Mortgagee Protection. Tenant agrees to give any
Mortgagee, by registered or certified mail, a copy of any notice
of default served upon Landlord by Tenant, provided that prior to
such notice Tenant has been notified in writing (by way of
service on Tenant of a copy of Assignment of Rents and Leases, or
otherwise) of the address of such Mortgagee (hereafter the
"Notified Party"). Tenant further agrees that if Landlord shall
have failed to cure such default within twenty (20) days after
such notice to Landlord (or if such default cannot be cured or
corrected within that time, then such additional time as may be
necessary if Landlord has commenced within such twenty (20) days
and is diligently pursuing the remedies or steps necessary to
cure or correct such default), then the Notified Party shall have
an additional thirty (30) days within which to cure or correct
such default (or if such default cannot be cured or corrected
within that time, then such additional time as may be necessary
if the Notified Party has commenced within such thirty (30) days
and is diligently pursuing the remedies or steps necessary to
cure or correct such default). Until the time allowed, as
aforesaid, for the Notified Party to cure such default has
expired without cure, Tenant shall have no right to, and shall
not, terminate this Lease on account of Landlord's default.
ARTICLE XVIII - QUIET ENJOYMENT
-------------------------------
18.01 Provided that Tenant performs all of its obligations
hereunder, Tenant shall have and peaceably enjoy the Premises
during the Lease Term free of claims by or through Landlord,
subject to all of the terms and conditions contained in this
Lease.
ARTICLE XIX - RULES AND REGULATIONS
-----------------------------------
19.01 The Rules and Regulations attached hereto as Exhibit C
are hereby incorporated by reference herein and made a part
hereof. Tenant shall abide by, and faithfully observe and comply
with the Rules and Regulations and any reasonable and non-
discriminatory amendments, modifications and/or additions thereto
as may hereafter be adopted and published by written notice to
tenants by Landlord for the safety, care, security, good order
and/or cleanliness of the Premises and/or the Project. Landlord
shall not be liable to Tenant for any violation of such rules and
regulations by any other tenant or occupant of the Project.
ARTICLE XX - ESTOPPEL CERTIFICATES
----------------------------------
20.01 Tenant agrees at anytime and from time to time upon
not less than twenty (20) days' prior written notice from
Landlord to execute, acknowledge and deliver to Landlord a
statement in writing addressed and certifying to Landlord, to
any current or prospective Mortgagee or any assignee thereof, to
any prospective purchaser of the land, improvements or both
comprising the Project, and to any other party designated by
Landlord, that this Lease is unmodified and in full force and
effect (or if there have been modifications, that the same is in
full force and effect as modified and stating the modifications);
that Tenant has accepted possession of the Premises, which are
acceptable in all respects, and that any improvements required by
the terms of this Lease to be made by Landlord have been
completed to the satisfaction of Tenant; that Tenant is in full
occupancy of the Premises; that no rent has been paid more than
thirty (30) days in advance; that the first month's Base Rent
has been paid; that Tenant is entitled to no free rent or other
concessions except as stated in this Lease; that Tenant has not
been notified of any previous assignment of Landlord's or any
predecessor landlord's interest under this Lease; the dates
to which Base Rent, additional rental and other charges have
been paid; that Tenant, as of the date of such certificate, has
no charge, lien or claim of setoff under this Lease or otherwise
against Base Rent, additional rental or other charges due or to
become due under this Lease; that Landlord is not in default in
performance of any covenant, agreement or condition contained in
this Lease; or any other matter relating to this Lease or the
Premises or, if so, specifying each such default. If there a
Guaranty under this Lease, said Guarantor shall confirm the
validity of the Guaranty by joining in the execution of the
Estoppel Certificate or other documents so requested by Landlord
or Mortgagee. In addition, in the event that such certificate is
being given to any Mortgagee, such statement may contain any
other provisions customarily required by such Mortgagee
including, without limitation, an agreement on the part of Tenant
to furnish to such Mortgagee, written notice of any Landlord
default and a reasonable opportunity for such Mortgagee to cure
such default prior to Tenant being able to terminate this Lease.
Any such statement delivered pursuant to this Section may be
relied upon by Landlord or any Mortgagee, or prospective
purchaser to whom it is addressed and such statement, if required
by its addressee, may so specifically state.
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No response by Tenant within twenty (20) days after receipt of
said Estoppel Certificate shall be deemed an acceptance by Tenant
of the terms contained therein.
ARTICLE XXI - ENTRY BY LANDLORD
-------------------------------
21.01 Landlord may enter the Premises at all reasonable times
to: inspect the same; exhibit the same to prospective purchasers,
Mortgagees or tenants; determine whether Tenant is complying with
all of its obligations under this Lease; supply janitorial and
other services to be provided by Landlord to Tenant under this
Lease; post notices of non-responsibility; and make repairs or
improvements in or to the Building or the Project; provided,
however, that all such work shall be done as promptly as
reasonably possible and so as to cause as little interference to
Tenant as reasonably possible. Tenant hereby waives any claim
for damages for any injury or inconvenience to, or interference
with, Tenant's business, any loss of occupancy or quiet enjoyment
of the Premises or any other loss occasioned by such entry.
Landlord shall at all times have and retain a key with which to
unlock all of the doors in, on or about the Premises (excluding
Tenant's vaults, safes and similar areas designated by Tenant in
writing in advance), and Landlord shall have the right to use
any and all means by which Landlord may deem proper to open such
doors to obtain entry to the Premises, and any entry to the
Premises obtained by Landlord by any such means, or otherwise,
shall not under any circumstances be deemed or construed to be a
forcible or unlawful entry into or a detainer of the Premises or
an eviction, actual or constructive, of Tenant from any part of
the Premises. Such entry by Landlord shall not act as a
termination of Tenant's duties under this Lease. If Landlord
shall be required to obtain entry by means other than a key
provided by Tenant, the cost of such entry shall be payable by
Tenant to Landlord as additional rent. Notwithstanding the
foregoing, Landlord may enter the Premises only upon advance
notice to Tenant except in the case of an emergency.
ARTICLE XXII
------------
LANDLORD'S LEASE UNDERTAKINGS-EXCULPATION FROM PERSONAL
-------------------------------------------------------
LIABILITY; TRANSFER OF LANDLORD'S INTEREST
------------------------------------------
22.01 Landlord's Lease Undertakings. Notwithstanding
anything to the contrary contained in this Lease or in any
exhibits, Riders or addenda hereto attached (collectively the
"Lease Documents"), it is expressly understood and agreed by and
between the parties hereto that: (a) the recourse of Tenant or
its successors or assigns against Landlord with respect to the
alleged breach by or on the part of Landlord of any
representation, warranty, covenant, undertaking or agreement
contained in any of the Lease Documents or otherwise arising out
of Tenant's use of the Premises or the Project (collectively,
"Landlord's Lease Undertakings") shall extend only to Landlord's
interest in the Project of which the Premises demised under the
Lease Documents are a part ("Landlord's Real Estate") and any net
sales proceeds received by Landlord from the sale of the Project
and not to any other assets of Landlord or its constituent
partners; and (b) except to the extent of Landlord's interest
in Landlord's Real Estate, no personal liability or personal
responsibility of any sort with respect to any of Landlord's
Lease Undertakings or any alleged breach thereof is assumed by,
or shall at any time be asserted or enforceable against,
Landlord, its constituent partners, Heitman Capital Management
Corporation or Heitman Properties Ltd., or against any of their
respective directors, officers, employees, agents, constituent
partners, beneficiaries, trustees or representatives.
22.02 Transfer of Landlord's Interest. In the event of any
transfer of Landlord's interest in the Project, Landlord shall
be automatically freed and relieved from all applicable liability
with respect to performance of any covenant or obligation on
the part of Landlord, provided any deposits or advance rents held
by Landlord are turned over to the grantee and said grantee
expressly assumes, subject to the limitations of this Section 22,
all the terms, covenants and conditions of this Lease to be
performed on the part of Landlord, it being intended hereby that
the covenants and obligations contained in this Lease on the part
of Landlord shall, subject to all the provisions of this Section
22, be binding on Landlord, its successors and assigns, only
during their respective periods of ownership.
ARTICLE XXIII - HOLDOVER TENANCY
--------------------------------
23.01 If Tenant holds possession of the Premises after the
expiration or termination of the Lease Term, by lapse of time or
otherwise, Tenant shall become a tenant at sufferance upon all of
the terms contained herein, except as to Lease Term and Rent.
During such holdover period, Tenant shall pay to Landlord a
monthly rental equivalent to one hundred fifty percent (150%) of
the Rent payable by Tenant to Landlord with respect to the last
month of the Lease Term. The monthly rent payable for such
holdover period shall in no event be construed as a penalty or as
liquidated damages for such retention of possession. Without
limiting the foregoing, Tenant hereby agrees to indemnify, defend
and hold harmless Landlord, its beneficiary, and their respective
agents, contractors and employees, from and against any and all
claims, liabilities, actions, losses, damages (including without
limitation, direct, indirect, incidental and consequential) and
expenses (including, without limitation, court costs and
reasonable attorneys' fees) asserted against or sustained by any
such party and arising from or by reason of such retention of
possession, which obligations shall survive the expiration or
termination of the Lease Term.
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ARTICLE XXIV - NOTICES
----------------------
24.01 All notices which Landlord or Tenant may be required,
or may desire, to serve on the other may be served, as an
alternative to personal service, by mailing the same by
registered or certified mail, postage prepaid, addressed to
Landlord at the address for Landlord set forth in Section 1.12
above and to Tenant at the address for Tenant set forth in
Section 1.13 above, or, from and after the Commencement Date, to
Tenant at the Premises whether or not Tenant has departed from,
abandoned or vacated the Premises, or addressed to such other
address or addresses as either Landlord or Tenant may from time
to time designate to the other in writing. Any notice shall be
deemed to have been served at the time the same was posted.
ARTICLE XXV - BROKERS
---------------------
25.01 The parties recognize as the broker(s) who procured
this Lease the firm(s) specified in Section 1.14 and agree that
Landlord shall be solely responsible for the payment of any
brokerage commissions to said broker(s), and that Tenant shall
have no responsibility therefor unless written provision to the
contrary has been made a part of this Lease. If Tenant has
dealt with any other person or real estate broker in respect to
leasing, subleasing or renting space in the Project, Tenant
shall be solely responsible for the payment of any fee due said
person or firm and Tenant shall protect, indemnify, hold
harmless and defend Landlord from any liability in respect
thereto.
ARTICLE XXVI - COMMUNICATIONS AND COMPUTER LINES
------------------------------------------------
26.01 Tenant may, in a manner consistent with the provisions
and requirements of this Lease, install, maintain, replace,
remove or use any communications or computer wires, cables and
related devices (collectively the "Lines") at the Building in or
serving the Premises, provided: (a) Tenant shall obtain
Landlord's prior written consent, which consent may be
conditioned as required by Landlord which shall not be
unreasonably withheld, (b) if Tenant at any time uses any
equipment that may create an electromagnetic field exceeding the
normal insulation ratings of ordinary twisted pair riser cable
or cause radiation higher than normal background radiation, the
Lines therefor (including riser cables) shall be appropriately
insulated to prevent such excessive electromagnetic fields or
radiation, and (c) Tenant shall pay all costs in connection
therewith. Landlord reserves the right to require that Tenant
remove any Lines which are installed in violation of these
provisions.
Landlord may (but shall not have the obligation to): (i)
install new Lines at the Property, and (ii) create additional
space for Lines at the Property, and adopt reasonable and uniform
rules and regulations with respect to the Lines.
Tenant shall not, without the prior written consent of
Landlord in each instance, grant to any third party a security
interest or lien in or on the Lines, and any such security
interest or lien granted without Landlord's written consent shall
be null and void. Except to the extent arising from the
intentional or negligent acts of Landlord or Landlord's agents
or employees, Landlord shall have no liability for damages
arising from, and Landlord does not warrant that Tenant's use of
any Lines will be free from the following (collectively called
"Line Problems"): (x) any eavesdropping or wire-tapping by
unauthorized parties, (y) any failure of any Lines to satisfy
Tenant's requirements, or (z) any shortages, failures,
variations, interruptions, disconnections, loss or damage
caused by the installation, maintenance, replacement, use or
removal of Lines by or for other tenants or occupants at
the Property. Under no circumstances shall any Line Problems
be deemed an actual or constructive eviction of Tenant, render
Landlord liable to Tenant for abatement of Rent, or relieve
Tenant from performance of Tenant's obligations under this Lease.
Landlord in no event shall be liable for damages by reason of
loss of profits, business interruption or other consequential
damage arising from any Line Problems.
ARTICLE XXVII - MISCELLANEOUS
-----------------------------
27.01 Entire Agreement. This Lease contains all of the
agreements and understandings relating to the leasing of the
Premises and the obligations of Landlord and Tenant in connection
with such leasing. Landlord has not made, and Tenant is not
relying upon, any warranties, or representations, promises or
statements made by Landlord or any agent of Landlord, except as
expressly set forth herein. This Lease supersedes any and all
prior agreements and understandings between Landlord and Tenant
and alone expresses the agreement of the parties.
27.02 Amendments. This Lease shall not be amended, changed
or modified in any way unless in writing executed by Landlord and
Tenant. Landlord shall not have waived or released any of its
rights hereunder unless in writing and executed by Landlord.
27.03 Successors. Except as expressly provided herein, this
Lease and the obligations of Landlord and Tenant contained
herein shall bind and benefit the successors and assigns of the
parties hereto.
27.04 Force Majeure. Landlord shall incur no liability to
Tenant with respect to, and shall not be responsible for any
failure to perform, any of Landlord's obligations hereunder if
such failure is caused by any reason beyond the control of
Landlord including, but not limited to, strike, labor trouble,
governmental rule, regulations, ordinance, statute or
interpretation, or by fire, earthquake, civil commotion, or
failure or disruption
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of utility services. The amount of time for Landlord to perform
any of Landlord's obligations shall be extended by the amount of
time Landlord is delayed in performing such obligation by reason
of any force majeure occurrence whether similar to or different
from the foregoing types of occurrences. See Insert 27.04
27.05 Survival of Obligations. Any obligations of Tenant
accruing prior to the expiration of the Lease shall survive the
expiration or earlier termination of the Lease, and Tenant shall
promptly perform all such obligations whether or not this Lease
has expired or been terminated.
27.06 Light and Air. No diminution or shutting off of any
light, air or view by any structure now or hereafter erected
shall in any manner affect this Lease or the obligations of
Tenant hereunder, or increase any of the obligations of Landlord
hereunder.
27.07 Governing Law. This Lease shall be governed by, and
construed in accordance with, the laws of the State of
California.
27.08 Severability. In the event any provision of this
Lease is found to be unenforceable, the remainder of this Lease
shall not be affected, and any provision found to be invalid
shall be enforceable to the extent permitted by law. The parties
agree that in the event two different interpretations may be
given to any provision hereunder, one of which will render the
provision unenforceable, and one of which will render the
provision enforceable, the interpretation rendering the provision
enforceable shall be adopted.
27.09 Captions. All captions, headings, titles, numerical
references and computer highlighting are for convenience only and
shall have no effect on the interpretation of this Lease.
27.10 Interpretation. Tenant acknowledges that it has read
and reviewed this Lease and that it has had the opportunity to
confer with counsel in the negotiation of this Lease.
Accordingly, this Lease shall be construed neither for nor
against Landlord or Tenant, but shall be given a fair and
reasonable interpretation in accordance with the meaning of its
terms and the intent of the parties.
27.11 Independent Covenants. Each covenant, agreement,
obligation or other provision of this Lease to be performed by
Tenant are separate and independent covenants of Tenant, and not
dependent on any other provision of the Lease.
27.12 Number and Gender. All terms and words used in this
Lease, regardless of the number or gender in which they are used,
shall be deemed to include the appropriate number and gender, as
the context may require.
27.13 Time is of the Essence. Time is of the essence of this
Lease and the performance of all obligations hereunder.
27.14 Joint and Several Liability. If Tenant comprises more
than one person or entity, or if this Lease is guaranteed by any
party, all such persons shall be jointly and severally liable for
payment of rents and the performance of Tenant's obligations
hereunder.
27.15 Exhibits. Exhibits A (Outline of Premises), B
(Work Letter Agreement), C (Rules and Regulations), D (Guaranty)
and E (Suite Acceptance Letter) are incorporated into this Lease
by reference and made a part hereof.
27.16 Offer to Lease. The submission of this Lease to
Tenant or its broker or other agent, does not constitute an offer
to Tenant to lease the Premises. This Lease shall have no force
and effect until (a) it is executed and delivered by Tenant to
Landlord and (b) it is fully reviewed and executed by Landlord;
provided, however, that, upon execution of this Lease by Tenant
and delivery to Landlord, such execution and delivery by Tenant
shall, in consideration of the time and expense incurred by
Landlord in reviewing the Lease and Tenant's credit, constitute
an offer by Tenant to Lease the Premises upon the terms and
conditions set forth herein (which offer to Lease shall be
irrevocable for fifteen (15) business days following the date of
delivery).
27.17 No Counterclaim; Choice of Laws. Tenant hereby submits
to local jurisdiction in the State of California and agrees that
any action by Tenant against Landlord shall be instituted in the
State of California and that Landlord shall have personal
jurisdiction over Tenant for any action brought by Landlord
against Tenant in the State of California.
27.18 Electrical Service to the Premises. Anything set
forth in Section 7.01 or elsewhere in this Lease to the contrary
notwithstanding, electricity to the Premises shall not be
furnished by Landlord, but shall be furnished by the approved
electric utility company serving the Project. Landlord shall
permit Tenant to receive such service directly from such utility
company at Tenant's cost (except as otherwise provided herein)
and shall permit Landlord's wire and conduits, to the extent
available, suitable and safely capable, to be used for such
purposes.
27.19 Rights Reserved by Landlord. Landlord reserves the
following rights exercisable without notice (except as otherwise
expressly provided to the contrary in this Lease) and without
being deemed an eviction or disturbance of Tenant's use or
possession of the Premises or giving rise to any claim for set-
off or abatement of Rent: (i) to change the name or street
address of the Project; (ii) to install, affix and maintain all
signs on the exterior and/or interior of the Project; (iii) to
designate and/or approve prior to installation, all types of
signs, window shades, blinds, drapes, awnings or other similar
items, and all internal lighting that may be visible from
39
<PAGE>
INSERT 27.04
In addition, for purposes of Section 3.01 only, the term "Force
Majeure" shall include any delays in the Substantial Completion
of the Work caused by Landlord's inability to gain access to the
Premises within a reasonable period of time prior to February 20,
1998, due to Griffin Financial Services' refusal to authorize
such access.
40
<PAGE>
the exterior of the Premises and, notwithstanding the provisions
of Article IX, the design, arrangement, style, color and general
appearance of the portion of the Premises visible from the
exterior, and contents thereof, including, without limitations,
furniture, fixtures, signs, art work, wall coverings, carpet and
decorations, and all changes, additions and removals thereto,
shall, at all times have the appearance of premises having the
same type of exposure and used for substantially the same
purposes that are generally prevailing in comparable office
buildings in the area. Any violation of this provision shall be
deemed a material breach of this Lease; (iv) to change the
arrangement of entrances, doors, corridors, elevators and/or
stairs in the Project, provided no such change shall materially
adversely affect access to the Premises; (v) to grant any party
the exclusive right to conduct any business or render any service
in the Project, provided such exclusive right shall not operate
to prohibit Tenant from using the Premises for the purposes
permitted under this Lease; (vi) to prohibit the placement of
vending or dispensing machines of any kind in or about the
Premises other than for use by Tenant's employees; (vii) to
prohibit the placement of video or other electronic games in the
Premises; (viii) to have access for Landlord and other tenants of
the Project to any mail chutes and boxes located in or on the
Premises according to the rules of the United States Post Office
and to discontinue any mail chute business in the Project; (ix)
to close the Project after normal business hours, except that
Tenant and its employees and invitees shall be entitled to
admission at all times under such rules and regulations as
Landlord prescribes for security purposes; (x) to install,
operate and maintain security systems which monitor, by close
circuit television or otherwise, all persons entering or leaving
the Project; (xi) to install and maintain pipes, ducts, conduits,
wires and structural elements located in the Premises which serve
other parts or other tenants of the Project; and (xii) to retain
at all times master keys or pass keys to the Premises.
IN WITNESS WHEREOF, the parties hereto have executed this lease
as of the date first above written.
LANDLORD: TENANT:
GT PARTNERS, an Illinois AMPLICON, INC.,
general partnership
By: HEITMAN CAPITAL MANAGEMENT a California corporation
CORPORATION, an Illinois
corporation, its duly
authorized agent and
attorney-in-fact By: S. Leslie Jewett /s/
By: Herb Kuehnle Its: CFO
Its: Vice President
41
<PAGE>
RIDER TO LEASE BY AND BETWEEN GT PARTNERS, AN ILLINOIS
GENERAL PARTNERSHIP ("LANDLORD"), AND AMPLICON, INC.,
A CALIFORNIA CORPORATION ("TENANT")
================================================================
This Rider and the Lease shall, for any and all purposes, be
deemed to be one instrument. In the event of any conflict or
inconsistency between the terms and provisions of the Lease and
the terms and provisions of this Rider, the terms and provisions
of this Rider shall, in all instances, control and prevail.
Except as expressly defined or modified in this Rider, all words
and phrases which are defined in the Lease shall have the same
meaning in this Rider as is ascribed to such words and phrases in
the Lease. The paragraph numbers set forth below correspond to
the applicable sections set forth in the Lease.
4.02 Base Rent.
(A) During the Lease Term, Tenant shall pay to
Landlord as rental for the Premises the Base Rent described
below, subject to the following adjustments (herein called the
"Rent Adjustments"):
<TABLE>
<CAPTION>
Monthly Base Rent
per Rentable square
Period Foot Monthly Base Rent
------ ------------------- -----------------
<S> <C> <C>
Months 1-20: $1.40 $68,282.20
Months 21-40: $1.50 $73,159.50
Months 41-60: $1.85 $90,230.05
</TABLE>
(B) For the use of the Old Premises prior to the
Commencement Date, Tenant will pay Landlord a one-time rental
payment, subject to no adjustment, of $23,500.00 on December 1,
1997.
7.03 Building Services. During the Lease Term, so long as
Tenant is not in default of the terms and conditions of this
Lease, HVAC shall be provided to the Premises after Business
Hours at the hourly rate of twenty-seven and 00/100 dollars
($27.00), and lighting shall be provided to the Premises after
Business Hours at the hourly rate of thirteen and 00/100 dollars
($13.00), with one (1) hour minimum usage in each case.
Notwithstanding the foregoing, Landlord shall provide HVAC
service from 7:00 a.m. to 6:30 p.m. and lighting from 5:30 a.m.
to 7:00 p.m., Monday through Friday and HVAC and lighting from
8:00 a.m. to 12:00 p.m., Saturdays (federal and state holidays
excepted) at no charge.
28. Parking. Tenant shall have the right to use one
hundred ninety-nine (199) unreserved parking spaces and one (1)
reserved parking space (located on the ground floor near the car
wash) in Landlord's parking area during the initial Term. The
charge for said parking shall be twenty-five dollars ($25.00) per
unreserved parking space per month and fifty dollars ($50.00) per
reserved parking space per month during the initial Term. In
addition, Tenant may lease up to forty-four (44) additional
unreserved parking spaces ("Additional Unreserved Parking
Spaces") on a revocable basis at a cost of twenty-five dollars
($25.00) per Additional Unreserved Parking Space per month during
the initial thirty (30) months of the Term and at the then
prevailing charge for parking at Griffin Towers not to exceed
fifty dollars ($50.00) per Additional Unreserved Parking Space
per month for the final thirty (30) months of the Term. Landlord
may revoke any or all Additional Unreserved Parking Spaces upon
thirty (30) days prior written notice to Tenant. In addition,
Landlord may require Tenant's Additional Unreserved Parking
Spaces to be located on the top level of the parking structure.
Any parking spaces provided for Tenant are for the exclusive use
of Tenant's officers and employees, and any such parking spaces
provided for Tenant shall not be sublet unless in connection with
an assignment or subletting of the Premises.
29. Renewal Option. Tenant shall have an option (the
"Renewal Option") to renew the initial Term with respect to all
(but not less than all) of the Premises demised under or pursuant
to this Lease as of the expiration date of the initial Term for
one additional term (a "Renewal Term") of five (5) years,
commencing on the day immediately following the expiration date
of the initial Term under the following terms and conditions and
subject to credit approval by Landlord (which approval shall not
be withheld unreasonably):
(a) Tenant gives Landlord written notice of its
election to exercise the Renewal Option no earlier than the date
which is three hundred (365) days prior to the expiration date of
the initial Term and no later than the date which is two hundred
seventy (270) days prior to the expiration date of the initial
Term.
(b) Tenant is not in breach or default under this
Lease either on the date Tenant exercises the Renewal Option or
at any time through and including the proposed commencement date
of the Renewal Term.
29.01 Exercise Terms. If Tenant timely and properly delivers
its intention notice in accordance with the provisions this
Section 29.01, Landlord shall have a period of thirty (30) days
from its receipt of such notice to deliver to Tenant written
notice of Landlord's quotation of the Base Rent for the Renewal
Term consistent with the definition of "prevailing rental rate"
set forth below ("Landlord's Quoted Base Rent"). Tenant shall
have thirty (30) days after receiving Landlord's Quoted Base Rent
to either (i) accept Landlord's Quoted Base Rent (in which event
Tenant shall be deemed to have exercised the Renewal Option and
Landlord's Quoted Base Rent shall be the "prevailing rental rate"
for purposes of this Section 29.01), or (ii) object in writing to
Landlord's Quoted Base Rent. In the event Tenant fails to take
one of the actions set forth in subparagraphs (i) and (ii) above
within said 30-day period,
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Tenant shall be deemed to have elected not to exercise its
Renewal Option. In the event Tenant timely objects to Landlord's
Quoted Base Rent, Landlord and Tenant shall have a period of 45
days after Landlord's receipt of such objection notice to use
their good faith efforts to agree upon the "prevailing rental
rate." If Landlord and Tenant fail to agree upon the prevailing
rental rate within such 45-day period, then the Renewal Option
shall not be deemed to be exercised and Tenant will be deemed to
have forever waived its Renewal Option under this Lease. If
Tenant timely and properly exercises the Renewal Option (or is
deemed to have exercised the Renewal Option), Tenant's lease of
the Premises shall be extended through the Renewal Term, and the
Rent payable for the Renewal Term shall be equal to the
prevailing rental rate for the Premises. For purposes hereof,
"prevailing rental rate" shall mean the total rental (including
any "base year" or "expense stop" in connection therewith) then
being accepted by landlords for Comparable Deals (as defined
below) in the South Coast Metro office market. "Comparable
Deals" shall mean leases or lease extensions which are
approximately as long, and commencing at approximately the same
time, as the Renewal Term and are for similar space in similar
quality high-rise office buildings, including reasonable
adjustments for differences in building, amenities, locations,
premises characteristics and applicable allowances for leasehold
improvement, brokerage commissions or other then-prevailing
economic concessions, but without regard to any time during which
the applicable building or space is taken off the market for
repairs, upgrades or improvements. Comparable Deals shall
explicitly exclude from consideration any transactions where the
landlord of the subject building is in default of its mortgage or
other indebtedness on the building, or is currently, or has
within the prior six months, been involved in foreclosure
proceedings on the applicable building. Comparable Deals shall
also exclude transactions whereby the tenant has some form of
equity participation in the deal.
Additional Terms. Furthermore, if Tenant timely and
properly exercises the Renewal Option;
(a) Tenant shall have no further options to renew the
Lease Term beyond the expiration date of the Renewal Term.
(b) Except as determined as a component of the
"prevailing rental rate," Landlord shall not be obligated to
perform any leasehold improvement work in the Premises or give
Tenant an allowance or other economic concessions for any such
work or for any other purposes.
(c) Except as otherwise provided herein, all of the
terms and provisions of this Lease shall remain the same and in
full force and effect during the Renewal Term.
29.02 Amendment. If Tenant exercises the Renewal Option,
Landlord and Tenant shall execute and deliver an amendment to
this Lease (or, at Landlord's option, a new lease on the form
then in use for the Building) reflecting the lease of the
Premises by Landlord to Tenant for the Renewal Term on the terms
provided above, which amendment (or new lease, as the case may
be) shall be executed and delivered prior to the commencement
date of the Renewal Term.
29.03 Termination. The Renewal Option shall automatically
terminate and become null and void and of no force or effect upon
the earlier to occur of (1) the expiration or termination of this
Lease, (2) the termination of the Tenant's right to possession of
the Premises, (3) the assignment of this Lease by Tenant, other
than to a successor of Tenant through merger or acquisition, (4)
the sublease by Tenant of all or part of the Premises, or (5) the
failure of Tenant to timely or properly exercise the Renewal
Option or (6) the uncured default by Tenant under the Lease.
30. Right of First Offer for Expansion Space. For purposes
of this Lease, Expansion Space shall mean all available space, as
determined by Landlord, located on the sixth (6th) floor of the
Building, as more particularly shown on Exhibit A-1 attached
hereto. Subject to the rights of existing tenants whose leases
pre-date this Lease (including a lease renewal not pursuant to a
renewal option), credit approval by Landlord and provided Tenant
is not in material default under this Lease at the time the
Expansion Space becomes available, or at any time through and
including execution of a lease amendment by the Landlord for the
subject space, Tenant shall have a one-time right of first offer
to lease each portion of the Expansion Space, such right
commencing on the Commencement Date of this Lease and expiring on
the last day of the sixtieth (60th) month of the lease Term,
subject to the following conditions. Landlord shall provide
Tenant with written notice of the availability of all or any
portion of the Expansion Space (such available portion of the
Expansion Space to be referred to herein as the "Available
Expansion Space"). Within five (5) business days of such
notification, Tenant shall notify Landlord in writing whether it
elects to negotiate to lease all of the Available Expansion
Space. If Tenant does not so notify Landlord, Tenant will be
deemed to have forever waived its right of first offer respecting
the Available Expansion Space. If Tenant does notify Landlord
that it wishes to negotiate to lease the Available Expansion
Space, Landlord and Tenant shall have (30) days to negotiate the
rent and terms for the Available Expansion Space. If Landlord
and Tenant cannot agree on rent and terms for the Available
Expansion Space, Tenant will be deemed to have forever waived
(subject to the following sentence) its right of first offer
respecting the Available Expansion Space and Landlord shall be
free to lease the Available Expansion Space to a third party on
terms which are not substantially more favorable to such third
party during the next thirty (30) days only. If the terms
offered to any such third party are substantially more favorable
to such third party than the terms negotiated by Landlord and
Tenant, Tenant shall have five (5) business days after its
receipt of a written notice from Landlord ("Landlord's Second
Notice") setting forth such substantially more favorable terms to
elect in writing to lease the Available Expansion Space on the
same terms and conditions offered to such third party. If Tenant
fails to so elect in writing within such five (5) business day
period, Tenant shall be deemed to have forever waived its right
of first offer respecting the Available Expansion Space. The
term "substantially more favorable" shall mean a net effective
rental rate which is less than ninety-five percent (95%) of the
net effective rental rate negotiated by Landlord and Tenant under
the terms of this Section 30. Also, if Tenant fails to execute
and deliver an amendment to this Lease consistent with the
foregoing within fifteen (15) days after receipt by Tenant of the
subject lease amendment, then Tenant's
43
<PAGE>
previous exercise of its right to lease the Available Expansion
Space shall be deemed null and void and Landlord shall thereafter
have the right to let the Available Expansion Space to a third
party tenant. The rights of Tenant under this Article are
personal and may not be assigned to or exercised by any other
party. Should Tenant lease any Expansion Space per the terms
contained herein, HVAC and lighting hours and charges shall be
charged separately from the Premises and be negotiated by
Landlord and Tenant at that time.
31. Option to Lease Additional Space. For purposes of this
Lease, Additional Space shall mean Suites 620 (3,714 rentable
square feet), 680 (1,159 rentable square feet), and 690 (2,133
rentable square feet) located on the sixth (6th) floor of the
Building, as more particularly shown on Exhibit A-2 attached
hereto. From the date of mutual execution of this Lease through
November 30, 1997, Tenant shall have the option to lease all of
(but not a portion of) the Additional Space, by providing written
notice to Landlord, under the following conditions:
(a) The Base Rent for the Additional Space shall be
$9,808.40 for months 1-20, $10,509.00 for months 21-40, and
$12,961.10 for months 41-60.
(b) Tenant shall have the right to use twenty-eight
(28) unreserved parking spaces in Landlord's parking area at a
cost of $25.00 per unreserved parking space per month during the
initial Term.
(c) Landlord shall contribute $96,542.68 towards the
design and construction of tenant improvements in the Additional
Space per the terms of the Work Letter.
(d) Tenant shall have free HVAC and lighting during
Business Hours only. Any after Business Hours HVAC and lighting
shall be charged separately from the Premises at the hourly rate
of $27.00 per hour for HVAC and $13.00 per hour for lighting.
(e) All other terms and conditions as contained in the
Lease.
The term of the lease for the Available Space shall commence
on the Commencement Date and expire on the Expiration Date. The
existing leases pursuant to which Tenant leases Suites 680 and
690 shall expire on the Commencement Date. Also, if Tenant fails
to execute and deliver an amendment to this Lease consistent with
the foregoing within fifteen (15) days after receipt by Tenant of
the subject lease amendment, then Tenant's previous exercise of
its right to lease the Available Space shall be deemed null and
void and Landlord shall thereafter have the right to let the
Available Space to a third party tenant.
IN WITNESS WHEREOF, the parties have caused this Rider to be
executed on the same date as the form lease to which it is
attached.
Landlord: Tenant:
GT PARTNERS, an Illinois
general partnership AMPLICON, INC.,
a California corporation
By: HEITMAN CAPITAL MANAGEMENT
CORPORATION, an Illinois
corporation, its duly BY: S. Leslie Jewett /s/
authorized agent and
attorney-in fact Its: CFO
By: Herb Kuehnle
Its: Vice President
44
<PAGE>
EXHIBIT A
Drawing of fifth floor.
45
<PAGE>
EXHIBIT A
Drawing of second floor.
46
<PAGE>
EXHIBIT A-1
Drawing of sixth floor.
47
<PAGE>
EXHIBIT A-2
Drawing of sixth floor.
48
<PAGE>
EXHIBIT A-3
Drawing of second floor (old premises).
Drawing of fifth floor (old premises).
49
<PAGE>
EXHIBIT B
WORK LETTER AGREEMENT
---------------------
[Landlord Performs Work]
[Allowance]
This Work Letter Agreement ("Work Letter") is executed
simultaneously with that certain Office Lease (the "Lease")
between AMPLICON, INC., a California corporation, as "Tenant",
and GT PARTNERS, an Illinois general partnership, as "Landlord",
relating to demised premises ("Premises") at the building
commonly known as GRIFFIN TOWERS, Santa Ana, California (the
"Building"), which Premises are more fully identified in
the Lease. Capitalized terms used herein, unless otherwise
defined in this Work Letter, shall have the respective meanings
ascribed to them in the Lease.
For and in consideration of the agreement to lease the
Premises and the mutual covenants contained herein and in the
the Lease, Landlord and Tenant hereby agree as follows:
1. Tenant's Initial Plans; the Work. Tenant desires Landlord
to perform certain leasehold improvement work in the Premises in
substantial accordance with the plan or plans (collectively, the
"Initial Plan") prepared by Ware & Malcomb Architects dated
May 5, 1997 and last revised, a copy or copies of which is/are
attached hereto as Schedule 1. Such work, as shown in the Initial
Plan and as more fully detailed in the Working Drawings (as
defined and described in Paragraph 2 below), shall be hereinafter
referred to as the "Work". As soon as possible, Tenant shall
furnish to Landlord such additional plans, drawings,
specifications and finish details as Landlord may reasonably
request to enable Landlord's architects and engineers to prepare
mechanical, electrical and plumbing plans and to prepare the
Working Drawings, including a final telephone layout and special
electrical connection requirements, if any. All plans, drawings,
specifications and other details describing the Work which have
been or are hereafter furnished by or on behalf of Tenant shall
be subject to Landlord's approval, which Landlord agrees shall
not be unreasonably withheld. Landlord shall not be deemed to
have acted unreasonably if it withholds its approval of any
plans, specifications, drawings or other details or of any
Additional Work (as defined in Paragraph 7 below) because, in
Landlord's reasonable opinion, the work, as described in any such
item, or the Additional Work, as the case may be: (a) is likely
to adversely affect Building systems, the structure of the
Building or the safety of the Building and/or its occupants; (b)
might impair Landlord's ability to furnish services to Tenant or
other tenants in the Building; (c) would increase the cost of
operating the Building; (d) would violate any governmental laws,
rules or ordinances (or interpretations thereof); (e) contains or
uses hazardous or toxic materials or substances; (f) would
adversely affect the appearance of the Building; (g) might
adversely affect another tenant's premises; (h) is prohibited by
any ground lease affecting the Building or any mortgage, trust
deed or other instrument encumbering the Building; or (i) is
likely to be substantially delayed because of unavailability or
shortage of labor or materials necessary to perform such work or
the difficulties or unusual nature of such work. Notwithstanding
the above, Landlord acknowledges that Tenant has advised it that
the Work will include putting in structural support for that
portion of the Premises that will be dedicated to Tenant's file
room. The foregoing reasons, however, shall not be the only
reasons for which Landlord may withhold its approval, whether or
not such other reasons are similar or dissimilar to the
foregoing. Neither the approval by Landlord of the Work or the
Initial Plan or any other plans, drawings, specifications or
other items associated with the Work nor Landlord's performance,
supervision or monitoring of the Work shall constitute any
warranty by Landlord to Tenant of the adequacy of the
architectural design for Tenant's intended use of the Premises.
2. Working Drawings. If necessary for the performance of the
Work and not included as part of the Initial Plan attached
hereto, Landlord shall prepare or cause to be prepared final
working drawings and specifications for the Work (the "Working
Drawings") based on and consistent with the Initial Plan and the
other plans, drawings, specifications, staging of the
construction, finish details and other information furnished by
Tenant to Landlord and approved by Landlord pursuant to Paragraph
1 above. So long as the Final Architectural Drawings (as defined
below) and Working Drawings are consistent with the Initial Plan,
Tenant shall approve the Final Architectural Drawings and Working
Drawings within three (3) business days after receipt of each of
same from Landlord by initialing and returning to Landlord each
sheet of the Final Architectural Drawings or Working Drawings or
by executing Landlord's approval form then in use, whichever
method of approval Landlord may designate.
3. Performance of the Work; Allowance. See Insert 3
4. Payment. Prior to commencing the Work, Landlord shall
submit to Tenant a written statement of the total Cost of the
Work as then known by Landlord, and such statement shall indicate
the amount, if any, by which the total Cost of the Work exceeds
the Allowance (the "Excess Costs"). Tenant agrees, within three
(3) business days after submission to it of such statement, to
execute and deliver to Landlord, in the form then in use by
Landlord , an authorization to proceed with the Work, and Tenant
shall also then pay to Landlord an amount equal to the Excess
Costs if any. No Work shall be commenced until Tenant has fully
complied with the preceding provisions of this Paragraph 4.
50
<PAGE>
INSERT 3
Except as hereinafter provided to the contrary, Landlord
shall cause the performance of the Work using (except as may be
stated or shown otherwise in the Working Drawings) building
standard materials, quantities and procedures then in use by
Landlord ("Building Standards"). The Work shall be competitively
bid between three (3) contractors selected by Landlord and a
fourth (4th) contractor selected by Tenant, provided such fourth
(4th) contractor meets Landlord's selection criteria. Landlord
agrees that the Working Drawings will be submitted to the
foregoing contractors for bidding with the contract to be awarded
by Landlord to the lowest responsible bidder, as mutually
determined by Landlord and Tenant (which shall be defined as that
contractor whose bid encompasses the full scope of Work
contemplated in the Working Drawings as well as covenants to meet
the schedule submitted with the bid package). Landlord shall pay
for a portion of the "Cost of the Work" (as defined below) in an
amount not to exceed $672,000.00 (such amount being $13.78 per
rentable square foot of the Premises which is to be improved, as
described in the Working Drawings) (the "Allowance"), and Tenant
shall pay for the entire Cost of the Work in excess of the
Allowance. For purposes of this Work Letter, the term "Cost of
the Work" shall mean and include, without limitation, (a) the
cost of space planning and Working Drawings, (b) the contractor's
fixed price bid (as based upon the approved Working Drawings),
and (c) any permit and license fees not included in a or b.
Notwithstanding the foregoing, Tenant shall receive a credit
towards Base Rent equal to the amount by which the Allowance
exceeds the Cost of the Work or any Additional Work, if any.
51
<PAGE>
See Insert 4. Landlord shall deliver to Tenant a revised
statement of the total Cost of the Work, indicating the revised
calculation of the Excess Costs, if any. Within three (3)
business days after submission to Tenant of any such revised
statement, Tenant shall pay to Landlord an amount equal to the
Excess Costs, as shown in such revised statement, less the
amounts previously paid by Tenant to Landlord on account of the
Excess Costs, and Landlord shall not be required to proceed
further with the Work until Tenant has paid such amount. Delays
in the performance of the Work resulting from the failure of
Tenant to comply with the provisions of this Paragraph 4 shall be
deemed to be delays caused by Tenant.
5. Substantial Completion. Landlord shall cause the Work
to be "substantially completed" on or before the scheduled date
of commencement of the term of the Lease as specified in Section
1.05 of the Lease, subject to delays caused by strikes, lockouts,
boycotts or other labor problems, casualties, discontinuance of
any utility or other service required for performance of the
Work, unavailability or shortages of materials or other problems
in obtaining materials necessary for performance of the Work or
any other matter beyond the control of Landlord (or beyond the
control of Landlord's contractors or subcontractors performing
the Work) and also subject to "Tenant Delays" (as defined and
described in Paragraph 6 of this Work Letter). The Work shall be
deemed to be "substantially completed" for all purposes under
this Work Letter and the Lease if and when Landlord's architect
issues a written certificate to Landlord and Tenant, certifying
that the Work has been substantially completed (i.e., completed
except for "punchlist" items listed in such architect's
certificate) in substantial compliance with the Working Drawings.
If the Work is not deemed to be substantially completed on or
before the scheduled date of the commencement of the term of the
Lease as specified in Section 1.05 of the Lease, (a) Landlord
agrees to use reasonable efforts to complete the Work as soon as
practicable thereafter, (b) the Lease shall remain in full force
and effect, (c) Landlord shall not be deemed to be in breach or
default of the Lease or this Work Letter as a result thereof and
Landlord shall have no liability to Tenant as a result of any
delay in occupancy (whether for damages, or otherwise), and (d)
except in the event of Tenant Delays, and notwithstanding
anything contained in the Lease to the contrary, the Commencement
Date of the Lease Term as specified in Section 1.05 of the Lease
shall be extended to the date on which the Work is deemed to be
substantially completed and the Expiration Date of the Lease Term
as specified in Section 1.06 of the Lease shall be extended by an
equal number of days. At the request of either Landlord or Tenant
in the event of such extensions in the commencement and
expiration dates of the term of the Lease, Tenant and Landlord
shall execute and deliver an amendment to the Lease reflecting
such extensions. Landlord agrees to use reasonable diligence to
complete all punchlist work listed in the aforesaid architect's
certificate promptly after substantial completion.
6. Tenant Delays. There shall be no extension of the
scheduled commencement or expiration date of the term of the
Lease (as otherwise permissibly extended under Paragraph 5 above)
if the Work has not been substantially completed on said
scheduled commencement date by reason of any delay attributable
to Tenant ("Tenant Delays"), including without limitation:
(i) the failure of Tenant to furnish all or any plans,
drawings, specifications, finish details or the other information
required under Paragraph 1 above on or before the date stated in
Paragraph 1;
(ii) the failure of Ware & Malcomb to furnish to
Tenant the Final Architectural Drawings (the "Final Architectural
Drawings") for Tenant's approval by October 2, 1997.
(iii) the failure of Tenant to grant approval of the
Final Architectural Drawings or Working Drawings within the time
required under Paragraph 2 above;
(iv) the failure of Tenant to comply with the
requirements of Paragraph 4 above;
(v) Tenant's requirements for special work or
materials, finishes, or installations other than the Building
Standards or Tenant's requirements for special construction
staging or phasing. Landlord agrees to promptly notify Tenant
if any of Tenant's requirements are not readily available and
would constitute a Tenant delay under this Section (v).
(vi) the performance of any Additional Work (as defined
in Paragraph 7 below) requested by Tenant or the performance of
any work in the Premises by any person, firm or corporation
employed by or on behalf of Tenant, or any failure to complete or
delay in completion of such work; or
(vii) any other act or omission of Tenant that causes a
delay.
7. Additional Work. Upon Tenant's request and submission
by Tenant (at Tenant's sole cost and expense) of the
necessary information and/or plans and specifications for work
other than the Work described in the Working Drawings
("Additional Work") and the approval by Landlord of such
Additional Work, which approval Landlord agrees shall not be
unreasonably withheld, Landlord shall perform such Additional
Work, at Tenant's sole cost and expense, subject, however, to the
following provisions of this Paragraph 7. Prior to commencing
any Additional Work requested by Tenant, Landlord shall submit to
Tenant a written statement of the cost of such Additional Work,
which cost shall include a fee payable to Landlord in the amount
of 10% of the total cost of such Additional Work as compensation
to Landlord for monitoring the Additional Work and for
administration, overhead and field supervision associated with
the Additional Work (such fee being hereinafter referred to as
"Landlord's Additional Compensation"), and, concurrently with
such statement of cost of Addtional Work, Landlord shall also
submit to Tenant a proposed tenant extra order (the "TEO") for
the Additional Work in the standard form then in use by Landlord.
Such TEO shall indicate if Landlord believes the Additional Work
shall cause a delay in completion of the Work by the Commencement
Date and if the cost of the Additional Work results in any Excess
Costs. If Tenant approves such Additional Work, Tenant shall
execute and deliver to Landlord such TEO and shall pay to
Landlord the entire cost of the Additional Work, including
Landlord's Additional Compensation (as reflected in Landlord's
statement of such cost), within five (5) business days after
Landlord's submission of such statement and TEO to Tenant. If
Tenant fails to execute or deliver such TEO or pay the entire
cost of such Additional Work
52
<PAGE>
INSERT 4
In the event, and each time, that any change order by
Tenant, unknown field condition, or other event or circumstance
causes the Cost of the Work to be increased after the time that
Landlord delivers to Tenant the aforesaid initial statement of
the Cost of the Work (a "Change Order"), Landlord shall deliver
to Tenant a Change Order for approval that details and
substantiates the cost of the Change Order. Within three (3)
business days after submission to Tenant of such revised
statement, Tenant shall advise Landlord of its approval of such
Change Order, or in writing, set forth its objections to the
Change Order. Landlord and Tenant shall promptly meet and in
good faith attempt to resolve Tenant objections. Once the Change
Order has been approved,
53
<PAGE>
within such 5-day period, then Landlord shall not be obligated to
do any of the Additional Work and may proceed to do only the
Work, as specified in the Working Drawings. See Insert 7.
8. Tenant Access. It is hereby acknowledged that Tenant
currently occupies and will continue to occupy a portion of the
Premises prior to the Commencement Date. Landlord, in Landlord's
reasonable discretion and upon request by Tenant, may grant to
Tenant a license to allow Tenant to do other work required by
Tenant to make the Premises ready for Tenant's use and occupancy
(the "Tenant's Pre-Occupancy Work"). It shall be a condition to
the grant by Landlord and continued effectiveness of such license
that:
(a) Tenant shall give to Landlord a written request not
less than five (5) days prior to the date on which such Tenant's
Pre-Occupancy Work will commence, which written request shall
contain or shall be accompanied by each of the following items,
all in form and substance reasonably acceptable to Landlord: (i)
a detailed description of and schedule for Tenant's Pre-Occupancy
Work; (ii) the names and addresses of all contractors,
subcontractors and material suppliers and all other
representatives of Tenant who or which will be entering the
Premises on behalf of Tenant to perform Tenant's Pre-Occupancy
Work or will be supplying materials for such work, and the
approximate number of individuals, itemized by trade, who will be
present in the Premises; (iii) copies of all contracts,
subcontracts and material purchase orders pertaining to Tenant's
Pre-Occupancy Work; (iv) copies of all plans and specifications
pertaining to Tenant's Pre-Occupancy Work; (v) copies of all
licenses and permits required in connection with the performance
of Tenant's Pre-Occupancy Work; (vi) certificates of insurance
(in amounts satisfactory to Landlord and with the parties
identified in, or required by, the Lease named as additional
insureds) and instruments of indemnification against all claims,
costs, expenses, damages and liabilities which may arise in
connection with Tenant's Pre-Occupancy Work; and (vii) reasonable
assurances securing Tenant's lien-free completion of Tenant's
Pre-Occupancy Work.
(b) Such pre-term access by Tenant and its
representatives shall be subject to scheduling by Landlord.
(c) Tenant's employees, agents, contractors, workmen,
mechanics, suppliers and invitees shall work in harmony and not
interfere with Landlord or Landlord's agents in performing the
Work and any Additional Work in the Premises, Landlord's work
in other premises and in common areas of the Building, or the
general operation of the Building. If at any time any such
person representing Tenant shall cause or threaten to cause such
disharmony or interference, including labor disharmony, and
Tenant fails to immediately institute and maintain such
corrective actions as directed by Landlord, then Landlord may
withdraw such license upon twenty-four (24) hours' prior written
notice to Tenant. See Insert 8(c)
(d) Any person or entity working for or on behalf of
Tenant shall be deemed to be subject to all of the terms,
covenants, conditions and provisions of the Lease, specifically
including the provisions of Section IX thereof (regarding
Tenant's improvements and alterations to the Premises), and
excluding only the covenant to pay Rent. Landlord shall not be
liable for any injury, loss or damage which may occur to any of
Tenant's Pre-Occupancy Work made in or about the Premises or to
property placed therein prior to the commencement of the term of
the Lease, the same being at Tenant's sole risk and liability.
Tenant shall be liable to Landlord for any damage to the
Premises or to any portion of the Work or Additional Work caused
by Tenant or any of Tenant's employees, agents, contractors,
workmen or suppliers. In the event that the performance of
Tenant's Pre-Occupancy Work causes extra costs to Landlord,
Tenant shall reimburse Landlord for such extra cost upon receipt
of reasonable document support of such extra cost solely related
to Tenant.
9. Lease Provisions. The terms and provisions of the Lease,
insofar as they are applicable to this Work Letter, are hereby
incorporated herein by reference. All amounts payable by Tenant
to Landlord hereunder shall be deemed to be additional Rent under
the Lease and, upon any default in the payment of same, Landlord
shall have all of the rights and remedies provided for in the
Lease.
10. Miscellaneous.
(a) This Work Letter shall be governed by the laws of
the state in which the Premises are located.
(b) This Work Letter may not be amended except by a
written instrument signed by the party or parties to be bound
thereby.
(c) Any person signing this Work Letter on behalf of
Tenant warrants and represents he/she has authority to sign and
deliver this Work Letter and bind Tenant.
(d) Notices under this Work Letter shall be given in
the same manner as under the Lease.
(e) The headings set forth herein are for convenience
only.
(f) This Work Letter sets forth the entire agreement of
Tenant and Landlord regarding the Work.
(g) In the event that the final working drawings and
specifications are included as part of the Initial Plan attached
hereto, or in the event Landlord performs the Work without the
necessity of preparing working drawings and specifications, then
whenever the term "Working Drawings" is used in this Agreement,
such term shall be deemed to refer to the Initial Plan and all
supplemental plans and specifications approved by Landlord.
54
<PAGE>
INSERT 7
Notwithstanding the foregoing, if there is any remaining unused
Allowance, any costs that Tenant is responsible for under this
Section 7 shall be paid for by Landlord to the extent of such
remaining Allowance (and thereby reducing said remaining
Allowance).
INSERT 8(c)
Notwithstanding the foregoing, Tenant's employees will be
continuing to conduct the Tenant's business in a portion of the
Premises and may make reasonable requests of Landlord or
Landlord's agents that they not disrupt their business, provided
that any disruption to the performance of the Work which is
caused by Landlord's efforts not to interfere with Tenant's
business at the Premises shall constitute a Tenant Delay.
55
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11. Exculpation of Landlord and Heitman. Notwithstanding
anything to the contrary contained in this Work Letter, it is
expressly understood and agreed by and between the parties hereto
that:
(a) The recourse of Tenant or its successors or assigns
against Landlord with respect to the alleged breach by or on the
part of Landlord of any representation, warranty, covenant,
undertaking or agreement contained in this Work Letter
(collectively, "Landlord's Work Letter Undertakings") shall
extend only to Landlord's interest in the real estate of which
the Premises demised under the Lease are a part (hereinafter,
"Landlord's Real Estate") and not to any other assets of Landlord
or its constituent partners; and
(b) Except to the extent of Landlord's interest in
Landlord's Real Estate, no personal liability or personal
responsibility of any sort with respect to any of Landlord's Work
Letter Undertakings or any alleged breach thereof is assumed by,
or shall at any time be asserted or enforceable against,
Landlord, its constituent partners, Heitman Capital Management
Corporation or Heitman Properties Ltd., or against any of their
respective directors, officers, employees, agents, constituent
partners, beneficiaries, trustees or representatives.
IN WITNESS WHEREOF, this Work Letter Agreement is executed as of
the 17th day of September, 1997.
TENANT: LANDLORD:
AMPLICON, INC., GT PARTNERS, an Illinois
general partnership
a California corporation By: HEITMAN CAPITAL MANAGEMENT
CORPORATION, an Illinois
corporation, its duly
authorized agent and
By: S. Leslie Jewett /s/ attorney-in-fact
Title: CFO
By: Herb Kuehnle
Its: Vice President
56
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EXHIBIT C
RULES AND REGULATIONS
---------------------
1. The sidewalks, entrances, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed
or used for any purpose other than ingress and egress. The
halls, passages, entrances, elevators, stairways, balconies and
roof are not for the use of the general public, and Landlord
shall in all cases retain the right to control or prevent access
thereto by all persons whose presence in the judgment of Landlord
shall be prejudicial to the safety, character, reputation or
interests of Landlord and its tenants, provided that nothing
herein contained shall be construed to prevent such access by
persons with whom the tenant normally deals in the ordinary
course of its business unless such persons are engaged in illegal
activities. No tenant and no employees of any tenant shall go
upon the roof of the Building without the written consent of
Landlord.
2. No awnings or other projections shall be attached to the
outside walls or surfaces of the Building nor shall the interior
or exterior of any windows be coated without the prior written
consent of Landlord. Except as otherwise specifically approved
by Landlord, all electrical ceiling fixtures hung in offices or
spaces along the perimeter of the Building must be fluorescent
and of a quality, type, design and bulb color approved by
Landlord. Tenant shall not place anything or allow anything to
be placed near the glass of any window, door, partition or wall
which may appear unsightly from outside the Premises.
3. No sign, picture, plaque, advertisement, notice or other
material shall be exhibited, painted, inscribed or affixed by any
tenant on any part of, or so as to be seen from the outside of,
the Premises or the Building without the prior written consent of
Landlord. In the event of the violation of the foregoing by any
tenant, Landlord may remove the same without any liability, and
may charge the expense incurred in such removal to the tenant
violating this rule. Interior signs on doors and the directory
tablet shall be inscribed, painted or affixed for each tenant by
Landlord at the expense of such tenant, and shall be of a size,
color and style acceptable to Landlord.
4. The toilets and wash basins and other plumbing fixtures
shall not be used for any purpose other than those for which they
were constructed, and no sweepings, rubbish, rags or other
substances shall be thrown therein. All damage resulting from
any misuse of the fixtures shall be borne by the tenant who, or
whose servants, employees, agents, visitors or licensees, shall
have caused the same.
5. No tenant or its officers, agents, employees or invitees
shall mark, paint, drill into, or in any way deface any part of
the Premises or the Building. No boring, cutting or stringing of
wires or laying of linoleum or other similar floor coverings
shall be permitted except with the prior written consent of
Landlord and as Landlord may direct.
6. No bicycles, vehicles or animals of any kind shall be
brought into or kept in or about the Premises and no cooking
shall be done or permitted by any tenant on the Premises except
that microwave cooking in a UL-approved microwave oven and the
preparation of coffee, tea, hot chocolate and similar items for
the tenant and its employees and business visitors shall be
permitted. Tenant shall not cause or permit any unusual or
objectionable odors to escape from the Premises.
7. The Premises shall not be used for manufacturing or for the
storage of merchandise except as such storage may be incidental
to the use of the Premises for general office purposes. No
tenant shall engage or pay any employees on the Premises except
those actually working for such tenant on the Premises nor
advertise for laborers giving an address at the Premises. The
Premises shall not be used for lodging or sleeping or for any
immoral or illegal Purposes.
8. No tenant or its officers, agents, employees or invitees
shall make, or permit to be made any unseemly or disturbing
noises, sounds or vibrations or disturb or interfere with
occupants of this or neighboring buildings or Premises or those
having business with them whether by the use of any musical
instrument, radio, phonograph, unusual noise, or in any other
way.
9. No tenant or its officers, agents, employees or invitees
shall throw anything out of doors, balconies or down the
passageways.
10. Tenant shall not maintain armed security in or about the
Premises nor possess any weapons, explosives, combustibles or
other hazardous devices in or about the Building and/or
Premises.
11. No tenant or its officers, agents, employees or invitees
shall at any time use, bring or keep upon the Premises any
flammable, combustible, explosive, foul or noxious fluid,
chemical or substance, or do or permit anything to be done in the
leased Premises, or bring or keep anything therein, which shall
in any way increase the rate of fire insurance on the Building,
or on the property kept therein, or obstruct or interfere with
the rights of other tenants, or in any way injure or annoy them,
or conflict with the regulations of the Fire Department or the
fire laws, or with any insurance policy upon the Building, or any
part thereof, or with any rules and ordinances established by the
Board of Health or other governmental authority.
12. No additional locks or bolts of any kind shall be placed
upon any of the doors or windows by any tenant, nor shall any
changes be made in existing locks or the mechanism thereof. Each
tenant must, upon the termination of this tenancy, restore to
Landlord all keys of stores, offices, and toilet rooms, either
furnished to, or otherwise procured by, such tenant, and in the
event of the loss of any keys so furnished, such tenant shall pay
to Landlord the cost of replacing the same or of changing the
lock or locks opened by such lost key if Landlord shall deem it
necessary to make such change.
57
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EXHIBIT C
13. All removals, or the carrying in or out of any safes,
freight, furniture, or bulky matter of any description must take
place during the hours which Landlord may determine from time to
time. The moving of safes or other fixtures or bulky matter of
any kind must be made upon previous notice to the manager of the
Building and under his or her supervision, and the persons
employed by any tenant for such work must be acceptable to
Landlord. Landlord reserves the right to inspect all safes,
freight or other bulky articles to be brought into the Building
and to exclude from the Building all safes, freight or other
bulky articles which violate any of these Rules and Regulations
or the Lease of which these Rules and Regulations are a part.
Landlord reserves the right to prohibit or impose conditions upon
the installation in the Premises of heavy objects which might
overload the building floors. Landlord will not be responsible
for loss of or damage to any safes, freight, bulky articles or
other property from any cause, and all damage done to the
Building by moving or maintaining any such safe or other property
shall be repaired at the expense of the tenant.
14. No tenant shall purchase or otherwise obtain for use in the
Premises water, ice, towel, vending machine, janitorial,
maintenance or other like services, or accept barbering or
bootblacking services, except from persons authorized by
Landlord, and at hours and under regulations fixed by Landlord.
15. Landlord shall have the right to prohibit any
advertising by any tenant which, in Landlord's opinion, tends to
impair the reputation of the Building or its desirability as an
office building and upon written notice from Landlord any tenant
shall refrain from or discontinue such advertising.
16. Landlord reserves the right to exclude from the Building
between the hours of 10:00 p.m. and 7:00 a.m. and at all hours of
Saturdays, Sundays and legal holidays all persons who do not
present a pass signed by Landlord. Landlord shall furnish passes
to persons for whom any tenant requests the same in writing.
Each tenant shall be responsible for all persons for whom he
requests passes and shall be liable to Landlord for all acts of
such persons. Landlord shall in no case be liable for damages for
any error with regard to the admission to or exclusion from
the Building of any person. In the case of invasion, mob, riot,
public excitement or other commotion, Landlord reserves the
right to prevent access to the Building during the continuance
of the same, by the closing of the gates and doors or otherwise,
for the safety of the tenants and others and the protection of
the Building and the property therein.
17. Any outside contractor employed by any tenant shall,
while in the Building, be subject to the prior written approval
of Landlord and subject to the Rules and Regulations of the
Building. Tenant shall be responsible for all acts of such
persons and Landlord shall not be responsible for any loss or
damage to property in the Premises, however occurring.
18. All doors opening onto public corridors shall be kept
closed, except when in use for ingress and egress, and left
locked when not in use.
19. The requirements of tenants will be attended to only upon
application to the Office of the Building.
20. Canvassing, soliciting and peddling in the Building are
prohibited and each tenant shall cooperate to prevent the same.
21. All office equipment of any electrical or mechanical nature
shall be placed by tenants in the Premises in settings approved
by Landlord, to absorb or prevent any vibration, noise or
annoyance.
22. No air conditioning unit or other similar apparatus shall
be installed or used by any tenant without the written consent of
Landlord.
23. There shall not be used in any space, or in the public
halls of the Building either by any tenant or others, any hand
trucks except those equipped with rubber tires and side guards.
24. Landlord will direct electricians as to where and how
telephone and telegraph wires are to be introduced. No boring or
cutting for wires or stringing of wires will be allowed without
written consent of Landlord. The location of telephones, call
boxes and other office equipment affixed to the Premises shall be
subject to the approval of Landlord. All such work shall be
effected pursuant to permits issued by all applicable
governmental authorities having jurisdiction.
25. No vendor with the intent of selling such goods shall be
allowed to transport or carry beverages, food, food containers,
etc., on any passenger elevators. The transportation of such
items shall be via the service elevators in such manner as
prescribed by Landlord.
26. Tenants shall cooperate with Landlord in the conservation
of energy used in or about the Building, including without
limitation, cooperating with Landlord in obtaining maximum
effectiveness of the cooling system by closing drapes or other
window coverings when the sun's rays fall directly on windows
of the Premises, and closing windows and doors to prevent heat
loss. Tenant shall not obstruct, alter or in any way impair the
efficient operation of Landlord's heating, lighting, ventilating
and air conditioning system and shall not place bottles,
machines, parcels or any other articles on the induction unit
enclosure so as to interfere with air flow. Tenant shall not
tamper with or change the setting of any thermostats or
temperature control valves, and shall in general use heat, gas,
electricity, air conditioning equipment and heating equipment in
a manner compatible with sound energy conservation practices and
standards.
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EXHIBIT C
27. All parking ramps and areas, pedestrian walkways, plazas,
and other public areas forming a part of the Building shall be
under the sole and absolute control of Landlord with the
exclusive right to regulate and control these areas. Tenant
agrees to conform to the rules and regulations that may be
established by Landlord for these areas from time to time.
28. Landlord reserves the right to exclude or expel from the
Building any person who, in the judgment of Landlord, is
intoxicated or under the influence of liquor or drugs, or who
shall in any manner do any act in violation of any of the rules
and regulations of the Building.
29. Tenant and its employees, agents, subtenants, contractors
and invitees shall comply with all applicable "no-smoking"
ordinances and, irrespective of such ordinances, shall not smoke
or permit smoking of cigarettes, cigars or pipes outside of
Tenant's Premises (including plaza areas) in any portions of the
Building except areas specifically designated as smoking areas by
Landlord. If required by applicable ordinance, Tenant shall
provide smoking areas within Tenant's Premises.
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EXHIBIT E
Suite Acceptance Agreement
Building Name/Address:
-----------------------------------------------
Tenant Name:
---------------------------------------------------------
Tenant Code: Suite #:
--------------------- ----------------------------
Management's Tenant Contact: Phone #:
---------------------- -----------
Gentlemen:
As a representative of the above referenced tenant, I/we have
physically inspected the suite noted above and its improvements
with , a representative of (name of
HPL Corporation). I/we accept the suite improvements as to
compliance with all the requirements indicated in our lease, also
including the following verified information below:
Lease Commencement Date: , Occupancy Date:
Lease Rent Start Date *: , Actual Rent Start *:
Lease Expiration Date: , Actual Expiration Date:
Date Keys Delivered:
Items requiring attention:
* If these dates are not the same, attach documentation.
NOTE: This inspection is to be made prior to tenant move-in.
EXHIBIT E
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